The Bankruptcy Of Loot Crate, the Subscription Service That Changed Comics

Loot Crate was the monthly subscription service that launched an industry amongst the geek demographic, upturned the comic book industry, doubled the sales of Marvel's Star Wars comic to over a million, made Bravest Warriors from Boom the second best-selling comic in one month with over half a million. made Escape From New York/Little China the best seller, and even commissioned their own Harley Quinn comic book by Amanda Conner, Jimmy Palmiotti and Chad Yardin, long before Walmart though that might be an idea.

It spawned many competitors, even a few that are still surviving. But as their competition went bust or ceased business, the market leader Loot Crate seemed to have less of a market to lead. Built on subscriber growth, that number which neared half a million has halved over the last year or so. They marketed themselves on exclusive items, with some that are genuinely hard to find now and valuable as a result. However, a combination of over order and production saw them cannibalise that exclusivity by selling the items individually at massive discount. Why risk $20 on a Loot Crate when you can wait a month and pick what you really want for $10?

Numbers fell. And faced with not being able to get rid of excess stock, even at discounted prices, they started replacing new items in boxes with 'classic' items. And then sold shirts en masse to companies such as Ollie's Discount Outlets or Zavvi in the UK. Which downgraded the appeal of the boxes even further. And numbers dropped off a cliff.

And so, inevitably, Look Crate has entered Chapter 11 bankruptcy. But not before they fired up to fifty staff without notice or severance pay, owing millions to vendors.

Subscribers got the following e-mail:

Hey Looter,

I am writing you with news – Loot Crate is being acquired. Our proposed buyer Loot Crate Acquisition LLC is an affiliate of an existing investor, Money Chest LLC who is providing us with immediate financial support. They know our company well – they have invested in Loot Crate in the past and have been a great partner.

As part of the sale agreement, Loot Crate filed for chapter 11 reorganization. The purpose of the chapter 11 filing is to facilitate the sale of the business and position the company to achieve the delivery times and customer experience you deserve.

You, the Looters, are our top priority. Our existing investor is providing us with up to $10 million in new financing which allows us to continue our daily operations and we intend to fulfill your subscriptions. Look for updates on deliveries soon.

As you are a big part of our Looter family, you will be receiving more communications from us during the sale process. Our goal is to fulfill the promises made to you, and we will be updating you with shipping and delivery dates as soon as we have them.

For information on the process and to answer some questions you might have, please see the FAQ below.

We appreciate your continued support. Team Loot Crate

Amazing how they manage not to use the word 'bankruptcy' once. They saved that for a press release

Loot Crate, the worldwide leader in fan subscription boxes, announced today that it has reached a definitive agreement for the sale of substantially all of its assets to Loot Crate Acquisition LLC. To facilitate the transaction, Loot Crate and its affiliates today filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in Wilmington, Delaware. The terms of the agreement will be formalized and submitted to the Court later this week.

In accordance with Section 363 of the U.S. Bankruptcy Code, other companies will have an opportunity to submit competing offers for the assets. The Company expects the sale to be completed within 45 days.

Loot Crate has taken significant steps toward financial health by reducing costs, capital expenditures and working capital needs, and looks forward to the benefits of new ownership.

"We have worked diligently to overcome challenges with our capital structure, along with legacy issues the Company has been struggling with for the past 18 months. We are very pleased with our progress from an operational efficiency standpoint, however, the company still faces liquidity issues," said Loot Crate's Chief Executive Officer Chris Davis.

"After careful review of a wide range of available options, management determined that a sale of the Company is in the best interests of all parties, including our valued Looters (customers) and employees."

Loot Crate received a commitment for up to $10 million in new financing from Money Chest LLC, an investor in the company. These funds coupled with ongoing revenue from subscriptions will be used to maintain normal operations. "During the sale process we will have the financial resources to purchase the goods and services necessary to fulfill our Looters' needs and continue the high-quality service and support they have come to expect from the Loot Crate team," Mr. Davis said.

Mr. Davis also emphasized that employees and customers should not notice any difference in operations as a result of the filing or during the sale process except for the better. "Daily operations will continue as usual, unique and exciting fan items will be purchased, crates will be shipped, and all aspects of the business will go on as before the Chapter 11 filing.  Our employees will continue to be paid as usual during this transaction," he said.

"This transaction represents good news for our employees, our customers, and our other constituents.  It will provide Loot Crate with greater access to the financial resources necessary to continue to prosper and grow.  By utilizing the Chapter 11 process, we are able to ensure an expedited and orderly transition," Mr. Davis concluded.

The LA Times reported

The company is now in dire financial straits. Its credit-card processor is withholding customer billings, Loot Crate hasn't shipped goods tied to $20 million in sales, and the company owes more than $30 million in trade debt, [Chief Restructuring Officer Stuart] Kaufman said. It's also behind on more than $5.87 million in sales taxes.

The firm defaulted on a loan from Breakwater Management in 2017 but was able to refinance it with a $21-million term loan from an Atalaya Capital affiliate in August 2018. Another entity, Money Chest LLC, has now bought that loan and agreed to provide a $10-million bankruptcy loan to Loot Crate.

Loot Crate customers are advised to contact their credit card provider or payment service like Paypal to get a chargeback. But some people have been waiting on their crates for many months.

Loot Crate is still offering a variety of subscription offers for those not risk-averse… here's a look at some of their current offerings.

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About Rich Johnston

Founder of Bleeding Cool. The longest-serving digital news reporter in the world, since 1992. Author of The Flying Friar, Holed Up, The Avengefuls, Doctor Who: Room With A Deja Vu, The Many Murders Of Miss Cranbourne, Chase Variant. Lives in South-West London, works from Blacks on Dean Street, shops at Piranha Comics. Father of two. Political cartoonist.
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