Posted in: Comics, Current News | Tagged: Ad Populum, diamond

Diamond Comics Was Losing $1.3 Million Dollars A Week This April Alone

Diamond Comic Distributors was burning through 1.3 million dollars a week back in April this year

Published Mon, 11 Aug 2025 14:57:04 -0500

A transcript from the Diamond Comic Distributors chapter 11 bankruptcy court session held on the 30th of April has been unsealed. Checking the Bleeding Cool Diamond Bankruptcy Timeline, we discover that this is the day that the courts approved of the sale of Diamond Comic Distributors to the joint back-up bid of Universal and Ad Populum. But it was also the day after the bankruptcy auction winners Alliance Entertainment or AENT sued Diamond Comic Distributors Inc, the debtors in this case, for fraud, alleging the debtors withheld information about their Wizards of the Coast contract. WOTC withdrew from supplying Diamond after the auction, a contract worth tens of millions of dollars a year, and it was AENT's contention that Diamond knew this was coming and withheld the information from AENT, as it would have affected the bid price, something they estimated at around $13 million. Without Diamond agreeing to such a price reduction, AENT pulled out of their $85 million bid for Diamond. As a result, the backup – and originally preferred – bidders of Universal and Ad Populum were chosen, albeit for only $72.3 million, a $7.6 million cut for Universal and $5.5 million for Ad Populum on their auction bids, after renegotiation.

Chief Judge David Rice presided over the proceedings. Attorney Mark Minuti of Saul Ewing, representing Diamond Comic Distributors, Inc., the debtors in the chapter 11 bankruptcy case, opened by providing context on the case's rapid deterioration. "A lot has been happening in the case, Your Honor, and unfortunately, most of what's happening has not been good."

"Burning cash… 1.3 million a week"…

Detailing the supplier fallout, Robert Gorin, co-Chief Revenue Officer at Diamond, took to the witness stand, and was asked by the Judge if they considered opening the sale to the wider market again, as they did in the original auction. He replied, "Time is not our friend here. We are burning cash… about 1.2, 1.3 million a week." Now this was back in April, of course. But there is nothing to suggest this has gone down. In the Diamond financial filings for May 2025, the most recent such document that has been filed, if we exclude the comics and games business asset sales entries, the remaining loss appears to be approximately a $12 million loss for that month. Of this, the loss on sales alone, not counting payroll, rent, and other operating expenses, was reported as a $7.5 million loss. Diamond's professional fees and expenses, to Raymond James Financial, Getzler Henrich & Associates, and lead counsel Saul Ewing, LLP, were reported to be $1,182,225 for that month.

Gorin told us "On April 17th we got an unexpected email from a vendor, an important vendor that said they were not going to renew their contract with the company." This is Wizards Of The Coasts of course, efforts to reverse this included a video conference, but "ultimately they came back the next day in writing and said they were not going to change their mind."

Jason Teele of Sills Cummis & Gross, representing AENT, objected to the expedited hearing, citing less than twelve hours' notice and questioning a price reduction coincidence, saying "the purchase price under the new Sale Agreement has been reduced by an aggregate of approximately 13 or so million dollars, which is almost precisely the same amount that Raymond James, the Debtors investment bankers suggested to Alliance's investment bankers would be an appropriate reduction in the purchase price given the loss of the Debtor's largest vendor contract had the Debtors negotiated that issue with Alliance in good faith, which, of course, they did not. So it's very curious that a reduction in price of the same magnitude that was called for upon discovery of this material adverse change is exactly the reduction in purchase price offered to the backup bidder."

He also wasn't happy that paperwork was being redacted. "It's concerning to Alliance, and I suggest it should be concerning to the Court, that the provision of the Universal Asset Purchase Agreement discussing material adverse changes and what can and can't be done in the event of a material adverse change is redacted… what do those redactions or unredacted version of that paragraph actually disclose? We don't know. I have theories, but those are just theories and speculation."

"No accounting for the fraud"…

As for those theories suggested by Teele, we can read between the lines. "There was no accounting for the fraud that we encountered as part of the closing process. That is the subject — one of the subjects of the Adversary Proceeding that I expect will be fully heard by the Court in due course. But I just want to point out that but for the discovery of that information, which had been concealed from at least Alliance, perhaps other bidders as well, we would have closed last Friday."

It is worth knowing that Diamond owes AENT a significant sum as well, from the auction process. Teele added, "But I suggest that Alliance does have standing, not only as a prepetition Creditor holding a small dollar claim, but also as a postpetition Creditor to the extent of the $8.5 million deposit, which the Debtors have unreasonably refused to refund"

Judge Rice asked Robert Gorin if Diamond had "ever given any thought to simply shutting down the business and liquidating the inventory or the other assets that were there?" Gorin replied, "We did, and we also had these conversations with the consultation parties as well, and our liquidation analysis shows it's significantly lower recovery to liquidate than to sell." And on why an extension in the DIP funding from JPMorgan Chase was necessary, "we need to keep running the company in the ordinary course, we need to be able to make payroll, we need to be able to pay our vendors and keep the airplane flying. As I keep telling everybody, we're trying to hold the airplane together while we're flying, and that is what we're trying to do. And we need the lender's help to do that." The DIP was extended but those vendors didn't seem to get paid. At least not yet.

"Opportunistic bidders"

Gianfranco Finizio of Lowenstein Sandler, representing the Unsecured Creditors' Committee, supported the sales despite frustrations, saying, "We now find ourselves pivoting to the backup bidders. They've been, unfortunately, opportunistic. You've heard Mr. Minuti describe the value degradation in the bids. But we don't have a backup to the backup bidder. We don't have the luxury of time to go out and market these assets. The Committee thinks that we need to stop the bleed immediately, whether that's the bleed of finding a new buyer, the $1.2 million burn that Mr. Minuti referenced… These sales in this case should not be run for the sole benefit of JPM. You know, two weeks ago, we were in a very different scenario where we were in the money, and there was excess proceeds. But now, a lot has changed, and this sale cannot be just for the sole benefit of paying JPMorgan down and leaving administrative Creditors exposed" and adding "it's as clear as mud to us on what the post-sale Estate looks like".

That would be JPMorgan Chase, the banks, represented by Jonathan Young of Troutman Pepper Locke who echoed support for the sale but noted the burn rate's impact: "The longer it takes to get to a monetization event, the greater the burn, the more my client has to consider lending, and the less distributable value for everyone."

The US Trustee Gerard Vetter observed without opposition, citing "concerning allegations" but deferring on the sale.

Judge Rice approved the motions, finding them a "sound exercise of the business judgment by the Debtors." He noted the "unusual course of events" but emphasised urgency: "That it's been a little bit difficult… is the reason why approving these matters today… is really necessary to protect the value of this Estate."

It has been 31 weeks since Diamond entered Chapter 11. I refer the honourable members to the case of Jarndyce vs Jarndyce in Bleak House by Charles Dickens…