Posted in: Comics, Current News | Tagged: bankruptcy, diamond

Diamond Seeks Bankruptcy Process 120 Day Extension To September 11th

Diamond Comic Distributors to seek 120 day extension on Chapter 11 bankruptcy proceedings, until September 11th

Earlier today, Bleeding Cool pointed out that tomorrow the finalising of the sale of Diamond Comic Distributors to Ad Populum, and of Alliance Gaming to Universal Distributors, as part of Chapter 11 bankruptcy proceedings, will be finalised. And while finalizing that sale on May 14, 2025, is still the plan according to documents filed today, that's not quite the end of the story — as they are asking for an additional 120 days to handle what happens next. Post-sale orders of business include working under Transition Services Agreements to assist the new owners in taking up the business, reviewing and reconciling creditor claims.  The "Plan of Liquidation" is meant to facilitate all of those steps, and wind down the debtor corporate entities completely.  While Diamond states they have made good progress towards this goal, they will need the additional time to formulate and execute the post-sale processes.

120 days later…

Diamond Comic Distributors has filed a legal request for additional time to develop a Chapter 11 reorganisation plan, seeking to extend its exclusive period to file one by 120 days, until September 11th, 2025, and then to solicit votes on the plan until November 10, 2025. The company, which employs over 400 people and owes more than $80 million to over 1,000 creditors, has been working to maximise value for its creditors through a sale of its assets, including securing debtor-in-possession financing from JPMorgan Chase Bank, and completing a competitive sale process.

As part of Chapter 11 bankruptcy, Diamond has had an exclusive period during which only they can propose a reorganisation or liquidation plan. Without an extension, their exclusive right to file a plan would end on the 14th of May, 2025, the same day the sale was to close. Their focus was on making sure the sale went through successfully, and it was not without complications. The original high bidder, Alliance Entertainment or AENT, was first rejected by Diamond. Then, the courts mandated their winning bid, and AENT withdrew, citing allegations of fraud and launched a lawsuit of their own. Diamond clearly preferred the backup bidders Universal Distribution and Ad Populum/Sparkle Pop, and the court approved these sales on the 1st of May, with the transactions expected to close by tomorrow.

Finalising this sale was crucial to raising money for creditors, so it took priority over drafting a Chapter 11 plan. Diamond hasn't spent time developing a detailed plan for what comes after the sale and intentionally waited to see the outcome of the sale,  how much money comes in, which parts of the business are sold, etc.,  before mapping out the next steps for the bankruptcy. Now that the sale is (almost) complete, they can turn their attention to formulating a plan. But as of tomorrow, no plan has yet been ready to file.

Liquidate this!

The next step is likely to propose a liquidation plan, to wind down the remaining estate and distribute sale proceeds and any other remaining assets to creditors. But it's worth remembering that Diamond's exclusivity to do so expires right after the sale. So other parties, such as the rather busy Unsecured Creditors Committee, could try to file their own Chapter 11 plan. More in them in a minute,

Diamond argues that allowing someone else to file a plan now would be premature and potentially disruptive, but that no creditor or interested party is "able or ready" to submit a workable plan yet. And Diamond states that giving them a bit more exclusivity time will lead to a better outcome for all creditors. Diamond states they wish to avoid a scenario where parties rush in with conflicting plans and will use the time to consult with major creditors and the Unsecured Creditors' Committee, address any open issues

The motion emphasises that Diamond has made "good faith progress" in its bankruptcy case, including obtaining court approval for key employee incentive and retention programs, filing financial schedules, and addressing creditor inquiries. The company argues that extending the exclusive periods will give it the necessary time to negotiate a viable plan with stakeholders, assess claims, and determine the best path forward, potentially through a plan of liquidation. Diamond asserts that the extension will not prejudice creditors and is not intended to pressure them, as the company aims to confirm a plan within approximately nine months of the bankruptcy filing.

The court has scheduled a hearing for the 17th of June, to consider the motion, with objections due by the 27th of May. If no objections are filed, the court may grant the extension without a hearing.

Unsecure insecure?

The Unsecured Creditors Committee (remember them?), representing the majority of the companies owed money by Diamond, heading up by Titan Comics, Simon & Schuster and Little Buddy Toys, has also filed a statement expressing concerns about the company's handling of a motion by the United States Trustee to convert the case to Chapter 7 or dismiss it entirely. The committee's filing, submitted on the 12th of May, highlights a "recurring and problematic" lack of communication from the debtors, including not filing monthly reports during the bankruptcy and sought to convert Diamond's Chapter 11 case into Chapter 7 liquidation. In response, Diamond and its lender, JPMorgan Chase Bank, N.A., filed a stipulation on the same day to extend the deadline for objecting to the trustee's motion, and have gained a one-week extension to respond to the motion. However, the new filing states that the creditors' committee was neither informed nor included in discussions about this stipulation, prompting frustration, despite the committee reaching out to the company's counsel for clarification. The committee notes that this lack of transparency is part of a broader pattern of untimely updates and exclusion from key case developments. The filing suggests that Diamond's recent submission of overdue monthly operating reports may resolve the trustee's motion, but the committee is reserving all rights to respond to the motion, its potential resolution, or any related hearings.

Maybe the Unsecured Creditors Committee might have something to say about this 120 day extension? Or have another plan to propose? We should start to find out tomorrow…

You can use these Diamond and bankruptcy tags to keep up with the latest on Bleeding Cool. And a quick reminder of how we got here…

• On the announcement of Chapter 11 on the 14th of January, Diamond started a 13-week bankruptcy process run by financial firm Raymond James, got financing to operate, and announced an auction for its assets.
• Those assets included Diamond Comic Distribution, Alliance Gaming Distribution, Diamond Select Toys, CGA and Diamond UK
• Universal Distribution was named the Stalking Horse bidder for Alliance Games and Diamond UK, which required a purchase commitment of thirty-nine million dollars, but with certain discounts and privileges for taking that position.
• The auction took place, and it went late. There was food and breakfasts billed for.
• And Alliance Entertainment, or AENT, was named the top bidder for the assets of $72,245,000, though not for Diamond UK. This was widely announced, including by Diamond themselves.
• Then we learned that a joint bid by Universal Distribution and Ad Populum came second and was named the back-up bid, with a bid of $69,130,000. With Universal getting Alliance and Diamond UK, and Ad Populum getting Diamond Comics, Diamond Select Toys and everything else. Basic Fun was third with fifty million.
• A court hearing with the Honorable Judge Rice in Courtroom 9-D at the United States Bankruptcy Court for the District of Maryland at 10 am was intended to ensure the legality of the bid and the process.
• But instead, over that weekend, the debtors declared that they had chosen the back-up bid from Universal and Ad Populum instead of AENT, despite AENT having bid more. No reason was given.
• AENT filed a lawsuit regarding this decision.
• It took the bankruptcy court to reverse that decision and state that AENT with the higher bid had won, though they would have to withdraw their lawsuit.
• AENT has terminated their winning bid and purchase.
• Universal Distribution and Ad Populum were back in the running
• Diamond declared "business as usual" but the courts threatened Chapter 7 over late paperwork.
• AENT sued Diamond, claiming fraud
• Diamond says it's all in hand and went back to court, wanting to be owned by Universal and Ad Populum.
• Sale of Diamond to Universal and Ad Populum was approved by the courts.
• Though Ad Populum paid more than we thought.
• Podcast blamed/credited with the current state of affairs
• Diamond tells Skyrush to stop claiming they won CGA.
• As part of court filings, Diamond released details for every comic store on account.
• And here we are now… with tomorrow meant to bring some finality,

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