Diamond Comic Distributors: Clearing The Warehouses
Selling and/or Disposing of Consigned Inventory, Free and Clear
The next, logical, step in the Diamond Chapter 11 case is now upon us. A motion has just been filed asking the court to give permission for the Debtors to sell or otherwise dispose of, consigned inventory free and clear of liens, claims, interests or encumbrances.
By dumping the inventory, this is a clear indication that the new owners of Diamond, Sparkle Pop, are moving out of distributing comic books entirely as the inventory was important for backorders.
In summary, the Debtors are seeking court approval for procedures to sell consigned inventory, which they believe they can do free of the consignors' interests due to lack of perfected liens. This is aimed at expediting sales to maximize value for the bankruptcy estate.
Who are the debtors? That’d be: Diamond Comic Distributors, Inc.; Comic Holdings, Inc.; Comic Exporters, Inc.; and Diamond Select Toys & Collectibles, LLC.
And where is the stock? In their warehouse at Olive Branch, Mississippi.
How is this justified?
Following the closing of the sales of a substantial majority of their assets, the Debtors are in possession of significant inventory that was shipped to the Debtors on a consignment basis.
The consignors have not satisfied the requirements under applicable law to perfect their interests in this consigned inventory. As further explained below, this give the Debtors the right to transfer title to this inventory free and clear of the consignor’s interests.
The Debtors accordingly seek to sell or otherwise dispose of the consigned inventory free and clear of the interests, if any, of the consignors.
And who are the consignment vendors? That’s a big list, but here it is.
Diamond are saying that,
Most of such product was purchased by the Debtors from vendors and placed into the Debtors’ inventory until sold to customers. Other inventory was provided to the Debtors on consignment with the Debtors pursuant to various distribution or similar agreements.
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The Debtors seek to sell or otherwise dispose of the consigned inventory pursuant to the procedures described in this motion (the “Consignment Sale Procedures”) to maximize its value for their estates. To that end, the Debtors and their professionals, in the exercise of their business judgment and in consultation with the DIP Lender and the Committee, and subject to Court approval of this Motion, will work diligently to conduct the Consignment Sales in an efficient and value-maximizing manner consistent with the Consignment Sale Procedures.
And how much do they want? Well, without seeing what’s in the warehouse, Diamond just want it gone. As they say, ‘The Debtors shall file executed declarations promptly after any closing on a sale of Consigned Inventory for a purchase price that is less than $100,000.’
The sale will be done by auction. The way this will be done will either be via auction or private sale. As the court filing says,
The Debtors may qualify bidders and require good faith deposits.
Sales may include private sales without competitive bidding.
Proceeds from sales will primarily go towards satisfying the DIP Lender's secured claims
That’s potentially a bargain for a store, or a retailer wanting some instant, albeit recent, inventory.
And what will the consignors see? Birdseed, if anything. I doubt that those who have stock in the warehouse that hasn’t been paid for yet will see a cent. If you want to object, you have until 16 July 2025 to get your objection in front of the court, otherwise, it’s open slather. Be quick, because they’re asking the court to waive the 14-day stay that is there under Bankruptcy laws in order to avoid delays. But, fret not, Diamond will let you know when and where the fire sale is happening.
The perils of publishing really.