Over the past 9 months, I have been following the Gen Con bankruptcy filing . After several delays, Gen Con’s Chapter 11 reorganization plan appeared Friday on the bankruptcy court’s website. There is some really fascinating information in it.
You can download the complete documents at the bottom of this post, but here are some interesting points that I thought worth mentioning.
This reorganization plan is not approved by the various creditors as yet, so it might change before final approval. I will post any updates.
The following information comes from the “DISCLOSURE STATEMENT FOR PLAN OF REORGANIZATION.”
Gen Con had a total net operating loss of $2.7 million during 2006 and 2007. 2008 shows a net profit of $527k. This was something of a surprise for me, as I thought Gen Con was profitable before the disastrous “Star Wars Celebration IV” convention that drove them into bankruptcy. Apparently 2006 was a losing year for them as well. This lead Gen Con to pursue selling the company
This effort continued up until the point Gen Con filed for bankruptcy. The disclosure document does not list who they approached as potential purchasers, but I bet the list makes for interesting reading.
The debtor disclosure form also lists some reasons why Gen Con believes “Star Wars Celebration IV” failed in 2007. A couple of the reasons seemed reasonable, but one confused me. The following are direct quotes from the “DISCLOSURE STATEMENT FOR PLAN OF REORGANIZATION” document.
- First, the Star Wars brand supremacy had declined.
- Second, the southern California venue, and the attendant high prices of local accommodations, resulted in decreased ticket sales, particularly multi-day passes.
- Third, Lucas Film presented unanticipated competition by granting a license for sales of an action figure, cutting into Gen Con’s sales of licensed goods.
I can buy the first and second reasons. “Star Wars” has declined in my opinion into little more than a giant marketing campaign and southern California does have expensive hotels.
The third reason confuses me. It sounds like Gen Con was going to sell an action figure and “Lucasfilm” licensed it to someone else. It does not go into detail, but that is my assumption. Was there some kind of “Star Wars Celebration IV” action figure for sale at the convention? If any of my readers attended I would be curious to know.
The documents also mentions the pending lawsuit by “Lucasfilm .” Here is the relevant quote:
“The Debtor is attempting to reach agreement with LucasFilm as to the amount of its Claim, but will be forced to litigate with LucasFilm if the Claim cannot be reconciled.”
Apparently some negotiations are taking place, but have not been completed. I checked on the lawsuit’s status directly through the federal court’s website, but there are no updates as yet. I will post any updates as they occur.
The disclosure document also goes into detail about the various categories of debtors and how each category (“class”) of debtors will be handled.
Here is the full list:
Claims against the Debtor are classified as follows:
Class 1: Allowed Priority Nontax Claims.
Class 2: Allowed Administrative Convenience Claims.
Class 3: Allowed Claim of Make-A-Wish Foundation.
Class 4: Allowed Unsecured Claims, excluding insider claims.
Class 5: Allowed Subordinated Claims.
There is a great deal of dull detail about how much various debtor receive, but the one that interests me is Class #3, the “Make-A-Wish Foundation.” Here is the relevant quote regarding this debt of $150,000.
As discussed above, Gen Con held an auction to benefit Make-A-Wish as part of its Star Wars Celebration IV convention in Los Angeles. The auction sold items donated by LucasFilm from its collection of movie memorabilia, and net proceeds were raised, after auction expenses, of almost $150,000. Gen Con has held these funds in trust, and desires to make immediate payment of this obligation. Thus, the Class 3 Claim will be paid on the Effective Date. The Debtor estimates that Class 3 Claim totals approximately $148,500. The
Debtor will pay this Claim in full.
I am happy to see that Gen Con intends to pay this obligation in full.
The documents present a fairly positive picture overall about the future of Gen Con, but there is one section that is disturbing.
Gen Con believes that the above proposal is in the best interest of Creditors. If the Plan is not adopted, Gen Con would most likely be forced to convert to a Chapter 7 and liquidate its assets in a more distressed situation.
I am not a lawyer, but the Chapter 7 description sounds very bad to the long-term survival of a company. I hope the voting debtors approve this plan and Gen Con is able to avoid this outcome.
If you are curious in reading the legalese for yourself, here are the original documents.
Gen Con “DISCLOSURE STATEMENT FOR PLAN OF REORGANIZATION ”
Gen Con “DEBTOR’S PLAN OF REORGANIZATION ”