Brook Mays files for Chapter 11

I first heard about it in an alert from MMR magazine. Now it's popping up all over the Internet.

Shame.
I once worked for a music store that had been around since 1890. Broke my heart when they went out of business.

I hope they can find a way to survive this.
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Brook Mays Music files for Chapter 11 bankruptcy[/b]

07/14/2006

Associated Press


Brook Mays Music Co., a 105-year-old seller of musical instruments, has filed for Chapter 11 bankruptcy, hurt by disappointing holiday sales last year.

The company, founded in Dallas in 1901, has annual sales of about $150 million. The privately held concern owes its lending group, led by JPMorgan Chase & Co., about $41 million.

Brook Mays, which operates 62 stores in eight states under 10 different brands, blamed the bankruptcy filing on lower-than-expected 2005 holiday sales, which caused it to default on a $60 million loan, according to its Tuesday filing in a Dallas bankruptcy court.

JPMorgan has agreed to lend Brook Mays $10.6 million to keep the company in business during its Chapter 11 case, the filing said.

Brook Mays listed assets of $10 million to $50 million and debts of $50 million to $100 million in the filing.


http://www.dallasnews.com/sharedcontent/APStories/stories/D8IRSFL03.html

In addition to "disappointing holday sales" having a $16.7 million dollar judgement against them may have something to do with it as well. I copied the article below from the Dallas Business journal:

Brook Mays to pay First Act $16.7M
Dallas Business Journal - July 5, 2006

First Act Inc. said Wednesday that it has accepted a $16.7 million settlement payment from Brook Mays Music's insurance company to settle a 2003 civil lawsuit against Brook Mays.
In its original lawsuit, Boston-based First Act accused Dallas-based Brook Mays of making false statements about First Act that materially deceived consumers and band directors. First Act alleged Brook Mays launched a "smear campaign" to discourage people from buying, servicing or keeping First Act instruments.
In December, a U.S. district court in Massachusetts ruled in favor of First Act and awarded $20.7 million to the company.
However, after the judge reviewed the verdict he tossed a portion of the award pertaining to reputational harm, lowering the award to $16.7 million.
Brooks Mays sells musical instruments, music equipment, DJ and lighting equipment and related software. The private company operates about 60 stores in eight states.

Web sites: www.brookmays.com and www.firstact.com
[/b]

Apparently the lawsuit was NOT a cause of the bankruptcy as they were insured for that loss.

A full accounting can be found at
http://www.kccllc.net/brookmays

The docket sheet at kccllc.net indicates (i) they've filed a motion for authority to auction off some or all of the assets, and (ii) there is no motion on file to approve debtor in possession financing...so they don't have any bank financing lined up.

This is essentially a liquidating reorganization...Brook Mays will be no more. Somebody may pick up a substantial part of the operation and try to do it a different way (can you say "Gibson buys Baldwin"?) Or the assets may just go away piecemeal (Can you say "Mars Music"?), but Brook Mays as we know it apparently is going away.

That's a shame. They were a presence in music retailing in this part of the country. One couldn't say that they were a top teir retailer or that they had a particular emphasis on quality...some of their stores down here are pretty seedy. Some of the pianos you see on their floor could use somebody giving enough of a s*** to wipe the coffee stains off the keyboard. But they weren't dishonest and filled a niche that's going to be empty now.

Somebody's going to be able to pick up the representation of Yamaha in the Dallas area...that would be a plum deal if anybody who wasn't a member of this forum bought pianos anymore. TGG

The following was just published my Music Merchandise Review (MMR):

"Brook Mays Seeks Quick Sale After Chapter 11 Filing

After months of industry speculation, Brook Mays Music, the 105-year old Dallas-based chain, filed for Chapter 11 bankruptcy protection on July 11. The filing was made at the U.S. Bankruptcy Court, Northern District of Texas.

In the filing, Brook Mays listed of assets of $10 million to $50 million and debts of $50 million to $100 million. The Dallas Morning News reported JP Morgan is lending the dealership $10.6 million to keep operations going during its Chapter 11 case.

Top creditors are owed in excess of $23 million. Yamaha leads the way, being owed an estimated $6.5 million, followed by Conn-Selmer at $5.0 million. Kawai is third at $1.6 million. Also owed more than $1.0 million each are Roland, Pearl River Piano, and Hoshino. Creditors owed in excess of $500,000 include Fender, Kaman, Pearl, and Buffet-Crampon.

In a follow-up story in the Dallas Morning News, an attorney representing Brook Mays said he expects the dealership to be sold out of bankruptcy in early August in advance of the back-to-school season. The retailer has been up for sale for several months, said Stephen A. McCartin of Gardere Wynne Sewell LLP. McCartin on July 14 said he will ask for an Aug. 2 auction during a hearing next week before U.S. Bankruptcy Judge Stacey G. Jernigan in Dallas.

The company has more than 1,000 creditors, 800 employees and 62,000 rental customers. The company took on an equity partner, Wellspring Capital, in 2000 to help fund its growth. Among its retail acquisitions during that period were McFadyen Music, Duncan Music, Caldwell Music, Zeswitz Music, McMurray Music, and Kurland Salzman Music.

The filing comes on the heels of Brook Mays paying First Act $16.7 million to settle the lawsuit in 2003 byFirst Act that found Brook Mays liable for false advertising and statements interfering with First Act's business relationships."

what's the newest on the Brook Mays auction? anyone heard?

I don't know about Dallas or Houston, but the Brook Mays stores I have been to in Odessa, Midland, and Austin have very few pianos left. The manager of one store told me they had not received anything new since February. Schottenstein Stores is a closeout specialist. They will probably do what they usually do with closing stores. They will run ads stating closeout sale, everything must go, 20% OFF. They will sell as much as they can at 20% then go to 30%, 40%, 50%, etc. until it's all gone. So, if you wait long enough and there are any left by then you may be able to get a piano for a ridiculously low price. I wouldn't count on it, though. Schottenstein was one of the partners in the buyout of the company I work for. They took the 100 or so stores that were slated to close and held closeout sales based on that formula.

One Brook Mays store I visited in Austin had only 2 pianos in the store. One was sold; the other was an H Schoenbach baby grand. These are very low end pianos made by Pearl River. The store in Odessa has only 3 or 3 uprights. I think they were Schoenbach and Conover Cable. The store in Midland has 2 Kawai grands, a Conover Cable, and about 6 Schoenbachs. They also have quite a few uprights which are Kawai and Schoenbach. The only nice grand they have left is a Kawai RX2.