Tweeter Says It May File for Bankruptcy
Struggling specialty retailer Tweeter Home Entertainment, which in March announced it would close 49 stores, admitted that it is in desperate need of capital and hinted at the possibility of filing for Chapter 11 bankruptcy.
As of May 8, Tweeter said it had sold approximately $17 million of the $35 million in inventory available for sale at the 49 stores on its chopping block. Tweeter said the sales had yielded a gross profit, but that the closings would result in additional short-term expenses that it believes it doesn’t have sufficient working capital to fund.
Tweeter said it is working with landlords of the closed and closing stores to reach termination settlements that will reduce the store closing expenses, but it might not have the funds necessary to pay even those settlements.
Thus far, six of the 49 stores have closed, with no continuing sales or payroll associated. Tweeter expects to close two more of the 49 stores this month and the remainder in June.
Tweeter, in a release, said it “believes that it does not have sufficient working capital to fund its short-term needs, such as the payment of costs associated with store closings, lump-sum payments to landlords of closed stores with whom it reaches settlements, and to fund its long-term cash needs.”
In an attempt to generate some of those funds, Tweeter is looking to sell its 18.75 percent ownership interest in privately-held Tivoli Audio, a manufacturer of table and portable radios and the home since 2005 of former Tweeter President and CEO Jeff Stone; Stone is president and COO of Tivoli. However, Tweeter acknowledged that “there is no guarantee” it will be able to sell its Tivoli stock, and is thus “pursuing other alternatives for raising additional capital,” which could take the form of debt or equity. Forebodingly, it added, “there can be no assurance that additional debt or equity will be available on acceptable terms or at all. Any equity financing could result in substantial dilution to existing stockholders. Absent obtaining additional capital or reaching adequate settlements with the landlords of its closing stores, the Company may choose to file for reorganization under Chapter 11 of the bankruptcy code.”