TOWER TAKES OFFENSE

When Dow Jones reported last week that Tower Records was contemplating filing for Chapter 11 bankruptcy protection following their 10Q financial report (see related hitsdailydouble story, 6/25), Tower CEO/President Michael Solomon’s jaw dropped. Then he got pissed off.

"Reports of our death have been greatly exaggerated," he quipped.

Dow has since published a retraction, saying that they "incorrectly attributed [the possibility of a bankruptcy] to a company regulatory filing." Solomon readily admits the company needs to find additional financing in the wake of the news that Chase (the retailer’s primary lender) was lowering Tower’s revolving credit line from $275 million to $225 million, with that number dropping to $100 million by the fall. But he insists that the "challenge" will be met, and that the 10Q report says nothing about the need for Chapter 11.

According to Solomon, Tower has retained the services of investment banker Chilmark Partners and fully expects to have a new investor in place by Oct. 1. In the meantime, Tower is looking at several cost-cutting measures, but none of them, says Solomon (contrary to published reports), include any major domestic store closings among its 105 U.S. locations. Tower did lose the lease on their huge Boston store, but have plans to find another location in the area immediately.

Most of the changes will take place on the international scene. Tower is seeking a "strategic partner" for their profitable 47 Japanese storefronts. And they’re also looking to take eight under-performing stores in Argentina, Hong Kong, Taiwan and Singapore and transform them from "wholly owned" operations to franchises. Some 50 of Tower’s 125 international shops are already operated as franchises.

Solomon also disagrees with those that contend that Tower is dependent on a huge 2001 fall sales season to right its ship. "Most of our competitors depend on the Christmas quarter for their overall profitability, and we generally don’t. Were it not for some of these international and restructuring issues, we would be profitable in every quarter. We need to obtain our refinancing, which will take place well before the fourth quarter. The fourth quarter will just be icing on the cake."

Is Tower on the block? Solomon is candid: "We are a private company with too much debt, and we would like to find a strategic investor. And we’re actively seeking it." But will Tower go Chapter 11? As one distribution topper told us: "That’s absolute horseshit!"