Musicland Files Chapter 11

MINNEAPOLIS-Mall-based retailer Musicland Holding Corp., owner of approximately 800 stores under the Media Play, Sam Goody and Suncoast chains, has filed for Chapter 11 bankruptcy protection. The company has faced pressure as music sales have decreased, while competition from big-box stores and Internet downloading has been on the upswing.

Musicland has been closing its 61 Media Plays since December, and executives expect to finish that process by the end of the month. As part of a Chapter 11 reorganization, they will also consider shutting a portion of its 425-unit Sam Goody music chain or some of the 324-unit Suncoast movie stores, though no definite plans have been released.

Musicland executives say they have received commitments for up to $75 million in debtor-in-possession financing from a bank group led by Wachovia. The company plans to normally pay its vendors and is asking the US Bankruptcy Court for the Southern District of New York, where it filed for bankruptcy, for permission to honor customer gift cards and loyalty programs.