Could Marvel have avoided its bankruptcy in the 90s?

[The Overlord]

Could Marvel have avoided its bankruptcy in the 90s?

[paurru]

Their "bankruptcy" was just a poor excuse ruse.



They all were getting burned from their own comic book storylines mostly Heroes Reborn

[codystarbuck]

Certainly, via recapitalization. They filed for Chapter 11 (as opposed to Chapter 13, which is liquidation), which allows for relief, while they reorganize, under court supervision. It's a financial tactic, at that level, to force creditors to negotiate to allow breathing room. Where it fell apart was that Carl Icahn had bought up a ton of the Marvel junk bonds and was pushing to take over the company and sell of its assets (his usual tactic). Basically, it went like this:

The McAndrews Group, a venture capital firm, bought Marvel and issued common stock. It then pocketed the proceeds (mostly) rather than using the money to build up Marvel. They then issued junk bonds, with the stock as collateral, again pocketing most of the proceeds. They issued a second round of junk bonds (stock still as collateral) and pocketed more money. They were using Marvel as a cash cow. Meanwhile, they bought up companies that were producing Marvel merchandise, to get a bigger share of the profits, including Fleer (who made trading cards), Panini (who did stuff in Europe) and a piece of Toybiz (who did toys and action figures). They then decided to take the distributor money for themselves and bought Heroes World, a New England and Mid-Atlantic regional distributor. Practically overnight, Heroes World had to go from handling a relatively small number accounts to every comic shop in the country, without a major investment in staff and infrastructure. They forced ridiculous terms on comic shops, forcing them to over-order to get better discounts. Comic shops, more often than not, operated on thin cash flow margins. They were getting stuck with unsold product, with more on the way. They started closing by the dozens. Heroes World was a mess and was hemorrhaging money. The bottom fell out of the trading card market and Fleer was bleeding money. Marvel was laying off staff left and right, to cut costs. Chapter 11 was a maneuver to try to get things stabilized and get the banks to refinance them, while keeping the junk bond holders at bay. Icahn was able to force the courts to put pressure on Marvel to revamp the leadership; but, the court didn't like Icahn's plans or McAndrews. In the end, Toybiz submitted a reorganization plan and ended up owning the company, while securing it new financing. They then controlled it to the nickel to pay back the money they put into it and pay off the creditors. The influx of movie cash improved the situation and got them further new financing; then Disney came calling.

So, yeah, it could have been avoided, if McAndrews had invested the money earned on the stock and junk bonds, in the company itself, and not tried to self-distribute, without more long-term planning. it had nothing to do with Marvel editorial (though low comic sales weren't helping).