September 12, 1997

MARVEL COMICS FACING DEADLY DEADLINE

After many months of confusing negotiations, time is running out for Marvel Comics. The company, in Chapter 11 bankruptcy, is burdened with more than $700,000,000 in secured debt, plus hundreds of millions more owned to bondholders and unsecured creditors. It has long been assumed that the company would be able to arrange a restructuring under which it would be able to reduce its indebtedness to the banks by transferring ownership of Fleer, Skybox, and Panini to them. It was planned that the banks would auction these assets, and that Marvel and Toy Biz would then merge into a single company, with a reduced debt load, and stretched-out payments. This plan seems to have fallen apart, however, after Marvel revealed second quarter losses of $42,000,000. Toy Biz (in which Marvel holds a 28% minority position) is now demanding a renegotiation of the terms of the original merger agreement. That agreement would have left Toy Biz with 49% of the combined companies. Toy Biz has stated this ratio is no longer acceptable. Unfortunately, any lesser ratio appears unacceptable to the banks. This has led insiders to reveal to THE WALL STREET JOURNAL that a Chapter 7 bankruptcy is being considered. In Chapter 7 all assets of a company are sold, and the creditors divide up the proceeds, with the secured creditors taking the lion's share. Under this scenario, unless a buyer is found for the individual operating companies of Marvel as complete units, each unit would be broken up and sold for parts. While such possibilities are being considered, the Court has provided funding for Marvel through Tuesday, September 16th. On that date a hearing will be held to determine what, if any, decision would be reached about which course of action to take.

JIM SHOOTER AND CHUCK ROZANSKI CONSIDERING BID FOR MARVEL PUBLISHING

With a break-up of Marvel Comics being potentially imminent, former Marvel Comics editor-in chief Jim Shooter, and long-time comics retailer Chuck Rozanski, are negotiating with two separate equity groups for funding to purchase the publishing unit of Marvel Comics. While neither would provide specifics on how such a bid might be structured, both emphasized that their bid was designed to encourage a potential Chapter 7 trustee to keep the company publishing while funding negotiations continue.

How's that for some startling news? We've been aware for some time that the Marvel negotiations were not going well, but the huge losses for the second quarter shocked everyone. It is still true, however, that the publishing unit of Marvel continues to be profitable. But the mountain of debt that presently encumbers the company as a whole now threatens to drag under even the most profitable units.

Even worse, our investigations have revealed that there are presently few, if any, other bidders for the Marvel Publishing unit. Unless the bankruptcy court sets aside a process initiated by Ronald Perelman to shift the licensing rights to all the Marvel Characters from Marvel to a shell company, there seems to be no interest in operating Marvel as a publisher. Outside bidders are far more interested in the individual character rights than the actual publishing company. The common perception seems to be that a company that has seen volume declines of 75% in the past four years isn't worth saving... That's why Chuck Rozanski, the owner of Mile High Comics, has agreed to join with his long-time friend Jim Shooter, to raise the money to purchase the company. The funds are potentially available. Making the deal happen will simply require the right set of circumstances to transpire. More news next week.

For more information, email Chuck