• As Galleycat reported this morning, reporter Peg Brickley has noted the following: On Monday, AMS is now seeking the Delaware Bankruptcy Court’s permission to sell itself or refinance its senior debt. The senior debt, of course, is the $220 million that is owed to publishers. Should the Court provide AMS permission, this would permit them to raise additional monies to pay off the existing debt, converting the debt into equity. But it remains to be seen whether AMS’s proposed plan would involve a swift revenue return to the indie publishers now left in the lurch or one that could go on indefinitely, as AMS attempts to raise its cash through a sale. It is also unknown whether AMS would seek protection from its creditors under the current bankruptcy plan. Either way, this setback isn’t good news for the Q4 2006 revenues now owed to publishers. As previously reported, a creditor’s committee meeting is scheduled for this Friday. So hopefully we’ll have some more information by the end of the week on whether there are any developments on the senior debt.
• There’s been some discussion by PW readers on this issue. Tom Haworth writes, “”One would think that Publishers would keep better track of the financial condition of a company that had not produced a legitimate quarterly or annual report for the past 3 years. The financial arm of all piublishers [sic] need to be more up to speed with the deals the sales and marketing arms are making. It’s easy to say that AMS’ customer are so big and strong that we must continue to pursue this business. But, one must remind the publishers that these companies (Costco, Sam’s and BJ’s) assume very little if any risk in dealing with AMS.”
• “Best coverage” or not, there’s been nothing else from the conspicuously silent PW on the purported “sources” who claimed that AMS was looking to unload PGW on a seller. So I’m going to have dismiss PW‘s report as rumormongering until they can come up with something concrete.
• The bankruptcy attorneys stand to make a killing.
• Mr. Popman announces, “I TOLD YOU SO!” and offers a few thoughts on why he saw the AMS bankruptcy coming.
• Levi Asher offers a personal comparison to the AMS bankruptcy.
• This Ain’t Livin’ believes that this spells out the end of an era.
• For those interested in the early PGW culture, Pat Holt offered a remembrance in January 2002. Of PGW co-founder Charlie Winton (now head of Avalon), who was replaced as President and CEO in favor of Rich Freese in July 2003, Holt writes, “And Winton did more: He delivered regular payment to cash-poor independent publishers who were accustomed to being the last vendor to be paid; he made it easy for independent booksellers to buy from a wide array of books without drowning in paperwork; he got orders for books from chain bookstores that would never have considered listening to a sales pitch from the smaller presses; and he established an in-house department to help independents with deadlines, editing and book design.” My, how times change! It’s worth noting that Holt expressed great reservations about the AMS sale, noting that AMS was “the opposite of PGW.”
• More on Winton from 2002: “As for the acquisition’s effect on publishers and the culture, it’s been a while since the sky-is-falling crowd really had anything to stew about–you might have to go as far back as B&N-Ingram–so if nothing else, Winton gave them some fodder. The argument: that Winton’s damn-the-torpedoes attitude–he was known for carrying publishers and books he liked even when their numbers were questionable–won’t fly with corporate bosses that just paid $37.3 million in an tight market.”
• And for those who wish to examine AMS’s SEC filings, you can find them here. Today’s filing? An issuance of common stock at $0.001 per share, filed by Foundation Resource Management, Inc. Is this the equity AMS hopes to raise to pay off its senior debt? Is this a sign that the Delaware Bankruptcy Court approved Monday’s request?

• Another roundup from Galleycat, including this statement (PDF) issued yesterday by PGW President Rich Freese. Freese asserts that the publishers are the owners of the inventory in the Indianapolis warehouse and that he’s cutting COD checks for post-petition payments. (I don’t believe the first assertion was ever in question. Then again, it’s Freese’s ass against the wall.) Well, that’s great, Rich, but what about pre-petition payments? You know, those monies PGW owes the publishers from October, November, and December? Well, that’s where a motion filed on January 5th comes in. The motion hopes to give PGW publishes “Critical Vendor status” and pay out these amounts sometime this month. Even if this motion passes, however, this still doesn’t ensure that the monies paid out won’t be “pennies on the dollar” payments. Again, as I pointed out in my initial post, PGW is going to need a lot more than $75 million to handle that.
• Meanwhile, Publishers Weekly has opened its doors to speculation on what can be done to change the current publishing industry model.
• There’s still nothing concrete on yesterday’s PW rumor that AMS was planning to sell out PGW. If you have any leads, drop me an email.
• Rachel Kramer Bussel reprints an email from Best Lesbian Erotica editor Tristan Taormino. In an effort to make up lost revenue, Cleis Press is offering a winter sale.
• More on the Quarto setback, which appears not to be as severe as previously reported, from This is Money. Broker Collins Stewart has remarked that AMS was only 3% of Quarto’s total sales.
• Meanwhile, former PGW employee Erica Mulkey writes: “I don’t know how I feel about this. It seemed inevitable, but what sucks is that yeah, PGW management has been weak and ineffective for a long time, at least since Mark Ouimet left, possibly since Charlie left, but PGW was essentially a Good Company. AMS (who bought PGW in 2001, or was it early 2002?) has been unprofessional and poorly managed to an unbelievable degree this whole time, and everyone knew it. Anytime AMS tried to interfere with PGW it was debacle after clusterfuck after shitstorm.”

• There’s continuing coverage at Galleycat, with additional commentary from Sarah, as well as the effects of AMS’s bankruptcy on Quarto, a publisher that has suffered significant losses (to the tune of $1.5m in payments). More on Quarto here.
• Additionally, Sarah has unearthed some considerable corruption within AMS over the years. I’m hoping to investigate this in more depth soon, but it appears that numerous AMS executives have been subject to SEC criminal charges since AMS purchased PGW.
• ICV2 has more, reporting that AMS has had considerable legal expenses over the years: over $14 million in 2005 and $6 million in 2006 (although offering no sources for these figures).
• Icarus Comics suggests that the AMS bankruptcy should serve as “a warning” and that Diamond, despite all the criticisms leveled its way, is an efficient and profitable distributor.
• Charlie Anders suggests supporting publishers through alternatives (such as the magazines at McSweeney’s and Soft Skull’s fiction subscription).
• The San Diego Business Journal tracks down AMS’ largest shareholder. The man’s name is Robert Robotti. His stock dropped from $3.4 million to $650,000 after the bankruptcy. That’s 7% of the outstanding stock. Robotti says that the bankruptcy move was the right decision. He would not reveal the steps in progress to preserve AMS, but it does involve selling the company.
• Kathryn Cramer offers some analysis on why publishers were continuing to use AMS as a distributor when AMS had several executives cooking the books. It may be because of AMS’s near-exclusive access to the discount retailers. Cramer’s question is whether or not AMS held a monopoly in violation of the Sherman Antitrust Act.
• But the biggest potential news comes from Publishers Weekly: AMS may be selling off PGW. PW says it has sources which suggest that there have been discussions along these lines, but until there’s more reliable information here (like PW offering a named source), this is mere conjecture.

Here are the most recent developments:

• Some folks have a sense of humor about PGW.
• Violet Blue has offered her thoughts on the meltdown, noting how the impact affects Cleis Press and pointing to a former AMS exec’s prison sentence. (The charge: falsifying earnings.)
• Soft Skull’s Richard Nash puts the catastrophe in perspective.
• Dan Wickett shares some ideas on how publishers might want to pick up some cash to make up for the lost revenue. The inspiration? An idea first put out there by Richard Nash.
• Scrivener’s Error has a helpful legal breakdown. The news ain’t good.
• Paul Collins: “Innumerable small publishers working with AMS and their subsidiary PGW — just about every good small publisher you’ve ever heard of — woke up in the street on New Year’s morning with their clothes missing and a pair of black eyes.”
• No further news as of yet from the San Diego Union-Tribune, but I don’t think we’re going to see any major action until the creditors committee meeting on January 12.
• I’m experiencing some technological issues with my main computer (hence, scant email replies from me for a while; apologies). But I’ll have more for you on Monday.
• [Sunday morning item]: Nick Mamatas reveals some inside information. Soft Skull (and perhaps others) has held off on inventory until forming a short-term strategy. There was apparently a lengthy conference call with 55 publishers and 6 lawyers conducted on Friday. (I have confirmed with an independent source that there was indeed a conference call, with over 70 publishers represented.) The consensus was that these publishers decided to ship the books to the PGW Indianapolis warehouse, despite the risks, and hope that revenue would come right in. So we know that stock for some of the 150 publishers will continue to be offered for the time being. Let’s just hope that PGW will come through on the revenue front.
• [Additional Sunday item]: Critical Mass observes that Pages Magazine was operated by AMS.

The Gray Lady finally gets on the case, with reporter Julie Bosman speaking to an unnamed publishing executive. “The publishers are going to end up taking a huge loss,” says this executive. Also quoted in the article is Grove/Atlantic publisher Morgan Entrekin, who simply says, “It’s a mess” and who is reported as now being in something of a mad scramble. Entrekin has nothing more to say beyond these three words.

Okay, so the publishers aren’t talking (or at least going on the record with journalists). But I must quibble with this publishing executive’s asinine suggestion that “authors and readers were unlikely to be affected by the bankruptcy filing.” With AMS currently incapable of paying off their creditors, with a pennies-on-the-dollar turnaround at best, and with current AMS stock now being extricated from warehouses, it’s very likely you won’t be seeing independent books in stores anytime soon, until the publishers left in the lurch work out alternative distribution methods or guaranteed ways to earn current revenue. So readers looking for something different from, say, Laurell K. Hamilton and Mitch Albom are going to start seeing a difference.

And let’s consider the publishers, who are now in the process of bearing the financial brunt in ways that may very well go unreported. With reduced revenue coming in, it is unlikely that the affected publishers are going to be paying out advances to authors as they struggle to meet their operating expenses. Authors who are writing quirky or experimental books that don’t sell as well as the blockbusters often must go to independent presses to get their work published. But if the independent presses are hurting, then advances and acquiring new titles may be the least of the indie publishers’ cost concerns as this mess gets sorted out.

This morning, Publishers Weekly reported grimmer news, noting that the bankruptcy court is now in the process of granting the publishers access to the inventory. At the moment, access is now at the discretion of Judge Sontchi. A creditors committee meeting is now set for January 12, but with the creditors committee being comprised of the 20 largest creditors (i.e., the big publishers), it remains to be seen whether the precarious financial condition of indie presses will be taken into account by the committee.

Heidi MacDonald observes this morning that it remains unknown what distribution percentage Dark Horse had with PGW.

Sarah’s also investigating this, discovering this article that suggests financial inconsistencies on PGW’s part.

• The official press release from AMS.
• The Seattlest’s Jeremy Barker focuses on the effect on Seattle presses.
• Matt Wagner suggests that consolidation may not be good for small presses, even if PGW’s huge volume allowed for independent presses to get into big-box stores.
• Sarah points to the Canadian impact.
• At The Beat, comics publisher Actionopolis/Komikwerks offers a response. Shannon Eric Denton and Patrick Coyle relay their attorney’s thoughts: AMS is looking for a buyer, but that a “fresh start” will enable any new company not to take on the debt. So they may be more attractive now than they were before the bankruptcy filing.
• Dean Haspiel: “BOTTOM LINE: in order to succeed, the author has to become the publisher and the publicist and, sometimes, the printer, too.”
• Time Out New York is looking into the story.
• At the Engine, Heidi MacDonald asks people how the AMS bankruptcy will affect them. Among some of the highlights: Warren Ellis insists that HarperCollins will not get the advance back for his second novel and Comic Relief owner Rory Root pointed out, as Soft Skull’s Richard Nash suggested in the first AMS post here, that pennies on the dollar is the likeliest prospect for the creditors.
• Colleen Doran suggests that Dark Horse was expecting big money from Frank Miller’s 300. [UPDATE: In the interests of accuracy, it remains uncertain what degree of output Dark Horse had with AMS, but hopefully we’ll have more information on this soon.]
• Unrelated to all of this, but perhaps indicative of the current publishing climate is the Independent Press Association ceasing operations. (Thanks, Dan Wickett, for the link.)