Subscription Claims in Doubt
after Divine Bankruptcy
The parent company of failed journal subscription agency RoweCom itself filed for bankruptcy protection February 25 in U.S. Bankruptcy Court in Boston, along with several of its other subsidiary companies. The Chicago-based Divine said the action was taken to protect its operations “while it works to restructure its liabilities and achieve a timely and favorable resolution to the economic issues facing the RoweCom, Inc. subsidiary.” The firm is in the midst of a contentious lawsuit by RoweCom, which accuses its parent of diverting $73.7 million in customer payments and forcing it into bankruptcy.
According to the official committee of unsecured creditors formed by the bankruptcy court, the Divine bankruptcy filing effectively creates an “automatic stay” of all monetary claims, including those asserted by libraries with unfulfilled subscriptions and publishers with unpaid orders. The committee has hired financial-services firm Deloitte and Touche to advise it on disposition strategies initiated by RoweCom and Divine.
The proposed purchase of RoweCom’s worldwide operations by Ebsco is still pending. As Information Today reported February 27, “Reasonable conjecture indicates that Divine’s bankruptcy will probably slow the process considerably, and could, in a worst case scenario, completely destroy the deal.”
The bankruptcy court could also choose to merge the two Chapter 11 cases, forcing the formation of a completely new creditors group composed of claimants—among them Microsoft, Dell Computer, chewing-gum magnate William Wrigley, and basketball star Michael Jordan—with losses far exceeding those of the largest library creditors.
“Even if the bankruptcy cases are not merged, RoweCom’s creditors are unlikely to see any of their money returned from Divine,” Information Today concludes. “It’s not a rosy—or divine—picture.”
Posted March 3, 2003.
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