Musicland's Creditors Sue Banks Over $25M Loan

Law360, New York (May 16, 2007, 12:00 AM EDT) -- A group of entertainment companies have sued two banks over a last-minute $25 million loan paid to Musicland Holding Corp. four months before the retailer filed for bankruptcy.

The eight secured trade creditors, which include Buena Vista Home Entertainment Inc. and Paramount Pictures Corp., claim the banks—Harris N.A. and Wachovia Bank N.A.—participated in a “subterfuge” to disguise the loan as part of a revolving credit facility secured by a senior claim on all of Musicland’s assets at the creditors' expense.

The funds, which were repaid to...
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