Wherehouse Files for Chapter 11

Wherehouse Entertainment Inc. (Torrance, Calif.), a 370-unit music and video retailer, has filed for Chapter 11 bankruptcy protection.

The company, which operates in 23 states under the Wherehouse Music, Tu Musica and XChange nameplates, said it filed “in order to facilitate its capital restructuring initiatives and streamline its operations.”

According to the company statement, since the installation of its current senior management team in June 2002, “a comprehensive review of all operations including the corporate headquarters has been underway. As part of its program to improve its competitiveness and profitability, Wherehouse recently closed 30 stores and expects to close an additional 120 unprofitable or underperforming stores within the next several months. Wherehouse expects that its remaining approximately 250 stores will form a solid basis for a return to profitability. These stores will continue to operate as normal.”

“After careful evaluation of various restructuring and recapitalization alternatives,” said president and ceo Jerry Comstock, “we concluded that a voluntary reorganization under Chapter 11 presents the most effective means to restructure the company's operations, strengthen its capital structure and position Wherehouse to compete effectively in the new music industry.”

As part of its restructuring initiatives, the company said it intends to re-invest capital in its stores “to create a more interactive environment for its customers including remodeling the stores, increasing listening availability and installation of interactive kiosks.”