Portland Indie Distributor Allegro Set To Liquidate, Labels Left Holding The Bag

Allegro: Everything Must Go?

PORTLAND-based distributor ALLEGRO MEDIA GROUP, a classical company that expanded into other genres after acquring NAIL DISTRIBUTION in the early 2000s, is apparently trying to liquidate its inventory and shut down, leaving many indie label clients pondering their next move.

In a story reported by online site OPB.org, the company was still trying to acquire product even as it was set to shutter its offices and sell off its stock.

Several hundred independent music labels and recording artists are now faced with buying their own music back as ALLEGRO proceeds with an out-of-court liquidation.

Brothers JOE, VINCE and RICO MICALLEF have run the company since 1982, selling indie product to retailers like TOWER RECORDS, BORDERS and BARNES & NOBLE.

WILLIAM TENNANT, a former product manager for ALLEGRO’s classical music lines, pointed to the industry's "huge contraction" in the wake of streaming. "In the ‘90s there were seven major label groups; now there’s basically two. And the same thing has basically happened with independent distributors.”

In 2007, TENNANT left ALLEGRO to become managing director for the local band PINK MARTINI, maintaining a business relationship with the distributor untiul now.

“There were delays on our checks,” he remembered, “then we weren’t being paid.”

TENNANT secured a new distributor for the band just months before the word came out that Allegro was laying off employees and liquidating most of its business.
 
The company has hired consultant ED HOSTMANN to administrate the liquidation.

“We’re in the process of selling assets and collecting receivable, and selling hard assets,” he said.

According to state documents, 17 liens have been filed against the company. Three units are being liquidated, including ALLEGRO’s main distribution arm. Music labels are now wondering how to get their CDs and DVDs back from ALLEGRO short of buying them.

"We’ll be happy to talk to them about that," said HOSTMANN. "Unfortunately the way the laws are written, the secured creditor have the right to sell those items.”

While the company is a year or more behind on some sales payments, ALLEGRO was still sending out purchase orders requesting more merchandise until very recently, according to some label owners.

Based on published reports and interviews with former employees, it appears about half the staff have lost jobs.

UNIVERSITY OF OREGON Business law expert ANDREA COLES-BJERRE says the rules for consigned inventory are governed by a series of federal regulations — the UNIFORM COMMERCIAL CODE, which put the burden on the labels to protect their own interests.

“Essentially they have to file a financing statement and give notice to those preexisting lenders.” she said. “If they don’t do that, the liquidator can sell those assets and pay the creditors of the merchant.” Small labels who haven’t filed liens to become secured creditors may be left holding the bad

“Secured creditors rule,” she said.  

Many observers expressed dismay that the MICALLEFS are trying to settle their debts on the backs of suppliers. 

The OREGON ATTORNEY GENERAL’s office has one open complaint in its consumer division about ALLEGRO’s behavior during the liquidation.

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