December 29th, 2009 by Reed Allmand 
The independent licensee and distributor of entertainment programming in North America, Image Entertainment Inc., may need to file Chapter 11 bankruptcy after defaulting on a payment under a convertible note. The company defaulted on an installment payment of $4 million due on Dec. 14, for its $15.7 million convertible note. The company also said that the default could adversely affect its business and they are hoping to continue operations if they choose to file Chapter 11 bankruptcy protection.
“The company does not currently have the funds, or access to the funds, necessary to repay all of its outstanding obligations to the Holder, Wachovia, Arvato and its other creditors,” Image said in a statement.
The possible bankruptcy filing doesn’t come as a complete surprise to those in the entertainment industry because Image Entertainments has been experiencing challenges in trying to increase its profit share of the Blu-ray disc market and still depends heavily on DVD sales which fell by more than 12 percent this year.
Image entertainment has stated that it is working with financial advisors to explore all strategic alternatives, including Chapter 11 bankruptcy. Chapter 11 bankruptcy would protect the company’s assets and give the company an opportunity to continue operations. However, it is not clear what the values of the company’s assets are or how much total debt they owe. But it is clear that if Image Entertainment chooses to not file Chapter 11 bankruptcy the intellectual property rights they own may be in jeopardy if creditors decide to act aggressively in seeking repayment.
About Reed Allmand
Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."
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