Whither Audio Research

davidavdavid

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Jun 30, 2014
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It would appear that in the past week in the State of Minnesota District Court, County of Hennepin Fourth Judicial District, the Audio Research Company has assigned its debts and assets (sic) to the Lightwave Management Group in Minnesota. They specialize in turnaround/bankruptcy and financial crisis management.

Interesting that these papers were filed just about a week after AXPONA 2023 was over.

Stay tuned.


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sad but predictable.
 
This is painful. I own a lot of ARC :(
 
ARC is such an iconic brand, a pillar in high end audio. There is much value in the name they will either reorganize, right size manufacturing or the name and remaining assets will be sold to continue the brand.

As a longtime resident of Minneapolis and owner of so many ARC amps and preamps I had the opportunity to visit their operations over the years. I do remember wondering after they moved into their current location...I hope they will have the business to justify this place?
 
I reviewed the Assignment filed on April 4 in state court. Audio Research voluntarily agreed to assign all of its assets to a receiver, Lighthouse Management Group, Inc. Lighthouse Management is in the business of working with troubled businesses and regularly acts as a receiver. This process is an alternative to a bankruptcy filing in federal bankruptcy court; however, any three creditors can seek to place Audio Research into an involuntary Chapter 7 bankruptcy in federal bankruptcy court. This might occur if three creditors do not trust the process or the company’s strategy in state court. Schedule B attached to the Assignment is 31-page, single-spaced list of creditors which includes many familiar names in the audio industry. The job of the receiver is to liquidate the assigned assets, collect all proceeds, pursue any claims, pay and discharge all expenses of the liquidation, and then pay and discharge (to the extent of available funds) all debts and liabilities of Audio Research. Sufficient funds may or may not be available depending on the sale proceeds and the amount of the debt. Unlike a bankruptcy filing, there is no statement of the amount of the debt in the state court filing.

The receiver has complete control and power of attorney over the assets of Audio Research. It is likely that, to maximize proceeds, the receiver will seek to sell the entirety of the assets and business (including goodwill) as a going concern; if that effort is successful, the business may continue under the ownership of the buyer. It is also possible that Audio Research already has a transaction agreed upon in place for the sale of its assets and business (including goodwill) as a going concern to a “white knight” and the filing with state court is intended to facilitate that transaction without an involuntary bankruptcy filing. I expect that Audio Research has already been (or soon will be) communicating with creditors. The argument will be that the “white knight” buyer will only contribute funds if Audio Research is not forced into bankruptcy and a bankruptcy will yield far less value for creditors.

Having owned and enjoyed many Audio Research products for many years including, most recently, the Ref 160S Amplifier, Ref 6SE Preamplifier, and Ref 3SE Phono Preamplifier, I find this turn of events to be unfortunate. Hopefully it will result in better things to come under new ownership. It seems, however, that the effort by Audio Research to appeal to a broader range of customers with the lower priced I/50 was not successful.
 
Did AR sell gear with internet vendors or did it rely on audio stores only? If the answers are no and yes respectively, that may be the main cause.

Other reasons may be competition for a very limited clientele, limited dealarship exposure, pricing, reliability issues, etc.
 
William Zane Johnson is rolling in his grave, sad..........
 
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I reviewed the Assignment filed on April 4 in state court. Audio Research voluntarily agreed to assign all of its assets to a receiver, Lighthouse Management Group, Inc. Lighthouse Management is in the business of working with troubled businesses and regularly acts as a receiver. This process is an alternative to a bankruptcy filing in federal bankruptcy court; however, any three creditors can seek to place Audio Research into an involuntary Chapter 7 bankruptcy in federal bankruptcy court. This might occur if three creditors do not trust the process or the company’s strategy in state court. Schedule B attached to the Assignment is 31-page, single-spaced list of creditors which includes many familiar names in the audio industry. The job of the receiver is to liquidate the assigned assets, collect all proceeds, pursue any claims, pay and discharge all expenses of the liquidation, and then pay and discharge (to the extent of available funds) all debts and liabilities of Audio Research. Sufficient funds may or may not be available depending on the sale proceeds and the amount of the debt. Unlike a bankruptcy filing, there is no statement of the amount of the debt in the state court filing.

The receiver has complete control and power of attorney over the assets of Audio Research. It is likely that, to maximize proceeds, the receiver will seek to sell the entirety of the assets and business (including goodwill) as a going concern; if that effort is successful, the business may continue under the ownership of the buyer. It is also possible that Audio Research already has a transaction agreed upon in place for the sale of its assets and business (including goodwill) as a going concern to a “white knight” and the filing with state court is intended to facilitate that transaction without an involuntary bankruptcy filing. I expect that Audio Research has already been (or soon will be) communicating with creditors. The argument will be that the “white knight” buyer will only contribute funds if Audio Research is not forced into bankruptcy and a bankruptcy will yield far less value for creditors.

Having owned and enjoyed many Audio Research products for many years including, most recently, the Ref 160S Amplifier, Ref 6SE Preamplifier, and Ref 3SE Phono Preamplifier, I find this turn of events to be unfortunate. Hopefully it will result in better things to come under new ownership. It seems, however, that the effort by Audio Research to appeal to a broader range of customers with the lower priced I/50 was not successful.
Nathan, are you an attorney or have expertise in bankruptcy law?

It reads like correct and helpful information but I was just wondering about your background.

Based on your comments, it seems there may be a good path forward. We also have the same amplifiers from ARC as audiophiles.
 
ARC has not recovered from the 2017 loss of their Diector of Engineering, Ward Fiebiger. Fiebiger was WZJ's right hand man and kept his vision alive. Most of ARC's recent products are Fiebiger designs up through the Ref 6se, Ref 3se and their predecessors. A huge loss. Dave Gordon and Warren Gehl remain from the nucleus that generated incredible success in the early 21st C and beyond.
 
Nathan, are you an attorney or have expertise in bankruptcy law?

It reads like correct and helpful information but I was just wondering about your background.

Based on your comments, it seems there may be a good path forward. We also have the same amplifiers from ARC as audiophiles.
Lee,

I am a practicing attorney in the areas of business and real estate transactions. I am not a bankruptcy attorney but have worked on both the purchase of businesses out of bankruptcy and out of court debt restructuring pursuant to the acquisition of a business. But, to be clear, my analysis is pure conjecture based only on clues from the filed Assignment. There is a hearing scheduled for May 17 in the case. Pending any press releases or motions filed in advance of the hearing, there may be little to go on before then.

I enjoyed my ARC equipment but happily moved in a different direction a couple years back.
 
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Lee,

I am a practicing attorney in the areas of business and real estate transactions. I am not a bankruptcy attorney but have worked on both the purchase of businesses out of bankruptcy and out of court debt restructuring pursuant to the acquisition of a business. But, to be clear, my analysis is pure conjecture based only on clues from the filed Assignment. There is a hearing scheduled for May 17 in the case. Pending any press releases or motions filed in advance of the hearing, there may be little to go on before then.

I enjoyed my ARC equipment but happily moved in a different direction a couple years back.
Okay, fantastic. Appreciate your comments!
 
If the company put itself into voluntary receivership, I suspect it has already looked for a buyer and couldn’t find one who was willing to take on the liabilities. I’m no expert but one of the receiver’s roles is to pay the creditors as quickly as possible, usually for some fraction of what’s owed. I don’t know enough about the business but given how strong high-end sales were during the pandemic, I’m surprised that such an iconic and widely known audiophile brand has found itself in this predicament. Looks like a good business with a bad balance sheet, likely saddled with too much debt for the business to service.
 
Voluntary receivership may be a tactic to get ahead of being forced to comply.

On beacons of Audio Research- Rich Larson was one of the key Engineers that WZJ relied on and had a hand in designs even after his retirement.

I wonder what dealer partners have to say of this unfortunate circumstance.
 
The truth is that anything a tube can do a transistor can do better! Speaking as an owner of lots of vintage tube gear - which goes unused!
You mean like ARC SP6 and D75?
 
They came from the same owner. The price was right - about $1300. For me it was a nostalgia purchase. My RGR 4/Sumo Andromeda combo sounds at least as good or better!
 
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