The Minnesota District Court for the Fourth Judicial District in the County of Hennepin held a hearing on Tuesday to determine the final disposition of the insolvent Audio Research Corporation which is operating under Assignment for the Benefit of Creditors (ABC) – a form of receivership. The assignee in this case, Patrick Finn of Lighthouse Management Group had executed an Asset Purchase Agreement (APA) with Acora Acoustics and was seeking an order from the judge to approve the APA and the transfer of the assets free and clear of any and all liens to Acora Acoustics.
See more on this end of one era of Audio Research…and the beginning of the next
In the end, it was all over in just a little over ten minutes. It felt almost anti-climatic, given many years of building the beloved high-end audio brand…and the months of drama surrounding Audio Research’s deteriorating financial situation, ultimately becoming insolvent and falling into receivership.
Gathered in the district court’s Zoom meeting space were the principal parties, including Patrick Finn of Lighthouse Management Group (the “assignee”) and his attorney Will Tansey, Valerio Cora of Acora Acoustics (the buyer) and his attorney Charles Nelson, the Judge’s law clerk, the court reporter, the Honorable Judge Susan N. Burke, and Strata-gee’s chief content creator, yours truly.
The Performative Aspects of Court
If you’ve never been to court for any reason, you miss some of the more performative aspects of it. In the case of this hearing, attorney Will Tansey took the floor to enter a motion for a judicial order approving the deal. He did this by laying out a narrative of events that have transpired since the ABC was implemented in early April. He presented a clearly articulated sequence of events including the launch of the ABC, the marketing of the company to potential buyers (with a nod to the help of the “assignor,” previous owner Trent Suggs, in identifying possible buyers), the auction process, the winning bidder (Acora Acoustics), and the status of the transaction at this time.
Toward the end of the presentation of his motion, it seemed to me as though his tone began to change. After explaining that there are enough funds based on this deal to completely pay the secured creditors in full and to make an additional payment to unsecured creditors as well – I actually felt that Tansey sounded almost like he was pleading with the judge. He began saying things like, “We don’t think a higher price is available…We believe this is in the best interest of the creditors…There have been no objections [to this proposed deal]…You know, there’s not enough assets here to really run another sales process and we don’t think we could do any better…We think we’d lose a lot on a net basis.”
Almost Pleading with the Judge to Sign Off on the Deal
With these statements, Tansey seemed to be pleading with the judge to accept this deal as it was…don’t ask them to try again. With the narrative fully laid out, Tansey simply asked the Judge for the appropriate order.
“And so we believe that court should enter an order approving the sale as proposed in the proposed order,” Tansey said.
One Last Twist
So far, everything transpired pretty much as I had expected. But there was one final small but noticeable twist. At the very end of Tansey’s motion, he noted to the judge that, “At the request of the buyer,” they have changed the buyer from being listed as simply “Acora Acoustics Corporation” to “Acora Acoustics Corporation, or Its Assigns” [emphasis added].
Of this change, Lighthouse’s attorney says: “We don’t think that changes the effect on anybody in the case. And so we would ask that Your Honor sign off on the updated proposed order that was submitted to your chambers earlier today and filed shortly before the hearing.”
The judge then asked the buyer’s attorney, Charles Nelson, if he had anything to add. Nelson deferred to Tansey’s presentation of the facts and said the buyer was satisfied. And then we came to one final act.
The Court Has Spoken; Ending One Chapter for Audio Research and Beginning a New One
Judge Burke then said, “I did have a chance to review the file prior to the hearing and it looked like everything was in order. And so I’ll grant the motion and approve the sale of the property, free and clear of liens.” She said the order will be filed either late on Tuesday or early Wednesday.
And just like that…the hearing was over. And Audio Research’s life would change forever…
Goodbye Audio Research Corporation, Hello AR Tube Audio Corporation
So ends one chapter of Audio Research’s life, with a new one to begin. It will have a new corporate identity as AR Tube Audio Corporation. What happens next comes down to how ingenious Cora’s plans are for revitalizing the brand. And how much more money he’s prepared to pour into a substantive rebuilding.
Cora has got his work cut out for him. Much has changed over the last three months and the brand has definitely lost some momentum. It will take more investment, more innovation, and more blood, sweat, and tears to start a more virtuous cycle for the brand.
But at least for now, Audio Research lives to see another day…with the hope for a better, brighter future…
See more on Audio Research at audioresearch.com.