The toy manufacturing and distribution industry has faced a challenging business environment since years before the Covid-19 pandemic.
The industry took its biggest hit when giant toy retail chain Toys “R” Us Inc. filed for Chapter 11 bankruptcy on Sept. 18, 2017, liquidated, and closed operations in 2018.
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The most significant manufacturer and distributor to file bankruptcy recently was Basic Fun’s Chapter 11 filing on June 28, 2024.
Related: Struggling popular retailer files for Chapter 11 bankruptcy again
Basic Fun produced and distributed major toy brands such as Care Bears, Tonka, Lite Brite, K’nex, Lincoln Logs, Tinker Toys, Playhut, Uncle Milton, Fisher Price Classics, Mash’ems, and Littlest Pet Shop.
The company had licensing agreements with Hasbro, Disney, Mattel, Nintendo, Netflix, Coca-Cola, Universal, Cloudco Entertainment, NFL, and NBA.
The company’s CEO Jay Foreman said that the company’s problems dated back to the demise of Toys “R” Us and Covid exacerbated the problems.
The company hoped the restructuring process would put its problems behind it and help secure a successful future and position the company for growth and value creation, the CEO said.
Marvel Comics on display in a comic book store.
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Diamond Comic files for bankruptcy after losing exclusive agreements
And now, Diamond Comic Distributors, a leading distributor of comics, graphic novels, toys, games, and other pop culture-related merchandise, filed for Chapter 11 bankruptcy along with three affiliates seeking a sale of their assets after losing exclusive distribution agreements with comic book publishers DC Entertainment, Marvel Worldwide, and Image Comics.
Related: Another major shipping company files for Chapter 11 bankruptcy
The debtor, whose affiliates include toymaker and distributor Diamond Select Toys & Collectibles, filed its petition on Jan. 14 in the U.S. Bankruptcy Court for the District of Maryland in Baltimore listing $50 million to $100 million in assets and liabilities, including about $32.6 million in secured debt and about $40 million in unsecured trade debt.
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The Hunt Valley, Md.-based debtor’s largest unsecured creditors include Penguin Random House, owed $9.2 million in trade debt; Bandai Co., owed about $4.3 million in trade debt, and National Entertainment Collectibles Association, owed about $2.6 million in trade debt.
Comic book publishers terminate agreements
The debtor historically had agreements with DC, Marvel, and Image to be their exclusive agent for sales to comic book specialty shops. DC terminated its exclusive agreement in 2020, moving its business to a newly launched competitor.
Marvel in 2021 and Image in 2023 converted their exclusive agreements to non-exclusive agreements for comic book distribution. The loss of all of these exclusive agreements directly led to a loss in the debtor’s overall sales volume, according to a declaration by co-Chief Restructuring Officer Robert Gorin.
The impact of a decline in sales was compounded by a rise in operating expenses, including an increase in labor costs, which created an unsustainable liquidity position. The company decided its best option was to market the company for a going-concern sale under a Chapter 11 bankruptcy filing.
Top retail bankruptcy filings in 2024
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The debtor will seek up to $41 million in debtor-in-possession financing to fund the debtor’s operations during its bankruptcy case with up to $5.5 million available on an interim basis from JPMorgan Chase Bank NA.
Diamond Comic Distributors, established in 1982, is a leading distributor of comics, graphic novels, toys, games, and other pop culture merchandise to retailers worldwide. The company began providing comic book shop retailers with wholesale, non-returnable comic books and related merchandise out of a single warehouse to 17 retail customers.
Diamond Comic’s business has since grown to five warehouses and thousands of retail customers. Its four divisions include Alliance Game Distributors, which is the oldest hobby game distributor in the U.S., founded as The Armory in 1976.
Alliance distributes popular product brands, including Dungeons & Dragons, Lord of the Rings, Pokemon trading cards, and Dragon Ball. The affiliate distributes to Barnes & Noble and Books-A-Million, as well as local retail shop owners.
Another affiliate Diamond Comic Distributors focuses on the sale and distribution of comics, graphic novels, trade paperback books, and other pop-culture books, toys, and merchandise produced by publishers, such as Marvel and Image Comics. It also distributes toys and collectibles, such as Funko Pops! and Star Wars statues.
Diamond Comic retailers include Walmart, Target, Amazon, Barnes & Noble, as well as comic book stores and collectible stores. The debtor also operates Collectible Grading Authority, which evaluates, authenticates, and grades vintage and modern toys, games, and other collectibles.
Debtor Diamond Select Toys and Collectibles manufactures collectible toys and animated-style statues based on licensed intellectual property from companies like Disney, Marvel, and Warner Bros.
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