(May 1, 2007) The Source magazine and Source Entertainment Inc. have filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Manhattan on Friday (Apr. 27) Dow Jones wire services reported yesterday (Apr. 30).
According to court documents, The Source is still struggling to recover from dishonest business practices and negative publicity brought on by former management, which caused various advertisers to withdraw support for the well known brand.
The Source also converted and consolidated a previous Chapter 7 filing in Friday's court proceedings and listed assets of about $1.3 million and liabilities of $35 million.
In early 2006, investors in The Source Entertainment ousted founders David Mays and Raymond "Benzino" Scott from the company, when ad revenue and newsstand sales plummeted, after the pair became engaged in bitter feuds with a number of rivals, including 50 Cent and Eminem.
To complicate matters, the magazine defaulted on an $18 million loan from Textron Financial Partners, who successfully fought to have Mays and Scott removed from the company.
According to the bankruptcy filing, The Source also stopped sending magazine's to over 140,000 subscribers and magazine subscriptions have dropped by more than 50 percent since 2002.
An attorney for The Source said the company will emerge from the bankruptcy successfully, as a "reorganized" entity.