The Source magazine and its parent company Source Entertainment Inc. have filed for Chapter 11 bankruptcy Friday, according to sources.
Court documents state that The Source is struggling to recover from the dubious business practices and negative publicity brought forth by its former management (Dave Mays and Ray Benzino), which caused several advertisers to leave the 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 according to sources.
Founders Dave Mays and Ray Benzino were ousted from the
company in 2006, when sluggish newsstand sales and lost ad revenue prompted a
need for a change.
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One of the company’s biggest financial issues prompting change in
management was The Source defaulting on an $18 million loan from
Textron Financial Partners.
According to the bankruptcy filing, The Source stopped sending
magazines to 140,000 subscribers and magazine subscriptions have
dropped by more than 50% since 2002.
