NBN Makes a Counteroffer for PGW Clients

National Book Network (NBN) announced this week that it is offering Publishers Group West (PGW) publisher clients a distribution contract that would pay them 85 cents on the dollar against the bankrupt estate and would extend their existing contract term by three years beyond their next anniversary date. News of the offer comes two weeks after Perseus offered PGW clients a distribution contract for 70 cents on the dollar with a four-year contract extension.

"We've been talking to [PGW clients] all day," Jed Lyons, NBN president, told BTW. "There is a lot of enthusiasm out there for our offer." He noted that working with PGW made sense, as NBN already had a good relationship with the company since PGW President Richard Freese used to work at NBN.

The late decision to offer a competing distribution contract to PGW publisher clients was spurred by the fact that NBN had received "so many queries form publishers unhappy with just one option. We thought we ought to take a run at this," Lyons said. He noted that the company would take on "as many [PGW publisher clients] as we can," and added, "The combination of our infrastructure and our Indiana warehouse is more than adequate."

A bankruptcy hearing is scheduled for Monday, February 12, at which point, a judge will approve either the Perseus or NBN contract offer. Publishers can sign agreements with both companies and wait for the court decision.

According to a letter sent by Lyons to PGW publisher clients, NBN would assume publishers' existing PGW contracts with a few modifications, including:

• "NBN does not offer free freight so clients will not be asked to help pay for it;
• NBN will apply a credit for returns the same month in which returns are processed by NBN;
• NBN does not contribute to the cost of co-op; and
• NBN clients pay a small fee for pages in the NBN seasonal sales catalog."

Lyons also noted that NBN would seek the balance of the money owed to PGW clients as an unsecured claim, rather than an administrative claim. An administrative claim, which Perseus is seeking for its balance of claims money owed to PGW publisher clients, is considered a priority claim and as such, would be paid before unsecured claims. An unsecured claim is "in the pool with other unsecured creditors," Lyons said.

With the announcement of another suitor in the mix, Eli Horowitz, managing editor and publisher of McSweeney's, said, "More is better. All the details are still pretty unclear, but some competition is definitely useful. In the major sense, the offers are quite similar, except for the length of contract and the dollar amount, which favor NBN." --David Grogan