Reuters is reporting that MTS Inc., the parent corporation of Tower Records, will shortly file for Chapter 11 bankruptcy protection.  MTS has been seeking a buyer for the distressed chain of almost 100 stores for some time.  Recently the Hollywood Reporter indicated that Sun Capital Partners, the company that took the Musicland chain off of Best Buy's hands, would take over Tower (see 'Sun Capital Sets Sights on Tower Records', but that deal has apparently fallen through.  Reuters estimates that Tower will file for bankruptcy some time in the next week, and the bankruptcy plan, which has already been approved by some key creditors, will not result in major store closings or employee layoffs or a mass liquidation of Tower's stock.

Still the financial difficulties of Tower Records is further testimony to the problems of the music industry, which has been hurt by both downloading and a failure to create a generation of hot new acts.  Tower was one of the first record chains to work hard at diversifying its product line with graphic novel sections and sell-through video, which now means that comic publishers and video producers (including anime distributors) may take part of the hit as Tower restructures its debt.  Last April MTS reported a debt of some $441.9 million, which included $195 million in bank debt plus some $247 million in operating leases.  Sales for the nine months prior to April 2003 fell 9% and losses for the period rose to $36.3 million.