Tower Records to Sell Company Under Chapter 11 Sale Process

SACRAMENTO, CA. (Tower Records) - MTS Incorporated and its subsidiaries (Tower Records), America's leading independent music and entertainment retailer which owns and operates 89 Tower Records stores in 20 states nationwide, tonight announced its intent to sell the Company through a process (Section 363) under Chapter 11 of the Bankruptcy Code. This process, which is subject to court approval, sets in motion a timeline of events that will ultimately insure a sale of the Company within approximately 60 days of the filing date.

According to Joseph D'Amico, Tower's recently named CEO, the filing is a necessary vehicle to execute his commitment to sell the Company. "Tower Records has conducted an extensive sale process and this step will allow buyers to complete a sale in time for the holiday season while maximizing the value for stakeholders." In March of 2006, the Company retained Houlihan Lokey Howard & Zukin as its marketing and sales agent. The Company is evaluating Letters of Intent from parties interested in acquiring the Company. Mr. D'Amico stated, "Potential parties seeking to acquire Tower Records recognize the strength of the brand and its unique position within the marketplace, making it a very attractive opportunity."

The Company also announced that it has entered into an $85 million Debtor in Possession financing with its current bank group led by CIT as agent. This financing will fund its operations and purchases of new product while the Company completes the sale. Tower has also been able to renegotiate delivery terms for product with the trade. D'Amico commented, "The trade has always supported Tower through difficult times and we recognize that their support is imperative to the consummation of a transaction."

Last week, Tower was voted 'Retailer of the Year' (Large Division) at the 48th annual National Association of Recording Merchandisers (NARM) convention for the third consecutive year. "Tower Records is a great brand that has a unique place in the market. I am confident that the brand will continue to endure for many years to come," added D'Amico.
Visit https://www.omnimgt.com to view filing documentation by clicking "Real Time Data" and Tower Records 2006.