Sam Goody's parent files for Chapter 11 bankruptcy

Musicland Holding files for Chapter 11 due to increased retail competition, music downloads.

NEW YORK (CNNMoney.com) - Music retailer Musicland Holding Corp., which operates stores under the Sam Goody, Suncoast and MediaPlay names, said it has filed for Chapter 11 bankruptcy.

The company said Thursday the move is necessary to complete its restructuring plan and that it has received commitments for up to $75 million in financing, which will allow it to keep operating during the restructuring period.

"We have been exploring various options for cutting costs, such as the impending closure of the Media Play chain," Musicland President and CEO Michael J. Madden said in a statement.

"We believe that the decisive action we are taking provides the Company with the most effective means to restructure our operations, strengthen our balance sheet and position us to compete more effectively in the current music and movies industry environment."

The specialty music retailer, which operates more than 800 retail stores and online nationwide, said its financial problems stemmed from increased retail competition and a rise in music downloading.

Musicland said it expects the court to grant a request to keep honoring its current customer policies regarding merchandise returns and to honor outstanding gift cards and loyalty programs.

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