Ron Isley prepares to face the music of a Chapter 7 bankruptcy filing as a portion of his music catalog goes on the auction block this week, possibly endangering The Isley Brothers $30 million securitization, which has yet to close.
The real threat to the bonds, though, is not from the bankruptcy itself, but from EMI Group Plc's attempt to purchase the assets.
"It was known to all parties that the [bankruptcy] was going on, it was just the fact that EMI was trying to block completion of the deal," said one source familiar with the situation.
The IRS has a $5 million claim on Ron Isley's assets, forcing him to sell off his property in U.S. bankruptcy court this week. In response, EMI is reportedly offering $4.1 million to acquire his portion of the songwriters and publishers' rights to the catalog.
According to sources close to the deal, if EMI does succeed in blocking the deal, it could be liable for the assets and any damages associated with their efforts. "EMI is basically saying [Ron Isley] can't sell those assets to anybody besides them," said a source. "They wouldn't be a good faith buyer and any sale would be overturned."
As part of an agreement made in 1980, EMI already owns a 50% stake in the publishing rights of Isley's catalog.
The Isley Brothers' music royalty securitization was launched by The Pullman Group last year. The music catalog includes over 200 compositions written by Ron Isley and his brothers, and includes songs like "It's Your Thing" and "That Lady."
"This is one of the classic R&B catalogs and we believe it will have value for many years," said an official for Pachulski, Stang, Ziehl, Young and Jones, the law firm representing Howard Ehrenberg, the trustee conducting the sale.
