RealTime IT News

Napster Suitor: Anonymous

The Napster saga continued Friday with a chain of events worthy of the "Who Shot J.R.?" mystery status.

Delaware Bankruptcy Judge Peter J. Walsh set the stage by ruling to keep the Redwood City-based Internet file-swapping service in Chapter 11 (reorganization) status as opposed to a Chapter 7 status, which would have liquidated the company and its assets entirely.

The company was forced to shut down last year after major record labels convinced a federal court it violated copyright laws.

The Napster trademark, napster.com domain and other related assets from the company are up for grabs a second time after judge Walsh denied Bertelsmann AG its bid to buy Napster last month.

But the decision leaves more questions than answers. Now that Napster has been given a stay on its existence, who will take over one of the most notorious sites in Internet history?

Costa Mesa, Calif.-based Trenwith Securities, the investment banking unit of BDO Seidman, which is handling the bidding process, was expected to come public with the name of a potential bidder to take over Napster's goods.

Instead, the holding company came forth with an attorney that represented, "a bidder who wished to remain anonymous."

"We have a LOI (letter of intent) from a bidder who met our requirements," said Rick Chance, managing director at Trenwith. "But until we have someone who signs a binding document and makes the deposit, we are not disclosing the name of the bidder."

Trenwith, which facilitated the first auction, recently lowered Napster's minimum bid price from $25 million to $6 million.

At the end of the 20-minute proceeding, judge Walsh contended that the court would name a Chapter 11 trustee come Monday to represent Napster in all legal issues. Chance said the trustee would not be a former member of the Napster team; instead it will likely be a lawyer who can sign off on all legal decisions.

"The biding process will now go through a series of negotiations, which will take some time," Chance said. "It is hard to say how long it will take."

Since the second rounds of auctions, Trenwith said more than a dozen companies, both domestic and international, have expressed interest in Napster including a publicly announced bid by pornography provider Private Media Group .

Even when someone does come forward, Bertelsmann may have a hard time collecting on its near $100 investment in Napster.

Sources close to the deal are telling Reuters that unsecured creditors such as record labels, music publishers, trade creditors will be challenging the German media giant's credited position based on Bertelsmann's claims it is a secured creditor.