Chapter 11 Filed By Musicland to Complete Restructuring

Musicland Holding Corp. Files Chapter 11 to Complete Restructuring Initiatives; Company Receives Commitment for $75 Million in Financing

MINNEAPOLIS--(BUSINESS WIRE)--Jan. 12, 2006--Musicland Holding Corp., an entertainment specialty retailer operating more than 800 retail stores and online under the names Sam Goody (SamGoody.com), Suncoast Motion Picture Company (Suncoast.com), and MediaPlay.com, announced today that the company and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The company believes the move is necessary to complete its restructuring initiatives and refine its business model. The company has received commitments for up to $75 million in debtor-in-possession (DIP) financing from its existing bank group, led by Wachovia as agent, which will enable it to continue to operate 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. "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 company attributes their financial difficulties to a diminishing music and movies marketplace, growing competition from big box retailers and the increase of music downloading.

"Musicland has a solid management team, enthusiastic employees and loyal customers. We have funding in place to continue our normal business operations during the restructuring. We will continue our plans to launch innovative new business initiatives in 2006 and continue to build our highly valued vendor relationships," Madden concluded.

During the restructuring process vendors will be paid for post-petition purchases of goods and services in the ordinary course of business. The company has asked for court permission to continue to honor its current customer policies regarding merchandise returns and to honor outstanding gift cards and loyalty programs, so that there will be limited impact on customers. Courts typically grant such requests and Musicland expects that the court will do so here.

The Company and its subsidiaries filed their voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York. The case has been assigned case number 06-10064. Additional information about Musicland's reorganization is available at www.musicland.com or via the company's restructuring information line 877-568-3857.

About Musicland

Musicland Holding Corp. is a leading national specialty retailer of music, movies and entertainment-related products. Musicland operates more than 800 retail stores and online under the names Sam Goody (SamGoody.com), Suncoast Motion Picture Company (Suncoast.com) and MediaPlay.com. In June 2003, Musicland was acquired by an affiliate of Sun Capital Partners, Inc.

Contacts

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Brenda Adrian, 212-573-6100
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Giovanna Falbo, 212-573-6100
giovanna_falbo@sitrick.com