Jun 4, 2002 2 min read

SAN FRANCISCO (AP) – Napster Inc. filed for Chapter 11 bankruptcy Monday, seeking court protection from creditors under a plan by music industry heavyweight Bertelsmann AG to take over what’s left of the company. The Internet music-swapping service has agreed to sell its assets to Bertelsmann for $8 million in cash and the assumption of certain liabilities, according to papers filed in a Wilmington, Del., court.

The liabilities include any new loans to Napster and forgiveness of the $91 million Bertelsmann loaned Napster before the filing, Napster’s bankruptcy lawyer Rick Cieri said.

After the bankruptcy process is complete, Napster will sell itself to Bertelsmann, unless another company submits a higher bid, Cieri said. “The Chapter 11 process is going to be utilized to maximize the value of Napster, whether by a sale to Bertelsmann or someone else,” Cieri said. Calls to a Napster spokeswoman were not returned Monday. Bertelsmann said May 17 it would buy Napster for $8 million – slightly more than half what it had previously offered to purchase the company – to pay Napster’s creditors as part of a financial reorganization. As of April 30, Napster had about $7.9 million in assets and about $101 million in liabilities, according to the filings. The bankruptcy filing is the swan song for a company that three years ago set off a frenzy of online song-swapping that attracted millions of users, as well as the ire of the recording industry.

, which sued for copyright infringement.

At its peak, Redwood City-based Napster boasted some 60 million users and seemed at once to symbolize both the excitement of the digital revolution and the worst nightmares of the established recording industry.

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On the Net:

http://www.napster.com

http://www.bertelsmann.com