After initially submitting an objection to payments concerning Diamond‘s Memphis warehouse today and then withdrawing that, also today, the Ad Hoc Committee of Consignors have submitted a motion objecting to Diamond’s move to convert to chapter 7.

The Ad Hoc Committee doesn’t object to the conversion to chapter 7 from chapter 11 by Diamond but instead in some of the details Diamond has submitted in their initial motion on December 12.

1. Diamond has proposed 14 days for parties to file an objection to any Final Fee Application. The Ad Hoc Committee feels it’s too short of a time period with potential of a lengthy list to review. Also, the period would fall over at least one holiday. Instead, they’re proposing at least 30 days.
2. Diamond has proposed paying nearly $193,250 to key employees. As Diamond currently has no employees and not operating any businesses, the Consignors are objecting to that.
3. Diamond has proposed paying $375,000 to Official Committee of Unsecured Creditors and Debtors’ professionals. The Ad Hoc Committee thinks that’s premature and any payments should come after a trustee is appointed and can better understand the current financial situation.
4. Diamond has proposed paying $128,286 to “Nov Storage Fees – Consignment.” That would go to Sparkle Pop for storing the consigned goods. The Ad Hoc states that Sparkle Pop has underreported the amount of sales it has made of consigned stock and Sparkle Pop may owe Diamond additional sums that have yet to be paid. During Sparkle Pop’s initial purchase of Diamond’s assets there was some wiggle room and the final amount wasn’t listed as it was based on various metrics. Whatever is now due is supposed to be paid December 17, 2025.
5. Diamond has asked for an extension of stay in all of the contested matters, the most notable is the fight concerning consigned goods. Diamond has inventory on consignment and wants to sell the inventory to raise money to pay off its debt. The publishers, whose inventory that originally was, are fighting to take back that inventory. There’s numerous motions and lawsuits concerning this. The Ad Hoc points out that the inventory’s value decreases every day it is held and the stay benefits Diamond and its lender JPMorgan Chase Bank. Sparkle Pop is the one that houses the physical stock and there is no knowledge of the storage conditions and security where it’s all housed.

Below is the “Case Transition Budget” Diamond proposed in their chapter 7 filing.

Case Transition Budget Amount
Claims Agent – Omni (Agent of the Court) (36,508)
Claims Agent – Omni (Noticing of Conversion) (10,000)
Employee Insurance Claims (1,250)
KEIP/KERP (193,250)
Professional Fees – Committee Catch Up (30,000)
Professional Fees – Debtor Catch Up (150,000)
Post Termination Carve Out (225,000)
Sales Tax & Preparation Fees (20,000)
Nov Storage Fees – Consignment (128,286)
Total Expenses (794,294)
Beginning Cash Balance 296,649
Use of Cash (794,294)
Ending Cash Balance (497,645)
**Sparkle Pop incentive Payment due 12/17/2025 – not factored into Adjusted Ending Balance

A hearing concerning Diamond’s motion to move to chapter 7 will be held December 16 at 10am ET.