Deadline Passes With No New Bidders for Napster

No new bidders emerged for the remains of Napster Inc. by Wednesday’s Bankruptcy Court deadline, moving the dormant music-swapping service a step closer to ownership by Bertelsmann, people close to Napster said.

A committee of unsecured creditors tried a last-ditch campaign to attract interest from record labels, media companies and others, asking for a minimum bid of $25 million.

That might not have been enough to guarantee control, because Bertelsmann believes it has bid more than $100 million, including early loans of more than $85 million.

But the creditors hoped that with a new entry, they could argue that much of the old loans didn’t count.

The creditors, including the law firm of former Napster litigator David Boies, hired Trenwith Securities in Costa Mesa to drum up potential rescuers starting less than two weeks ago. Trenwith Managing Director Rick Chance declined to comment on whether any had emerged.

“Given the time frame, I think we did everything humanly possible,” Chance said.

Unless legal objections in Napster’s Delaware bankruptcy proceedings stop the sale, Bertelsmann could take ownership after a final hearing Aug. 29.

One creditor, PlayMedia Systems Inc., filed an objection Wednesday, arguing that its software code unwittingly may be transferred in the sale. More problematic would be an objection by the record labels, which has yet to surface.

On Wednesday, Bertelsmann again declined to say what its intentions are for the revamped system. Since the ouster of Bertelsmann Chief Executive Thomas Middelhoff, Napster’s prospects for success within the German media company have grown bleaker.

After losing a series of court rulings in a copyright infringement lawsuit by the record labels, Napster was forced to shut its system and cut off as many as 60 million subscribers. It developed a new version with copyright protections, but has been unable to strike deals for content from the labels.

Napster filed for bankruptcy protection earlier this year, and Middelhoff agreed that Bertelsmann would buy it after the proceedings washed away the company’s legal liabilities from its past actions.