Tower Records' parent company files for Chapter 11

WEST SACRAMENTO, Calif. -- The parent company of Tower Records, inventor of the music megastore and one of the nation's largest music and video retailers, filed for Chapter 11 bankruptcy Monday.

MTS Inc., the privately held parent of the West Sacramento-based chain, took the step a day after the record industry celebrated itself with the Grammy Awards.

Tower stores will stay open, but the filing is expected to help clear the way for the sale of the 93-store chain, which suffered from the exploding popularity of free music on the Internet and competition from deep discounters such as Best Buy and Wal-Mart.

MTS decided nearly a year ago to sell Tower. A filing last April with the Securities and Exchange Commission revealed that Tower had lost money for 13 straight quarters.

Analysts predicted that more music retailers might suffer Tower's fate. Music attorney Jerry Reisman of Garden City, N.Y., singled out the Sam Goody chain as a possibility.

"They suffer from some of the same pains that Tower Records suffers from," he said.

Los Angeles investment banker Lloyd Greif, hired to sell the company, said his firm is still talking with interested buyers.

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