Handleman Company Reaches Agreement with Lenders on Amendments to Credit Agreements

TROY, Mich., May. 15 /PRNewswire/ --

TROY, Mich., May 15 /PRNewswire-FirstCall/ -- Handleman Company , www.handleman.com , today announced that it has entered into a sixth amendment to its credit agreements that, based on its recently completed fiscal year 2009 business plan, establishes financial covenants and reduces the size and cost of its credit facility without impacting liquidity. The size of the revolving credit facility has been reduced from $223 million to $163 million, reflecting Handleman's projections in its fiscal 2009 budget for significantly lower borrowings.

Handleman also announced today that, in accordance with a provision in a previous amendment to its credit agreements, it has retained the investment banking firm W.Y. Campbell & Company for the purpose of exploring a sale or other strategic options for its subsidiary Crave Entertainment Group, Inc. (Crave). Through its two subsidiaries, Crave Entertainment, Inc. and SVG Distribution, Inc., Crave is both a leading full-service distributor of video game software, hardware, and related accessories and a specialty video game publisher.

Albert A. Koch, President and Chief Executive Officer of Handleman, said, "The new amendments to our credit agreements have been developed with the support of our lenders based on our recently completed business plan for fiscal 2009. The amended credit facility will help ensure that we have sufficient liquidity to operate our business as we continue to take action to address the rapid and dramatic change under way in the music industry."

He continued, "In light of the considerable challenges facing Handleman, we are continuing to focus on controlling costs and finding other opportunities to leverage our core competencies. We will also explore strategic alternatives for valuable assets, like Crave, as part of our ongoing efforts to maximize value for our stakeholders."

A leader in the high-growth interactive entertainment industry, Crave is uniquely focused on the value-priced games category within both its distribution and publishing businesses. Crave focuses its distribution operations on a broad array of value-added services, including category management, assortment planning, promotional planning, merchandising, and full-service packaging. Crave provides its products and value-added services to a variety of major resellers including mass merchants, specialty electronics and video game stores, toy chains, warehouse clubs, drugstores, supermarkets, and online retailers.

Michael Maas, President and CEO of Crave Entertainment Group, said, "The Crave management team seeks to expand our leadership as a value-added video game distributor and specialty publisher. Our company has built a leading position in the industry and developed strong relationships with our vendor and customer partners. We believe Crave has a unique market position and is a valuable and desirable asset with substantial growth potential."

About Handleman Company

Handleman Company is a category manager and distributor of prerecorded music and console video game hardware, software and accessories to leading retailers in the United States, United Kingdom, and Canada. As a category manager, the Company manages a broad assortment of titles to optimize sales and inventory productivity in retail stores. Services offered include product selection, direct-to-store shipments, marketing and in-store merchandising.

Forward-Looking and Cautionary Statements

This press release contains forward-looking statements, which are not historical facts. These statements involve risks and uncertainties and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results, events and performance could differ materially from those contemplated by these forward-looking statements including, without limitation, the ability to comply with all lending covenants, the ability to execute the Company's fiscal 2009 business plan, risks associated with the Company's responsibilities required under its agreement with Tesco PLC, improving operating performance after the termination of the Company's music and greeting card supply agreements with ASDA and generating cash from reducing working capital investment, the ability to secure funding or generate sufficient cash required to maintain, build or grow its business, achieving the business integration objectives expected with the Crave Entertainment Group and REPS acquisitions, achievement of cost saving strategies identified or in the process of being implemented, changes in the music and console video game industries, continuation of satisfactory relationships with existing customers and suppliers, establishing satisfactory relationships with new customers and suppliers, effects of electronic commerce inclusive of digital music and console video game distribution, success of new music and video game releases, dependency on technology, ability to control costs, relationships with the Company's lenders, pricing and competitive pressures, successfully executing new business initiatives, dependence on third-party carriers to deliver products to customers, the occurrence of catastrophic events or acts of terrorism, retaining and/or recruiting key executives, certain global and regional economic conditions, and other factors discussed in this press release and those detailed from time to time in the Company's filings with the Securities and Exchange Commission. Handleman Company notes that the preceding conditions are not a complete list of risks and uncertainties. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.