KEY POINTS:
Big record companies appear to be among the worst-hit losers in the collapse of an Auckland hip-hop label.
Music giants Universal and Warner are owed $320,000, but it is not known if they will pursue the debt now entertainment company Dawn Raid has gone into liquidation owing just over $1 million.
Debts to the music companies make up the bulk of $518,819 owed to unsecured creditors.
Inland Revenue, a preferential creditor, is owed $410,000 and secured creditors, who are first in line for any pay-out, are owed $140,000.
Dawn Raid - seven companies with interests including streetwear and graphic design - went into voluntary liquidation last week.
Founders Andrew Murnane and Danny Leaosavai'i blamed a downturn in revenue and a decline in local urban music, compounded by an increase in illegal downloading.
The pair told the liquidator their expansion into Australia was bad timing and "coupled with a loss of a major contract in 2006 led to cashflow difficulties".
The first reports setting out the companies' financial states were issued this week.
Liquidators have yet to find out whether Universal, which had a publishing joint-venture with Dawn Raid, and Warner Music Australia have recorded the $320,000 as real debt and will claim the money.
Among other unsecured creditors are finance companies, trade creditors, and investors in an expensive, New York-produced album by artist Mareko, who are owed $15,000.
The liquidation report says Murnane and Leaosavai'i sold their homes and invested more than $200,000 as Dawn Raid struggled.
They tried to negotiate a deal with Inland Revenue to settle outstanding taxes, but their offer was rejected, forcing them to place the companies in liquidation.
The effect of the Dawn Raid failure on its top-selling hip-hop artists is unclear. Liquidators are seeking advice on their contracts and whether they can be assigned to any new owner of the company.
Liquidator Peri Finnigan said it appeared artists could terminate songwriter agreements, but they might still have an obligation to Universal under its deal with Dawn Raid.
The companies entered a joint publishing venture in 2004.
Legal advice is being sought on more than a dozen recording contracts, but Ms Finnigan said the liquidators could sell master recordings held by the company.
Up to 10 parties have expressed an interest in buying Dawn Raid's assets - mostly the intellectual property of their artists - and an offer to purchase is expected within a week.
Creditors' queue
$320,000: Universal & Warner (unsecured)
$410,000: IRD (preferential)
$140,000: Secured creditors
