Tattered Cover Book Store, one of the country’s largest and best-known independent bookstores, filed for reorganization under Chapter 11 Subchapter V in the U.S. Bankruptcy Court for the District of Colorado yesterday. According to the Denver Post, documents filed in the bankruptcy court show Tattered Cover was more than $660,000 in the red between January and September. The business owes more than $1 million to publishers, as well as more than $375,000 to Colorado's Office of the State Auditor for abandoned gift cards.
The Subchapter V portion of Chapter 11 was enacted by Congress in 2020 to provide a streamlined process for small companies to reorganize. If the financing is approved, Tattered Cover will have access of up to $1 million in debtor-in-possession financing, provided by a new company formed by current company board members and investors that include Leslie Rainbolt and Margie Gart. The new funding, the announcement said, “will be used to obtain much-needed additional inventory in time for the critical 2023 holiday consumer buying season, fulfill customer orders, upgrade technology, and to maintain operations and staff compensation during the restructuring process.”
Various companies that supply books to Tattered Cover said that they will need to time to get a better understanding of the store's new financing before deciding on how to continue to work with the store in the future. The store has been on credit hold with a number of publishers.
The current owners, Bended Page LLC, acquired Tattered Cover in 2020 and, after an initial period of expansion, found business slowing, due in part to the pandemic. The bookstore also endured some management changes when Kwame Spearman, one of the lead investors who was named CEO, stepped down from that position in April after deciding to run for mayor of Denver. He subsequently withdrew from that race, and is now running for the Denver school board.
In July, Brad Dempsey, a lawyer specializing in finance and business restructuring, was named interim CEO. “Our objective is to put Tattered Cover on a smaller, more modern and financially sustainable platform that will ensure our ability to serve Colorado readers for many more decades,” Dempsey said in a statement. “Restructuring for long-term viability requires managers to make very difficult business decisions that affect people and business partners, and we intend to do what we can to minimize these impacts.”
Dempsey was referring to a host of changes that are in the process of being implemented. Among them are closing three of its seven stores: the locations in Denver’s McGregor Square, Westminster, and Colorado Springs. Those stores are expected to be closed by early November, at which time inventory and technology from the three will be transferred to the store’s four other locations.
The store closures will result in cutting “at least” 27 staff positions out of Tattered Cover’s current 103 positions, though the company said that some employees may fill temporary seasonal positions at the remaining stores during the holiday season. Tattered Cover’s Denver International Airport locations will continue operating, as part of a licensing agreement with Hudson Bookstores.
In addition to Dempsey, the company’s restructuring will be led by its senior management team: CFO Margie Keenan, newly named COO Jeremy Patlen (formerly v-p of buying), and Alexis Miles, v-p of human resources.
The company said that all customer gift cards will be honored, and orders will continue to be fulfilled, while all loyalty programs will also continue as usual. Events currently scheduled for this October and November at closing locations will be rescheduled, if possible, to take place at the store’s remaining locations, with all event changes to be posted on the bookseller's website.
The original Tattered Cover was opened in 1971 by Stephen Cogil and purchased by Joyce Meskis in 1974. Meskis sold it to Len Vlahos and Kristen Gilligan in 2015, who sold it to the current owners. The store is considered among the leading independent bookstores in the country, and has a long history of being at the forefront in the fight for free speech and First Amendment rights.