Tattered Cover has filed an updated financial plan that could let the Denver-area bookstore emerge from Chapter 11 bankruptcy as early as June. The bookstore filed for Chapter 11 last October and immediately closed three of its 10 stores and laid off about one-third of its staff of just over 100.
In January, the bookstore filed a reorganization plan. The new proposal, which was submitted to the U.S. Bankruptcy Court for the District of Colorado last week, reiterates the basics of the January filing, laying out a plan to resolve $3.4 million in unsecured debt while continuing to give Tattered Cover access to debtor-in-possession financing. The filing said Tattered Cover has already received $700,000 from a new lender, which includes current board members of the store, and that that the group has the right to convert the loan to an ownership stake in a reorganized company.
The current ownership, which operates under the Bended Page name, acquired Tattered Cover in 2020 for what the bankruptcy filing shows was $400,000, of which $40,000 was paid at closing. The new owners initially began a round of expansion shortly after the purchase, but quickly ran into financial problems as stores were forced to close to foot traffic during the pandemic. The filings show that Tattered Cover lost $1.2 million in 2022 on sales of $10.5 million. According to the filings, Tattered Cover’s revenue has remained flat even as costs have increased.
Under the reorganization, Tattered Cover hopes that a streamlined bookstore operation can become profitable next year. The updated proposal laid out a schedule to generate $478,000 in “disposable income” through 2027 to pay back creditors. Among Tattered Cover’s largest creditors are Penguin Random House, which is owed about $400,000, and Ingram, which is owed $348,000. Simon & Schuster and Macmillan are owed $253,000 and $234,000, respectively.
Tattered Cover said it expects the bankruptcy court to hold a May hearing to rule on the proposal. If the reorg plan is approved, Brad Dempsey, who was named interim CEO in July, will continue to head the bookstore.
