As the liquidation process of Koen Book Distributors moves forward, various industry members are watching the proceedings with a mix of curiosity and wariness. The curiosity stems from word that Levy Home Entertainment plans to buy some Koen assets to expand its distribution into bookstores. Some small publishers, meanwhile, are concerned that Baker & Taylor, which bought Koen's inventory, may return some of those books for full credit. Earlier this month, the bankruptcy court overseeing the Koen liquidation approved the sale of some 875,000 salable books to B&T for $4 million, as well as the $500,000 purchase of books that had been returned to Koen from its customers. Virtually all publishers will see only a small portion of the money owed to them by Koen, and small publishers fear they could take a second hit if B&T returns Koen's books for a full credit. Margo Baldwin, president of Chelsea Green, who lost $15,000 in the Koen bankruptcy, hopes that B&T will not return books that it bought at a big discount from Koen to Chelsea. "It really will be unfair if we have to turn around and issue credits to B&T for returns they send to us from the Koen inventory," Baldwin said. Another small publisher suggested it would be fair if B&T asked for a small premium on the books from Koen that it is returning, rather seeking a full discount. Many calls to B&T seeking comment on plans for the inventory were not returned at press time.
With the sale of Koen's inventory, one of the final steps in the liquidation process is the sale of its operational assets, which could be completed as early as today, October 17. LHE has been in talks with Bob Koen for several months to purchase the company's equipment, customer list, computer systems, vehicles and rights to the Koen name.
If the $300,000 purchase is approved by the bankruptcy court, LHE will create a wholly new subsidiary, Koen-Levy Wholesalers LLC, to service current LHE customers, primarily in the mass market and bookstores in the Northeast and Mid-Atlantic regions. LHE has already made arrangements to lease Koen's facilities in Moorestown, N.J. Bob Koen has been named general manager and a number of other Koen employees have been hired. The new operation will build to between 50 and 100 employees within the next few months. The Koen warehouse holds about 60,000 titles, compared to 8,000 now carried by LHE. The additional inventory will allow LHE to not only service bookstores but to offer more titles to its existing accounts, said Howard Reese, LHE president and CEO.
While Reese is optimistic about the success of Koen-Levy, there are several potential wrinkles, not least of which is that the company won't be able to get into Moorestown until after B&T clears out its inventory. The new venture needs to get in new inventory and begin operations by mid- to late November if it wants to establish itself this holiday season. In addition, Koen-Levy faces competition from another new regional wholesaler BookStream in Poughkeepsie, N.Y., which plans to open at the same time, is targeting the same customer base and is also staffed with former Koen employees.
Although Reese said that "it could well be a challenging season," he added, "We're in it for the long haul." He also held out the possibility of further expansion into the bookstore market. "If the regional wholesaling model works, we would look to do it in the Midwest, the far West and the South," Reese said. LHE has warehouses in Salt Lake City, Chicago and Roanoke, Va.
