Crown Books Files For Bankruptcy Protection
Jim Milliot -- 7/20/98
Millions owed to publishers; new loan will help chain to continue operations
After months of trying to revive its flagging fortunes, Crown Books was finally forced to file for Chapter 11 bankruptcy protection last week. In its filing with the U.S. Bankruptcy Court for the District of Delaware, Crown listed assets of $130.4 million and liabilities of $100.5 million, although a note in the filing stated that the asset and liability figures are reported at book value and may not reflect actual market value or realizable value.
Crown filed for bankruptcy after it failed to find a buyer for the chain. John Stokely, CEO of Crown's new parent company, Richfood Holdings, told the Washington Post that since Richfood could not find an appropriate buyer for Crown, "we felt like the best thing to do was give Crown a chance to reorganize itself." According to reports, talks with First Lincoln Holdings about a possible deal broke off last week.
Crown's largest creditor is Ingram Book Co., to which it owes just over $10 million. Ingram, which has filed suit against Crown and Dart for fraudulent misrepresentation, had no comment on Crown's bankruptcy. Ingram's affiliated company, Publisher Resources, is owed nearly $397,000.
The publisher that is owed the most money is Penguin Putnam -- a total of $2.38 million, of which $1.2 million is owed to Penguin USA. New American Library is due $608,714, while Berkley is owed $570,397. Simon &Schuster is due nearly $1.4 million, a figure that includes $810,793 owed to Macmillan.The new Random House is out slightly less than $1.2 million, with Random House Inc. due $392,474, Random Value Publishing owed $254,188, Ballantine out $306,833 and Bantam Doubleday Dell due $242,903.
In addition to Ingram, the only other wholesaler owed money is Bookazine, which is due $513,242. Book Sales, the wholesaler/promotional book publisher, is owed $243,587.
Other publishers owed money among Crown's 20 largest creditors are St. Martin's ($358,031), Avon ($385,284), General Publishing Group ($231,778) and Workman ($303,750).
S&S consumer group president Jack Romanos observed that because Crown returned so many books earlier this year and then used Ingram as its sole supplier, publishers have less exposure to Crown's bankruptcy than if the chain had carried on business as usual. Romanos said that while S&S is not happy about the prospects of receiving only a portion of what it is owed, the bigger blow is the loss of shelf space, particularly in such cities as Washington, D.C., and Los Angeles. Penguin Putnam COO David Shanks noted that when a chain the size of Crown stops ordering books, "it is a serious blow to the industry." He added that in Penguin's case, Crown has been an important outlet for its backlist titles. Shanks, like Romanos, was hopeful that Crown could somehow remain in business.
At press time, Crown had not disclosed any particular plans for reorganizing the company. It said it would continue to operate its 179 stores, although most industry members felt it was only a matter of time before Crown begins closing outlets. The company is also reported to still be looking for a possible buyer.
To help it continue to run during the bankruptcy proceedings, the Delaware court approved $40 million of debtor-in-possession financing from Paragon Capital and Foothill Capital. Crown will use the money to pay the CITGroup/Business Credit Inc., which provided financing prior to the Chapter 11 filing. The financing will also give Crown increased liquidity and allow it to acquire additional inventory.
Crown is the second major regional chain to file for bankruptcy this year. Lauriat's went into Chapter 11 in February.
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