The great retail shakeout of 2001 continued last week with the announcement that Baltimore’s Bibelot has filed for Chapter 11 and will close its four stores over the next 90 days. Bibelot, which employed about 100 people, was founded in 1995 by Brian Weese, former general manager of Encore Books, and his wife, Elizabeth. The four Bibelot stores were well regarded for their selection, events program and author signings. The stores averaged about 25,000 square feet and stocked more than 100,000 book titles as well as music CDs.
The Bibelot bankruptcy follows the closing of the Crown Books chain and the Chapter 11 proceedings involving Wallace’s Bookstores and Wallace’s Book Co.
The company began running into financial problems last year and in May defaulted on a $17-million loan from the Bank of America, according to a report in the Baltimore Sun, which broke the story. Weese told PW that he had explored numerous ways to try to keep Bibelot alive, including finding a buyer or restructuring, but in the end, “we came up empty.” While the company’s first two stores performed well, newer stores in the Baltimore Harbor and Cross Keys “just didn’t work out,” Weese explained, acknowledging that the company, which had earlier closed a fifth store, may have overexpanded.
In its Chapter 11 filing, Bibelot, which operated under the corporate name Bloomsbury Group, listed assets of between $10 million and $15 million and debts of between $15 million and $18 million. Random House is listed as the company’s largest unsecured creditor, with an outstanding debt of $274,477. Other publishers owed money include Penguin Putnam ($169,798); Simon & Schuster ($145,918); Time Warner Trade Publishing ($93,244); HarperCollins ($89,531); and Holtzbrinck ($89,027).
Money Movement Questioned
The Bibelot story became more than just another sad case of an independent going out of business when an article in the online version of the Daily Record, which covers business and legal news in Maryland, reported that the Weeses “transferred tens of millions of dollars in assets into offshore accounts on the day they entered into arbitration with Bank of America over a defaulted $17 million promissory note.” The loan was used to finance the store’s expansion.
Court papers show, the article continued, that “more than $25 million in [Weese] assets, including [their] house, furnishings, deposit accounts, brokerage accounts, mutual funds and tax-exempt bonds were transferred to the Book Worm Too Trust,” a trust formed in the Cook Islands. Reportedly, the Weeses sold their home, worth about $3 million, for $10 to Book Worm Too Trust trustees.
Bank of America said that its loan to Bloomsbury came due on May 31, 2000, but that the Weeses did not pay and offered no plans for repayment. Elizabeth Weese, whose brother and father once controlled Rite Aid Corp., but left in 1999, had personally guaranteed the loan. Bank of America estimated her net worth at $36.8 million before the note was due.
Eventually, the Weeses consented to arbitration in the dispute, and, as a result, they were supposed to pay $17,676,306.85 plus post-judgment costs. But the bank alleges that by selling assets and moving money, the Weeses “have transferred and placed the bulk of their assets beyond the reach of the court and bank.”
Weese, who has resigned as a member of the ABA board, declined to address the details of the Bank of America charges, but asserted that “my wife and I did nothing illegal in terms our personal assets.”
