Bookpeople was racing last week to meet a July 11 deadline to reduce its debt in order to comply with the demands of an investment firm that will supply the Oakland, Calif.—based wholesaler with much need new capital. In a letter sent to publishers at the end of June, Stephen Kerr, a financial consultant brought in by Bookpeople nine months ago, explained that St. Cloud Capital had agreed to provide new financing for the company, provided Bookpeople can significantly reduce the debt it owed vendors.
To cut the debt, Kerr told vendors that Bookpeople would pay 50% of what they were owed on invoices between 91 and 180 days old, and 25% on invoices over 180 days. All invoices less than 90 days old will be paid in full. Kerr estimated that under the proposal, Bookpeople would be paying publishers about 83% of what it owes them. The company sent letters to 430 publishers and, as of July 10, Bookpeople was close to receiving the 80% approval mark from vendors that is necessary before St. Cloud will complete the deal. Kerr and Judy Wheeler, v-p and director of sales and marketing for the wholesaler, said they were optimistic Bookpeople would hit its goal. "It looks like we'll get over the hump," Kerr said.
Bookpeople, which is employee-owned, has been on financial thin ice for about two years, and the company's cash flow has worsened to the point where, without a cash infusion, it could be forced to file for bankruptcy protection. In his letter, Kerr blamed the sluggish book market and loss of independent booksellers for the wholesaler's plight.
Bookpeople will use the new funds to upgrade its back-office operations and to help it move into new retail accounts. Schools, libraries, the gift market and health-food stores are all areas where Bookpeople plans to extend its reach. "Bookpeople is moving out to meet the consumers wherever they shop for books," Kerr said in his letter. Wheeler added that Bookpeople will "accentuate the positive" aspects of its business, such as its distribution arm, Word Distributing, and Bookpeople Fulfillment. "There's not much profit in traditional wholesaling," Wheeler said.
Even if the financing comes through, there will be some changes at the company. Don Benson has been brought in by St. Cloud to serve as general manager and CEO. The employees are also putting their voting share in a trust that will be controlled by St. Cloud, although the employees will have the opportunity to reacquire the stock in the future.
Publishers were inclined to go along with the Bookpeople proposal because of the company's importance to West Coast distribution and, as Ronin publisher Beverly Potter put it, they have nothing to lose. Michael Kerber, president of Boston's Red Wheel/Weiser, remains a supporter of Bookpeople and agreed that the company's problems were due to a combination of a sluggish market and fewer independent bookstores. "This says a lot less about Bookpeople than [it does] the times," he said.
