Retail chain fights to stop Chapter 11 bankruptcy, store closures

Once a company files for bankruptcy, it loses some control of its own fate. Any moves it makes need to be approved by a bankruptcy court which considers not just the needs of the company, but also its creditors, employees, and customers. 

In some cases, the court needs to choose between multiple bad outcomes. Take the recent bankruptcy of David's Bridal, for example, the company had an offer from an outside party to purchase and continue to operate the brand.

Related: Discount retailer faces Chapter 11 bankruptcy or liquidation

That was good for employees and wonderful for thousands of brides who ended up getting the wedding dresses they had paid for, but it did not make vendors whole. In that case, the bankruptcy court also had to weigh that the new owner would use those same vendors who would have an opportunity to keep making money.

It's not always an easy decision, but sometimes a lack of funds or a lender who pulls out can force a the bankruptcy court to order liquidation. No outcome is guaranteed after a Chapter 11 bankruptcy filing even when the company enters the process with a plan.

One popular retailer, which filed for bankruptcy in October has asked its bankruptcy court to delay the proceedings as it may have found a buyer that won't force it to make some of the drastic changes it originally planned.

Bookstore chain fights to survive

Bookstores have both thrived and struggled since the rise of the digital book. On the positive side, e-book sales only took about half the market. That left the other 50% to people who want to buy physical books and, in some cases, will pay a premium for that.

In many ways, it mirrors the music business where the launch of all-you-can-stream services actually created value for people selling vinyl records. It's a niche business, but Taylor Swift and Beyonce fans want physical souveniers of their fandom.

When it comes to books, it's a mix of people wanting something to display and a decent amount of people just enjoying reading an actual book.

Tattered Covers, a Colorado bookstore chain has a loyal following but ran into financial trouble at the time of its Chapter 11 filing. The company, in its initial plan expected to close some of its stores but keep operating. 

On March 24, it actually asked the bankruptcy court to pause its proceedings because new financial interest may allow it to continue operations without taking some of the drastic steps planned in its initial filing. 

The company has also resolved about $3.4 million in debt during the bankruptcy process.

Tattered Cover may have a new saviour

"Bended Page, LLC, which owns and operates Tattered Cover Book Store, has filed a motion with the U.S. Bankruptcy Court for the District of Colorado asking to reschedule the hearing set to consider confirmation of its reorganization plan in order for the company to respond to potential buyers," the company shared on its website.

The bookstore chain, which has already closed three of its stores has held discussions with multiple people and companies who may be willing to acquire the chain.

"The company’s board of directors, which includes its current debtor-in-possession (DIP) lenders, determined last week that positioning Tattered Cover for sale to a qualified, committed new owner is in the best long-term interests of the company, current investors, employees, suppliers, and Colorado’s literary community," the company added.

Postponing the Chapter 11 bankruptcy process would allow the company to take the time needed to explore a sale.

"The motion to postpone the plan hearing emphasizes that growing interest in acquiring Tattered Cover during its Chapter 11 reorganization has been accelerated by the store’s continuing operating success, including a full schedule of literary and author events, and year-over-year monthly sales numbers that are better than the national average for independent bookstores," Tattered Cover posted.

While the court has not ruled on the request, the company's executive team is confident.

“Read Colorado’s DIP loan was the lifeline that allowed Tattered Cover to rework itself into a strong position to be acquired by people who share our commitment to independent bookstores,” said CEO Brad Dempsey. “It supported ongoing operations so we could pay wages and benefits for more than 70 employees, as well as severance to those we had to let go when we consolidated our store locations. We were able to keep paying rent at our four local stores, host many terrific events, and paid more than $300,000 in sales taxes to the communities we serve.”