Jonathan Dow reads at the Tattered Cover on Thursday, Dec. 8, 2011. (Photo by AAron Ontiveroz/The Denver Post)
In its first appearance before a bankruptcy judge Thursday, Tattered Cover received temporary permission to borrow money from a local philanthropist so that it can buy books.
The expedited hearing, called three days after it filed for Chapter 11, centered on how the bookstore chain can survive in the weeks that follow. In court documents ahead of the hearing, Tattered Cover, which previously disclosed it lost $667,882 in the first nine months of this year, revealed that it lost $1.2 million in 2022. The company also said it can’t buy books directly from top publishers because it owes them money, so has been buying at a markup instead.
To avoid doing that during the holidays — the company’s most profitable season — Tattered Cover wants to borrow $350,000 from Read Colorado LLC, a company formed this week by Dr. Leslie Rainbolt and Denver philanthropist Margie Gart, whose family sold a sporting goods chain to Sports Authority. Read Colorado plans to ultimately loan $1.3 million to Tattered Cover, according to Brad Dempsey, the store’s CEO.
“My clients very much want to make this loan to this iconic institution in Colorado, to see if (Tattered Cover) can turn around,” Read Colorado attorney Tim Swanson of Moye White told U.S. Bankruptcy Court Judge Michael Romero on Thursday. “They believe in the company. They believe in Mr. Dempsey and his ability to execute on his plan.
“We appreciate the need, and I believe the court does too, to purchase these books — the inventory — for the holiday season.”
Romero was skeptical. He noted that Tattered Cover and Read Colorado haven’t signed “an actual” loan agreement but instead have “a handshake deal to borrow large amounts of money.” The judge said that he had never approved such a deal in 20 years on the bench, but allowed the loan to move forward and scheduled a fuller hearing on the matter.
Dempsey also asked the judge for permission to pay severance to laid-off employees.
“We are trying to close the stores as rapidly as possible,” Dempsey, who is also a bankruptcy lawyer, said of locations in LoDo, Colorado Springs and Westminster.
“We start closures and moving out next week … and likely separate with employees from those stores next week. These are employees who need the funds. It’s the right thing to do and if we don’t do the right thing here, it causes irreparable harm to our reputation,” he said.
The CEO received pushback from the U.S. Trustee’s Office, which monitors bankruptcy cases on behalf of the government and didn’t see the need for emergency severance payments. Romero didn’t approve the payments Thursday but said he likely will next week.
The judge did approve a request by Tattered Cover to let it honor $115,000 in gift cards that it has sold over the years. The bookstore warned that not doing so would wreck its reputation among customers. No one opposed the motion, so Romero signed off on it.
Tattered Cover agreed to hold off on its request to formally approve Dempsey as CEO and to pay his company, Dempsey Consulting, a monthly fee of $26,181. The U.S. Trustee’s Office planned to oppose that motion, so Tattered Cover’s lawyers set it aside for now.
Budget documents filed by Dempsey this week show that he expects Tattered Cover to make $77,514 next week but lose $42,341 the week after that due to payroll.
“This is going to be an interesting case,” Romero told attorneys for all sides Thursday.
“We will be watching,” he added. “This is an icon in this town, so it’ll be interesting to see.”
Jonathan Dow reads at the Tattered Cover on Thursday, Dec. 8, 2011. (Photo by AAron Ontiveroz/The Denver Post)
In its first appearance before a bankruptcy judge Thursday, Tattered Cover received temporary permission to borrow money from a local philanthropist so that it can buy books.
The expedited hearing, called three days after it filed for Chapter 11, centered on how the bookstore chain can survive in the weeks that follow. In court documents ahead of the hearing, Tattered Cover, which previously disclosed it lost $667,882 in the first nine months of this year, revealed that it lost $1.2 million in 2022. The company also said it can’t buy books directly from top publishers because it owes them money, so has been buying at a markup instead.
To avoid doing that during the holidays — the company’s most profitable season — Tattered Cover wants to borrow $350,000 from Read Colorado LLC, a company formed this week by Dr. Leslie Rainbolt and Denver philanthropist Margie Gart, whose family sold a sporting goods chain to Sports Authority. Read Colorado plans to ultimately loan $1.3 million to Tattered Cover, according to Brad Dempsey, the store’s CEO.
“My clients very much want to make this loan to this iconic institution in Colorado, to see if (Tattered Cover) can turn around,” Read Colorado attorney Tim Swanson of Moye White told U.S. Bankruptcy Court Judge Michael Romero on Thursday. “They believe in the company. They believe in Mr. Dempsey and his ability to execute on his plan.
“We appreciate the need, and I believe the court does too, to purchase these books — the inventory — for the holiday season.”
Romero was skeptical. He noted that Tattered Cover and Read Colorado haven’t signed “an actual” loan agreement but instead have “a handshake deal to borrow large amounts of money.” The judge said that he had never approved such a deal in 20 years on the bench, but allowed the loan to move forward and scheduled a fuller hearing on the matter.
Dempsey also asked the judge for permission to pay severance to laid-off employees.
“We are trying to close the stores as rapidly as possible,” Dempsey, who is also a bankruptcy lawyer, said of locations in LoDo, Colorado Springs and Westminster.
“We start closures and moving out next week … and likely separate with employees from those stores next week. These are employees who need the funds. It’s the right thing to do and if we don’t do the right thing here, it causes irreparable harm to our reputation,” he said.
The CEO received pushback from the U.S. Trustee’s Office, which monitors bankruptcy cases on behalf of the government and didn’t see the need for emergency severance payments. Romero didn’t approve the payments Thursday but said he likely will next week.
The judge did approve a request by Tattered Cover to let it honor $115,000 in gift cards that it has sold over the years. The bookstore warned that not doing so would wreck its reputation among customers. No one opposed the motion, so Romero signed off on it.
Tattered Cover agreed to hold off on its request to formally approve Dempsey as CEO and to pay his company, Dempsey Consulting, a monthly fee of $26,181. The U.S. Trustee’s Office planned to oppose that motion, so Tattered Cover’s lawyers set it aside for now.
Budget documents filed by Dempsey this week show that he expects Tattered Cover to make $77,514 next week but lose $42,341 the week after that due to payroll.
“This is going to be an interesting case,” Romero told attorneys for all sides Thursday.
“We will be watching,” he added. “This is an icon in this town, so it’ll be interesting to see.”
