The news that Tattered Cover, Denver’s iconic long running independent bookseller, had declared Chapter 11 bankruptcy on October 16th sent ripples of concern through the world of books.
According to an informational press release on the firm’s website, “As part of the bankruptcy process Tattered Cover will close three stores from its seven current locations: Denver’s McGregor Square, Westminster and Colorado Springs. Closure of these locations is expected to begin October 23, 2023 and be completed by early November. Inventory and technology from the three closing locations will be promptly transferred to the store’s four other locations, where it will be business as usual with improved inventory at Colfax Ave. and Union Station in Denver, Aspen Grove Shopping Center in Littleton, and the children’s store at Stanley Marketplace in Aurora.
“Tattered Cover’s Denver International Airport locations will continue operating as part of a license agreement with Hudson Bookstores.
“At least 27 staff positions out of Tattered Cover’s current 103 positions will be impacted by the closures. Some impacted employees may fill temporary seasonal positions at the remaining stores during the holiday season. The company is working to develop severance packages for eligible employees affected by the closures.
“The company’s restructuring will be led by its senior management team of Brad Dempsey, CEO, Margie Keenan, CFO, Jeremy Patlen, COO, and Alexis Miles, Vice President of Human Resources. Previously Vice President of Buying Jeremy Patlen has officially been named Chief Operating Officer, after having informally served in that capacity since February.”
But Tattered Cover is not your run of the mill independent bookseller and this does not appear to be your garden variety bankruptcy either.
According to an Oct. 17th Publisher’s Weekly (PW) article, “The original Tattered Cover was opened in 1971 by Stephen Cogil and purchased by Joyce Meskis in 1974 who ran it until 2015.”
(Following her death in Dec. 2022 her New York Times obituary noted: “In addition to creating a bookstore famed for its vast selection and bibliophile-friendly atmosphere, Ms. Meskis often took a stand in matters related to censorship and the First Amendment. Sometimes those positions were not easy ones to embrace.”)
PW went on to say that Meskis sold Tattered Cover to Len Vlahos and Kristen Gilligan in 2015, who sold it in 2020, to an investment group whose members included William “Kawame” Spearman, Alan Frosh and David Back doing business as Bended Page LLC.
Bended Page is currently filing for bankruptcy protection. In an Oct. 23 email company communication spokesperson Steve Silver wrote,"We have approx. 20 investor/shareholders of which five make up the board of directors."
Back in 2020, the announcement of the new ownership, headed by Spearman (who is black) was accompanied by a release dubbing Tattered Cover ‘the largest black owned bookstore in the world.’ This claim drew an immediate and pointed response.
On Dec. 11, 2020 PW coverage was headlined Black Booksellers Denounce Tattered Cover Announcement.
The article began, “From Washington, D.C., to Los Angeles, Black booksellers have been at the forefront of a resurgence of independent bookselling in America over the last decade. But the framing of the announcement about the purchase of Denver’s Tattered Cover Bookstore was met with withering criticism from Black booksellers. Specifically, Black booksellers are offended and angered by the decision of the new owners to call the Tattered Cover the country’s largest Black-owned bookstore, which they say appears to be little more than a branding opportunity.”
During his tenure as Tattered Cover's CEO Spearman acknowledged the company’s fragile financials. “When we bought Tattered Cover, the organization was headed towards bankruptcy,” Spearman told Denverite in early 2022. “The amount of revenue from our stores was not enough to support the entire organization. To secure a future for our brand and avoid bankruptcy, we had two options — to grow or dramatically cut costs with company-wide layoffs. We chose to grow.”
Spearman stepped down as CEO in April 2023 after rankling some customers with his hardline positions on homelessness and immigration during a short-lived run for Denver mayor.
In announcing his departure, Spearman said he needed to separate his politics from Tattered Cover. Spearman left the board of directors but remained as owner. Spearman is now running for an at-large seat in the Nov. 7th Denver School Board election.
Asked if Spearman continues to play an active role in the firm, Silvers, communications spokesperson for the company, replied to RBH in emails on Oct. 23rd, “No. Not at all. He took a leave of absence in January 2023 and officially stepped down as CEO in April. He is still a minority shareholder, but he is not a member of the board of directors, has no decision-making role, is not a member of management and has absolutely nothing to do with the operations of Tattered Cover, including this reorganization."
For clarification he wrote in a follow up email: "Tattered Cover is solely owned and operated by Bended Page, LLC, which is governed by a board of six directors, all of whom are equity holders/investors. The company currently has an additional 15 equity holders/investors who are not on the board of directors."
In July, Tattered Cover hired bankruptcy attorney and former Republican congressional candidate Brad Dempsey as CEO. Dempsey said at the time that his goal was to “remedy” the company’s “immediate financial obstacles.”
Dempsey told Denver9-TV News on Oct. 16 after the bankruptcy filing, "This is not a liquidation, not by any means."
But as details come to light they raise more than a few eyebrows in the book business, as well as financial and political circles.
The firm’s press release posted on its website stated, “Tattered Cover Book Store, announced that it has filed a voluntary petition for reorganization under Chapter 11 Subchapter V in the U.S. Bankruptcy Court for the District of Colorado. (Case 23-14679)
“Utilizing the streamlined small business features of Chapter 11 will allow Tattered Cover to obtain supportive financing while working quickly toward overcoming substantial financial issues that have stymied the 52-year-old independent bookstore’s liquidity and ability to recover from changing market conditions exacerbated by the COVID pandemic.
It quoted Brad Dempsey, who became CEO in July, as saying, “Our objective is to put Tattered Cover on a smaller, more modern and financially sustainable platform that will ensure our ability to serve Colorado readers for many more decades….Dempsey reiterated that all customer gift cards will be honored and orders will continue to be fulfilled without interruption.”
Despite former CEO Spearman’s distinctly blue chip credentials, including degrees from Columbia, Yale Law, Harvard Business School and a stint at Bain & Company, a global management and consulting firm, his vision of growth at Tattered Cover came with a hefty price tag and left the company with a slew of unpaid bills. A list of the 20 creditors with the largest unsecured claims and who are not insiders include six owed more than six figures:
Penguin Random House LLD $375,765
Office of the State Auditor $375,563
Ingram Book Group $306,477
MacMillan Publishing $295,728
Simon & Schuster $259,355
TC Incorporated $215,000
The top six are owed $1,827,888; debts owed an additional 14 named creditors came to another $380,000 (rounded), making the total disclosed unsecured debt total $2.208 million (rounded).
Company spokesperson Silvers declined to release any information on past or current projected income.
An October 20th article in the Denver Post also had eyes rolling when the bankruptcy judge in the case noted that Tattered Cover and Read Colorado (the company’s intended financial benefactor) haven’t signed “an actual” loan agreement but instead have “a handshake deal to borrow large amounts of money.”
The article said that, “In its first appearance before a bankruptcy judge Thursday, Oct. 19th, Tattered Cover received temporary permission to borrow money from a local philanthropist so it can buy books.
“In court documents before 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 it 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 ultimately plans to loan $1.3 million to Tattered Cover, according to Brad Dempsey, CEO.
“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.”
“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.
“This is an icon in this town, so it’ll be interesting to see.”