Storied Manhattan retailer ABC Carpet & Home is headed for Chapter 11. In paperwork filed late yesterday, the company has petitioned for bankruptcy protection, citing more than $80 million in debt to creditors. According to an affidavit submitted by CEO Aaron Rose, the two primary culprits are COVID and a sluggish reaction to the e-commerce revolution.
“Business operations have been severely impacted by the pandemic, including government mandated store closures, fulfillment issues due to supply chain shortages, production delays, and delays in return to work for nearby commercial office spaces,” he wrote. “In addition, business has been negatively impacted for the past few years by other adverse market trends, including the shifting of sales from traditional brick-and-mortar retailers to online retailers.”
Whatever the cause, 2021 has been rough for ABC. From the beginning of the year through August, the company generated $25.46 million in revenue, less than half of what it brought in during the same period in 2017. The company is also burdened by a complex real estate dispute, to the tune of $3.5 million, involving construction delays, leases and sub-leases in its primary location, 880-888 Broadway.
The filings indicate that ABC employed 152 at the date of the petition, but that it was “forced to implement significant workforce reductions immediately prior to bankruptcy.”
While the financial picture for the 120-year-old company is certainly not rosy, the filings make clear that ABC intends to press on. Its current lender, 888 Capital Partners, will advance the retailer a $6 million loan to fuel operations through bankruptcy. 888 will also act as a stalking horse, meaning it will set the floor bid (“a $15 million credit bid plus $300,000 in cash and various assumed liabilities”) in a forthcoming auction to acquire ABC.
There are reasons for the company to be optimistic. It lists up to $50 million in assets, and while New York was hit particularly hard by pandemic shutdowns, there is evidence that the market is recovering, especially at the high end (a recent report by Olshan Realty suggested that luxury real estate transactions in Manhattan had rebounded from their pandemic nadir).
And while ABC does owe a considerable sum, according to the filings roughly half of the $80 million in debt consists of loans from someone who is likely to be a forgiving creditor: owner Paulette Cole, whose great-grandfather founded the business in the late 1800s out of a pushcart.
“[We] have not commenced this case to liquidate and shutter operations,” wrote Rose. “[We are] seeking to pursue a sale of assets on an expedited timeframe in order to limit administrative expenses and maximize value for the benefit of their stakeholders.”
Homepage photo: Courtesy of ABC Carpet & Home
