Crown Books Corp., once part of the Haft family's retail chain, said yesterday that it has filed a plan to emerge from bankruptcy protection as a publicly traded company that will be mostly owned by an investment firm and several creditors.
Earlier this year, the Landover-based chain announced plans to eliminate its existing stock and reissue new shares to its creditors, which included several major book publishers.
However, publishers such as Penguin Putnam Inc. and Random House Inc. balked at the idea. They knew that independent booksellers, who had embarked on an ultimately successful effort to quash Barnes & Noble's deal to acquire wholesaler Ingram Book Group, would oppose this latest retail-publisher collaboration.
Crown Books' "turning point" was its ability to find the investment company, which purchased the claims of both Penguin Putnam and Random House and is negotiating to buy other companies' claims, said Steven Panagos, a partner in Zolfo Cooper LLC, a New York financial firm now advising the retailer. The plan, if approved, would give Crown Books another chance to attract customers who abandoned the company during its struggles.
"Those publishers actually did us a great favor," Anna Currence, Crown Books' chief executive, said.
Both Currence and Panagos declined to name the investment firm, but two sources identified the company as Primus Multi-Sector Credit Master Fund Inc. There was no information immediately available about the firm.
So far, the investment firm has bought about $20 million worth of claims, or about one-third of the Crown Books' total unsecured claims, Panagos said. After Crown Books emerges from Chapter 11 bankruptcy protection, the investment firm will become the largest single shareholder in the company, he said.
If the judge approves the plan, Crown hopes to emerge from bankruptcy protection in September -- just in time for the holiday shopping season.
Phil Schwartz, executive vice president of St. Martin's Press, said the plan appears to be an "intelligent" one. "I personally like it, and for those people more comfortable selling and not being involved, I understand that, too," he said.
Schwartz said he did not know whether St. Martin's Press planned to sell its $1.2 million claim to the investment firm. He said his company and several others have been approached by the investment firm.
Independent booksellers still aren't happy about Crown's plan. Even if publishers own just a sliver of Crown, it's still cause for concern, said Richard Howorth, president of the American Booksellers Association.
"It represents a conflict," Howorth said. "If a publisher is a supplier of mine . . . I don't want it to be engaged in ownership with a company I compete with."
Crown Books was a thriving retailer in the 1980s before it began to stumble over the next decade during the Hafts' legal battles. While its owners fought, Crown's market share was eaten by large chains such as Barnes & Noble and Borders Books & Music. Over the last year, it has faced even more competition from online booksellers, notably Amazon.com Inc.
Under Currence, who was hired in January 1998, Crown Books has closed 79 unprofitable stores, including 14 in the Washington area. After continuing losses, the company filed for bankruptcy last July.