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In January, after a turbulent few months, Compass Coffee filed for bankruptcy protection. The Washington, D.C.-based company operated 25 cafes across the capital but had struggled with declining foot traffic at many of its locations and faced multiple lawsuits from landlords and other creditors.
As Tim Carman reports for the Washington Post, the U.K. chain Caffè Nero submitted a winning bid of $4.75 million during a Feb. 19 bankruptcy auction to purchase most of Compass’ assets. Co-founder and CEO of Compass, Michael Haft, told the Washington Post that five groups went through 24 rounds of bidding to purchase the company’s inventory, equipment, and intellectual property, among other assets.
Haft anticipates that Caffè Nero will keep 17 D.C.-area cafes operating under the Compass brand “for the time being.” Haft emailed staff to say that he expected their jobs to remain safe. However, in an interview with NPR affiliate WAMU, Carman said that some Compass locations were closing: “Caffe Nero … has said it doesn’t want some of these shops. So you’re starting to see them close.”
Caffè Nero has more than 1,000 locations in the U.K. and internationally. Its parent company, the Nero Group, has been on what the Times called an “expansion blitz.” The group has opened dozens of new locations and bought up smaller chains, leaving the brand with over $500 million in debt.
In its bankruptcy filing, Compass listed liabilities of between $10-50 million. Caffè Nero’s $4.75 million buyout won’t cover all these debts, Carman reports. This means Compass will still owe unsecured creditors around $5 million, of which more than $726,000 is owed to what Carman previously reported were “three coffee suppliers or importers.” Haft said that none of Compass’ investors will make anything from the sale.
Read the full story on the Compass bankruptcy sale from The Washington Post here.
