A.B.C. Carpet Co.: 888 Capital Credit Bid and 40.7% GUC Recovery

A.B.C. Carpet Co., Inc. and two affiliated entities operating "abc carpet & home" filed chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York on September 8, 2021, opening lead case 21-11591 before Hon. David S. Jones. The case was structured from day one as a 363 sale to the prepetition senior secured lender, 888 Capital Partners, LLC, which simultaneously acted as DIP lender and stalking horse purchaser. The sale closed under eight weeks after the petition, after a Rule 9019 settlement with the official creditors' committee resolved a dispute over insider claims two days before the sale hearing.

The Joint Plan of Liquidation, filed by the Debtors and the Official Committee of Unsecured Creditors as co-proponents after the sale closed, was confirmed on March 3, 2022 and went effective on March 11, 2022. General unsecured creditors ultimately received a 40.7% distribution from the post-effective Liquidating Trust — a recovery driven by the Rule 9019 settlement, the subordination of approximately $40 million of insider claims, and four years of trust-level litigation and claim reconciliation. With final distributions completed on December 29, 2025 and the Liquidating Trustee's final decree motion filed in February 2026, the case is now in its closing posture.

Debtor(s)	A.B.C. Carpet Co., Inc. (3 jointly administered entities)
Court	U.S. Bankruptcy Court, Southern District of New York
Case Number	21-11591
Petition Date	September 8, 2021
Plan Type	Chapter 11 Plan of Liquidation
Confirmation Date	March 3, 2022
Effective Date	March 11, 2022
Judge	Hon. David S. Jones
Claims Agent	Stretto, Inc.
DIP Facility	$5.7 million from 888 Capital Partners, LLC at 12.0% (15.0% default), $2.25 million interim draw, maturing November 10, 2021

From a Lower East Side Pushcart to 888 Broadway

The business traces to 1897, when the great-grandfather of majority owner Paulette Cole began selling rugs from a pushcart in Manhattan's Lower East Side, according to the first-day affidavit submitted under Local Rule 1007-2 by Aaron Rose. The company expanded into broader home furnishings in 1983 and operated under the "abc carpet & home" brand selling antiques, floor coverings, accessories, and home décor. As of the petition date the Debtors operated approximately 350,000 square feet of retail space across the 888 Broadway flagship, an outlet location in Brooklyn, and warehouses in Long Island City and New Jersey, and employed 152 people split 83 salaried to 69 hourly.

The three filing entities — A.B.C. Carpet Co., Inc., A.B.C. Home Furnishings, Inc., and A.B.C. Oriental Carpets, Inc. — were jointly administered as a family-run enterprise, with Paulette Cole as the controlling principal.

COVID-19, Lease Disputes, and the Liquidity Squeeze

The first-day affidavit attributes the filing to a combination of factors. Government-mandated New York City store closures during the COVID-19 pandemic, supply-chain disruption across a vendor base of more than 1,000 suppliers, and a sustained decline in foot traffic at the 888 Broadway flagship reduced retail revenue. Construction at 888 Broadway and disputes with the Master Landlord further disrupted operations through 2020 and into 2021. Bloomberg reported that the company cited the pandemic and a delayed renovation as the primary drivers of the filing.

The Debtors had drawn down a $5 million senior secured facility from Gerber Finance, Inc. originated in October 2020. The facility carried interest at prime plus 3% (prime plus 5% on default) and was scheduled to mature on September 30, 2022. Cole personally injected capital into the facility through a junior participation interest — purchasing $2 million on July 21, 2021 and an additional $700,000 on August 4, 2021. In August 2021, immediately before the chapter 11 filing, 888 Capital Partners, LLC acquired the Gerber senior secured credit facility and made additional protective advances, then offered to serve as the stalking horse purchaser in a chapter 11 sale process.

Capital Structure and the Cole Insider Loans

As of the petition date, total funded debt obligations were approximately $63 million, with the bulk concentrated in non-arms-length insider debt rather than third-party financing. The structure is described in the LR 1007-2 affidavit and reflected in the DIP-related findings.

The senior secured facility had grown from its original $5 million principal to no less than $8 million by the petition date, reflecting protective advances from 888 Capital after it acquired the Gerber facility in August 2021. Of that $8 million secured obligation, not less than $2.7 million constituted Cole's junior participation interest. With trade payables, vendor exposure, and unexpired-lease claims layered on top, the Debtors estimated total general unsecured claims would exceed $80 million.

The ~$40 million of insider loans owed to Cole-affiliated entities — including ABC Kitchen(s), LLC; Hudruf Realty L.L.C.; Amma421, LLC; and the estate of Jerome Weinrib — sat at the same priority level as general unsecured trade and lease creditors absent subordination.

DIP Financing and 888 Capital's Lender-Buyer Role

888 Capital Partners agreed to provide debtor-in-possession financing on terms set out in the DIP Motion filed at the outset of the case. The facility committed up to $5.7 million, with $2.25 million available on entry of the interim order, at 12.0% per annum (15.0% on default), maturing November 10, 2021 — a nine-week runway tied to the sale schedule. Reuters reported that the court approved interim access to the bankruptcy loan shortly after the filing. The interim DIP order entered September 13, 2021 and the final DIP order on October 1, 2021.

The final order granted the prepetition lender adequate protection in the form of replacement liens on all DIP collateral, junior to the DIP liens and the carve-out, and a superpriority administrative-expense claim under section 507(b) for any diminution in value of prepetition collateral. All DIP and adequate-protection claims were subordinated to the carve-out. 888 Capital held both the prepetition senior secured loan and the DIP, and the final order authorized credit bidding both layers at the sale.

Stalking Horse Sale and the Cancelled Auction

From the petition date forward the case was structured as a 363 sale rather than a standalone reorganization. The Sale Motion, filed concurrently with the first-day package, designated 888 Capital Partners as the stalking horse bidder and proposed bidding procedures and bid protections.

The stalking horse bid combined a credit bid of all secured debt obligations — the prepetition loan plus DIP obligations, estimated at more than $15 million in the aggregate — with cash of $300,000 plus "Store-Level Cash" as defined in the Stalking Horse Agreement, up to $250,000 toward wind-down expenses, cash sufficient to pay retained estate professionals and any official committee, and assumption of certain consumer-facing liabilities including outstanding gift cards and customer orders. The court approved the bidding procedures on October 1, 2021 with bid protections of a $750,000 break-up fee and up to $330,000 in expense reimbursement, and required 888 Capital to serve as back-up bidder for 30 days following any approved alternative transaction. The qualified-bid deadline was October 19, 2021.

No qualified competing bids were submitted. On October 21, 2021 the Debtors filed a notice cancelling the auction and designated 888 Capital as the successful bidder without an auction. The Bloomberg report that day previewed an outcome in which ABC Carpet would stay in business through the bankruptcy sale under the lender's ownership. The court entered the Sale Order on October 27, 2021, authorizing a sale of substantially all assets to 888 Capital free and clear of all liens, claims, interests, and encumbrances and confirming 888 Capital's right to credit bid any or all obligations under the DIP and prepetition loan documents, including Cole's participation interest. The sale closed on November 1, 2021, less than eight weeks after the petition.

Rule 9019 Settlement With the UCC and Paulette Cole

The Joint Rule 9019 Settlement Motion was filed on October 22, 2021 by the Debtors, the Official Committee of Unsecured Creditors, 888 Capital Partners, and Paulette Cole, and the court entered the Settlement Order on October 27, 2021 alongside the Sale Order.

The settlement modified the sale on five points. 888 Capital agreed to increase the consideration under the Stalking Horse APA by $200,000 in cash. The Debtors retained the first $200,000 of net proceeds from any Visa/Mastercard interchange-fee class action recovery as an "Excluded Asset"; any recovery above that threshold would pass to 888 Capital as an "Acquired Asset." The UCC agreed to support and not object to the sale and APA as long as the terms conformed to the settlement. The Debtors retained D&O claims against Paulette Cole in her director/officer capacity, but those claims were limited strictly to recoveries under the Debtors' D&O insurance policies, with no collection permitted from Cole personally. Paulette Cole and her affiliated entities (ABC Kitchen(s), LLC; Hudruf Realty L.L.C.; Amma421, LLC; and the estate of Jerome Weinrib) agreed to subordinate all of their claims so that they would receive no distributions until all other allowed creditor claims were paid in full. All other estate claims and causes of action were acquired by 888 Capital and released at the sale closing.

Confirmed Plan, UST Releases, and the 40.7% GUC Recovery

With the sale closed, the Debtors and the Creditors' Committee filed a Joint Chapter 11 Plan of Liquidation as co-proponents on December 20, 2021. The plan went through several rounds of amendment in the disclosure-statement phase before a final solicitation version was approved.

The most contested issue in confirmation was a release dispute. The U.S. Trustee objected to the adequacy of the Disclosure Statement on the grounds that the plan contained non-consensual third-party releases. The UST argued that opt-out mechanisms and "deemed consent" based on failure to return a ballot do not constitute the knowing and informed consent required for valid third-party releases, and objected separately that Classes 1 and 2 — designated unimpaired and given no ballots — were nevertheless being subjected to releases without any opportunity to vote or opt out. The UST sought either an opt-in mechanism or severance of the non-consensual releases.

The Debtors resolved most of the objections in a reply filed before the disclosure-statement hearing. They revised the releases so that rejecting creditors, non-voting parties, and creditors filing objections to the releases would not be deemed "Releasing Parties" and would not be bound; refined the definition of "Releasing Parties" to exclude entities a creditor lacks authority to bind; and carved out legal-malpractice claims from the scope of the releases. The disclosure statement was approved on January 27, 2022 and the Amended Plan (as further modified) was filed on February 28, 2022. Confirmation followed on March 3, 2022 and the effective date was March 11, 2022, when the post-effective Liquidating Trust was established to hold remaining assets, prosecute preserved causes of action, and reconcile and pay claims.

Class structure and the 40.7% Class 3 dividend. The plan established a six-class structure. The lender's credit-bid had already transferred the operating assets to 888 Capital, leaving the Liquidating Trust with the Excluded Assets, the $200,000 settlement consideration, post-petition operating cash, preserved D&O claims, and retained avoidance actions to fund creditor distributions. Class treatment was as follows.

Class	Description	Treatment	Recovery
1	Secured Claims	Paid in full to extent of collateral value; no actual secured claims existed post-sale	100%
2	Other Priority Claims	Paid in full in cash on or as soon as practicable after the Effective Date	100%
3	General Unsecured Claims	Pro rata share of Liquidating Trust assets after higher-priority claims satisfied	40.7%
4	Subordinated Claims (Cole affiliates)	No distribution until all other allowed claims paid in full	0%
5	Intercompany Claims	Adjusted, reinstated, or discharged at Liquidating Trustee's option	0%
6	Interests in the Debtors	Cancelled as of the Effective Date	0%

The 40.7% Class 3 dividend is the actual cumulative distribution made by the Liquidating Trustee, not a confirmation-stage projection. The Trustee reconciled all 531 filed proofs of claim across the joint case and litigated targeted objections through the four-year wind-down — including objections to JPMorgan Chase Bank claim numbers 293 and 294 filed in July 2023 and a December 2023 objection to Madeline Weinrib claim number 347. The Class 4 subordination of approximately $40 million of Cole-affiliate claims under the Rule 9019 settlement removed those claims from competition with the Class 3 pool.

Greenberg Traurig, B. Riley, and the Final Fee Order

The Debtors retained Greenberg Traurig, LLP as counsel and B. Riley Securities, Inc. as investment banker and financial advisor. The UCC retained Seward & Kissel LLP as counsel and Province LLC as financial advisor. ASK LLP served as special counsel and Stretto, Inc. served as administrative advisor and claims and noticing agent. The court entered the Final Fee Order on April 27, 2022 covering the period September 8, 2021 through March 11, 2022.

Professional	Role	Final Fees	Expenses
Greenberg Traurig, LLP	Debtors' Counsel	$2,222,803.70	$206.16
B. Riley Securities, Inc.	Investment Banker / Financial Advisor	$824,890.58	$289.73
Seward & Kissel LLP	UCC Counsel	$868,770.00	$0.00
Province LLC	UCC Financial Advisor	$677,090.50	$19.70
ASK LLP	Special Counsel	$34,430.00	$1,754.09
Stretto, Inc.	Administrative Advisor / Claims Agent	$32,839.75	$0.00

Total estate professional fees through the effective date approached $4.7 million across the six retained firms, with Greenberg Traurig's allocation the largest at approximately $2.2 million. B. Riley's compensation was structured as a transaction fee equal to the greater of 2.5% of Sale Transaction Value or $500,000, plus a $50,000 retainer, with total approved compensation of $824,890.58. Greenberg Traurig was later recognized at the M&A Advisor's 16th Annual Turnaround Awards for its role in the restructuring. The Debtors also obtained approval of a KEIP and KERP on October 5, 2021 covering two senior management participants under the KEIP — capped at $30,000 per participant and $60,000 in the aggregate, with payouts tiered to operating net cash flow against budget and conditioned on consummation of the sale and full satisfaction of 888 Capital's secured debt — and a separately scoped KERP for non-insider employees with individual amounts filed under seal with the U.S. Trustee and the Committee.

Key Timeline

Date	Event
September 8, 2021	Petition Date — three entities file chapter 11
September 9, 2021	First-day motions filed (DIP, cash management, wages, sale)
September 10, 2021	Interim first-day orders entered; joint administration ordered
September 13, 2021	Interim DIP order entered
September 22, 2021	Official Committee of Unsecured Creditors appointed
October 1, 2021	Final DIP order entered; bidding procedures approved
October 5, 2021	Bar date order entered; KERP approved
October 19, 2021	Qualified bid deadline (no competing bids received)
October 21, 2021	Auction cancelled; 888 Capital designated successful bidder
October 22, 2021	Joint Rule 9019 settlement motion filed
October 27, 2021	Sale Order entered; settlement approved
November 1, 2021	Sale to 888 Capital closed
December 20, 2021	Initial Plan of Liquidation and Disclosure Statement filed
January 27, 2022	Disclosure Statement approved
February 28, 2022	Amended Plan filed (as further modified)
March 3, 2022	Confirmation Order entered
March 11, 2022	Effective Date; Liquidating Trust established
April 27, 2022	Final professional fee order entered
July 12, 2022	Affiliate cases closed
December 29, 2025	Final distributions to general unsecured creditors
February 23, 2026	Final Decree Motion and Trust Extension Motion filed
March 10, 2026	Scheduled hearing on Final Decree

Frequently Asked Questions

Who bought A.B.C. Carpet & Home in the chapter 11 sale?

888 Capital Partners, LLC acquired substantially all assets of A.B.C. Carpet Co., Inc. and its two affiliated debtors as the sole qualified bidder. The auction was cancelled on October 21, 2021 after no competing qualified bids were received, and the court entered the Sale Order on October 27, 2021. The sale closed on November 1, 2021. 888 Capital was the prepetition senior secured lender and DIP lender, and consideration consisted of a credit bid of secured and DIP obligations of more than $15 million, $300,000 in cash plus Store-Level Cash, up to $250,000 toward wind-down expenses, professional-fee funding, and assumption of certain consumer-facing liabilities, along with the additional $200,000 negotiated in the Rule 9019 settlement.

What recovery did general unsecured creditors receive?

Class 3 general unsecured creditors received a 40.7% distribution from the Liquidating Trust, an actual cumulative recovery as of December 29, 2025 rather than a confirmation-stage projection. The recovery was driven by the subordination of approximately $40 million of Cole-affiliate claims under the Rule 9019 settlement, the additional $200,000 of cash consideration negotiated by the UCC, and four years of trust-level claim reconciliation against the 531 filed proofs of claim.

Who is the claims agent for A.B.C. Carpet Co.?

Stretto, Inc. (Bankruptcy Management Solutions, Inc. d/b/a Stretto) serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

Is the case still open?

The Liquidating Trustee filed a Final Decree Motion on February 23, 2026, with a hearing scheduled for March 10, 2026. Final distributions to general unsecured creditors were completed on December 29, 2025. The affiliate cases closed on July 12, 2022.

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