Kelly-Moore Paints halts operations and is closing all of its stores

Kelly-Moore Paints store at 710 Auzerais Avenue in downtown San Jose.

Kelly-Moore Paints, founded in San Carlos in 1946, has abruptly decided to go out of business by halting all operations and closing every one of its stores after failing to secure a cash infusion to help the retailer escape a financial quagmire.

The shutdown affects 61 Bay Area locations, according to a check of the retailer’s website.

San Jose has the largest concentration of Kelly-Moore Paint stores, with six retail sites. San Francisco has five Kelly-Moore stores while Santa Rosa has three.

Oakland, Concord, Fremont, Mountain View, San Mateo and Santa Clara all have two Kelly-Moore Paint stores, the company’s website shows.

“All the company’s facilities (other than a distribution center in Union City) will be permanently closed effective immediately, including Kelly-Moore’s manufacturing facility in Texas, and its retail stores,” the company said in a prepared release.

The Union City complex is being kept temporarily open to help Kelly-Moore Paints fulfill existing orders.

“The company and its advisors conducted an exhaustive process that included pursuing opportunities for new capital investment, a potential sale, merger or reorganization,” the retailer said.

Kelly-Moore Paints said its finances have been eroded by three decades of asbestos claims.

“Largely due to the asbestos litigation overhang, it was impossible to attract any additional funding or interest to recapitalize, restructure, or reorganize the business,” Kelly-Moore Paints stated.

The company determined that the cash squeeze that it was facing was so severe that it wouldn’t be possible top attempt to revamp its finances through a bankruptcy proceeding.

“Neither a bankruptcy reorganization nor an in-court liquidation is viable or advantageous given the company’s inability to fund its continued operations,” Kelly-Moore stated in the prepared release.

Kelly-Moore also claimed that it had few assets that it could dangle in front of creditors as part of the give-and-take between a debtor and its creditors that frequently accompanies a bankruptcy proceeding.

“The company leases all its facilities and has no unencumbered hard assets that could be made available for distribution to creditors,” Kelly-Moore stated.

The abrupt collapse of Kelly-Moore means scores of dark storefronts are about to appear on an already gloomy landscape for the commercial real estate market in the Bay Area.

But many locations could attract retailers, especially since the size of a typical Kelly-Moore store is about 7,000 to 8,000 square feet in size, in the view of David Taxin, a partner with Meacham Oppenheimer, a commercial real estate firm.

“There should be plenty of retailers out there for stores of this size,” Taxin said. “There of plenty of ways to re-purpose these buildings.”

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