RedEnvelope files Chapter 11, finds buyer
In a filing with the Securities and Exchange Commission today, RedEnvelope reported that it filed for Chapter 11 bankruptcy protection on April 17 with the US Bankruptcy Court for the Northern District of California, San Francisco.
In conjunction with the bankruptcy filing, RedEnvelope entered into an agreement with Creative Catalogs Corp. to purchase all of RedEnvelope's assets and assume certain of the company's obligations for $5.7 million. In addition the cataloger has received a $4.5 million debtor-in-possession credit facility and loan extended by Creative Catalogs and Granite Creek FlexCap so it can continue business operations during the bankruptcy sale process. The final sale price of RedEnvelope will be less the outstanding amount from that loan.
The agreement requires the sale to close by May 30, during which time RedEnvelope will accept other bids.
Frank Buettner, RedEnvelope's president and COO, had no comment on the recent developments.
On March 31, RedEnvelope revealed in another SEC filing that its bank would no longer provide the multichannel merchant with the ability to draw on its credit line. As a result, the nine-year-old gifts cataloger said in the filing that it had insufficient funds to continue operations as a going concern and was engaged in discussions with potential acquirers.
As one of the only successful pureplay e-commerce sites to launch and maintain a catalog business, RedEnvelope was a multichannel retail success story. However, as with Lillian Vernon, which was sold recently to Taylor Corp. at auction, and a host of other retailers, a tough economic environment coupled with banks that are increasingly wary of extending credit to retailers has cast a pall over the year.
In February, RedEnvelope reported a loss of $4.3 million, compared with a net income of $5.3 million for the same period last year. Order shipments during the third quarter dropped about 20% compared with last year.
Earlier this month, Creative Catalogs Corp., a catalog and online retailer of personalized gift items across several product categories, lost its bid to acquire Lillian Vernon.