Paper Source Inc. has filed for Chapter 11 bankruptcy protection with a plan to sell itself.
The card, paper goods and gift retailer, which is planning to close at least 11 of its 158 stores while it seeks rent concessions, has a stalking horse bid from current lenders led by MidCap Financial to buy the company and provide $16.5 million in financing to help the company keep operating.
In March 2020, Paper Source acquired 30 shuttered stores from rival Papyrus after Papyrus’ parent company declared bankruptcy with a plan to close all of its 254 stores.
Paper Source took a big hit as its stores closed amid COVID-19. Prior to the pandemic, the retailer had been "enjoying rapid expansion and sustained sales growth," CFO Ronald Kruczynski stated in court papers.
“However, as with many other retail brands, the Debtors have sustained deep damage to their finances and operations as a result of the ongoing COVID-19 pandemic,” he said.
Paper Source plans to hold an auction for its business on April 21, and a sale hearing on April 30.