RedEnvelope Files Chapter 11
By Staff -- Gifts & Decorative Accessories, 4/22/2008 10:58:00 AM
San Francisco — Online and catalog gift vendor RedEnvelope Inc. filed for Chapter 11 bankrutcpy protection.with the US Bankruptcy Court for the Northern District of California, San Francisco.In connection with the filing, RedEnvelope entered into an asset purchase agreement with private company Creative Catalogs Corp., Lemont, IL, so that it can continue operating. Creative Catalogs will purchase substantially all of RedEnvelope's assets and assume certain of the Company's obligations through a supervised sale. The sale must be completed by end of next month.
The purchase price is $5,700,000, less the outstanding amount of a a $4.5 million debtor-in-possession credit facility. RedEvelope will use the credit "to provide working capital and financial resources necessary to allow business operations to continue as normal," the company said in a statement.
Consummation of the purchase is subject to better offers, approval of the Bankruptcy Court and customary closing conditions. Offers must be at least $.5 million higher than Creative Catalogs' price, and top each other by at least $100,000. If RedEnvelope accepts another offer, it will pay Creative Catalogs a 5 percent breakup fee and reimburse reasonable expenses up to another 2 percent. The sale must close by May 30.
Phil Neri, RedEnvelope's recently appointed CFO, said, "We believe the sale will strengthen the company and foster a sustained turnaround for RedEnvelope. We expect to proceed quickly with the sale and the related bidding process and that the business will have a significantly improved balance sheet, greater operating flexibility and a path to profitability."
As a result of the bankruptcy, the company's stock will lose its value. Earlier this month, RedEnvelope recieved a delisting letter from the NASDAQ stock exchange.
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