Red Envelope finds a buyer maybe

It looks like gifts cataloger Red Envelope, which filed for Chapter 11 bankruptcy protection on April 17, will be sold to Creative Catalogs Corp. The sale of Red Envelope had to be completed by May 30, according to the filing; the company could solicit other bids up until that time.

Creative Catalogs Corp., which reported nearly $43 million in sales for 2007, according to Hoover’s business directory, owns personalized gifts merchant Personal Creations. It agreed to purchase Red Envelope’s assets and assume some of the company’s liabilities for $5.7 million.

Red Envelope also received a $4.5 million debtor-in-possession credit facility and loan from Creative Catalogs and Granite Creek FlexCap so that it doesn’t have to close during the transition.

Red Envelope filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Northern District of California. The court assumed jurisdiction over the assets of the company as of the date of the filing of the bankruptcy petition.

According to the filing, Red Envelope owes $8.76 million to creditors. That includes $708,356.33 to gift box maker Design Packaging of Scottsdale, AZ; $224,338.62 to catalog printer Arandell Corp.; $563,844.29 to Google; and $1.56 million to United Parcel Service.

The company remains in possession of its assets, and continues to manage and operate its business and properties, as debtor-in-possession, subject to the provisions of the Bankruptcy Code and the supervision and orders of the Bankruptcy Court.

“We intend to use this filing to take the actions necessary to position Red Envelope for future success,” Phil Neri, Red Envelope’s chief financial officer, said in a release. “We want to assure our customers, our employees, our vendors, and our partners that Red Envelope is operating business as usual during this transition.”

According to media brokerage services firm ParadyszMatera, San Francisco-based Red Envelope had a universe of just under 882,000 names in the fourth quarter, and an average sale of $92.

Sights on synergies

Stuart Rose, managing director with Wellesley, MA-based investment firm Tully & Holland, sees similarities with Creative Catalogs and Red Envelope. “I assume there are fulfillment and list synergies between the two companies,” he says.

The stalking horse bidder in the recent sale of Lillian Vernon, Creative Catalogs Corp. lost out to Current USA.

“There is a break-up fee here, so if Creative loses, they still make a small sum,” Rose notes. “If they are successful, it would catapult Creative Catalogs’ volume. The owner there is very astute and would likely make Red Envelope a success.”

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.