Petals Files Chapter 11

May 21, 2003 9:30 PM  By

Cataloger/retailer Petals filed for Chapter 11 bankruptcy protection on May 21, but president/CEO Richard Belenski says that the company isn’t dying on the vine.

In its filing with the U.S. Bankruptcy Court for the Southern District of New York, the marketer of artificial flowers and home accessories listed $32 million in assets and $40 million in debt. But in a statement, Belenski said, “The fundamental business model of Petals, including margins, response rates, and average order, remain strong around the core of a significantly larger 12-month buyer file year on year.” None of the Tarrytown, NY-based company’s top creditors holds more than $2 million in claims against the company, according to the filing.

Prior to December 2001, the assets and stock of Petals, a wholly owned subsidiary of Interiors, had been pledged as collateral for debt financing by its parent company, according to Belenski. When the now-defunct Interiors could not liquidate its debt, its creditors foreclosed on their collateral, and Petals became a free-standing company. Petals retained significant liabilities, Belenski continues, primarily Interiors’ $26 million worth of debt. What’s more, Petals was forced to file for bankruptcy protection to prevent it from being evicted from its Virginia warehouse, which holds a substantial part of its inventory.

“The company needed to raise money or at least establish a line of working capital to handle the basic seasonal cash requirements of the business,” Belenski said in a statement. “This became impossible with such a highly leveraged balance sheet.” Petals had been in risk of being evicted from its 220,000-sq.-ft. manufacturing and distribution facility in Suffolk, VA, which houses a significant portion of its product.

Petals will continue to run the Virginia facility and plans to bring the operations of its Florida facility there later this year. Petals will continue to operate its three stores, and its corporate headquarters and call center will remain in Tarrytown.