Paper Source bankruptcy crushes small greeting card vendors

“If they were worried that we wouldn’t ship to them, they should have prepaid for the product,” said Janie Velencia, owner of The Cards Office in Washington, DC “$ 15,000 for them is nothing. For a small business like me, it’s payroll, it’s rent.

Paper Source ordered more from The Card Bureau over a 60-day period than it ordered in 2020, according to Velencia. The chain has ordered merchandise for $ 5,000 within 20 days of filing and $ 10,000 in previous weeks, she said.

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Vendors were urged to place larger-than-usual orders after the holidays because Paper Source needed to stock 27 new stores acquired from Papyrus, another stationery chain that went bankrupt last year, said General Manager Winnie Park in an emailed statement. Most orders will be given a higher refund priority on how to file bankruptcy due to their proximity to the deposit, Park said.

“We apologize for the inconvenience to the Paper Source designer community,” Park said. “These are difficult times for the entire Paper Source community, our company and its manufacturers. We care deeply about our creators, especially since many of them are small business owners. ”

Paper source filed for bankruptcy this week with plans to sell to lenders. The retailer, currently owned by Investcorp International Inc., has 158 stores in the United States and approximately 1,700 employees. She has over 100 million debts.

Last year, after temporarily shutting down its stores amid the Covid-19 pandemic, Paper Source demanded rent cuts from landlords and lengthened payment terms with suppliers given the dwindling cash flow, according to court documents. Its bankruptcy filing included new financing, and the company said in a statement Tuesday that it has enough cash to pay suppliers in the future.

Exactly when Paper Source received the pre-bankruptcy orders will likely play a big role in how much sellers like Velencia get back. Under bankruptcy rules, orders received within 20 days of filing for bankruptcy can become administrative claims, which puts the supplier’s claim higher on the refund line and increases the likelihood that it will be paid in full. . Prior to this period, however, sellers may be viewed as general unsecured creditors who often only receive pennies on the dollar after months or years of legal proceedings.

Steel petal press, a Chicago-based greeting card maker, has five open invoices from Paper Source, owner Shayna Norwood said in an interview on Friday. Two of the orders are more than 20 days old, she said.

“We’re still recovering from the pandemic and 2020, so having to deal with that puts a wrench in the work,” Norwood said, adding that she was aware of more than 200 small sellers affected by the bankruptcy. “It will be a less smooth transition.”

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