The Papyrus chain of stores selling art-inspired gift cards and fancy paper products will shut down after failing to find a buyer to rescue the company and its sister stores, American Greetings and Carlton Cards.
Owner SFP Franchise filed for bankruptcy with plans to hire liquidators to run going-out-of-business sales at its 254 stores, which includes the Paper Destiny brand.
The company employs about 1,100 people and has assets worth $39.4 million and debts of $54.9 million, according to court papers filed Thursday. SFP traced its bankruptcy to a 2009 deal, saying it saddled the chain with the high costs of closing stores and an increase in the price of products.
In 2009, as SFP was struggling, it traded the Papyrus name and its wholesale business to American Greetings for that company’s retail operations. The deal left Papyrus as a store operator with 500 locations in the United States and Canada. And Papyrus became dependent on American Greetings to supply much of the cards and other items sold in those stores.
American Greetings, which isn’t in bankruptcy, produces greeting cards under the Papyrus brand and other well-known gift-card names. American Greetings sells its cards, balloons, candles and other products to retailers like SFP.
In the past two years, SFP tried to negotiate better terms from suppliers and landlords. It also began exploring a sale, according to court papers. The company and American Greetings “worked cooperatively to address operations and financial issues,” until December, when American Greetings accused it of defaulting on their agreements.
The dispute caused the company’s lenders to cut off financing and declare their own default. When SFP failed to find a buyer, it filed bankruptcy with plans to hire a liquidator to shut down its stores and run going-out-of-business sales to move as much of its remaining product as possible.
“The proposed liquidation, consisting of substantially all of their assets, will provide the greatest recovery for their creditors,” SFP said in court papers.