Paper Source, with locations in both Oak Park and Forest Park, filed for Chapter 11 bankruptcy on March 2, but according to Paper Source representatives, customers and operations won’t be impacted.
“There is no foreseeable impact to the product, experiences and services provided to our customers as a result of the filing. Operations will continue as normal,” said a representative from the company in an email to the Review.
Oak Park is home to a Paper Source store at 1109 Lake St. The shop sells greeting cards, crafting supplies, wrapping paper and other items.
Since 2015, Forest Park’s Industrial Drive has been the location of an approximately 120,000 square foot Paper Source warehouse and manufacturing facility.
Paper Source is headquartered in Chicago and was founded in 1983.
In a March 2 press release, the company stated, “All Paper Source stores will remain open across the country and will continue to operate safely within applicable COVID-related guidelines. The company has ample liquidity to support ongoing operations across all channels, and to fulfill commitments to its valued employees, customers, makers and suppliers prior to a sale, which is expected to close in approximately 90 days.”
The sale is to MidCap Financial, whose stalking horse bid was accepted by Paper Source. MidCap Financial, according to the release, will “purchase substantially all of [Paper Source’s] assets. The MidCap Financial transaction also includes approximately $16.5 million in committed financing, which will be immediately available to support the company’s operations through its stores, eCommerce and wholesale businesses.”
“We are very pleased to have the full support of our lenders led by MidCap Financial,” Winnie Park, CEO of Paper Source, said in the press release. “Today’s action represents a critical milestone in driving long-term, profitable growth and is a pivotal step forward in achieving the full potential of Paper Source as an omnichannel lifestyle brand.” She added: “The Covid-19 pandemic presented real challenges to our stores business, but this sale will help us to emerge stronger.”
The company has about 1,700 employees at its stores, Loop headquarters and Forest Park distribution center, according to Lauren Zumback in a March 2 article in the Chicago Tribune. Zumback also reported that during the pandemic, about 95 percent of Paper Source store employees were furloughed. Most have returned, and only nine positions were eliminated from the 275 corporate and warehouse employees.
But according to a March 5 Bloomberg story by Jeremy Hill, Paper Source placed unusually high orders from vendors in the months before declaring bankruptcy, and now payment for those orders are up in the air, causing those vendors, many of them small businesses, to fear they’ll be unable to make payroll or pay rent.
Park told Bloomberg that the large orders were placed to stock 27 new stores the company had acquired when the stationery chain Papyrus went out of business last year. Because of timing of their orders, Park also said, those orders will have higher priority in terms of repayment.
Park told Bloomberg in an email, “We apologize for the inconvenience this brings to the community of makers for Paper Source. This is a difficult time for the entire Paper Source community, our company and its makers. We care tremendously about our makers, especially as many of them are small business owners.”