Peekay Stores Plan Asset Sale after Filing Chapter 11 of US Bankruptcy Code

By on August 12, 2017
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Xbiz.com reports that Peekay Boutiques, which operates a retail chain of sexual wellness products under various store brands, filed for Chapter 11 bankruptcy protection yesterday reporting $72.6 million in debts.

Under four banners — Lovers, Christals, ConRev and A Touch of Romance — the company operates the bulk of its 46 stores in Washington state and Oregon, but also has locations nationwide. It also has affiliated ZJ Gifts stores in Texas, Colorado and Oklahoma.

In the Chapter 11 filing, Peekay listed about $1.1 million in trade debt to various well-known sex toy and novelty manufacturers that are creditors with unsecured claims. The sex toy maker with the largest claim is owed $293,000 for unpaid merchandise.

Auburn, Wash.-based Peekay said in the filing it was seeking approval from the court for a stalking-horse-led marketing effort to sell its 46-store enterprise and website, LoversPackage.com. A bid deadline has been set for Oct. 18.

Peekay’s Lovers division consists of 23 stores in Washington and Oregon, along with nine A Touch of Romance stores located in Los Angeles, Orange, Riverside and San Bernardino counties.

ConRev has four stores in Los Angeles and Orange counties, as well as 10 Christal’s stores in Texas, Tennessee and Iowa.

As of Aug. 1, Peekay had a total of 338 employees, 136 of whom are full-time employees.

Each of the 46 stores offer sexual wellness products, including massagers, vibrators, personal care and restraints, as well as personal lubricants, apothecary, candles, condoms, sensitizers and desensitizers.

Its lingerie products include a range of sleepwear, bodystockings, clubwear, costumes, corsets, baby dolls, hosiery and panties.

Along with its retail brand portfolio, the company also offers Sutera private label merchandise.

The chain, founded in 1982 by Phyliss Heppenstall as a family business, was acquired in 2012 by private equity investors who borrowed heavily to acquire several regional retailers in hopes of building a national franchise.

One of the largest equity holders listed in Peekay’s Chapter 11 filing is Colbeck Capital Management, which has a 29 percent share of common stock. (The investment firm is familiar with the adult space. In 2011, Colbeck Capital branched out to the industry after it facilitated a $362 million loan to Mansef before it became the adult entertainment conglomerate now known as MindGeek.)

The Chapter 11 filing for bankruptcy protection capped years of unsuccessful restructuring and sale efforts, including an attempted initial public stock offering and tentative sale agreements, according to Albert Altro, Peekay’s newly appointed chief restructuring officer.

Peekay filed with the bankruptcy court a motion for an order approving stalking-horse bid procedures for the company’s assets. The stalking-horse bidder — an entity that has already drawn out a plan to potentially acquire the assets — would be required to pay more than $30 million for assets.

“Although the debtors have been marketing their assets for more than 17 months, the proposed bid procedures contemplate a marketing process in the Chapter 11 cases and a bid deadline of Oct. 18,” a court filing said.

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