Bankruptcy Filing by Paper Source Includes Plans for Self-Sale
Paper Source Files for Chapter 11 Bankruptcy Amidst Pandemic-Induced Retail Struggles
The retail world, including the card and gift sector, has been hit hard by the COVID-19 pandemic, with Paper Source joining the list of affected businesses. The Chicago-based retailer, known for its range of products from books and journals to wedding invitations, has filed for Chapter 11 bankruptcy.
Founded in 1983 by Susan Lindstrom, Paper Source started as a single store showcasing handcrafted papers from around the world. Over the years, it expanded under various ownership, with Lindstrom growing the retailer to 27 stores by 2007 before selling a majority stake to private equity firm Brentwood Associates. Under Brentwood's ownership, Paper Source added nearly 25 more stores.
In 2013, Paper Source was acquired by Investcorp International. The retailer continued to expand its omnichannel capabilities and accelerated its growth. However, the pandemic's impact on consumer demand and supply chains has taken a toll. As of its Chapter 11 filing, Paper Source's outstanding rent obligations stood at $15.8 million.
The company's financial woes are part of a broader trend affecting card and gift retailers. The gift and card retailer IG Design Group Americas, which produces wrapping paper, gift bags, greeting cards, and stationery, filed for Chapter 11 bankruptcy in July 2025. Other retailers in adjacent categories have also faced significant challenges, with Claire’s filing for bankruptcy and potential closures of over 1,100 stores, and chains like Macy’s and Kroger closing dozens of stores across the U.S.
Analysis suggests that companies with overseas sourcing or exposure to tariffs and inflation, challenges exacerbated by pandemic-related disruptions, have been particularly vulnerable. Paper Source designs about 40% of its own products and has a wholesale business as well.
The store closures hit right at important holidays for the gift seller, including Mother's Day and Easter. Paper Source aims to hold an auction for its business on April 21 and a sale hearing on April 30. The company offers children's art camps, skill workshops, design consultations on wedding invitations, and other services.
A stalking horse bid from current lenders led by MidCap Financial values the company at $16.5 million. The bid includes $16 million for a debtor-in-possession facility and $72.8 million on a first lien facility. The company plans to sell itself and close at least 11 stores.
The pandemic has weakened consumer spending, disrupted supply chains, and increased costs, pushing many retailers, including gift and card businesses, toward restructuring or shutdowns. Paper Source's bankruptcy and store closures reflect this wider pattern, with retail sectors suffering severe pandemic-related financial pressures, leading to bankruptcies and widespread store closings.
- The pandemic-induced retail struggles have led to Paper Source, a Chicago-based retailer known for its products in the card and gift sector, filing for Chapter 11 bankruptcy.
- Amidst these retail strife, Paper Source's financial troubles are part of a broader trend affecting various industries, including card and gift retailers.
- A significant challenge faced by retailers, including Paper Source, is the impact of the pandemic on consumer demand and supply chains, which have led to increased costs and financial pressures.
- As Paper Source aims to sell itself and close at least 11 stores, AI could potentially assist in analyzing financial data to help make informed decisions in this critical time for the business.
- Government support, such as aid for small businesses or tax breaks, may be necessary to help retail companies like Paper Source during pandemic-related financial pressures, safeguarding jobs and the economy as a whole.
