Peekay Files for Chapter 11 Bankruptcy

AUBURN, Wash.—Adult retailer chain Peekay, along with 16 of its affiliates and subsidiaries, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware. Peekay operates as Christals, Lovers, ConRev and A Touch of Romance, primarily on the West Coast. The company is headquartered in Auburn, Wash., and operates a total of 46 stores. Peekay was founded in 1982 by Phyllis Heppenstall and was purchased in 2012 by a group of private equity investors. In the past few years, the owners have been unsuccessful in their efforts to restructure and/or sell the company. The bankruptcy filing lists Peekay’s assets between $10 million and $50 million and their liabilities between $50 million and $100 million. The company’s original debt of $38.2 million to its primary lenders has grown to almost $52 million, according to the filing. The filing also includes plans for a stalking horse bid, which is an attempt by the debtors to test the market for the assets in advance of an auction of them. The bid is an attempt to maximize the value of the assets or avoid low bids during a court auction. According to the First Day Declaration, filed on Aug. 10, Peekay enters Chapter 11 seeking a competitive sale process. Chief Restructing Officer for Peekay Albert Altro noted the company also attempted a public stock offering and had tentative sale agreements that never came to fruition. “No executable transaction came from these extensive marketing efforts, including the most recent letter of intent, which terminated in July 2017, precipitating these Chapter 11 cases,” Altro wrote. While the company worked hard to gain mainstream acceptance, that has worked against Peekay at the same time, Alto wrote. “Sexual health and wellness products can be found on the shelves and are available on websites of some of America's most prominent retailers, including Walmart and Amazon,” Altro said in his declaration. The goal is to satisfy the creditors, keep stores open and keep workers employed, Altro wrote. The case is assigned to Judge Brendan L. Shannon.