Coincidental Caption: PennySaver files Bankruptcy

From the O.C. Register:

PennySaver has filed for Chapter 7 bankruptcy in Delaware, a week after it shut down and in the wake of lawsuits claiming nearly 700 workers were abruptly laid off without notice or final pay.

A Delaware bankruptcy judge on Friday granted a lawyer representing the company and several of its affiliates a 14-day extension to file a list of assets and liabilities.

The voluntary petition for relief is the first step for the company in the Chapter 7 bankruptcy process, which will protect them from creditors before an assigned trustee begins to dispose of all their assets and pay off those same creditors.

The petition filed by PennySaver, based in Brea, lists debts between $10 million and $50 million against the same range in assets.

Creditors number from 200 to 999, the petition states.

The bankruptcy comes nearly three years after Los Angeles private equity firm OpenGate Capital LLC acquired the Brea-based coupon and classified mailer for $22.5 million.

“OpenGate Capital regularly acquires under-performing businesses that by their very nature are sometimes operationally distressed … But in some cases, as with PennySaver, external circumstances frustrate our ability to have our investments realize their full potential,” according to a statement issued by Sitrick and Co., a crisis management firm representing OpenGate Capital.

“OpenGate worked diligently to try to resolve the issues confronting PennySaver,” the statement continued. “Despite the best efforts of PennySaver, its employees and management, due to circumstances beyond the company’s control, PennySaver was not able to continue operations.”

PennySaver unexpectedly ceased operation and laid off 678 employees at the end of the May workday May 22.

At least two lawsuits have been filed by employees, with one seeking class action status, claiming the company did not give employees proper notice ahead of the closure – as per California labor laws.

The Chapter 7 bankruptcy filing will temporarily halt lawsuits against PennySaver, but the suits still could move forward against OpenGate Capital, according to attorney Richard McCune, who filed a lawsuit on behalf of former PennySaver employees.

PennySaver, launched in 1962 in Huntington Beach, has been a common sight in mailboxes across California.

Article from Staff Reporter Joseph Pimentel at O.C. Register.


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