Capital Teas Bankruptcy Reorganization Focuses on Closures, Foodservice Expansion

Capital Teas announced July 12 that it has commenced a formal proceeding to reorganize to better position itself for the future. To facilitate this restructuring, the company filed a voluntary petition under chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland.

Capital Teas has obtained interim debtor-in-possession (DIP) financing and is negotiating for an additional DIP financing facility package. Subject to court approval, such financing, combined with the company’s cash from operations, is expected to provide sufficient liquidity during the chapter 11 process to support its continuing business operations and minimize disruption to customers.

“We have conducted an extensive review of alternatives to address Capital Teas’ needs, and we believe that pursuing a reorganization through chapter 11 is the best path forward now,” said Peter Martino, chairman & CEO of Capital Teas. “Reducing the company’s lease obligations and restructuring our debt through the chapter 11 process will best position Capital Teas for future success.”

Capital Teas Restructuring Focus

As part of the restructuring, Capital Teas plans to close, or has recently closed, 10 of its 22 brick-and-mortar stores, nine of which are remote expansion stores that opened in the last two years in Pennsylvania, New Jersey, Delaware, Florida and Colorado. The company intends to consolidate its retail operations around its its fast-growing online business and 12 remaining stores in Maryland, D.C., Virginia and Florida.

Additionally, the company plans to expand its wholesale outreach to restaurants, hotels and other hospitality industry clients.

Finally, Capital Teas aims to expand its experiential reach to consumers in its stores through increased beverage options as well as enhanced interactivity and tea education for customers.

“This is a critical step in our transformation from a traditional retailer to an omnichannel specialty tea provider,” Martino said. “The previous business model became incompatible with the current retail environment and we are rapidly adapting to meet the needs and desires of the modern consumer. Many of our business channels are performing well, and we are confident that we can emerge from this reorganization process stronger than ever. Pursuing restructuring through chapter 11 will enable us to reduce the company’s debt and interest expense, and lease obligations, while providing increased financial flexibility to further invest in innovative growth surrounding our amazing teas and products. Most importantly, we are keenly focused on minimizing disruption to our customers and employees, particularly those within our home base of the metropolitan Washington, D.C., area. We also intend to fully honor all gift cards held by Capital Teas consumers.”

More from Capital Teas Bankruptcy

Contemporaneously with its bankruptcy filing,┬áCapital Teas filed several “first-day” motions with the court to facilitate a smooth transition into chapter 11 and to minimize business disruption.

Yumkas, Vidmar, Sweeney & Mulrenin is the company’s restructuring counsel.

Capital Teas opened its first store in Annapolis, Maryland, in 2007. The company was recently recognized as a member of the Inc. 5000, the nation’s fastest growing private companies. The mission of Capital Teas is to educate people and inspire lives, through the wonders of tea, one cup at a time.

Press Release Source: Capital Teas