Discounted gift card

NEW YORK -- Factory Card Outlet has outlined its turnaround strategy as the party supply retailer begins to turn the corner from its two-year bankruptcy. The retailer announced on March 20 that the U.S. Bankruptcy Court for the District of Delaware had confirmed the company's amended plan of reorganization filed with the Court on Feb. 5.

The 172-store chain filed for Chapter 11 protection on March 23, 1999, after it experienced liquidity problems that lead to a disruption in the flow of merchandise.

Deeply discounted cards, selling for $0.49 cents a piece, and off-priced special occasion party supplies, such as balloons, invitations and giftwrap, make up the bulk of the retailer's merchandise mix.

As part of the company's reorganization strategy, chairman and ceo William Freeman also announced several executive changes, including the promotion of Gary Rada to the position of president.

Rada joined Factory Card Outlet in 1998 as senior vp and gmm, and was promoted to executive vp in 1999. Cfo James Constantine will assume additional roles of executive vp and chief financial and administrative officer.

Both Rada and Constantine will serve on the new board of directors when Factory Card Outlet emerges from bankruptcy, which is expected to take place in early April. Also, Freeman, who co-founded the chain with Bayard Kelly, announced he will step down as chairman and ceo.

Freeman has served as chairman, president and ceo at various times from 1989 to 1996, having led a group of investors in acquiring the original 10-store chain from parent company Viking Enterprises Inc. In 1999, Freeman returned to the fledging company as president and ceo.

"Having Bill in a leadership role to guide us through the successful emergence from bankruptcy was vital," said Rada. "His energy and confidence in our associates motivated all of us to attain record operating performance. He made many significant contributions to Factory Card Outlet, and we are grateful to have had him with us during this period."

Under the terms of the amended plan, upon its exit from Chapter 11, most general unsecured creditors will share a receipt of approximately 90% of common stock of the reorganized company and cash distributions of $1 million. In addition, creditors will receive $2.6 million three years from bankruptcy, subject to certain prepayment provisions.