Multi-channel electronic retailer Gems TV (USA) Ltd. has filed for Chapter 11 bankruptcy protection, a month after the company announced it was ceasing operations while its parent company bid to acquire a stake in rival Jewelry Television.

 

Documents filed Monday in the U.S. Bankruptcy Court for the District of Delaware in Wilmington, Del., indicate that Gems TV has struggled to maintain profitability since its inception, and the recession exacerbated these problems as U.S. consumers cut back on discretionary spending.

 

Formed in November 2006, the company is wholly owned by NCS Group Co., which in turn is wholly owned by Gems TV Holdings Ltd., a Cayman Islands-based corporation traded on the Singapore Stock Exchange. Gems TV Ltd. made a business out of selling colored gemstone jewelry via its 24/7 home shopping channel GemsTV, which reaches 37 million viewers through satellite television providers, DirecTV Inc. Dish Network and select cable markets, and on its Web site, GemsTV.com.

 

At the time of its Chapter 11 filing, Gems TV reported its assets totaled about $51.2 million while its liabilities stood at approximately $120 million.

 

"The company's margins and profitability have been under constant pressure from this extremely challenging and unpredictable economic environment," court papers said, noting that one particular problem area was the high price of gold.

 

"The company's margins were severely impacted by heightened gold prices, as attempts to fully pass the costs of raw materials increases to customers were unsuccessful," the bankruptcy petition says. 

 

On March 2, Gems TV announced it was ceasing operations and beginning an orderly wind-down of affairs. Employees were notified of this decision on March 8 and will have their jobs until May 6, court documents show.

 

In addition, on March 8, Gems TV notified satellite television providers that the network was going out of business, and that the company would no longer broadcast after April 15.

 

The bankruptcy, however, does not erase Gems TV Holdings Ltd's bid to acquire a stake in Jewelry Television.

 

"JTV's signed term sheet is with the Singapore-based holding company," a Jewelry Television spokesperson told National Jeweler. "JTV has no comment on Gems TV's decision to file Chapter 11 on their U.S. operations."

 

Trade creditors were hit particularly hard by Gems TV's filing, as 17 out of the company's top 20 unsecured creditors are jewelry companies.

 

Court documents show that New York-based B.H. Multi Com Corp. is the unsecured creditor with the largest claim, at $2.82 million.

 

Bangkok, Thailand-based Creative Gems and Jewelry Public Co. Ltd. holds an unsecured claim of $2.01 million, followed by Emerald House Co. in Hong Kong at $1.41 million, and Mumbai, India-based M/S Charisma Jewellry Pvt. Ltd. at $1.39 million.

 

In addition to trade debt, court papers show that DirecTV holds an unsecured claim of $2.67 million against Gems TV for broadcast fees.

 

DirecTV also has filed a $25 million lawsuit against the retailer for an alleged breach of an affiliation agreement related to Gems TV's decision to terminate broadcasting, court papers show. The satellite television provider sought a preliminary injunction to prevent Gems TV from transferring or disposing of any of its assets outside the ordinary course of winding down the business. A hearing in that case was scheduled to take place April 19, but was stayed by the commencement of the Chapter 11 filing.