Online retailer Ritz Interactive Inc. is picturing a successful reorganization after winning approval to send its Chapter 11 plan to creditors.

Judge Erithe A. Smith of the U.S. Bankruptcy Court for the Central District of California in Santa Ana on Nov. 17 approved Ritz's disclosure statement and scheduled a Feb. 2 confirmation hearing on the related reorganization plan, said debtor counsel Scott F. Gautier of Peitzman, Weg & Kempinsky LLP. No order had been entered as of Monday morning.

Gautier said the debtor expects strong support from creditors pending the confirmation hearing and that no parties opposed the disclosure statement.

The owner of an e-commerce network of websites selling a variety of products, including cameras, boats, clothing, sandals, and scrapbooking and needlecraft supplies, plans to hand its equity to its secured creditor to exit from bankruptcy as a going concern.

Ritz Interactive's primary asset is an exclusive license to use and reproduce certain names and trademarks owned by Ritz Camera & Image LLC, which acquired the intellectual property in July 2009 during Ritz Camera Centers Inc.'s bankruptcy case.

Ritz Interactive plans to hand all its reorganized equity to Ritz Camera & Image. In return, Ritz Camera would waive about $3.5 million in secured claims and contribute up to $150,000 to pay Ritz Interactive's administrative and priority claims and about $1 million to pay unsecured trade claims. Ritz Camera would continue to operate the debtor after it left Chapter 11.

The debtor amended its disclosure statement on Nov. 15, altering the projected recovery for unsecured creditors from 20% to 2%. The new estimate is due to Ritz's settlement with creditor TW AOL Holding LLC, which will now have a $7.9 million allowed unsecured claim.

The claim arises from a 2005 agreement under which the debtor repurchased a $10 million equity stake with a note originally due December 2006. The note is now due November 2012.

Under Ritz's latest amended plan, filed Sept. 27, $713,000 in administrative claims would be paid in full.

Secured creditors Western Finance & Lease Inc. and U.S. Bancorp Business Equipment Finance Group, collectively owed $168,000, would either be paid according to their agreements or would receive the collateral securing their claims.

Priority unsecured creditors, owed $200,000, would be paid in the ordinary course of business.

General unsecured creditors would receive a pro rata share of $100,000 on the plan's effective date.

Convenience creditors -- unsecured creditors with claims of $15,000 or less -- would recover 99% of their claims.

Equity holders would be wiped out.

Ritz Interactive filed its first plan on Aug. 30. The company then filed an amended plan on Sept. 14, which the court denied approval of two days later because it discussed Ritz Camera as a potential insider.

Ritz Interactive and Ritz Camera became involved in 2009, when Ritz Camera acquired the licenses from Ritz Camera Centers, which liquidated in Chapter 11. Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware in Wilmington confirmed its plan on April 20, 2010.

Ritz Interactive had been selling Ritz Camera Centers' products since Aug. 1, 2005.

Ritz Interactive began to experience a downturn in revenue in the latter half of 2008. Its revenue further declined when Ritz Camera Centers filed for bankruptcy protection on Feb. 22, 2009.

Even after Ritz Camera Centers' case concluded, Ritz Interactive still could not purchase inventory. While Ritz Camera & Image had been financially accommodating, Ritz Interactive couldn't fund its operations.

The Irvine, Calif., company then filed for Chapter 11 on Aug. 19.

Founded in 1999, Ritz Interactive started with $2.4 million in annual sales. Revenue then increased to $111 million in 2007 and $107 million in 2008. With the debtor's consecutive years of profitability, Internet Retailer named Ritz Interactive the country's 32nd-largest Internet-only commerce website.

In schedules, Ritz Interactive listed assets of $809,192 and liabilities of $7.2 million.