Dec. 29 (Bloomberg) -- The Parent Co., a Denver-based online retailer of products for children and babies, filed for bankruptcy protection with a plan to sell its assets at auction after sales plunged.

The company listed assets of $20.6 million and debt of $35.7 million in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware. Net sales were about $20 million in the first half of fiscal 2008, compared with about $106 million for all of the previous year, according to court papers.

Parent Co. has been “impacted by a sharp drop in sales due to reduced consumer recessionary spending,” Chief Executive Officer Michael Wagner said in court papers.

The company joins more than a dozen retailers that sought bankruptcy protection this year as consumers limited discretionary spending, according to data compiled by Bloomberg. Retail filings include Circuit City Stores Inc., KB Toys Inc., Boscov’s Inc., Sharper Image Corp., Mervyn’s LLC, Linens ‘n Things Inc. and Value City Department Stores LLC.

Parent Co. is owned by D.E. Shaw & Co., which holds about 63 percent of the company’s common stock, according to court papers and Bloomberg data. A spokeswoman for D.E. Shaw declined to comment on the filing.

The company is seeking permission to borrow $10.9 million from an affiliate of D.E. Shaw to help fund operations while it finds a buyer. It wants to borrow $3.5 million on an interim basis.

Workforce Reduction

Parent Co. said it had about 946 employees at the beginning of December. Since then, it had reduced its workforce to 103 people, including 4 independent contractors, at the time of the filing, according to court documents.

Nine affiliates, including Etoys Direct, BabyUniverse, Dreamtime Baby, PoshTots, Gift Acquisition and My Twinn also sought protection. Parent Co. asked the court to jointly administer the cases.

Parent Co. subsidiary Etoys Inc. filed for bankruptcy protection in March 2001, listing $285 million in debt, after it failed to get new funding to stay in business. The company was never profitable. KB Toys, the largest mall-based toy retailer in the U.S., bought the company’s assets for $5.4 million at an auction a month later.

Blaming a “sudden drop” in sales, KB Toys filed for protection a second time this month, saying it owes creditors as much as $500 million. KB Toys sold its online assets to D.E. Shaw, Parent Co. owner, during its first bankruptcy in 2004, according to court documents.

2007 Merger

In 2007, BabyUniverse Inc., a Parent Co. unit, agreed to a merger with Etoys in which Etoys shareholders received two- thirds of the combined company’s stock. The merged company changed its name to The Parent Co. this year, court papers show.

Parent Co. operates seven retail Web sites including Etoys.com and KBtoys.com, where it sells children’s toys and three Web sites that provide educational resources to expectant parents, according to court documents.

The company first offered its stock for $9.50 a share in August 2005, and it reached a high of $12 a share on Oct. 12, 2007. The stock fell 15 cents, or 65 percent, to 8 cents in Nasdaq Stock Market trading after reaching an all-time low of 7 cents earlier today. Parent Co. has fallen 99 percent this year.

The 40 largest consolidated creditors without collateral backing their claims are owed $10.9 million. The largest unsecured creditor is United Parcel Service Inc., owed $3.1 million.

The lead case is In re eToys Direct 1 LLC, 08-13412, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware at dmccarty@bloomberg.net; Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net.

Last Updated: December 29, 2008 20:04 EST