Emergency Bankruptcy Reform – A Call For Action!
Virtually every business—regardless of its size, nature (manufacturing, service, professional, tech) or particular industry—is currently suffering significant distress as a result of the unprecedented shutdown of huge portions of the U.S. (and global) economy. It is therefore clear that the number of businesses (and individuals) who will seek bankruptcy protection in the coming months will be enormous. Among the hardest hit will be bricks and mortar retailers, who were already experiencing a years-long downturn for a variety of reasons, with e-commerce frequently being the most referenced negative disrupter. Now that e-commerce is virtually the only form of commerce that is functioning in large portions of the U.S. (aside from grocery stores and other “essential” businesses), both the near and long-term implications for physical store-based retailers is especially grim. Iconic retail names such as JCPenney, Lord & Taylor, Macy’s, Neiman Marcus and Nordstrom are all either on the verge of a chapter 11 filing or on a “dead-man-walking” watch list as to when they might have to file. In the short term, those retailers who had already entered chapter 11 before the Covid-19 outbreak saw their exit strategies either materially delayed or destroyed, whether their strategy was a sale or a liquidation, the two most frequent outcomes for those types of businesses in recent years. Now, with entire malls and a huge number of freestanding retail stores shuttered, any potential buyer has no way to accurately gauge performance on a going forward basis. Moreover, even in a liquidation, the country’s leading retail liquidators—who can often precisely predict what will be realized in “going out of business” sales—are currently either effectively or actually precluded from conducting such sales in large portions of the country.
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Restructuring GlobalView by Norman N. Kinel. April 29, 2020.