Start Image liquidating

Image liquidating

Now, merchandise received in the 20 days prior to a Chapter 11 filing must be paid in full, in cash, prior to emerging from bankruptcy.

The findings revealed that the proportion of large retail debtors that liquidate is, in fact, consistently far greater than the proportion of non-retailers — by a whopping 48% to 22%, respectively.

As a result, lenders today frequently require retail debtors to find a strategic buyer or propose a reorganization plan within 90 to 120 days after filing for bankruptcy or else commit to a GOB sale and face liquidation.

BAPCPA also changed the way certain goods are treated by the debtor in a reorganization plan.

This disparity raises two compelling questions within the industry: Why is it so hard for troubled retailers to reorganize?

And what distinguishes retailers that shut down for good from those that live to fight another day?

For instance, the debtor must make decisions about renewing or rejecting its leases within 120 days of filing, with the bankruptcy court permitting only one 90-day extension beyond that (without landlord consent).

This is a heavy burden for a large retailer with hundreds of locations and dozens of landlords — in general, it can take 120 days just to complete a Going Out of Business (GOB) sale.

While there are still opportunistic buyers out there, they are cautious.