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In an ironic bankruptcy twist, the COVID-19 outbreak is thwarting Modell’s Sporting Goods’ ability to liquidate. Modell’s filed its bankruptcy case on March 11th and announced that it was closing all 134 of its stores. The chain was founded by Morris A. Modell in 1889, with a single store on Cortlandt Street in Manhattan. Modell’s followed in the footsteps of The Sports Authority, Gander Mountain, Eastern Mountain Sports, and other sporting goods retailers who have struggled mightily in recent years, and have landed in Chapter 11. Modell’s intention was to complete all liquidation sales by the end of April. The budgets filed with the bankruptcy court reveal no line item for lease expenses starting in May.

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The lawsuits just keep coming… last week, Chapter 11 Debtor, Sears Holdings Corporation (“Sears”) continued to file hundreds of preference complaints to recover money from paid pre-petition creditors. The Debtor filed a mass of suits back in November 2019.

For most creditors, it makes no sense that they receive a complaint to return money for goods or services sold prior to October 15, 2018, when the company filed for bankruptcy protection. However, the Federal Bankruptcy Code allows a debtor to recover “preferences” in bankruptcy – 11 U.S.C. 547.

If you are a trade creditor who received a complaint, before you open the check book to Sears, know what defenses there are to this statutory claim.


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frutta-bowls-logo-bankruptcyThe wave of retail bankruptcy filings has crash landed on the burgeoning fruit bowl industry. Frutta Bowls Franchising, LLC, the franchisor for the popular “Frutta Bowls” chain filed a voluntary petition for Chapter 11 bankruptcy protection in the District of New Jersey on February 15th (Case No.: 19-13230). According to its website, Frutta Bowls is the fastest growing superfoods café with healthy alternatives to traditional fast food, including options such as Açai, Pitaya, and Kale bowls.

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Multiple new sources are reporting that the long anticipated bankruptcy filing for Sears Holding may happen this week.

A $134 million dollar debt payment due this coming Monday may force the company into bankruptcy. On Tuesday Sears announced that The CEO of Drivetrain, an advisory firm for distressed companies had joined its Board. Sears Holding operates approximately 500 Sears and 360 Kmart stores.

While in the past Sears’ CEO Eddie Lampert has provided funding from his own hedge fund, ESL Investments, to keep the company afloat, CNBC reports that Sears has contacted financiers to secured potential financing to keep it afloat in bankruptcy.


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Ignite Restaurant Group (“Ignite”) filed a voluntary petition for Chapter 11 bankruptcy protection in the Southern District of Texas, Houston Division today (Case no. 17-33550). Ignite operates 137 Joe’s Crab Shack and Brick House Tavern + Tap restaurants, including three international franchise locations in Dubai. Ignite employs 8,400 people, including 2,900 full-time (both salaried and hourly) employees. Ignite’s bankruptcy schedules list $197 million in liabilities and $153 million in assets.

In its bankruptcy filings, Ignite cites to declines in comparable restaurant sales and income from operations at both Joe’s and Brick House. The company also notes that it has closed underperforming restaurants, including a location in Newark, NJ which had opened in 2013.


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Golfsmith International, Inc., a specialty golf retailer with 109 Golfsmith stores across the U.S. and 55 Golf Town stores in Canada, filed for Chapter 11 bankruptcy protection in Wilmington, Delaware on Wednesday, September 14, 2016. This case follows other large sports retailer bankruptcy cases, including Sports Authority and Eastern Mountain Sports, who both filed Chapter 11 proceedings in Delaware earlier this year.

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Last week, South Korea’s Hanjin Shipping Company (“Hanjin”) filed for bankruptcy protection under the Debtor Rehabilitation and Bankruptcy Act in the Seoul Central District Court in South Korea. As the world’s seventh largest container shipper servicing 8% of the Trans-Pacific trade in the United States, Hanjin’s bankruptcy filing is cause for concern for landlord retail anchor tenants, such as Target and JCPenney, as well as to other trade creditors and suppliers.

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On October 29th, the the liquidating trustee of the Radio Shack liquidating trust filed lawsuits in the United States Bankruptcy Court for the District of Delaware seeking to claw back “preferential” payments made by Radio Shack to its creditors. These payments were made within the 90 days of its bankruptcy filing on February 15, 2015.

The creditors sued in these cases include, among others, landlords, utility providers, banks, logistics companies and providers of electronic goods. All totaled, approximately 200 creditors were sued for allegedly being “preferred.” These creditors undoubtedly provided valuable services and goods that Radio Shack accepted and used prior to filing for bankruptcy protection.

Additionally, many of these creditors likely had outstanding receivables as of the date Radio Shack filed for bankruptcy, which may never be paid. Under these circumstances, it is easy to understand why vendors might feel outraged upon receipt of a preference complaint.
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