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Thomas S. Onder

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In the last few days, hundreds of bankruptcy complaints against trade creditors were filed by bankrupt Chapter 11 debtor VRG Liquidating, LLC (formerly EMS) (docket 16-10971). The crux of the complaints that many businesses will be shortly served concern “preferences,” requesting the return of money received from bankrupt debtors 90 days prior to the bankruptcy filing of April 18, 2016 for goods or services sold. However, before you go writing a check to return hard earned money, you should know that you may have defenses that can be asserted.

What is Preference?

A preference is a payment received from a debtor, made within 90 days of the bankruptcy filing. Bankruptcy Code section 547(b) allows a bankruptcy trustee or debtor-in-possession (here, VRG) to avoid these payments, if the transfers were to or for the benefit of a creditor on account of an antecedent debt, while the debtor was insolvent. When Congress enacted the Bankruptcy Code, the policy behind preferences was to level the playing field for all creditors by not allowing a creditor to receive more than it would have within the debtor’s bankruptcy case.

Continue Reading EMS Bankruptcy Preference Complaints: Trade Creditors Protect Yourselves

Within the last week, two (2) retailers filed for Chapter 11 bankruptcy protection, Heritage Home Group LLC and Real Mex Restaurants. Heritage originally emerged after a 2013 bankruptcy of the Thomasville, Broyhill, and Lane furniture brands, and Rex Mex operates Chevys Fresh Mex, El Torito, and other full-service restaurant brands. Both filed in the United States Bankruptcy Court District of Delaware, cases 18-11736 and 18-11795 respectively.

Additionally, Reuters and CNBC are reporting that Mattress Firm Inc., the largest U.S. mattress retailer, is also contemplating Chapter 11 filing.

Continue Reading More Retail Chapter 11 Filings – Thomasville & Chevys Stakeholders File for Bankruptcy; Mattress Firm Appears to be Next

This week, Massachusetts-based pizza chain Bertucci’s filed for Chapter 11 bankruptcy protection in the Delaware (seeking joint administration under case No. 18-10894). Bertucci’s operates 59 stores, 29 of which it plans to reject.

According to The Wall Street Journal, an affiliate of Chicago-based investment firm Right Lane Capital LLC has agreed to purchase the chain’s assets, but that bid will be tested at a bankruptcy-court supervised auction.

Continue Reading Pizza Chain Bertucci’s Files for Chapter 11 Protection

Today, Claire’s Stores, Inc., along with seven affiliates and subsidiaries filed for Chapter 11 bankruptcy protection in the Delaware (Case No. 18-10584). Claire’s is a well-known specialty retailer of teen and young women jewelry, accessories, and beauty products, as well as ear piercings at local malls, based in Cook County, Illinois.

Back in January 2018, I included them on my list of Retailers to Watch for a Bankruptcy Filing in 2018.

According to Court pleadings, the company negotiated a restructuring support agreement and plan term sheet with an ad hoc group of its first lien noteholders and is seeking approval of up to $135 million in DIP financing.

The company lists 92 stores to close, on top of the 100 that it closed last year. Still, Claire’s indicates that it intends to operate the remaining 1,600 Claire’s and Icing brand stores through a restructuring.

Continue Reading Teen Fashion Retailer Claire’s Files for Chapter 11 Protection

*Updated February 6, 2018*

Carson Pirie Scott II, Inc., aka Bon-Ton Stores (“Bon-Ton”), which has dual headquarters in Milwaukee, WI and York, PA, filed on Super Bowl Sunday for Chapter 11 bankruptcy protection in the US Bankruptcy Court, District of Delaware, Docket # 18-10248 (MFW).

The regional department store chain operates 260 stores in 24 states, largely in the Northeast and Midwest. Bon-Ton operates stores under its own name as well as: the Boston Store, Carson’s, Younkers, Herberger’s, and Elder-Beerman. Rumblings of a possible filing circulated in early December as the chain watched its holiday sales fall.

Bon-Ton reports that it has a commitment of $725 million for debtor-in-possession (“DIP”) financing to operate during the restructuring process. The company’s business plan, which was filed earlier this week with the SEC, reports it’s main priority is the overhaul of its private-label products, as it plays catch-up with Kohl’s, Macy’s, and J.C. Penney.

Continue Reading As Predicted, Bon-Ton Stores file for Chapter 11 Protection? First Large Retail Department Store Bankruptcy of 2018

2017 represented one of the busiest years for Chapter 11 retail bankruptcy filings. Many companies that filed have successfully emerged, like Payless. Yet, some are still questionable as to their future, such as Toys “R” Us, which is expected to begin selling a number of their leases and company owned real estate this quarter.

As the New Year begins, here are 10 retailers to watch for a possible Chapter 11 bankruptcy filing this year:

Continue Reading 10 Retailers to Watch for a Bankruptcy Filing in 2018

On December 11, 2017, Charming Charlie Holdings, Inc. (“Charming Charlie”), the Houston–based fashion jewelry and accessories chain filed a Chapter 11 Bankruptcy Case in the United Bankruptcy Court for the District of Delaware. Charming Charlie has closed about 100 of its 360 stores. Further, its New York City flagship location on Fifth Avenue will soon close.

The company is working with turnaround advisor AlixPartners LLP, in addition to other restructuring advisors and attorneys.

More than 15 retailers, including Toys “R” Us Inc, the largest toy seller in the U.S., have filed for bankruptcy this year.

Continue Reading Charming Charlie’s the Next Retail Filing in 2017?

Wayne, NJ-based Toys “R” Us filed a voluntary petition for Chapter 11 bankruptcy protection in the Eastern District of Virginia (Richmond) on Monday (Case no. 17-34665). Toys “R” Us operates more than 1,600 locations for both Toy “R” Us and Babies “R” Us and employs approximately 64,000 people. The chain is seeking borrow money in order to pay suppliers by restructuring $5 billion in long-term debt. The company noted that the approaching holiday shopping season accounts for 40% of its net sales.

Prior to the filing, almost all the company’s vendors sought cash in advance before shipping products, forcing Toys “R” Us to raise $1 billion for suppliers. The company’s debt is attributed to a $6.6 billion buyout in 2005 led by KKR & Co. LP, Bain Capital LP and Vornado Realty Trust.

Continue Reading Toys “R” Us Files For Chapter 11 Bankruptcy Protection

Thirty six years ago today, MTV was launched. The song by the The Buggles “Video Killed the Radio Star” was the first video played. Non-video, radio artists, like Christopher Cross (remember “Sailing?”), suffered, by not being ready for TV. Yet, how many people today actually think about a singer’s video and not their song? Heck, when was the last time you saw a video on MTV?

Just like MTV didn’t really kill all the radio stars, Amazon, demographic changes, and consumer tastes are not killing all the shopping centers and malls. Rather, these developments are changing the way we use and see the shopping center and mall experience.

True, there are a number of so-called “dead” centers. At one time, these were popular (just like Christopher Cross), anchored by Sears, JCPenney, or some other big box store that drew traffic. The structure, zoning, and high traffic areas with good visibility to the community still exist. There is just no draw… no “MTV” … to bring people in. This presents opportunities for developers to resurrect “dead” centers.

Continue Reading Amazon Isn’t Killing All the Shopping Centers, Just Like Video Didn’t Kill All the Radio Stars

Rue21 Inc. (“Rue21”) filed for Chapter 11 bankruptcy protection in Pittsburgh, PA on Monday (case no. 17-22045-GLT, Western District of Pennsylvania).

This was another bankruptcy filing I saw coming back in January, when I wrote my blog Retailers to Watch for Possible Bankruptcy Filings in 2017. In the bankruptcy petition, the teen fashion retail chain lists more than 1,100 stores in the U.S. and assets and liabilities in the range of $1 billion and $10 billion.

Continue Reading Rue21 Files for Chapter 11 Bankruptcy