Below is our initial take on recent bankruptcy-related developments:
Party City filed for Chapter 11 bankruptcy on Tuesday, signaling the latest retailer to seek bankruptcy protection as high inflation has affected consumer spending. Party City has also reached an agreement with a bondholder group for an “expedited restructuring” that is expected to be completed in the second quarter of 2023.
S&K Take: One of the big cases that everyone has been waiting for finally filed (a common theme this week). Very interesting case construct here. There is a majority/minority lender issue baked into the DIP, with Mudrick voicing objection to the construct at the first day hearing. DIP participation ties to a number of case benefits. Another interesting element is that Judge Jones stated concern with the speed of the case—not that it was too fast, that it might be too slow. Will be interesting to see if a creditors’ committee shares his view.
In an earnings call this week, Bed Bath & Beyond CEO Sue Gove detailed that the company is hoping to reduce its costs by up to $100 million, moving forward with employee layoffs and plans to close 150 stores in the early part of this year.
S&K Take: BBBY is looming on the heels of Party City and seems inevitable at this point. Other rumors are circulating about a few other retail names, including some chapter 22s. A confluence of issues continues to cause these retailers pain—inventory issues, declining consumer sentiment, higher interest rates and less available liquidity. None of those appear like they will be remedied in the near term, so this looks like a trend bound to continue.
After crypto lender Genesis froze customer redemptions in November as a result of FTX’s downfall, many have been anticipating a bankruptcy filing, which appears to be happening as soon as this week.
S&K Take: Time flies in the restructuring world, so this news is dated. Genesis filed last night, seeking to implement a speedy restructuring around a toggle concept—either a sale to a third-party or an equitization. Yet another victim in the cryptopocalypse.
Brazilian retail giant, Americanas, also one of the country’s largest online retailers, is considering an emergency bankruptcy filing after discovering nearly $4 billion in accounting inconsistencies last week.
S&K Take: A little cross-border action here, with a huge Brazilian retailer disclosing some notable accounting issues. Unclear whether there will be any US element to this one, but interesting nonetheless. The case was filed in Rio and largely driven by BTG Pactual, a lender to the retailer.