In the Press

In March 2019, the luxury retailer Neiman Marcus opened its first outpost in Manhattan. Spread over three floors and 188,000 square feet, the store was an anchor tenant of the gleaming Hudson Yards development and, the company’s chief executive said, a new kind of “retail theater.” It boasted in-house aestheticians, live cooking and mixology demonstrations, and fitting rooms complete with interactive touch screens.

The executive, Geoffroy van Raemdonck, was about a year into the job and had already hired a slew of new executives, including a chief for the company’s other jewel in New York, Bergdorf Goodman. Each of the hires, he said in a late November interview with The New York Times, has “a passion for transforming our business.”

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*Source: Vanessa Friedman and Sapna Maheshwari

Time is running out for JCPenney

The clock is ticking for JCPenney.

With two missed debt payments in the past month and only a tiny fraction of its stores able to reopen, JCPenney could be the next iconic retailer to file for bankruptcy — perhaps as soon as this week.
Last week two national retailers, Neiman Marcus and J.Crew, both filed for bankruptcy protection. On Sunday, the holding company Stage Stores (SSI) — which operates about 800 smaller department stores under the brand names Bealls, Goody’s, Palais Royal, Peebles, Stage and Gordmans — also filed for bankruptcy.
JCPenney’s first missed debt payment, $12 million due to bond holders, came on April 15. The second missed payment, for $17 million, came on a credit line this past Thursday. The grace periods for the two missed payments expire on Thursday and Friday of this week.
*Source: Chris Isidore, CNN Business. Updated 2:18 PM ET, Mon May 11, 2020

J.Crew has filed for bankruptcy

J.Crew Group, which operates the J.Crew and Madewell brands, has become the first national US retailer to file for bankruptcy protection since the coronavirus pandemic forced a wave of store closures.

The clothing retailer said Monday that it has filed to begin Chapter 11 proceedings in federal bankruptcy court in the Eastern District of Virginia. The company also said it had reached a deal with its lenders to convert about $1.65 billion of debt into equity.
The retailer expects to stay in business and emerge from bankruptcy as a profitable company. Madewell, the fast-growing denim brand that had been slated for an IPO, will remain part of the business.
“We will continue all day-to-day operations,” J.Crew Group CEO Jan Singer said in a statement.

*Source: Updated 9:52 AM ET, Mon May 4, 2020

Bumble Bee files for bankruptcy after $25 million fine for tuna price fixing

Tuna maker Bumble Bee Foods said Thursday that it has filed for Chapter 11 bankruptcy protection, with an agreement from Taiwan-based FCF Fishery, its largest creditor, to purchase its assets for roughly $925 million.

The bankruptcy proceedings are meant to reduce Bumble Bee’s debt burden caused by “recent and significant legal challenges” and help facilitate the sale. In 2017, the company pleaded guilty to price fixing and was fined $25 million for forming a cartel with Chicken of the Sea and Starkist. It still owes $17 million to the U.S. Department of Justice, according to its bankruptcy filing.

Bumble Bee is also facing civil lawsuits related to price fixing. Earlier this year, the company confidentially settled with Sysco and U.S. Foods.

In addition to its legal troubles, Bumble Bee is grappling with the declining popularity of packaged tuna. Consumption of canned tuna has dropped 42 percent per capita from the last 30 years through 2016, according to U.S. Department of Agriculture data.

FCF’s bid includes $275 million in cash and $638.5 million in debt. Even if both parties agree to the sale, the transaction would be subject to receiving higher or better offers while the company is in bankruptcy protection. London-based private-equity firm Lion Capital bought Bumble Bee in 2010 for $980 million.

Despite the bankruptcy proceedings, Bumble Bee expects that its U.S. and Canadian operations will continue uninterrupted.

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*Source: MSN Money, Tuesday November 22, 2019: Amelia Lucas

America’s middle class is addicted to a new kind of credit

The payday-loan business was in decline. Regulators were circling, storefronts were vanishing and investors were abandoning the industry’s biggest companies en masse.

Yet today, just a few years later, many of the same subprime lenders that specialized in the debt are promoting an almost equally onerous type of credit.

It’s called the online installment loan, a form of debt with much longer maturities but often the same sort of crippling, triple-digit interest rates. If the payday loan’s target audience is the nation’s poor, then the installment loan is geared to all those working-class Americans who have seen their wages stagnate and unpaid bills pile up in the years since the Great Recession.

In just five years, online installment loans have gone from being a relatively niche offering to a red-hot industry. Subprime borrowers now collectively owe about $50 billion on installment products, according to credit reporting firm TransUnion. In the process, they’re helping transform the way that a large swathe of the country accesses debt. And they have done so without attracting the kind of public and regulatory backlash that hounded the payday loan.

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*Source: MSN Money, Tuesday October 29, 2019: Christopher Maloney and Adam Tempkin

“Can You Afford To Go Bankrupt?”

Onerous living expenses, a fiercely competitive business world, the devastating recession, and reliance on credit are all contributing factors to the rapid rise in the number of people who see bankruptcy as their best — or only — option.
In 1960, about 110,000 Americans filed for bankruptcy. That number swelled to nearly 1.8 million by 2005.
Bankruptcy laws were designed to facilitate a “fresh start” by absolving or significantly reducing an insurmountable debt, enabling a person to regain their financial footing.

The promise of a fresh start certainly appeals to those who see no light at the end of their financial tunnel, but the rapid rise in filings also led to a series of reforms that have rendered bankruptcy a more complex process.

Congress passed the Bankruptcy Reform Act of 2005 at the behest of credit card companies and other creditors who felt abused by the system. The act tightened many of the qualifying criteria for bankruptcy protection.

“In the 1990s, I dealt with a couple who earned about $1 million a year facing a $10 million lawsuit,” says Tuvia (Ted) Mozes, Esq., a Spring Valley,New York, attorney who has dealt with bankruptcy law for over two decades. “They successfully declared bankruptcy and were fully relieved of liability despite the millions that they were going to earn in subsequent years. Today, they would never get away with that.”

The tougher criteria have increased the onus on bankruptcy filers to prove that their accumulated debt and claims of inability to pay are not abusive. In addition to filing additional documentation and paperwork, the law also requires filers to attend a debt counseling session before pursuing bankruptcy. Attorneys have typically upped their fees due to the more demanding requirements. The total cost of a personal bankruptcy filing, including court filing and attorney fees, is in the $2,000 to $3,000 range (when there are no complications).

Consumer advocates opposed the 2005 law from the outset, claiming that it unfairly shut legitimate filers out of the process. A recent study submitted to the National Bureau of Economic Research (NBER) claims that each year, between 200,000 and 1 million Americans do not file for bankruptcy because they cannot afford the costs. The study also noted two ironies: a spike in filings after taxpayers receive some extra cash from their tax refunds, as well as the fact that today’s bankruptcy filers typically have the means to do so. “It ends up being the relatively better off, or middle class consumers, who can actually afford to file and the people with lower incomes can’t afford to file,” says study coauthor Jialan Wang.

The reform act accomplished its goal, at least initially. In 2006, bankruptcy filings dropped by over 60 percent from the previous year, to under 700,000. However, the numbers quickly rose to the 1.4 to 1.6 million a year range in recent years, just a notch lower than during the pre-reform era.

Did the reform act root out only the bad apples?

For the most part, consumers with legitimately insurmountable debt are able to satisfactorily complete the process even today. Mr. Mozes attributes some of the drop-off in bankruptcy filings to the greater availability of other options for debt relief, such as credit card settlements, loan modifications, and short sales for people with homes that are underwater. Manhattan bankruptcy attorney Robert M. Fox, Esq., says that he has indeed noticed that recent filers tend to be more professional and “white collar” than in previous years, but he attributes that to the fact that these people may have staved off bankruptcy for several years by using their savings and other assets, which have by now been depleted. “As a rule of thumb,” says Mr. Fox, “you generally don’t consider bankruptcy unless you have over $10,000 in unsecured dischargeable debt, and the fees will usually total less than if you try settling that debt any other way.”

*Source: Mishpacha, Can You Afford To Go Bankrupt?, Tuesday June 12, 2012
http://www.mishpacha.com/Browse/Article/2138/Can-You-Afford-To-Go-Bankrupt