PacSun has become the latest retailer to file for Chapter 11 seeking to pull off the herculean task of a quick reorganization, but experts say changes to the Bankruptcy Code have made the prospect more challenging than ever as the retailer and others in the industry continue to reel from structural shifts in the economy, Law360 reported today. Although amendments to the code in 2005, chiefly those that bolstered vendor rights and set stricter timelines on dealing with landlords and leases, are not new, they were enacted during a time when business was relatively good for the retail sector. Fast-forward 10 years and the retail industry is on the ropes, scrambling to deal with an unrelenting migration of consumers to online shopping as well as stubborn weakness in the general economy. While Pacific Sunware of California Inc. appears to be making the proper preparations to deal with retail bankruptcy's changed landscape, the Code amendments mean that the details of any retail restructuring have to be decided on such a quick timeline that they can often turn into chaotic scrums, swelling professional fee bills in the process, practitioners say. “Those changes are the things that killed retail reorganization forever and ever,” said Edward T. Gavin IV of corporate restructuring firm Gavin/Solmonese. “With the time frame and other constraints there is simply less time for herding cats and getting everyone organized.” Read more. (Subscription required.)
ABI’s Chapter 11 Reform Commission final report contains recommendations to modernize the Code to help struggling businesses, such as retailers, reorganize in today’s business environment. Click here to read more on the recommendations.
