%1

Rite Aid is negotiating with creditors over the terms of a bankruptcy plan that would include liquidating a substantial portion of its more than 2,100 drugstores, WSJ Pro Bankruptcy reported. Rite Aid has proposed to close roughly 400 to 500 stores in bankruptcy, and either sell or let creditors take over its remaining operations. A group of bondholders would prefer to liquidate a larger number of stores. The two sides are in discussions over the number of stores to be closed, they said. The Philadelphia-based company faces more than $3.3 billion in debt and over a thousand federal lawsuits alleging it oversupplied opioids. A number of its stores are stuck in uneconomical long-term leases that the company can’t get out of, making bankruptcy an effective tool to shed them. The company, which competes with larger drugstore players CVS and Walgreens, plans to conduct an auction process in an effort to sell its Elixir pharmacy unit and other valuable parts of the business. Most of the federal opioid lawsuits against Rite Aid have been consolidated into a multidistrict litigation in Ohio. The company also faces similar cases pending in state courts that allege it contributed to the opioid epidemic, as well as a civil lawsuit by the Justice Department that alleges the company dispensed controlled substances in violation of the False Claims Act and Controlled Substances Act.

Noble House Home Furnishings joined the ranks of furniture suppliers to file for bankruptcy last week, with the company blaming cost inflation and past supply chain disruptions, among other challenges, Supply Chain Dive reported. When the company filed for chapter 11, it owed suppliers and warehousers in its supply chain some $10 million from the period leading up to its bankruptcy, according to a court filing. Trade debts from importers and vendors in China and Vietnam make up a majority of the largest claims by the company’s unsecured creditors. Since filing, Noble House asked for and received court permission to make emergency payments to keep its suppliers in good stead and prevent warehousers from seizing inventory. Without the ability to pay claims to vendors as they arise, Noble House would face “significant disruption to [the company’s] operations at this critical time,” it said in the filing. Founded in 1992, the family-owned company dropships merchandise for some of the largest retailers in the U.S., including Amazon, Walmart, Costco, Wayfair, Overstock, Target and Home Depot, the company’s current CFO, Gayla Bella, said in court papers. Among its wholesale customers are off-price giants Ross Stores and TJX Cos.

The chapter 11 bankruptcy for Tempe-based electric scooter company Phat Rides Inc. proved to be short-lived, the Phoenix Business Journal reported. U.S. Bankruptcy Court Judge Paul Sala on Sept. 14 dismissed the bankruptcy case that had been filed two weeks earlier by deposed former CEO Tim Moran, ruling that he "did not have the proper legal authority to execute PRI's voluntary petition under applicable law," according to Sala's order. A power struggle over ownership of the company had been waged since late July, with Moran attempting to maintain control even after Phat Rides defaulted in May on a multimillion-dollar loan from its biggest investor — leading the investor to take control of the company. Sala ruled that an effort by Moran in late August to reappoint himself as sole director of the company was improper because he didn't convene the company's shareholders before doing so. As a result, Judge Sala found that investor Merchant Banking Income Fund LLC (MBIF) maintained control of Phat Rides. When MBIF took control a month prior, it had named its principal, Jeremy Hill, as sole director of Phat Rides. “I don’t know what percentage MBIF owns of this company. I don’t know what percentage Mr. Moran owns of this company. But I know, based on the undisputed facts, that MBIF owns some percentage," Judge Sala said. “This debtor had no authority to file the bankruptcy, and that’s how I’ll rule.”

American Dream, the megamall in New Jersey’s Meadowlands, has seen its losses increase fourfold in one year, according to a draft securities filing, Bloomberg News reported. The 3.5-million-square-foot shopping and entertainment complex, home to an indoor ski slope, amusement park and water park, lost about $245 million in 2022 as expenses almost doubled to $428 million, according to the three-page document posted Monday to the Municipal Securities Rulemaking Board’s EMMA website. Financial expenses, which typically include debt service payments, ballooned to $189 million. American Dream, which has faced construction delays, pandemic shutdowns, and a fire that closed its indoor ski slope for several months, has struggled to manage its debt. In November 2022, lenders led by JPMorgan Chase & Co. gave American Dream a four-year extension on repaying $1.7 billion in construction borrowing. The mega mall, located across the Hudson River from New York City, had to draw on a debt reserve fund to pay interest on $800 million of municipal bonds, backed by fees the mall’s owner gives to bondholders instead of paying property taxes. The so-called payments in lieu of taxes that back the bonds could decline further if American Dream wins a tax appeal against the borough of East Rutherford and a judge reduces the value of the mall. The mall is appealing five years of assessments by the borough in state tax court. The bonds trade at about 91 cents on the dollar.

A retailer in the Fashion District has shuttered and filed for bankruptcy protection as the Center City mall and its tenants struggle to recover from the effects of the pandemic, the Philadelphia Business Journal reported. RBJ Philly LLC, which operates the Beef Jerky Experience store, filed for chapter 7 bankruptcy protection in U.S. Bankruptcy Court for the Eastern District of Pennsylvania on Aug. 30 and closed its doors the same day. Beef Jerky Experience set up shop on the mall's concourse level shortly after the Fashion District opened in late 2019. Brad Sadek of Sadek Law Offices, the attorney representing franchisee owners Randy Giandonato and Richard Kromer in the chapter 7 case, said that the duo chose to file for bankruptcy because reduced foot traffic in the Fashion District and the “rapid pace” of store closures have resulted in low visitation levels over the past four years. Handicapped by COVID-19 shutdowns and the accelerated rise of e-commerce, the Fashion District has not lived up to the expectations co-owners Macerich and PREIT had when it debuted on East Market Street in September 2019 following a $420 million redevelopment of the former Gallery mall. Prior to its opening, PREIT CEO Joe Coradino told the Business Journal he believed the retail complex would be a "resounding success" and would "transform" the struggling company. Instead, the Fashion District was derailed when COVID-19 hit the U.S. six months later. PREIT gave up most of its involvement after going through chapter 11 bankruptcy in late 2020, and Macerich has substantially controlled the Fashion District’s operations and decisions since then.

American Eagle is suing the owner of a prominent downtown San Francisco shopping center for allegedly failing to address safety and security concerns, claiming that it has “let the mall deteriorate into disarray,” the Washington Post reported. The clothing retailer says Unibail-Rodamco-Westfield, a commercial real estate firm, neglected the mall, including by failing to invest in security. A complaint filed Monday in the Superior Court of California for San Francisco County accuses the company of “allowing the mall to become a lightning rod for, in Westfield’s words, ‘rampant criminal activity.’” “American Eagle believed it was leasing a prime real retail space with a street-front entrance in Downtown San Francisco from one of the most established and reputable retail landlords in the country,” the complaint reads. But the neglect of Westfield San Francisco Centre left “American Eagle and its employees to suffer and respond to gun violence, physical assaults, burglaries, and robberies,” it adds. “This is not the store American Eagle paid millions of dollars for, or the store that Westfield promised.”

In March, master distiller Les Beasley's company filed for chapter 11 bankruptcy — one of many commercial business failures in a year that’s seen an 18% surge in filings, the Dallas Morning News reported. Beasley’s limited liability corporation listed assets and liabilities that both totaled between $1 million and $10 million. As a result, Whiskey Hollow, and all of its property, are for sale — victims of an unforgiving business in an uncertain time. Owing thousands to investors, contractors and the county, Beasley estimates he could lose up to two-thirds of his life savings as he hands off his dream to a buyer and begins his retirement.

U.S. Auto Sales Inc., a car dealer that catered to consumers regardless of their credit history, quietly filed for bankruptcy late last month as more Americans fall behind on their car payments, Bloomberg News reported. The company listed assets and liabilities of as much as $100 million each in its bankruptcy petition, filed in Delaware. U.S. Auto filed for chapter 7 protection. The car seller, which had several dozen locations across the southeastern part of the country, closed its dealerships amid stresses in the auto finance market in April. The company had previously raised money by packaging auto loans held by consumers with lower credit scores into bonds, a process known as securitization. Last June U.S. Auto sold a $233 million bond. U.S. Auto’s bankruptcy follows the demise of American Car Center, another car dealer and finance company that focused on subprime customers. American Car Center filed for Chapter 7 bankruptcy in March after ceasing operations. Off Lease Only, a used-car dealer owned by Cerberus Capital Management LP, filed for Chapter 11 bankruptcy last week. The U.S. Consumer Financial Protection Bureau claimed in a lawsuit last month that USASF Servicing LLC, the company that serviced the loans originated by U.S. Auto, wrongfully repossessed dozens of cars and illegally disabled thousands more with starter-interruption devices.

Noble House Home Furnishings LLC filed for bankruptcy with plans to sell its assets after inflation and weakening consumer spending crimped its finances, Bloomberg News reported. The company — which counts Amazon.com Inc., Wayfair Inc., and Target Corp. among its customers — listed assets and liabilities of at least $100 million each in its bankruptcy petition. The filing allows Noble House to keep operating while it works to close a sale of itself to publicly traded GigaCloud Technology Inc. or another, higher bidder. GigaCloud has agreed to buy Noble House’s assets for $85 million, subject to a working capital adjustment, plus $4.1 million for equipment and the assumption of certain debts, according to court papers. The bid sets a floor for further offers and the deal with GigaCloud has an outside closing date of Oct. 31, court papers show. Chatsworth, Calif.-based Noble House was founded in 1992 and is a distributor, manufacturer and retailer of indoor and outdoor home furnishings. Its brands include Christopher Knight Home, LePouf and OkiOki. The company’s sales grew quickly during the COVID-19 pandemic as stuck-at-home customers bought more furniture. But as pandemic restrictions eased, total net sales started falling. They dropped from $671 million in 2021 to $491 million in 2022 and 2023 revenue is projected lower, court papers show. The decrease in sales coupled with persistent inflation and supply chain challenges pushed the company to financial instability. Noble House worked to cut costs in 2023, including reducing headcount, optimizing inventory management and vacating a facility in New Jersey, but those efforts failed to keep it out of bankruptcy.

Clothing retailer Soft Surroundings has filed for bankruptcy with plans to close its 44 leased stores and to sell its online and catalog business to Coldwater Creek, WSJ Pro Bankruptcy reported. The St. Louis-based company, which caters to upper-middle-class women around the age of 60, sought protection from creditors Sunday in the U.S. Bankruptcy Court in Houston. Soft was founded in 1999 as a catalog company and opened its first retail store in 2005. Private-equity firm Brentwood Associates, backer of consumer businesses such as OrangeTheory Fitness and Blaze Pizza, became the majority owner in 2012. Soft recorded roughly $220 million in sales last year, of which two-thirds were made online. In the latter part of last year, it closed more than 20 stores. “Shifts in the competitive landscape, a move towards online channels, the Covid-19 pandemic, and increased costs of goods and services due to inflation all impacted the company’s financial position,” Chief Restructuring Officer Curt Kroll said in a sworn declaration. The company plans to close the remaining stores by late February 2024, according to a court filing.