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With astonishing range and rapidity, big-box retailers and corporate giants are using an aggressive legal tactic to shrink their property tax bills, a strategy that is costing local governments and school districts around the country hundreds of millions of dollars in lost revenue, the New York Times reported. These businesses — many of them brick-and-mortar stores like Walmart, Home Depot, Target, Kohl’s, Menards and Walgreens that have faced fierce online competition — maintain that no matter how valuable a thriving store is to its current owner, these warehouse-type structures are not worth much to anyone else. So the best way to appraise their property, they contend in their tax appeals, is to look at the sale prices on the open market of vacant or formerly vacant shells in other places. As shuttered stores spread across the landscape, their argument has resonated. To municipalities, these appeals amount to a far-fetched tax dodge that allows corporations to wriggle out of paying their fair share. “The potential for a domino effect of property tax appeals across the commercial and industrial portions of the tax base, which, were it to occur, could have a much more profound effect on some governments’ ability to levy” property taxes,” S&P Global Ratings concluded in a report last year.

Bath and body products retailer Crabtree and Evelyn will be shutting its 12 stores here in the coming months as it moves its operations online, with some outlets already emptied of goods, the Straits Times reported. The Britain-based company filed for bankruptcy protection in Canada in December amid “significant losses” that it attributed to changing consumer demand, the rise of e-commerce and long-term declines in traditional retail traffic, according to Canadian news reports. Crabtree and Evelyn is moving its business fully online, and that all physical stores will be closing in phases over the next few months save for a new retail concept store in the London borough of Islington.

FullBeauty Brands Inc. said yesterday that it will file for bankruptcy in New York in late January, having reached a deal with most lenders to hand control to a group of creditors led by Oaktree Capital Management in exchange for slashing $900 million in debt, WSJ Pro Bankruptcy. The New York-based apparel retailer targeting plus-size women has struggled with competition from Amazon.com Inc. and mainstream apparel companies that increasingly cater to its core customers. Lenders including Oaktree have been in talks with FullBeauty and its private-equity owners for months to take control of the company and wipe out most of its $1.2 billion in debt. Almost all of FullBeauty’s lenders support the plan, and it expects its stay in bankruptcy to be short, the company said. FullBeauty’s private-equity owners Apax Partners LLP and Charlesbank Capital Partners have also agreed to hand over control to the lenders. Some of FullBeauty’s lenders are providing a new $30 million loan to bolster its liquidity, the company said.

Sears Chairman Eddie Lampert’s hedge fund, ESL Investments Inc., is interested in scooping up Sears Holdings Corp.’s real estate for $1.8 billion, as well as some other assets, if its offer to buy the company out of bankruptcy as a going concern fails, Sears disclosed in a filing, WSJ Pro Bankruptcy. The billionaire’s hedge fund, which had controlled Sears, last week made a $4.4 billion bid to carve out a chunk of Sears stores and keep them open. At the same time two teams of liquidation firms submitted competing bids to liquidate all of Sears and sell off the pieces, according to people familiar with the matter. If ESL’s bid to keep 425 Sears stores open doesn’t succeed, the hedge fund plans to make a $1.8 billion offer for the company’s real estate, according to the filing on Wednesday. Sears and its independent board members have to determine by Friday if ESL’s bid is “qualified” under the sale procedures approved by the bankruptcy court. If the bid passes muster, Sears and its independent board members will then have to determine if the ESL offer is a better outcome for the company and its creditors than either of the offers from liquidators. Read more. 

In related news, credit default swap holders resolved their standoff with one of Sears Holdings Corp.’s largest creditors over an $82.5 million bankruptcy auction that spotlighted potential problems in the multitrillion-dollar derivatives market, the Wall Street Journal reported. Cyrus Capital Partners LP reached settlements with investors on the opposite side of its soured derivative bets on Sears, ending the legal wrangling between them in the company’s bankruptcy proceedings. The settlements brought a quiet resolution to the latest instance of credit default swaps working in unexpected ways. Holders of these insurance contracts, which were triggered when Sears filed for bankruptcy, had accused Cyrus of orchestrating a market squeeze to salvage a bad bet. Read more. (Subscription required.) 

It’s a familiar story: a deep-pocketed investor takes a stake in a retailer, hoping to spark a turnaround or help transition to e-commerce. However, the company’s performance inexorably worsens. Some, like Toys “R” Us and Sears, file for bankruptcy while others may look like a bargain, but that's rarely the case, according to a Reuters commentary. Lenders can give retailers rope, sometimes for years, according to the commentary. That’s often the case with private-equity backers, who have the money to see firms through hard times and can extract fees and dividends along the way. But such forbearance rarely avoids a restructuring, or worse. KKR and Bain Capital kept Toys “R” Us going for years as EBITDA declined before pulling the plug. It's being liquidated. That’s a possibility for Sears as well, notwithstanding last week’s $4.4 billion takeover offer from ESL founder Eddie Lampert. Companies like J.C. Penney may appear cheap after a 70 percent stock-price decline in the past year. But retailers’ woes could easily worsen. Although U.S. retail sales have been strong for the last several years, many companies couldn't hack shifting consumer tastes and online competition. Even penny stocks can be expensive if it’s a prelude to chapter 11.

Once the Marsh Supermarkets chain began to falter a few years ago, its owner, a private-equity firm, began selling off the vast retail empire, piece by piece, according to a Washington Post analysis. The company sold more than 100 convenience stores, then pharmacies, and closed some of the 115 grocery stores, having previously auctioned off their real estate. Then, in May 2017, the company announced the closure of the remaining 44 stores and filed for bankruptcy. While the sell-off allowed Sun Capital and its investors to recover their money and then some, the company entered bankruptcy leaving unpaid more than $80 million in debts to workers’ severance and pensions. For Sun Capital, this process of buying companies, seeking profits and leaving pensions unpaid is a familiar one. Over the past 10 years, it has taken five companies into bankruptcy while leaving behind debts of about $280 million owed to employee pensions.

The toy industry may have missed out on the broader spending spree ahead of the holidays, as the loss of Toys “R” Us Inc. proved too much of a disruption during a critical time of year, the Wall Street Journal reported. U.S. toy sales fell at a high-single digit percentage in the fourth quarter, according to UBS data, with the two weeks before Christmas failing to provide as big a lift as it did in previous years. The firm estimates that other retailers picked up only about half the sales that would have been done at Toys “R” Us, which liquidated its operations over the summer. That leaves a big gap for the toy industry, as Toys “R” Us last year sold about $2 billion worth of toys in the last two months of the year, including $1.4 billion in December. Retailers fought hard for those displaced sales, with Target Corp., Walmart Inc. and others adding larger toy selections for the holidays and other chains opening temporary toy stores to cater to holiday crowds. Many scrambled to keep their shelves filled right up until Christmas Eve for last-minute shoppers. Online retailers also went after the toy business, with Amazon.com putting out its first physical toy catalog. The results may prove worse at Hasbro Inc. and Mattel Inc. UBS estimates that the two large, publicly traded toy companies broadly lost market share in the fourth quarter, with Hasbro brands like Nerf and My Little Pony and Mattel’s Fisher-Price struggling.

Sears Holdings Corp. Chairman Eddie Lampert submitted a $4.4 billion takeover bid on Friday for the bankrupt U.S. retailer, representing its only chance of escaping liquidation and laying off tens of thousands of workers, Reuters reported. Lampert’s bid is backed in part by $1.3 billion in financing from three different financial institutions, the spokesman for his hedge fund, ESL Investments Inc, said. It would preserve about 425 stores that Sears has yet to close, and secure the jobs of up to 50,000 workers out of the 68,000 employed by the retailer. An affiliate of ESL, Transform Holdco LLC, submitted the bid. People familiar with the matter said that the financing comes from Sears’ existing lenders Bank of America Corp. and Citigroup Inc., as well Royal Bank of Canada, which was not previously a lender, which together agreed to provide a $950 million asset-based loan and a $350 million revolving credit line.

Sears last shot at survival is a $4.6 billion proposal put forward by its chairman, Eddie Lampert, to buy the company out of bankruptcy through his hedge fund, ESL Investments. Lampert, however, is staring down a deadline of today to submit his offer, CNBC.com reported. As of yesterday, Lampert had neither submitted his bid, nor rounded up financing. Should Lampert submit a bid, Sears' advisors would have until Jan. 4 to decide whether he is a "qualified bidder." Only then could ESL take part in an auction against liquidation bids on Jan. 14. It is possible Lampert, Sears' largest investor, secures financing in time to meet the deadline. The hedge fund manager turned retailer has managed last-minute feats before. Due to requirements by the Securities and Exchange Commission, Lampert will be required to make his bid public. That stipulation that could sway him to prolong the filing until its exact deadline of 4:00 p.m. ET today.

A Neiman Marcus Group Ltd. bondholder that has sued the luxury retailer over a recent transfer of its MyTheresa e-commerce unit sent a letter to the company’s board on Wednesday demanding the company withdraw its counterclaim and asserting that other creditors share its concerns, WSJ Pro Bankruptcy reported. Marble Ridge Capital LP, the bondholder, and Neiman Marcus recently sued each other in a district court in Dallas over a dispute involving the internal transfer of MyTheresa, a fast-growing Munich-based online business that caters to customers in Europe, Asia and the Middle East. In its latest missive, Marble Ridge asserts that it and other creditors have “serious concerns regarding Neiman’s financial condition.” Marble Ridge also says in the letter that other creditors share its concerns about the MyTheresa transfer. In September, Neiman Marcus moved MyTheresa from an unrestricted subsidiary to its parent company. Neiman’s creditors say the transfer weakened their claims on the unit. Marble Ridge’s lawsuit accuses the luxury retailer of a fraudulent transfer of MyTheresa. Neiman Marcus responded by suing Marble Ridge, accusing it of spreading false statements about the company being in default under its debt documents and asking the court to dismiss Marble Ridge’s lawsuit.