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Recent retail bankruptcy cases speak to the debate underway about proposed changes to bankruptcy laws that would make the process cheaper for and potentially more favorable to businesses trying to reorganize, according to a commentary yesterday by Prof. Stephen J. Lubben in the New York Times DealBook blog. In response to the recommendations of ABI's Chapter 11 Reform Commission, the Loan Syndications and Trading Association recently released a report in response focused on the importance of preserving chapter 11 in its current form. ABI's Chapter 11 Reform Commission instead portrays its proposed changes as restoring the balance of power in chapter 11. Read more. 

To read more or to watch presentations on the Commission's the recommendations to modernize chapter 11, be sure to visit http://commission.abi.org/.

When the Federal Trade Commission in January cleared grocery chain Albertsons Cos. to buy rival Safeway Inc., it insisted that the two companies sell 168 of their stores to rivals to preserve competition and protect consumers from higher prices, the Wall Street Journal reported on Saturday. The FTC allowed the small Pacific Northwest supermarket operator Haggen Holdings LLC to buy most of the stores, and Haggen quickly ballooned to 164 locations throughout the West from 18 in Washington and Oregon. Just months later, however, the rapid expansion appears to have been more than the company could handle, and the FTC-approved plan might have been a major mistake. Instead of becoming a regional powerhouse, Haggen is struggling to stay afloat. The company filed for bankruptcy protection last month and began closing 26 of its recently purchased stores. It then announced plans to close 100 more locations and realign its business around 37 “core stores.”

Boston-based athletic gear retailer City Sports Inc. filed for chapter 11 protection yesterday in order to liquidate at least a quarter of its stores, the Wall Street Journal reported today. City Sports said that it has a deal with liquidators Tiger Capital Group to hold going-out-of-business sales at eight of the company’s 26 stores, which are scattered throughout the Northeast from Massachusetts to Washington, D.C. For the remaining 18 stores, City Sports is working to locate a buyer during its bankruptcy case that would either continue operating the stores or liquidate them, the company said in court documents.

Sbarro LLC, the chain of Italian eateries that emerged from its second bankruptcy last year, is betting that it can build a comeback by opening stand-alone pizzerias and reducing its reliance on declining mall traffic, which it blames for its chapter 11 filings, the Wall Street Journal reported on Saturday. The goal is to return the 59-year-old brand to its roots as a maker of New York-style pizza, said Sbarro Chief Executive David Karam, positioning it to compete with much larger pizza chains such as Domino’s Pizza Inc. and Yum Brands Inc.’s Pizza Hut. The company plans to open the first four neighborhood pizza shops in the next few weeks in its home town of Columbus, Ohio. It plans possibly an additional hundred stand-alone Sbarros elsewhere in the next year or two, Karam said. The neighborhood shops will offer delivery and take-out in addition to dine-in seating. They will feature new menus that are similar to the ones that already have been rolled out at existing mall locations, which are now free of the lasagna, chicken parmesan and vegetable dishes executives say distracted from Sbarro’s pizza heritage.

American Apparel Inc. filed for bankruptcy protection after posting years of losses as the clothing retailer, which fired controversial founder Dov Charney last year, seeks to reorganize debts that have ballooned to levels exceeding its assets, Bloomberg News reported today. As part of a pre-packaged chapter 11 restructuring, more than $200 million of bonds will be exchanged for stock in the reorganized company and the clothing retailer will have access to financing after its restructuring, American Apparel said in a statement. Business will continue throughout the reorganization, which was supported by 95 percent of secured lenders and may last about six months, it said. Though American Apparel has been in disarray since Charney was suspended and then fired as chief executive officer last December for alleged misconduct — claims he says are baseless — American Apparel’s financial woes stretch back longer. The chain has posted losses every year since since 2010.

The former RadioShack won final court approval of its chapter 11 plan Wednesday after brokering key settlements with lenders that paved the way for the former electronics retailer to secure a judge’s signature on the proposal, the Wall Street Journal reported today. Bankruptcy Judge Brendan Shannon said following a hearing that he would sign off on both the settlements and the chapter 11 plan, which distributes proceeds from the company’s liquidation to its creditors. Burdened with more than $1 billion in debt, RadioShack filed for bankruptcy protection in February and shut down or sold off almost all of its 4,000-store chain. Under its chapter 11 plan, the corporate remains of what was once RadioShack will pay most secured lenders in full but will leave little behind for lower-ranking creditors.