Retailer Turmoil ‘23

January 31, 2023
Turnarounds & Workouts

Herrick Restructuring & Finance Litigation partner, Christopher Carty, spoke with Turnarounds & Workouts about the retail industry as filings for bankruptcy and bankruptcy protection continue to ramp up. 

The article highlighted that Party City recently filed for bankruptcy and Bed Bath & Beyond has signaled that it is planning to file for Chapter 11 in the coming weeks. Chris explained, “The Party City filing, as well as the anticipated Bed Bath & Beyond bankruptcy, are signs that the wave of brick-and-mortar retailer bankruptcies the market had been bracing for in 2020 and 2021 may now be coming.” Chris added that COVID-related economic relief and low interest rates have staved off retail bankruptcies until this point. “We can expect more retailers to suffer short-term struggles with the impacts of inflation and higher interest rates, exacerbating their underlying issues that will make bankruptcy necessary.”

The article noted that in 2023, other retailers have already sought bankruptcy protection, including Serta Simmons. Chris indicated that the advantage of starting early — its first day filings suggest Serta started negotiations with key constituencies in September 2022 — will likely give Serta the advantage of a softer landing in bankruptcy. “Bankruptcies do not always go as planned, but you would much rather be a debtor entering Chapter 11 with a pre-packed plan supported by key constituencies with financing already secured than the alternative," Chris noted. 

"Since the economic realities leading to filings like Serta and Party City took shape in 2022, I would expect that other retailers have been engaged in discussions with creditors as they consider all alternatives,” Chris concluded.  

Please click here for a PDF copy of the article. A full-text copy of the January 2023 Turnarounds & Workouts newsletter is available here.