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2018 Chapter 11 Cases In Review – Part One: Toys R Us And Sears – Glass & Goldberg | Financing, Property & Bankruptcy Law
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2018 Chapter 11 Cases In Review – Part One: Toys R Us And Sears

There are typically several major Chapter 11 bankruptcy cases filed each year. Sears was one of the significant Chapter 11 cases filed in 2018.  Toys R Us filed in 2017, but was in the public eye much of 2018 as it began the liquidation of its assets. Here is part one of a brief summary of the more interesting recent cases:

Sears

Sears Holdings ended a 125-year period as one of the country’s leading retail stores. After several years of trying to maintain solvency, Sears filed for bankruptcy in October. The company announced it would close 142 stores by the end of 2018. Sears had 68,000 employees and approximately 700 stores prior to the filing. It listed $11.3 billion in liabilities and $7 billion in assets while announcing that Mohsin Meghji, managing partner of M-III Partners, would serve as its chief restructuring officer. It started liquidating inventory and other assets shortly after the bankruptcy filing.

Toys R Us

After sixty years of selling toys, Toys R Us, Inc. actually filed its case in September of 2017 with more than $5 billion in funded debt. It hoped to use the 2017 holiday season to rebound and move forward. Instead, its holiday sales were well below expectations and in March of 2018, it announced that it would close more than 700 stores in the U.S. and wind down operations.

A consensual liquidation plan was formulated and the company reached settlement terms with vendors with administrative claims, as well as other unsecured creditors and lenders. The company conducted going-out-of-business sales at store locations nationwide, selling off leases and other holdings, while negotiating purchase deals in other countries, including Canada, for its businesses. It managed to confirm its Chapter 11 plans through extensive settlements and negotiations thus allowing the brand name to survive beyond the bankruptcy case.

Having a large physical footprint and a considerable amount of debt made survival against online competitors almost impossible. In liquidating, the company laid off more than 30,000 employees. Some industry analysts pointed to the leveraged buyout of the corporation in 2005 as a major factor in causing its downfall. In November of 2018, it was announced that a $20 million fund to provide severance pay for some of the chain’s former workers had been established.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services, and advice for clients in all aspects of commercial compliance, business litigation, and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

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