Retail Update: New Pre-Bankruptcy Webinar and Other Important News
April 23, 2019 | The Toy Association is providing resources to help members deal with financially-troubled retailers and highlighting recent news.
New Webinar: Best Practices for Doing Business with a Financially-Troubled Retailer
Toy companies are invited to participate in The Toy Association’s webinar “Best Practices for Doing Business with a Financially-Troubled Retailer,” taking place May 16 at 2 p.m. (Eastern). Registration is now open. All toy professionals, particularly those who are involved in credit, finance, and legal functions, are invited to attend.
The one-hour session will help trade vendors minimize risk and maximize recovery when dealing with struggling retailers (that are not in bankruptcy). Presenter Jason M. Torf, partner at Ice Miller LLP, will also discuss useful credit enhancements, including important considerations when dealing with small versus large retail customers. The session will be moderated by Paul Vitale, executive vice president of finance and operations at The Toy Association.
The webinar is free for Toy Association members and $49 for non-members who wish to participate. A recording of the session will be made available for those who are unable to participate live.
This webinar is part one of a two-part series. Part two will cover best practices during bankruptcy proceedings. More information on the second webinar will be announced in the coming weeks.
Watch Out for Debt Refinancings
Retailers have been pushing lenders to support debt refinancings that put non-participating lenders at a disadvantage should bankruptcy occur. Some believe that these refinancings are delaying inevitable bankruptcy filings for retailers that have too much debt. From 1987 until the financial crisis, so-called distressed-debt exchanges, which are considered defaults by credit rating firms, accounted for 15 percent of all corporate defaults in the U.S. After the crisis, they have accounted for 42 percent of defaults, according to Moody’s Investors Service.
Distressed-debt exchange transactions have been good for some companies, helping them to weather an economic downturn. However, from 1987 through 2017, some 28 percent of companies that executed a distressed-debt exchange ended up filing for bankruptcy and another 13 percent came back with a second debt swap, according to Moody’s.
Nearly 6,000 Retail Stores to Close this Year
U.S. retailers so far plan to close 5,994 store locations in 2019, exceeding last year’s total of 5,864 store closing announcements, according to Coresight Research. Among retailers shuttering locations, Payless, Gymboree, Charlotte Russe, and Shopko have all filed for bankruptcy this year resulting in the closing of 3,720 stores. Fred’s (which also hired an advisory firm) is planning to close 159 – nearly 30 percent – of its stores, and Family Dollar plans to close 359 stores. Meanwhile, Walgreens and JCPenney are looking to reduce their store footprints. UBS analysts estimate there could be as many as 75,000 store closings by 2026.
However, Coresight Research reported that retailers have announced the opening of 2,641 new stores in 2019, primarily in the discount sector. Dollar General plans to open 975 stores; Ollie’s Bargain Outlet and Five Below are also expanding.
Sears Sues Former CEO Eddie Lampert
Sears Holdings Corp. on Thursday filed a federal lawsuit claiming that former CEO Eddie Lampert drove the company into bankruptcy by siphoning off the company’s assets and preventing it from being able to pay off debts, according to Chain Store Age.
The complaint alleges that Lampert, his ESL Investments hedge fund, and others associated with Sears and ESL caused more than $2 billion of assets to be transferred to himself and other shareholders and beyond the reach of Sears’ creditors in the years leading up to the retailer’s bankruptcy. The lawsuit asks that the transactions be ruled fraudulent transfers and that creditors should be compensated.
The Toy Association will continue to monitor developments in the retail sector and will share relevant news with members as quickly as possible. Questions may be directed to Paul Vitale, executive vice president of finance and operations at The Toy Association.
For questions about any of The Toy Association’s upcoming webinars, contact Anne McConnell, senior director of market research and data strategy at The Toy Association.