NACM Oregon
July/August 2012
Business Credit Journal BAPCPA Revisited: A Three-Part Series Analyzing Retail Restructurings Before BAPCPA, Since BAPCPA, and the Future of Retail Bankruptcies Under the Bankruptcy Code
In This Issue
by Lawrence C. Gottlieb, Brent Weisenberg, and Michael Klein This article is Part 3 in a three-part series analyzing the impact of the 2005 amendments to the Bankruptcy Code, commonly referred to as “BAPCPA”, on the ability of bankrupt retailers to utilize the Chapter 11 process to successfully restructure their affairs. Part 1 of this series highlighted the major changes to the Bankruptcy Code enacted by BAPCPA. In Part 2, we analyzed the impact of the BAPCPA amendments on retail reorganizations. In this third and final installment of the series, we will discuss how BAPCPA is likely to shape retail bankruptcies in the coming years.
As we noted in our prior articles, BAPCPA’s numerous amendments and modifications to the Bankruptcy Code have profoundly impacted the Chapter 11 process to the point that it is nearly impossible for retailers to reorganize regardless of the prevailing national and international economic conditions. Time and again in the seven years since its enactment, BAPCPA has significantly impaired the ability of retailers to obtain the necessary postpetition financing and breathing room from creditors to test and implement a reorganization strategy, regardless of the debtor’s capital structure, the fluctuating state of the credit markets or the extent to which they compete with large discount retailers and online retailers. As a result, retail cases have invariably taken one of two forms: either the case is filed as a liquidation or the debtor is given a small window within which to conduct
BAPCPA Revisited, Part III....... 1 Chair’s Message...................... 2 Member Profile....................... 3 NOF Scholarship Funds............ 5 Personal Guarantees & Consumer Credit Reports Q & A............... 6 Credit Congress Pics................ 7 International Corner................ 10 BCLC Webinars....................... 11
a going concern sale under Section 363 of the Bankruptcy Code that typically generates enough value only to satisfy administrative and secured creditors.
Education Schedule................. 11
We fully anticipate that this trend will continue unabated in future retail bankruptcies, as the window within which retailers can successfully reorganize gets smaller and smaller. The last few years have witnessed a rise in the use of so “called “prepackaged” and “prenegotiated” bankruptcies as a mechanism by lenders—most often private equity firms owning second lien debt -- to
New Member Introduction....... 13
Certified Credit Group Administrator.......................... 12
Legislative Corner................... 15 Social Media........................... 16 Contacts................................. 19
...continue on page 17
Page 1 7931 NE Halsey, Suite 200, Portland, Oregon 97213 Tel 503.257.0802 or 800.622.6985 • Fax 503.257.0247 • www.nacmoregon.org