August 30, 2020
A number of retailers that filed for Chapter 11 bankruptcy in the early months of the COVID-19 crisis are now at the finish line or close. To get here, retailers sought financing while facing the risks that come with months-long store closures, then reopened stores during the ongoing pandemic and struck deals with creditors, lenders, and in some cases, buyers.
While the proceedings so far have shown courts willing to accommodate retailers’ requests and defer to their business judgment, there are still questions of long-term survival, bankruptcy attorneys said.
“I think there’s going to be a tendency to approve things that may be less likely to be approved in a more healthy market environment,” said Zev Shechtman, partner at Danning Gill Israel & Krasnoff LLP.
“But in order to exit from bankruptcy, companies need to have a viable business plan going forward,” he said. “The question is, where is the money coming from on a going-forward basis?”
“Bankruptcies can be really successful for reorganizations when there is an exit, a light at the end of the tunnel,” said Shechtman of Danning Gill. “The bankruptcy story will be mirroring the general economic story in many ways,” he said. “If there is no end in sight for the economy, bankruptcy is not a silver bullet.”
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