AMERICAN BRANDS DO NOT HAVE ENOUGH FUNDS FOR BANKRUPTCY PROCEEDINGS

The circumstances force many American retailers to seriously think about bankruptcy. Both large and smaller stores were in an extremely difficult situation due to the coronacrisis. However, it turned out that it would be difficult for many retail companies to go bankrupt right now. The problem is liquidation sales that have become impossible to carry out due to the pandemic.

The first among the American trading giants, as it is known, was the J. Crew Group. The management was forced to file a bankruptcy lawsuit in Richmond City. Now the company can reorganize and temporarily not pay debts to its creditors. According to the experts, the Neiman Marcus and JCPenney (JCP) networks are already in line among those wishing to declare bankruptcy.

The first quarter of the year, as the statistics show, was quite successful for the American retail chains. They received revenue almost 26% higher than last year ($ 75.5 billion).

However, the analysts note that the growth mainly affected online sales, especially the sale of technological products. The sales of such goods have increased by 275%. The same cannot be said about the goods for teenagers, where the decline was simply catastrophic.

The problems of traditional trade, as the experts note, did not occur in recent weeks and months. They have been accumulated for several years and resulted in a drop of sales and serious losses. According to the analysts of Coresight Research, 9,275 outlets were closed in 2019. For the mentioned above J. Crew, the fiscal year ended with a loss of $ 78.8 million, despite the huge revenue of $ 2.54 billion.

At the same time, J. Crew, as the experts say, was lucky. The lawyers, serving the interests of the brand, managed to go to court on time and file for bankruptcy.

For the moment, the company, which closed 500 outlets in March and, as the experts suggest, is losing about $ 900 million in revenue, has a chance to get out of bankruptcy by September 11th.

According to the informed sources, the company will exchange its $ 2 billion debts for the 82% stake, which the creditors will receive in the reorganized company.

The majority of the retail chains in the US can no longer afford this. And although the analysts predict the closure of more than 15 thousand shopping centers in the US by the end of 2020, not everyone will be able to file for bankruptcy.

Many retailers are forced to postpone bankruptcy, because they cannot accurately predict how many stores they will eventually have to close during the bankruptcy period. The experts note that now is the most unfortunate time for filing bankruptcy applications. The companies need to conduct liquidation sales in order to receive the funds, needed during the reorganization process.

In conditions when the customers are afraid to visit shopping centers because of the threat of infection, it is hardly possible to finance bankruptcy.

And if for some companies filing an application can become a road to freedom and prosperity, the others may face a complete liquidation within 180 days, as it is defined by the American law.