Sears bankruptcy looms

Unless Sears can come up with $134 million by Monday it will need to declare bankruptcy. Sears most recent filing showed it only had $193 million on hand as of August and another $269 million available to it from lenders.

All signs point to bankruptcy next week since out of that on hand money the company has to pay vendors, employees and stock up on inventory for the holidays.

Also, three companies that sell items at Sears told Reuters that Sears had missed payments to them over the past few weeks. One of Sears’ major shareholders recently dumped a large bunch of his stock for pennies on his original investment. The company added a new director last week who is familiar with bankruptcies and restructuring.

Robert Schulz, chief credit analyst for the retail industry for Standard & Poor’s said despite years of losses, store closings and other financial problems, “the possibility of a bankruptcy does seem to be higher than over the past couple of years,” . He said in years past the situation did not have the “sense of urgency” that exists now.

The investor mentioned above, Bruce Berkowitz of Fairholme Capital Management dumped 142,000 shares of Sears last week.

The Wall Street Jouirnal recently reported Sears has also hired M-III Partners, a boutique advisory firm specializing in seeing companies through bankruptcies and restructuring. The company is also talking to lenders about providing it with debtor-in-possession financing, according to CNBC. That kind of loan is used by companies that file for bankruptcy to fund operations during the process.

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Tops to close 10 underperfoming NY State stores

This past May a NYC bankruptcy judge gave the bankruptcy beleagured Tops Supermarket chain permission to close 10 of its underperforming stores in New York State, but the chain refused to say which stores would be shuttered. This past August that changed. The following are the ten stores that will be closing.

  • 2120 West Genesee St., Syracuse
  • 4141 South Salina St., Syracuse
  • 710 Lake Ave., Rochester
  • 175 N. Winton Road, Rochester
  • 6720 Pittsford/Palmyra Road, Fairport
  • 33 Forgham St., Lyons
  • 381 Hamilton St., Geneva
  • 909 West 1st St. S., Fulton
  • 299 S. Main St., Elmira
  • 622 Lake Flower Ave., Saranac Lake

Frank Curci, Tops’ chief executive officer told the Buffalo News, “There are a few stores that are not performing to our standards, due to a number of factors including location, store size, lack of visibility, and lease costs. “We are using the tools available to us through the court-supervised process to conduct an orderly wind down of these stores.”

The ten stores slated to close are scheduled to shutter by the end of November.

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Student debt solution? Allow bankruptcy

One of the great financial burdens today is student debt. Gigantic tuition hikes over the last few decades have saddled college graduates with insurmountable debt that can’t be relieved by bankruptcy.

In 1978, the bankruptcy laws were overhauled and the ability to discharge studennt loans was taken away. The reasoning was tuitions were much lower and there was a robust job market and most graduates had no problems getting jobs.

Fast forward 30 year and tuitions have skyrocketed and graduates have no avenue to climb out from under the debt even if they are gainfully employed.

The ability to declare bankruptcy as a last resort has long been a vital element of American society yet that is denied to young people who need to borrow for their education.

Back when the law was changed, student loan defaults were not an issue. Now due to the high cost of college, defaults are common and a change in the law is needed.

Last year U.S. News and World Report released study saying total student debt now tops $1.3 trillion. It’s the single fastest-growing segment of U.S. consumer debt, increasing by 170 percent over the past ten years. 44 million Americans currently have student debt, and 8 million of those have already defaulted on their loans.

We define that as a crisis.


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Retailer Gymboree emerges from bankruptcy ashes

Gymboree, the kids clothing maker, managed to achieve a rare move in the world of retail bankruptcy. It was able to restructure successfully. Bloomberg reported that the company will be  unveiling a rebranded apparel line and an increased tech push in an effort to appeal to the modern parent.

Bloomberg  quotes CEO Daniel Griesemer, who took over in May 2001, “We have spent the past nine to 10 months positioning the company, and the Gymboree brand in particular, for a turnaround. So nationwide, all new products, new brand positioning, new look and feel. Essentially, an all-new Gymboree.”

The company rolled out its new offerings last week which include more basic staples to allow better mixing and matching in an attempt to go up against fast-fashion  retailers who have snagged a bigger share of the youth market.

Griesemer said, “The modern parent learned to shop at Forever 21 and H&M and Zara” and that Gymboree’s line seemed “dated.”

In the next month approximately 75% of their stores will feature the new line and the old inventory will be sold as discounted clearance.

Gymboree will also open 12 new Janie and Jack stores across the country. These stores are a   higher-end clothing line which Griesemer said “has significant room to grow” and will see a “broadening product line.” There are also plans to open “a couple” of new Crazy 8 stores, an  affiliated brand.

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2 Arizona hospitals file bankruptcy

Gilbert (Ariz.) Hospital and Florence (Ariz.) Hospital entered Chapter 11 bankruptcy in May  after creditors tried to force the hospitals into bankruptcy to try  and recoup $1.96 million they claim the affiliated hospitals owe.

In April, three employees of Florence filed an involuntary bankruptcy petition for $46, 650 in wages and the Gilbert involuntary petition was filed by the founder and CMO Dr. Timothy Johns, an unsecured creditors’ trust and a Phoenix law firm. Involuntary bankruptcies are used by creditors when they don’t believe they will be paid for goods or services they provided.

In court documents filed May 1st, creditors claimed the two Arizona hospitals failed to make lease payments for months and both facilities are “on the brink of complete shutdown.”

After creditors ask a court to initiate bankruptcy proceedings, the debtor(s) have the chance to contest the petition. The two Arizona hospitals failed to meet the 21-day timeline and the court granted the creditors’ request for relief through the Chapter 11 bankruptcy process.

This is the second time the two hospitals have been in bankruptcy court. The hospitals filed for voluntary Chapter 11 bankruptcy in 2014.


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