As retailers across the country continue to file for bankruptcy in light of the impact COVID-19 is having on the already-struggling industry, Larry Katz lent insight to a July 23, 2020 article in The Washington Post explaining Chapter 11 bankruptcy as retailers frequently seek its protections in recent months.
Chapter 11 bankruptcy provides troubled businesses a path to save themselves by preserving profitable parts of their businesses and removing or adjusting the less financially sustainable parts. Retailers had been struggling for years, and the pandemic forced them to close thousands of stores, which caused a dramatic reduction in revenues while they were still on the hook for several overhead expenses, like rent.
“For companies that were barely hanging on, the pandemic was the straw that broke the camel’s back,” Katz said. “Many had debt problems, they were struggling to find the right market – and then all of a sudden the pandemic hits, stores close and they realize the only way out of this now is to file for Chapter 11.”
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Kristen M. Chatterton