That arguably makes reorganization more challenging. Prior to BAPCPA, a retailer could spend a year or more in bankruptcy.
Now, significant time constraints place pressure on a debtor to move faster.
In sum, the “bird in the hand” alternative to reorganizing has become more attractive to senior creditors than it used to be.
Some provisions of BAPCPA favor the interests of certain creditors over a debtor, especially so when the debtor is a retailer.
But according to FTI’s analysis, the effect of BAPCPA on retail debtors’ ability to reorganize may be overblown: In the years subsequent to BAPCPA compared to those prior, the proportion of liquidated retailers rose a mere two percentage points, from 47% to 49%.¹ So if it’s not BAPCPA, what’s driving all the liquidations?
One plausible explanation is the attraction of significant values brokered by professional liquidators compared with the continued struggle amidst the uncertain future of the retail industry.
While there are still opportunistic buyers out there, they are cautious.
As a result, many Chapter 11 retailers have found themselves abandoned at the altar.