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By Chuck Tatelbaum

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Tripp Scott, PA

2016 saw a surge in retail bankruptcy filings, most of which were blamed upon shifts in consumer spending behavior. Some of those that filed for bankruptcy reorganization or liquidation were Backwoods Retail, Nasty Gal, Pacific Sportswear, Aeropostale, Direct Buy, Sports Authority, Vestis Retail Group, Golfsmith, Movie Stop Hancock Fabrics, Total Hockey to name a few.

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2016 also saw a surge in bankruptcy filings of significant franchisees of McDonald’s, Burger King and Long John Silver’s, as well as the parent entities of Sweet Tomatoes and Logan’s Roadhouse. These, too, were blamed on a change in consumer discretionary spending.

With the recent report by Sears of a wider third-quarter loss than the prior year with sales declining 7.4% at established stores, Sears, (and perhaps its affiliated entity Kmart) may have one last chance of survival during this holiday season.

With the deep discounting that proliferate advertising for both retailers and casual dining establishments, even maintaining the volume of sales may not create the profits needed to extricate many retailers and restaurateurs from what has been the disastrous financial year.

With business bankruptcy filings increasing at a rate not seen since the beginning of the 2008/2010 recession, the handwriting is on the wall that notwithstanding the euphoria that seems to pervade the equity markets, Main Street purveyors of goods and services are suffering greatly.

Factors, lenders, manufacturers, and distributors have curtailed available credit for the purchase of goods for struggling retailers. With the uncertainty of the enforceability of consignment agreements brought on by the litigation in the Sports Authority bankruptcy case, the availability of inventory for financially struggling retailers has greatly diminished. Savvy consumers are only frequenting retailers with large inventories that are deeply discounted.

About Chuck Tatelbaum

Charles M. Tatelbaum is a Director of Tripp Scott law firm, PA and chair of the bankruptcy and creditors’ rights department focuses his practice on bankruptcy and creditors’ rights issues, complex business litigation, Uniform Commercial Code transactions and lender liability litigation and other types of secured transactions, as well as domestic and international letters of credit.

He regularly represents secured and unsecured creditors in transactions and insolvency situations, creditors’ committees, and throughout the United States he represents business clients in complex business litigation, the defense of lender liability claims, all types of bankruptcy proceedings and products liability defense based on warranty. He also represents secured and unsecured creditors in distressed business transactions and litigation. He has also has represented clients in Chapter 9 municipal bankruptcy proceedings and Chapter 15 foreign bankruptcy proceedings.

As an example, he represented the major motor vehicle floor plan lender in the largest motor vehicle dealer bankruptcy in U.S. history, recovering more than $150 million, which constituted payment in full of principal, interest, attorney fees and costs. In that case, the court awarded a $300,000 substantial contribution fee to the represented lender. As another example, he has represented the lender in the worldwide bankruptcy proceeding of Saab Automobiles and was able to obtain payment in full of all principal, interest and attorneys’ fees. As of a result of his prior work with the U.S. State Department in eastern Europe to develop bankruptcy laws in Croatia and Slovakia, Mr. Tatelbaum has regularly handled business and insolvency issues that develop in foreign countries.

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