According to The Street , Chapter 11 bankruptcy carries substantial risks for a company’s survival. While a business may file with a pre-packaged plan, the process still involves significant uncertainty, as issues can arise from creditors, vendors, or even employees who might object to the proposed plan. In the case of retail chains, vendors hold considerable influence: if they believe a company is beyond saving, they can halt supplies or demand cash upfront, making it nearly impossible for the company to recover. This scenario contributed to the downfall of chains like Bed Bath & Beyond, Christmas Tree Shops, and Tuesday Morning, which entered bankruptcy with plans to reorganize but were unable to secure the necessary support from key stakeholders.
Occasionally, a prepackaged Chapter 11 plan goes smoothly. Joann, for example, emerged from bankruptcy with a stronger financial position. However, Chapter 11 filings put a company’s fate in the hands of the bankruptcy court, and if objections arise, the plan can quickly unravel, shifting the company from reorganization to liquidation.
Express, the popular mall-based clothing retailer, filed for Chapter 11 bankruptcy with the intention of being acquired by a consortium led by WHP Global. This group also includes Simon Property Group and Brookfield Properties, two of Express’ major landlords. These landlords have a history of assisting struggling retailers to keep them as tenants in their malls.
As part of the plan, Express received a $35 million financing commitment from existing lenders, pending court approval, and an additional $49 million from the IRS under the CARES Act. Despite the bankruptcy filing, Express continued to operate its stores and online platforms across its brands: Express, Bonobos, and UpWest.
Express CEO Stewart Glendinning expressed confidence in the company’s ability to stabilize, saying, “We continue to make meaningful progress refining our product assortments, driving demand, connecting with customers, and strengthening our operations. This is an important step in strengthening our financial position and moving forward with our business initiatives.”
However, the bankruptcy process has encountered challenges. Some creditors have raised concerns about a proposed 3% breakup fee if the WHP-led consortium is not the winning bidder. This fee could deter other potential buyers from bidding on the company or its assets, according to a Bloomberg Law report.
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One of Express’ major lenders, ReStore Capital LLC, which represents second lien lenders, has expressed support for the company’s efforts to recover, but is at odds with the terms being demanded by WHP. In the meantime, Express closed 95 retail locations as part of its restructuring.
While WHP’s consortium is currently the preferred buyer, a competing liquidation bid has been submitted by Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC, valued at approximately $261 million. This bid does not include a breakup fee or expenses, which could make it a more attractive option. If the bankruptcy process does not proceed swiftly, liquidation could become the likely outcome for Express.
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