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Bankruptcy Boom Ahead? What to Watch Early in 2023

The bankruptcy blues are coming for retail.

After Bed Bath & Beyond warned it might have no other option but to file for bankruptcy, the home goods chain has sparked a flurry of interest and activity this month, with Authentic Brands Group this week surfacing as a possible contender, though a spokeswoman for the Reebok owner declined to comment on reports of the company’s rumored interest “at this time.”

Interest in Bed Bath & Beyond suggests it could end up finding a buyer or winding up with a fairly tidy, pre-pack Chapter 11 bankruptcy in which creditors, the debtor and the buyer negotiate a sale that gives the buyer the assets it wants and leaves the rest for someone else. Authentic Brands has used the pre-pack approach before in tandem with SPARC, where mall operator Simon Property Group is a joint partner. Private equity firm Sycamore Partner is also said to be monitoring the Bed Bath & Beyond situation.

On Tuesday, Party City, long on credit ratings watch lists, crumbled under years of debt and financial misfortunes when it filed for bankruptcy in a Texas court in hopes of restructuring with a healthier balance sheet.

The retailer’s debt totals $1.45 billion, including over $900 million held by noteholders considered “first lien” debt because it’s secured by collateral. This means these noteholders are first in line to get some sort of payout from a bankruptcy filing.

Bankruptcy court has seen other action early in the year.

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United Furniture Industries, one of the largest furniture producers in the U.S. and the parent to Lane Furniture, hastily filed its Chapter 11 petition on Jan. 9—even though three creditors led by Wells Fargo forced the company into a Chapter 7 liquidation on Jan. 2. A bankruptcy court in Mississippi on Wednesday gave its nod to allow United Furniture to convert the Chapter 7 into a Chapter 11. The company’s abrupt shutdown days before Thanksgiving put 2,700 workers out of a job. United’s owner and main shareholder David Belford could not be reached, leading the bank to accuse him of “abandonment.”

Bankruptcies are taking place elsewhere too. In the U.K., over 17,000 stores closed in 2022, with the Centre for Retail Research estimating that the closures averaged 47 a day. The study found that 5,509 of the closures were due to a bankruptcy filing. Some of those closures have hit the fashion and retail world, such as the Joules, and M&Co insolvencies. More retail bankruptcies are expected in 2023, particularly as a roughly 10.5 percent inflation rate fuels a high cost-of-living crisis that continues to envelop the U.K. Holiday sales haven’t been great, and many online retailers such as Boohoo and Asos are still struggling with operational issues.

In Australia, online furniture and home decor retail Brosa collapsed, while French fashion chain Camaïeu has seen its fortunes fade.