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Low Valuations Diminishing Struggling Retailers' Chances of Achieving Sustainable Turnaround, According to August ABI Journal Article

Alexandria, Va. — While retail bankruptcy filings have dominated headlines to date, depressed market valuations for healthy retailers have continued to diminish the efforts of struggling retailers to achieve a successful reorganization, according to an article in the August ABI Journal. “Currently depressed valuations for most U.S. retailers make these considerable efforts seem destined for futility in the event of a chapter 11 filing,” Chuck Carroll and John Yozzo of FTI Consulting write in their article “Depressed Valuations Pose Added Challenge to Retail Reorganizations.”

 

Carroll and Yozzo particularly highlight how low valuations, should they persist, may impact reorganization efforts of retailers owned by private-equity (PE) sponsors. “Valuations of these debtors will likely confirm as worthless or nearly worthless the equity interest and claims of many impaired creditor classes,” they write. “We puzzle over some of the financing maneuvers by sponsors trying to preserve value in investments that are extremely impaired.”

 

Carroll and Yozzo write that PE sponsors of distressed retailers have been trying to postpone a day of reckoning via tendered debt exchanges, open-market repurchases of debt securities or equity cures in order to bide their time to achieve a turnaround, opportunistically de-lever their investment, postpone impending maturities, or preserve equity value in the event of a restructuring. “These sponsor actions have mostly served their intended purpose to delay or avoid a formal restructuring, but the length of potential runway that would allow a sustainable business turnaround is starting to come up short,” according to Carroll and Yozzo.

 

To read “Depressed Valuations Pose Added Challenge to Retail Reorganizations” from the August edition of the ABI Journal, please click here. To arrange interviews with the article’s authors, please contact ABI Public Affairs Manager John Hartgen at 703-894-5935 or jhartgen@abiworld.org.

 

For an in-depth look at how to navigate the valuation of distressed or bankrupt business, be sure to pick up a copy of ABI’s A Practical Guide to Bankruptcy Valuation, Second Edition.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.