My colleagues Lawrence C. Gottlieb, Michael Klein, and Ronald R. Sussman recently authored an article entitled "BAPCPA’s Effects on Retail Chapter 11s Are Profound," in the February 2009 edition of the The Journal of Corporate Renewal, published by the Turnaround Management Association. You can access a copy of the article by clicking on its title in the prior sentence.

What’s their assessment of the impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (known as BAPCPA) on retailer Chapter 11 bankruptcies? Here’s an excerpt:

BAPCPA’s numerous creditor-friendly amendments and modifications have profoundly impacted the Chapter 11 process, to the point that it is nearly impossible for retailers to reorganize, regardless of the prevailing national and international economic conditions.

Time and again in the three years since its enactment, BAPCPA has significantly impaired the ability of retailers to obtain the necessary post-petition financing and breathing room from creditors to test and implement a reorganization strategy, regardless of the debtor’s capital structure, the fluctuating state of the credit markets, or the extent to which they compete with large discount retailers like WalMart or online retailers like Amazon.

The article details several of the critical changes BAPCPA made, their effect on retailers, and how the timing of a bankruptcy filing is often critical for a retailer to have any chance of trying for a going concern sale to avoid complete liquidation through going out of business sales.

The Cooley Bankruptcy & Restructuring Group, which Lawrence Gottlieb chairs, is representing official committees of unsecured creditors in many high-profile national and regional retail bankruptcies, including Steve & Barry’s, The Bombay Company, Hancock Fabrics, Lillian Vernon, The Sharper Image, Mervyns, Shoe Pavilion, Boscov’s and Goody’s. The article, drawn from these recent experiences, is important reading for retailers, creditors, and insolvency professionals alike.