Make us your home page
Instagram

So many in bankruptcy, so many sharing stain

LIMPING ALONG: Facing pressure from vendors threatening to withhold products during the holiday period, Circuit City Stores Inc. filed for bankruptcy protection Monday, a move that will allow the nation’s second-biggest electronics retailer to keep operating while it develops a reorganization plan. The company announced a week ago it planned to close 155 stores and cut 17 percent of its work force.

Getty Images

LIMPING ALONG: Facing pressure from vendors threatening to withhold products during the holiday period, Circuit City Stores Inc. filed for bankruptcy protection Monday, a move that will allow the nation’s second-biggest electronics retailer to keep operating while it develops a reorganization plan. The company announced a week ago it planned to close 155 stores and cut 17 percent of its work force.

Is Chapter 11 the new business fad?

It's a legitimate question: In this dire economy, where the stigma of bankruptcy is fading fast, should more companies think about the benefits of taking the Chapter 11 plunge?

Think of it as capitalism's second chance. It's certainly on the minds of GM, Chrysler and Ford, especially if the feds do not come up with bailout money soon.

On Monday, electronics retailer Circuit City opted for Chapter 11 to give it breathing room from lenders owed $898-million. Chapter 11 protects companies from creditors, allows time to reorganize and, hopefully, re-emerge. Most often, businesses continue to operate — as Circuit City will to take advantage of the holiday shopping season. Weak as sales forecasts may be, now is the time of year when retailers do the bulk of their business.

Circuit City said it was afraid that without Chapter 11 protection it could not get the electronics inventory shipped to its stores in time for Black Friday — the shopping spree that occurs the day after Thanksgiving.

Also on Monday, a Tampa business sought the Chapter 11 umbrella. Accentia Biopharmaceuticals, whose stock was bounced off the Nasdaq market earlier this month for failing to meet a minimum market value, says it plans to "significantly decrease operating expenses" and "focus cash and resources on drug development" to attract outside investors again.

The Chapter 11 club used to be of modest size. Now it's one of the few things growing in this down economy.

The American Bankruptcy Institute predicts a total of 1-million to 1.2-million bankruptcy filings in 2008, a 30 percent increase from 2007.

"This is, in essence, kind of the cleansing cycle. It's the tail of financial distress," says Jack Williams, the American Bankruptcy Institute's resident scholar.

Look who's recently landed in Chapter 11:

• Clearwater's Evatone Inc., a maker of CDs and DVDs. Why? A dispute with its headquarters' landlord.

• Bill Heard, the nation's largest Chevy dealership. Why? A credit crunch and poor Chevrolet sales.

• Homebuilders Tousa Inc. of Hollywood, Fla., and Bonita Springs-based WCI Communities Inc. Why? A glut of housing, falling prices.

• Airlines ATA, Aloha Air and Alitalia. Why? High fuel prices and declining demand.

• Retailers Mervyn's, Steve & Barry and Linens 'n Things. Why? Weak sales.

• The Treasure Island Tennis and Yacht Club and the Colony Beach & Tennis Club Association, a homeowners group on Longboat Key. Why? Tighter consumer budgets.

• Tampa alternative newspaper business Creative Loafing. Why? Overexpansion.

• Vicorp Restaurants, which owns the Village Inn chain, and Metromedia Steakhouses, which controls the Ponderosa and Bonanza steakhouse brands. Why? Consumers retreating from dining out.

So what happens when the impact is felt of the Wall Street and banking crisis, which pushed Lehman Brothers and Washington Mutual into bankruptcy?

Most bankruptcy filings from that mess won't start rising dramatically until the second quarter of 2009, says American Bankruptcy Institute's Williams.

"Bankruptcy filing rate is a lagging economic indicator," he says. "It's usually about three quarters behind bad news."

Robert Trigaux can be reached at trigaux@sptimes.com.

So many in bankruptcy, so many sharing stain 11/10/08 [Last modified: Wednesday, November 12, 2008 5:11pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Federal agencies demand records from SeaWorld theme park

    Tourism

    ORLANDO — Two federal agencies are reportedly demanding financial records from SeaWorld.

    Killer whales Ikaika and Corky participate in behaviors commonly done in the wild during SeaWorld's Killer Whale educational presentation in this photo from Jan. 9. SeaWorld has been subpoenaed by two federal agencies for comments that executives and the company made in August 2014 about the impact from the "Blackfish" documentary. 
[Nelvin C. Cepeda/San Diego Union-Tribune/TNS]
  2. Legalized medical marijuana signed into law by Rick Scott

    State Roundup

    TALLAHASSEE — Gov. Rick Scott on Friday signed into law a broader medical marijuana system for the state, following through on a promise he made earlier this month.

    Gov. Rick Scott signed legislation on Friday that legalizes medical marijuana in Florida.
  3. Line of moms welcome Once Upon A Child to Carrollwood

    Business

    CARROLLWOOD — Strollers of all shapes and sizes are lined up in front of the store, and inside, there are racks of children's clothing in every color of the rainbow.

    At Once Upon A Child, you often as many baby strollers outside as you find baby furniture and accessories. It recently opened this location in Carrollwood. Photo by Danielle Hauser
  4. Pastries N Chaat brings North India cuisine to North Tampa

    Business

    TAMPA — Pastries N Chaat, a new restaurant offering Indian street food, opened this week near the University of South Florida.

    The menu at Pastries N Chaat includes a large variety of Biriyani, an entree owners say is beloved by millions. Photo courtesy of Pastries N Chaat.
  5. 'Garbage juice' seen as threat to drinking water in Florida Panhandle county

    Water

    To Waste Management, the nation's largest handler of garbage, the liquid that winds up at the bottom of a landfill is called "leachate," and it can safely be disposed of in a well that's 4,200 feet deep.

    Three samples that were displayed by Jackson County NAACP President Ronstance Pittman at a public meeting on Waste Management's deep well injection proposal. The sample on the left is full of leachate from the Jackson County landfill, the stuff that would be injected into the well. The sample on the right shows leachate after it's been treated at a wastewater treatment plant. The one in the middle is tap water.