Risk Exposure Lessons Learned
Looking back, 2018 saw a number of notable businesses succumb to financial woes and file for bankruptcy protection, while others filed for Chapter 11 and strategized a new plan to restructure their debt and rebuild. It’s not just retail goliaths that are vulnerable to changing consumer tastes and buying habits. From pharmaceutical and healthcare companies to industrial manufacturers, the financial fortunes of U.S. businesses in many sectors took a turn for the worse.
With an eye on credit and risk management from the vendors’ perspective, we look back at ten high-profile bankruptcies in the 2018 calendar year.
Sears Bankruptcy Filing
The once dominant 125-year-old retailer filed for Chapter 11 bankruptcy in October with a plan to close 142 of its 500 stores by the end of the year. Today, Sears Holdings Corp. is nearing a deal with new lenders to increase a bankruptcy financing package from $300 million to as much as $600 million.
Southeastern Grocers Bankruptcy Filing
Paper or plastic? For some customers of Winn-Dixie and Bi-Lo, that was no longer an option, as the Florida-based operator of supermarket chains filed for bankruptcy protection to restructure debt in March. Southeastern Grocers shed nearly 100 stores and decreased overall debt by $600 million. Less than three months later, it emerged leaner, with plans for 100 store remodels and a new loyalty program.
Product Quest Manufacturing Bankruptcy Filing
Not surprisingly, Product Quest Manufacturing filed for bankruptcy this past year. The manufacturer of over-the-counter drugs and cosmetics, as well as some prescription drugs and animal health products, was racked by poor product quality, regulatory compliance issues, and product recalls. It had two manufacturing plants in Florida and North Carolina.
Constellation Healthcare Technologies Bankruptcy Filing
An apple a day doesn’t keep bankruptcy away, as Constellation Healthcare Technologies discovered. A provider of outsourced revenue cycle management, practice management, and group purchasing services to U.S. physicians, Constellation took on significant debt to pursue its acquisition strategy based on what it now knows to be fraudulent information, according to its press release. As a result, it initiated bankruptcy to sell off the business and are in active discussions with several interested buyers.
Mattress Firm Bankruptcy Filing
Don’t get too comfortable. Chapter 11 bankruptcy protection can claim even the largest of category leaders as Mattress Firm, the specialty mattress retailer, found out this past year. The sleep giant could close as many as 700 of its 3,500 U.S. stores. (They had a large retail footprint; some stores were located in shopping centers across the street from each other.) Mattress Firm said it will continue to pay its vendors during the restructuring; in fact, they owe $90 million alone to manufacturers Serta and Simmons.
Aralez Pharmaceuticals Bankruptcy Filing
Even pharmaceutical companies are not immune to filing for bankruptcy. Aralez Pharmaceuticals had to sell a substantial amount of its assets for an incredibly low $300 million. It was a difficult pill to swallow, but it has allowed the organization to continue operating business and serving customers as usual, with Richter Advisory Group Inc. serving as a monitor.
Gibson Bankruptcy Filing
Unfortunately, the ability to keep on rockin’ in the free world is no longer an option for legendary guitar maker, Gibson. The iconic American company, founded way back in 1894, filed for bankruptcy in 2018. According to some reports, Gibson might be as much as $500 million in debt. However, the popular guitar company has plans for a comeback special of its own soon.
Remington Outdoors Bankruptcy Filing
Unfortunately for Remington, the second amendment can’t protect its right to sell arms. The 202-year-old company, which owns more than a dozen brands of guns and ammunition, including Bushmaster and Marlin, filed for Chapter 11 bankruptcy protection in March due to a 30% fall in sales and an increase in debt. It emerged two months later with creditors, including JPMorgan Chase, taking ownership stakes in exchange for forgiving more than $775 million of debt, according to Reuters.
Toys “R” Us Bankruptcy Filing
After years of declining sales, the toy retail giant, Toys “R” Us, finally succumbed to online goliaths and cheaper brick-and-mortar stores like Walmart and Target. Failing to restructure the business through bankruptcy, Toys “R” Us liquidated its business, including Babies “R” Us in 2018. However, the brand smartly reorganized its intellectual property into a holding company called Geoffrey, LLC, and launched a new retail brand of in-store pop-ups called Geoffrey's Toy Box.
Verity Health System Bankruptcy Filing
Even the best of bedside manners could not prevent California-based Verity Health System from having to fend off creditors. Comprised of six hospitals and several medical offices, the not-for-profit healthcare system is actively seeking potential buyers while under Chapter 11 protection. With financing of up to $185 million, Verity will continue operations without interruption throughout the Chapter 11 process.
Ways to Avoid Bankruptcy Risk in Your Customer Base
The potential for bankruptcy-induced risk can cause business credit professionals and finance leaders an untold amount of stress, as they strive to manage slow payments and navigate business relationships. While information from the news, social media, or even SEC filings can cue a business’s overall health, trusted data and insights from Dun & Bradstreet can help provide a more predictive measurement of security. Our proprietary scores and analytics can help manage and limit your risk exposure with speed and efficiency before it impacts your business.