See the Ritz Camera Docsheet™ Report for subsequent developments in the Ritz Camera bankruptcy proceedings.
In a bankruptcy that may signal the opening of the 2009 floodgates of retail sector filings, Ritz Camera Centers, Inc. filed on February 23 Chapter 11 proceedings in Delaware in Case No. 09-10617. The focus in this bankruptcy will be on the store leases – how many and which ones are to be rejected, which ones are going to be renegotiated upon threat of rejection, and which ones are going to be assumed for assignment.
For a post talking about this aspect of the Ritz Camera Centers bankruptcy and the challenges it will present to landlords see Ritz Camera Centers, Inc. Bankruptcy – Tenant’s Lease Options to Play Central Role at www.tenantbankruptcy.com.
Retail bankruptcy present special challenges in terms of predicting the likelihood of bankruptcy preference claims. Simply, it is too early for us to make a prediction. We note that there are a lot of creditors in this bankruptcy. As we have pointed out in other retail bankruptcies, the large consumer electronics manufacturers have big payments in the preference period but have used their muscle to get paid on time thereby preserving the ordinary course of business defense. It is the mid-market provider of goods and services that faces the brunt of the preference claims. See the statistics discussed in the post Circuit City Liquidation – Preliminary Bankruptcy Preference Assessment.
Ordinary course of business defenses are lost when suppliers get pushed out on payables. One very bad indication that suppliers may have been pushed out by Ritz is the admission in the bankruptcy filings that sales tax payments are behind. Because of the penalties that can be imposed on delinquent sales tax payments, you normally would expect that these payments were amount the last not to be made.
We have to point out one of the worst ironies we have seen in a long time. In order to diversify and reduce the risk of the consumer electronics retail sector, Ritz decided to diversify…. They acquired “Boater’s World Marine Centers”, 140 stores selling boating supplies.