Understanding and managing the risks of an insolvent acquisition

OPPORTUNITY ARISES OUT OF ADVERSITY

The recent global financial crisis has seen consumers tighten their belts and the retail industry as a whole has faced increasing pressure. Profits warnings have peppered the financial pages and fashion retailers, in both the budget and luxury sectors, have been subject to formal insolvency processes.

In our “Insolvency in the fashion retail sector: the risks and opportunities” article in the Q2 edition of Global Insight, we looked at the challenges the fashion retail industry faces today and the opportunities available for both existing players and new market entrants in the context of insolvent business acquisitions. In this article we comment in more detail on these opportunities and consider some of the factors and risks to be aware of when purchasing an insolvent fashion retail business and its assets.

OPPORTUNITY ARISES OUT OF ADVERSITY

In this article on the changing landscape of UK fashion retail, we consider the challenges and changes faced by the industry and comment on the opportunities available for existing players and potential new entrants to the market.

The UK fashion industry is estimated to contribute over £21 billion annually to the UK economy. Of this figure, an estimated £2.5 billion comprises retail spending. With over 800,000 people employed in the industry, fashion retail is a significant and vibrant part of UK Plc.

In this article on the changing landscape of UK fashion retail, we consider the challenges and changes faced by the industry and comment on the opportunities available for existing players and potential new entrants to the market.

The UK fashion industry is estimated to contribute over £21 billion annually to the UK economy. Of this figure, an estimated £2.5 billion comprises retail spending. With over 800,000 people employed in the industry, fashion retail is a significant and vibrant part of UK Plc.

Bankruptcy Code § 365(d)(3) requires the trustee or the debtor in possession to "timely perform all the obligations of the debtor . . .arising from and after the order for relief under any unexpired lease of nonresidential real property, until such lease is assumed or rejected, notwithstanding section 503(b)(1)." In 2001 the Third Circuit construed this section to require the debtor to perform the lease in accordance with its terms. CenterPoint Properties v. Montgomery Ward Holding Corp. (In re Montgomery Ward Holding Corp.), 268 F.3d 205 (3d Cir. 2001).

On October 12, 2010, Consolidated Horticulture Group, LLC and Hines Nursery LLC (the "Debtors"), filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. According to the Declaration filed by Debtors' President and CEO, Stephen Thigpen (the "Declaration"), Debtors are one of the largest commercial nurseries in North America, selling shrubs and container-grown plants to commercial and retail customers. Decl.

Introduction

George Miller, the Chapter 7 Trustee in the HomeBanc Mortgage bankruptcy, recently filed approximately 400 preference actions against various defendants under section 547 of the Bankruptcy Code. According to a Summons filed in one of the adversary actions, the first pre-trial conference is scheduled in the United States Bankruptcy Court for the District of Delaware on April 21, 2010. The HomeBanc bankruptcy, along with these adversary actions, are before the Honorable Kevin J.

Introduction

Introduction