If you have done any shopping in the Midwest over the last decade, you most likely have come across a Gordmans. The once 100 store strong, retail chain filed for bankruptcy almost 12 months ago, as the bear market for brick and mortar retailers started claiming its first victims. The Gordmans Chapter 11 bankruptcy case came to a conclusion this week with a bankruptcy court approving its final plan for liquidation.
Unsecured Creditors Hurt in Chapter 11 Bankruptcy
In looking over the final liquidation documents, the real losers of the deal are the unsecured creditors of Gordmans who received pennies (literally 5 to 11 cents) to dollar on the money that they were owed. The company haw been struggling with sales since 2012, with sales falling 6 percent just last year, resulting in a net loss of more than $12.5 million. The company sold about half of its stores and its warehouse to a Texas owned department store chain named Stage Stores in an effort to boost operating capital and save nearly 150 jobs. Additionally Gordmans raised another $76 million through going-out-of-business sales.
Chapter 11 Maximizes Creditor Recoveries
In the end, Chapter 11 bankruptcy allowed Gordmans to stay in business long enough to continue liquidating its own assets, something typically done under q Chapter 7 corporate liquidation. Bankruptcy and debt experts close to the deal state that by filing Chapter 11 bankruptcy, the maximum amount could be recovered in order to pay back creditors.
Gordmans bankruptcy is a big deal to long time company employees, owners, stock holders and the public at large, but is merely another victim of a shift in the way Americans shop, moving from shopping malls and large retailers, to discount stores and online shopping at internet shopping behemoths such as Amazon and Wal-Mart. It’s certain evident that chain retails stores in the United States need to come up with a new game plan if they want to avoid Chapter 11 bankruptcy and stay operational.