Recently, many retail giants such as Joan Department Store, Dollar Tree, The Body Shop, and Macy's have declared bankruptcy or closed stores. At the same time, the German Retail Association has warned that around 5,000 stores in Germany will close their doors forever this year.
Some analysts believe that the retail industry will become a hot area of bankruptcy in 2024, and the wave of retailers' store closures continues. In this regard, how should foreign trade export enterprises respond?
The tide of bankruptcies and store closures has come and gone
According to a report by the Washington Post on March 18, Joann Inc., an 80-year-old textile and craft retailer in the United States, filed for bankruptcy as consumers reduced their spending on non-essential items. According to a statement released by the company, its shares will be delisted and privatized by "certain lenders and industry figures" after the bankruptcy proceedings end. The document lists debts of $1 billion to $10 billion.
Joan's creditors have reached a restructuring agreement that will provide about $132 million in new financing, which will help the company reduce its debt by about $505 million. The parties to the transaction also agreed to extend certain loans and credit facilities for a period of six months. "Customers, vendors, landlords, and other trade creditors won't see any service interruptions." ”
At the same time, Dollar Tree, a discount retailer known for its "dollar stores" in the United States, announced on March 13 local time that it plans to close nearly 1,000 stores nationwide after suffering a major quarterly loss. The "indigestion" after its own mergers and acquisitions, combined with external pressures such as high inflation and intensified competition, is an important reason for the predicament of the dollar tree.
The latest performance report for the fourth quarter of fiscal 2023 released by Dollar Tree shows that in the face of the development dilemma of a sharp decline in profitability, Dollar Tree has no choice but to "break its arm to survive".
Coincidentally, Macy's, a major U.S. department store chain, announced on February 27 that it plans to close about 150 stores by the end of 2026 and shift its focus to luxury sales. The former beauty giant, The Body Shop, a global chain of British skincare and beauty brands with a history of nearly 50 years, also declared bankruptcy a few days ago. The brand has now closed 50 stores in the U.S. and 33 of its 105 stores in Canada.
At present, many brick-and-mortar retail chains in the United States, such as 3B Home, are on the verge of bankruptcy. - Sarah Foss, bankruptcy expert at the American company Debtwire
Many department stores in Germany are also facing a bleak future. Among them, the century-old Kadewe department store, which "symbolizes Berlin's old prosperity", filed for bankruptcy in February. According to the German newspaper BZ Daily, the German Retail Association has warned that many downtown malls have been in a critical state for years. The association predicts that around 5,000 stores in Germany will close their doors forever this year.
How do foreign trade export enterprises respond?
If the buyer enters bankruptcy proceedings, what are the key links that foreign trade export enterprises need to pay attention to?
The legal provisions on the types of enterprise bankruptcy vary from country to country, but there are two directions for dealing with basic bankruptcy cases: first, and second
After encountering the bankruptcy of the buyer, the foreign trade export enterprise should understand the provisions of the local enterprise bankruptcy law on the type of bankruptcy of the buyer and the corresponding bankruptcy procedure, and follow up the important links in the bankruptcy process in a timely manner, so as to protect their own interests to the greatest extent:
1. Registration of bankruptcy creditor's rights
After receiving the notice of bankruptcy of the buyer, the time limit for the bankruptcy registration of the buyer shall be confirmed, and the creditor's rights shall be registered within the prescribed time limit. Different countries have different regulations on the time of registration of creditor's rights, and some buyers will publish a list of creditors when they go bankrupt, and foreign trade export enterprises can verify whether their claims are correctly recorded on the list.
If the creditor's rights information is incorrectly registered, the foreign trade export enterprise may, and if the creditor's rights are registered correctly, the foreign trade export enterprise shall also be subject to the list of creditors published by the bankruptcy administrator because of the final creditor's rights information.
2. Participate in the creditors' meeting
After the successful registration of bankruptcy claims, important matters such as the disposal of bankruptcy estate, enterprise reorganization, and distribution plans of foreign trade export enterprises need to be approved by the creditors' conference.
The creditors' meeting is the basic form for all creditors to participate in the bankruptcy proceedings, and actively participating in the creditors' meeting and voting is conducive to protecting the interests of creditors. While participating in the creditors' meeting, export enterprises can also actively strive for seats on the creditors' committee, so as to further enhance their own voice and negotiation advantages.
3. Fully understand the situation of creditors
In most bankruptcy cases, the insolvency representative tends to decide to continue the day-to-day operation of the debtor's business. A going concern is premised on the continuous supply of goods or services by suppliers of the debtor's enterprise. After verifying the debtor's business debts and ensuring its ability to pay the price of the goods for subsequent supplies. It is generally recommended that a foreign trade export enterprise require the bankrupt buyer to pay in advance or require the bankrupt enterprise to agree to the transaction through the terms of retention of title to the goods.
Foreign trade export enterprises can also apply to become a "key supplier" of a bankrupt enterprise. A key supplier is usually a supplier that supplies a specific kind, necessary, or irreplaceable product or service that the buyer needs to sell. Accounts receivable arising from the continued supply of goods to the debtor by the "key supplier" during the bankruptcy period may be repaid during the bankruptcy reorganization in accordance with the agreed transaction terms. Moreover, if the debtor's restructuring fails and enters the bankruptcy liquidation procedure, the part of the creditor's rights will be treated as "unsecured preferential claims" and will be repaid in priority over "other unsecured claims".
Since the determination of the identity of the "key supplier" is reviewed and determined by the court, the debtor's application does not guarantee that the court will ultimately agree to grant the status of a "key supplier" to a particular supplier. Therefore, it is recommended that the exporter should request the restructured enterprise to provide the approval documents of the court and carefully check them to ensure that it is on the list of "key suppliers" determined by the court. At the same time, when negotiating the terms of the subsequent supply transaction, the repayment method of the pre-bankruptcy claims should be clarified, and the repayment method needs to be verified by contacting the bankruptcy court or the bankruptcy administrator.
4. Distribution of bankruptcy estate
In the stage of distribution of bankruptcy property, there are also some precautions for export enterprises to receive the notice of bankruptcy distribution.
For example:
- Do exporters need to fill in the relevant confirmation documents?
- For example, it is required to confirm the name, address, and account information of the export enterprise. If there is a change in the name, account and other information of the export enterprise, it is necessary to communicate with the bankruptcy administrator in time to confirm it, so as not to affect the acceptance of the distribution payment.
- Is it necessary for the exporter to provide the local bank account information of the bankrupt enterprise?
- Some bankruptcy administrators will require creditors to provide local collection account numbers or representatives who can accept payments on their behalf, and the exporting enterprises need to prepare in time, otherwise they will not be able to accept the distribution.
The content is reprinted from Zhejiang International Trade Promotion, and the picture comes from the Internet