Original Story: forbes.com
As the prospects of bankruptcy for American Apparel have shifted from “if” to “when,” the company is faced with mounting legal baggage. A bankruptcy filing would automatically pause all lawsuits against the company, but its docket has grown in recent months with complaints from vendors, employees, shareholders and its infamous former CEO, Dov Charney – himself the target of a series of sexual harassment suits. A Toledo bankruptcy lawyer is reviewing the details of this case.
Last week, the New York Stock Exchange notified the company that it is at risk of being delisted from the exchange. The company has until November 15 to come into compliance with listing standards, but will likely be in bankruptcy court before then. American Apparel is ironing out the preliminary details of a restructuring plan that would see it skip a $14 million coupon payment due October 15 and use the 30-day grace period to drum up revenues during its pivotal Halloween shopping period before filing for Chapter 11, sources have told Debtwire.
Outside the small world of lawyers and bankers who have long eyed a restructuring for the company, American Apparel is as well known for Charney’s antics as it is for its clothing. A 2004 Jane magazine profile described Charney repeatedly masturbating in front of its reporter during interviews, and other stories followed that Charney referred to women as “sluts” and demanded that his store managers fire “ugly” employees. Lawsuits followed, alleging sexual harassment against many of the company’s female employees. A Boston M&A lawyer represents business clients in company restructuring and acquisitions.
American Apparel’s board of directors ousted Charney as chairman in June 2014, with cause – accusing him of refusing to take sexual harassment training and using company funds as hush money for former employees. The board highlighted the mounting legal expenses the company faced while defending lawsuits aimed at Charney, and said that potential financing sources would not deal with the company while Charney was involved.
Following his dismissal, Charney pursued a hostile takeover of American Apparel, reaching a deal with hedge fund Standard General to increase its hold on the company’s stock to 43% and potentially prop up Charney to retake control of the company. This May, a group led by Eliana Gil Rodriguez, a former American Apparel employee and friend of Charney’s, sued the company in Delaware claiming that the board had concealed a plot to fire Charney after its reelection in June 2014 by issuing false and misleading statements.
But the alliance of Charney and Standard General was short-lived, as Charney filed a suit in June accusing Standard General and American Apparel of conspiring to remove him from the company. The hedge fund filed a lawsuit in July claiming that Charney had not met the financial conditions of the deal.
In September, American Apparel shareholders sued Standard General and board member Joseph Magnacca, the former CEO of RadioShack, claiming that the hedge fund is using the same vulture tactics on American Apparel that it used when it bought RadioShack debt to keep the company out of Chapter 11 before acquiring half its stores in bankruptcy. American Apparel’s shareholders claim that Magnacca and Standard General are too entangled, with Magnacca allegedly texting Standard General’s leader that he would be “anyplace anytime” for the hedge fund.
Vendor The Knit House Corp also sued the company last month, seeking $53,667 it claims was never paid on a fabric merchandise agreement. In June, BSG Tech LLC sued the company for infringement of its sound technology patents. More than 200 employees filed a class action against the company in April, claiming that they were laid off without proper legal notice. A Minneapolis class action lawyer is experienced in the effective resolution of class actions lawsuits as related to damage inflicted upon groups of people.
As bankruptcy fast approaches, shareholders are going after Standard General and Magnacca, Standard General and Charney are pursuing each other following their breakup, and Charney at this point is on no one’s team while he continues to make noise. Now Charney’s declaration of good faith at the time of his joining with Standard General has an ironic echo as the family drama comes under the jurisdiction of a bankruptcy judge. A Kansas City bankruptcy lawyer is following this story closely.
“The least important thing was me,” Charney said at the time. “I know that will be dealt with fairly later.”
Showing posts with label bankruptcy. Show all posts
Showing posts with label bankruptcy. Show all posts
Thursday, October 8, 2015
Wednesday, August 5, 2015
SKYMALL FILES FOR BANKRUPTCY
Original Story: bloomberg.com
(Bloomberg) -- SkyMall LLC, the in-flight catalog company that sells exercise bikes that double as desks and automated ball-launchers for dogs, filed for bankruptcy as air travelers spend more time on their mobile phones and Amazon.com. A Tulsa bankruptcy lawyer provides bankruptcy litigation, business litigation, bankruptcy & creditor and debtor rights representation.
The seat-pocket marketer of more than 30,000 products reached 650 million travelers a year, according to its website. Phoenix-based SkyMall, which suspended its catalog and fired 47 employees from its call centers Jan. 16, said in a court filing that it hopes to keep up barebones operations while seeking a buyer.
Idle fliers could browse the catalog for novelty items such as an Ultrasonic Barking Dog Deterrent that looks like a birdhouse, for $49.95, or a replica of a 16th-century Italian globe based on nautical maps that doubles as a liquor cabinet, for $189. A Memphis business lawyer is following this story closely.
Lately, however, more carriers are offering in-flight Internet access and regulators have let passengers use smartphones and tablets during take-offs and landings, depriving SkyMall of its captive audience.
“Now, even if you’re not connected, you can at least have your phone in front of you for the entire flight,” Brett Snyder, an aviation consultant and founder of CrankyFlier.com, said in a phone interview. “There’s just not that same draw that there used to be to go pull some reading material out of the seatback pocket.”
‘Increasingly Unattractive’
“With the increased use of electronic devices on planes, fewer people browsed the SkyMall in-flight catalog,” Chief Financial Officer Scott Wiley said in court papers. He listed Amazon.com Inc. and EBay Inc. as among competitors with greater resources and more customers. New technology and the cost of getting the magazine on planes “made the traditional in-flight SkyMall catalog increasingly unattractive to the airlines,” he said.
Delta Air Lines Inc. and SouthWest Airlines Co. had already notified the company that they would cease to carry its magazines, according to court filings. A Denver bankruptcy attorney is reviewing the details of this case.
Financial disclosures by SkyMall’s publicly traded affiliate, Xhibit Corp., had also caused vendors to reduce credit limits and refuse to ship products without prepayments, the company said. The company works as a distributor, without maintaining its own inventories.
Shares of Xhibit, which also filed for bankruptcy, have plunged 96 percent in the past 12 months.
The company and its affiliates listed as much as $50 million in liabilities and as much as $10 million in assets in Chapter 11 filings in Phoenix Thursday.
Online Experiment
The business generated $33.7 million of revenue in 2013, according to court filings. In early 2014, the company had tried to remake itself as an online retailer but ran out of cash to pay employees and vendors before it could learn whether the experiment was working.
Retailers of novelty goods and gadgets have struggled to survive the changing retail environment. Sharper Image Corp., which reached customers with its catalog and chain of retail stores, wound down in a 2008 bankruptcy. Offerings such as $299.99 air purifiers and “man cave” accessories like $119.99 custom bobble heads are still available online after liquidators bought the rights to the Sharper Image brand and licensed it.
Brookstone Inc., which sells $2,999 massage chairs and Das Horn, a $24.99 drinking vessel shaped like an animal tusk, reorganized in a 2014 bankruptcy through a $173 million sale to Hong Kong-based Sailing Capital Overseas Investment Fund LP and retailing conglomerate Sanpower.
SkyMall has proposed an auction be held around March 24.
The case is In re SkyMall LLC, 15-00679, U.S. Bankruptcy Court, District of Arizona (Phoenix).
(Bloomberg) -- SkyMall LLC, the in-flight catalog company that sells exercise bikes that double as desks and automated ball-launchers for dogs, filed for bankruptcy as air travelers spend more time on their mobile phones and Amazon.com. A Tulsa bankruptcy lawyer provides bankruptcy litigation, business litigation, bankruptcy & creditor and debtor rights representation.
The seat-pocket marketer of more than 30,000 products reached 650 million travelers a year, according to its website. Phoenix-based SkyMall, which suspended its catalog and fired 47 employees from its call centers Jan. 16, said in a court filing that it hopes to keep up barebones operations while seeking a buyer.
Idle fliers could browse the catalog for novelty items such as an Ultrasonic Barking Dog Deterrent that looks like a birdhouse, for $49.95, or a replica of a 16th-century Italian globe based on nautical maps that doubles as a liquor cabinet, for $189. A Memphis business lawyer is following this story closely.
Lately, however, more carriers are offering in-flight Internet access and regulators have let passengers use smartphones and tablets during take-offs and landings, depriving SkyMall of its captive audience.
“Now, even if you’re not connected, you can at least have your phone in front of you for the entire flight,” Brett Snyder, an aviation consultant and founder of CrankyFlier.com, said in a phone interview. “There’s just not that same draw that there used to be to go pull some reading material out of the seatback pocket.”
‘Increasingly Unattractive’
“With the increased use of electronic devices on planes, fewer people browsed the SkyMall in-flight catalog,” Chief Financial Officer Scott Wiley said in court papers. He listed Amazon.com Inc. and EBay Inc. as among competitors with greater resources and more customers. New technology and the cost of getting the magazine on planes “made the traditional in-flight SkyMall catalog increasingly unattractive to the airlines,” he said.
Delta Air Lines Inc. and SouthWest Airlines Co. had already notified the company that they would cease to carry its magazines, according to court filings. A Denver bankruptcy attorney is reviewing the details of this case.
Financial disclosures by SkyMall’s publicly traded affiliate, Xhibit Corp., had also caused vendors to reduce credit limits and refuse to ship products without prepayments, the company said. The company works as a distributor, without maintaining its own inventories.
Shares of Xhibit, which also filed for bankruptcy, have plunged 96 percent in the past 12 months.
The company and its affiliates listed as much as $50 million in liabilities and as much as $10 million in assets in Chapter 11 filings in Phoenix Thursday.
Online Experiment
The business generated $33.7 million of revenue in 2013, according to court filings. In early 2014, the company had tried to remake itself as an online retailer but ran out of cash to pay employees and vendors before it could learn whether the experiment was working.
Retailers of novelty goods and gadgets have struggled to survive the changing retail environment. Sharper Image Corp., which reached customers with its catalog and chain of retail stores, wound down in a 2008 bankruptcy. Offerings such as $299.99 air purifiers and “man cave” accessories like $119.99 custom bobble heads are still available online after liquidators bought the rights to the Sharper Image brand and licensed it.
Brookstone Inc., which sells $2,999 massage chairs and Das Horn, a $24.99 drinking vessel shaped like an animal tusk, reorganized in a 2014 bankruptcy through a $173 million sale to Hong Kong-based Sailing Capital Overseas Investment Fund LP and retailing conglomerate Sanpower.
SkyMall has proposed an auction be held around March 24.
The case is In re SkyMall LLC, 15-00679, U.S. Bankruptcy Court, District of Arizona (Phoenix).
Monday, February 9, 2015
RETAILERS ARE CLOSING UP SHOP. HERE'S WHY...
Original Story: cnbc.com
When it filed for Chapter 11 bankruptcy protection last month, teen name Delia's said it will seek court approval to close all of its stores.
Also last month, Aéropostale said it would close 120 stores soon, a significant increase from the 40 or 50 it had originally planned. The company will also close about 125 of its P.S. by Aéropostale children's stores by the end of the month. A Business Transactions lawyer represents clients in commercial disputes and business litigation matters.
Sears, which is trying to turn around its performance after a string of declining sales reports, said last month it would accelerate the number of closings during the year, from 130 to 235.
And RadioShack, which is negotiating with lenders to gain approval to shutter 1,100 stores, said last month that it had closed 175 locations in 2014.
Several macroeconomic factors are driving this push toward a smaller store base, analysts said. For one, retailers simply have too many stores, particularly as more consumers shop online. For another, the demographics no longer make sense for stores to exist in certain suburban locations, as more young Americans are flocking to cities and staying there longer.
But it's more than just external factors. Many of the retailers closing stores are facing company-specific problems that in some ways forced them to downsize. An Atlanta Business Lawyer provides experience in all aspects of corporate and business law.
"When you have a fleet of 1,000 stores, you're going to have some in lousy locations," said Craig Johnson, president of Customer Growth Partners. "That's a tiny subset of the issue."
Supply outweighs demand
One of the biggest issues is that retail is simply overstored, Johnson said. He attributed this supply versus demand imbalance to the fact that retail sales growth has been too tepid to account for an increase in retail real estate. The situation developed even though 2014 saw limited new construction, according to Jesse Tron, a spokesman for the International Council of Shopping Centers.
"If we start most broadly, you have a retail sector that has basically been in slow-growth, no-growth mode for a number of years," Johnson said. "Meanwhile, store square footage has kept expanding."
Location also plays a role. Belus Capital Advisors analyst Brian Sozzi said suburban markets are particularly vulnerable, as more Americans move into cities. He used Target as an example; although the discounter announced a round of store closures in November, it's also opening new stores in urban markets. An Atlanta banking lawyer assists clients in commercial lending, loan workouts, and real estate matters.
Johnson added that mall-based locations are facing greater challenges than off-mall concepts, which are stealing share.
It should also come as no surprise that the rapid growth of the Web is causing a traffic decline at physical stores. Johnson said that for the merchandise category, online sales now account for about 13 percent of all retail sales.
Not everyone is hurting
While there are certainly external factors to blame, it's important to note that the companies shuttering a large quantity of stores are also victims of their own mistakes.
For example, much of the trouble facing teen retailers is the fact that their target demographic no longer finds their product appealing. Instead, they've begun shopping at fast-fashion stores such as H&M and Zara—which, in contrast, are growing their U.S. square footage.
In a similar vein, Johnson pointed out that department stores' woes are due, in part, to the fact that their overall share is shrinking. A few years ago, these big-box locations accounted for well over 10 percent of the retail market; now, it's about 3 percent, he said.
"[J.C. Penney] has to shrink the size of its store base to fit the addressable demand that it can reasonably capture," he said.
Not all store closings should be viewed as a sign of distress for the retailer. That's because the beginning of the year is when most retailers evaluate their portfolios. According to preliminary estimates from ICSC, about 45 percent of last year's announced store closings occurred in the first quarter.
Companies that close underperforming stores to strengthen their portfolio stand in sharp contrast to names such as RadioShack, which "need the store closures to stay alive," Sozzi said.
Although analysts have long been calling for retailers to trim their square footage, it does come with pitfalls. Closing a store cannot only cause someone to switch to a competitor—it can also limit a company's distribution network.
"If you're aggressively closing stores, well now you can't do this ship from store," he said.
Where there's death, there's life
The past four years have seen the death of more than two dozen indoor malls, with another 60 teetering on the edge, according to data from Green Street Advisors that was first reported by The New York Times. But ICSC's Tron said he does not foresee a year when the industry will post a net decline in retail space.
He added that occupancy rates were at 92.5 percent in the third quarter, which is back above prerecession levels.
"We kind of see this every year," he said. "[In the] first quarter a bunch of stores close and there's a little bit of panic. And then new retailers emerge."
Among new tenants filling these vacancies are gyms, minute clinics, clicks-to-bricks concepts such as Rent the Runway, and international retailers such as Primark. The latter signed a deal for space in seven Sears locations last year.
"For all these deaths there will be life," Sozzi said.
When it filed for Chapter 11 bankruptcy protection last month, teen name Delia's said it will seek court approval to close all of its stores.
Also last month, Aéropostale said it would close 120 stores soon, a significant increase from the 40 or 50 it had originally planned. The company will also close about 125 of its P.S. by Aéropostale children's stores by the end of the month. A Business Transactions lawyer represents clients in commercial disputes and business litigation matters.
Sears, which is trying to turn around its performance after a string of declining sales reports, said last month it would accelerate the number of closings during the year, from 130 to 235.
And RadioShack, which is negotiating with lenders to gain approval to shutter 1,100 stores, said last month that it had closed 175 locations in 2014.
Several macroeconomic factors are driving this push toward a smaller store base, analysts said. For one, retailers simply have too many stores, particularly as more consumers shop online. For another, the demographics no longer make sense for stores to exist in certain suburban locations, as more young Americans are flocking to cities and staying there longer.
But it's more than just external factors. Many of the retailers closing stores are facing company-specific problems that in some ways forced them to downsize. An Atlanta Business Lawyer provides experience in all aspects of corporate and business law.
"When you have a fleet of 1,000 stores, you're going to have some in lousy locations," said Craig Johnson, president of Customer Growth Partners. "That's a tiny subset of the issue."
Supply outweighs demand
One of the biggest issues is that retail is simply overstored, Johnson said. He attributed this supply versus demand imbalance to the fact that retail sales growth has been too tepid to account for an increase in retail real estate. The situation developed even though 2014 saw limited new construction, according to Jesse Tron, a spokesman for the International Council of Shopping Centers.
"If we start most broadly, you have a retail sector that has basically been in slow-growth, no-growth mode for a number of years," Johnson said. "Meanwhile, store square footage has kept expanding."
Location also plays a role. Belus Capital Advisors analyst Brian Sozzi said suburban markets are particularly vulnerable, as more Americans move into cities. He used Target as an example; although the discounter announced a round of store closures in November, it's also opening new stores in urban markets. An Atlanta banking lawyer assists clients in commercial lending, loan workouts, and real estate matters.
Johnson added that mall-based locations are facing greater challenges than off-mall concepts, which are stealing share.
It should also come as no surprise that the rapid growth of the Web is causing a traffic decline at physical stores. Johnson said that for the merchandise category, online sales now account for about 13 percent of all retail sales.
Not everyone is hurting
While there are certainly external factors to blame, it's important to note that the companies shuttering a large quantity of stores are also victims of their own mistakes.
For example, much of the trouble facing teen retailers is the fact that their target demographic no longer finds their product appealing. Instead, they've begun shopping at fast-fashion stores such as H&M and Zara—which, in contrast, are growing their U.S. square footage.
In a similar vein, Johnson pointed out that department stores' woes are due, in part, to the fact that their overall share is shrinking. A few years ago, these big-box locations accounted for well over 10 percent of the retail market; now, it's about 3 percent, he said.
"[J.C. Penney] has to shrink the size of its store base to fit the addressable demand that it can reasonably capture," he said.
Not all store closings should be viewed as a sign of distress for the retailer. That's because the beginning of the year is when most retailers evaluate their portfolios. According to preliminary estimates from ICSC, about 45 percent of last year's announced store closings occurred in the first quarter.
Companies that close underperforming stores to strengthen their portfolio stand in sharp contrast to names such as RadioShack, which "need the store closures to stay alive," Sozzi said.
Although analysts have long been calling for retailers to trim their square footage, it does come with pitfalls. Closing a store cannot only cause someone to switch to a competitor—it can also limit a company's distribution network.
"If you're aggressively closing stores, well now you can't do this ship from store," he said.
Where there's death, there's life
The past four years have seen the death of more than two dozen indoor malls, with another 60 teetering on the edge, according to data from Green Street Advisors that was first reported by The New York Times. But ICSC's Tron said he does not foresee a year when the industry will post a net decline in retail space.
He added that occupancy rates were at 92.5 percent in the third quarter, which is back above prerecession levels.
"We kind of see this every year," he said. "[In the] first quarter a bunch of stores close and there's a little bit of panic. And then new retailers emerge."
Among new tenants filling these vacancies are gyms, minute clinics, clicks-to-bricks concepts such as Rent the Runway, and international retailers such as Primark. The latter signed a deal for space in seven Sears locations last year.
"For all these deaths there will be life," Sozzi said.
APPAREL RETAILER CACHE FILES FOR BANKRUPTCY
Original Story: cnbc.com
Cache has become the fifth U.S. apparel retailer to file for bankruptcy in three months as the sector struggles with growing competition and lower spending by teen shoppers.
Cache is seeking a "stalking horse" bidder for its assets and it has received commitment for debtor-in-possession financing of up to $22 million from Salus Capital Partners, the retailer said on Wednesday. A Tulsa bankruptcy lawyer represents clients in bankruptcy workouts and business restructuring matters.
Cache listed assets of $10 million-$50 million and liabilities of $50 million-$100 million.
The company said in December that it was evaluating strategic alternatives and had received an inquiry regarding a potential sale.
The mall-based retailer, which has 218 outlets, has not reported a profit in the past nine quarters. Cache had about 2,652 employees in 2013.
The 40-year-old company was the first to bring brands such as Armani and Versace to the United States, according to its website.
Cache blamed the depressed brick-and-mortar retail market, the growth of online shopping and rapidly changing consumer tastes for its Chapter 11 filing. A business bankruptcy lawyer is following this story closely.
Several teen apparel retailers have been struggling as young shoppers switch to fast-fashion brands such as H&M, Forever 21 and Inditex's Zara as well as online retailers such as Amazon.com.
Teen apparel retailers Deb Shops and Delia*s filed for bankruptcy in December, while mall-based apparel retailer Body Central Corp shut shop in January.
Wet Seal, which sells apparel and accessories for teen girls and young women, filed for bankruptcy protection last month.
Cache has become the fifth U.S. apparel retailer to file for bankruptcy in three months as the sector struggles with growing competition and lower spending by teen shoppers.
Cache is seeking a "stalking horse" bidder for its assets and it has received commitment for debtor-in-possession financing of up to $22 million from Salus Capital Partners, the retailer said on Wednesday. A Tulsa bankruptcy lawyer represents clients in bankruptcy workouts and business restructuring matters.
Cache listed assets of $10 million-$50 million and liabilities of $50 million-$100 million.
The company said in December that it was evaluating strategic alternatives and had received an inquiry regarding a potential sale.
The mall-based retailer, which has 218 outlets, has not reported a profit in the past nine quarters. Cache had about 2,652 employees in 2013.
The 40-year-old company was the first to bring brands such as Armani and Versace to the United States, according to its website.
Cache blamed the depressed brick-and-mortar retail market, the growth of online shopping and rapidly changing consumer tastes for its Chapter 11 filing. A business bankruptcy lawyer is following this story closely.
Several teen apparel retailers have been struggling as young shoppers switch to fast-fashion brands such as H&M, Forever 21 and Inditex's Zara as well as online retailers such as Amazon.com.
Teen apparel retailers Deb Shops and Delia*s filed for bankruptcy in December, while mall-based apparel retailer Body Central Corp shut shop in January.
Wet Seal, which sells apparel and accessories for teen girls and young women, filed for bankruptcy protection last month.
Friday, March 1, 2013
10 Big Companies Risking Bankruptcy
Story First Appeared on Business Insider -
Following is a list of ten of the U.S. companies which GMI Ratings (a governance research firm) has identified as having a high likelihood of insolvency in the next twelve months.
This list is by no means comprehensive, nor are these the companies at greatest risk. Rather, they present potential solvency issues that have not yet been identified by the marketplace.
Analysis using GMI Ratings’ Bankruptcy Risk Model places the probability of insolvency of the listed companies in a range from 6.5 percent to 23.3 percent, or a one in four chance. Another dozen companies tested with similar results, but were removed from the list because they are late filers and probabilities of bankruptcy could not be determined without more recent data.
The likelihood of insolvency during the next one-year period is a function of a company’s exposure in four areas:
• Macro-economic events (i.e., the state of the overall economy). The U.S. may still be in the throes of recession, with added alarm over the debt crises in Europe, and the pace of recovery is lethargic.
• Micro-economic events (i.e., the state of the industry). The home building industry has suffered greatly in the past four years. Airlines are at the mercy of fluctuating oil prices. Bookstores and paper products are fighting to overcome reduced demand. Other industries may find themselves disproportionately affected.
• Specific product events, such as product failure.
• The company’s ability to finance continuing operations.
All these factors are intertwined, and impact each company in varying degrees.
(All bankruptcy risks were calculated by GMI Ratings.)
----------------------------------------------------------------------------------------------------
#10 Targacept, Inc.
Bankruptcy risk: 6.5%
Market cap ($MM): $140
Founded: 1997
Industry: Biotechnology
Targacept is in Biotechnology, a highly competitive industry dependent on successful product launches. Product failure can be a disaster.
----------------------------------------------------------------------------------------------------
#9 KB Home
Bankruptcy risk: 7.7%
Market cap ($MM): $592
Founded: 1957
Industry: Home-Building
KB Home is in home building. The market is convinced that this industry is turning around. That may be true, but the rate of change may not be sufficient to support the very large debt levels associated with KB Home over the next 12 months.
----------------------------------------------------------------------------------------------------
#8 Pacific Sunwear of California, Inc.
Bankruptcy risk: 7.9%
Market cap ($MM): $112
Founded: 1980
Industry: Retail - Apparel / Accessories
The Retail Apparel industry is constantly faced with winners and losers. It is highly dependent on second-guessing the latest fad. Pacific Sunwear (PacSun) seems to be on the wrong side of the marketplace. New product introduction may save them but that, in itself, is associated with substantial risk.
----------------------------------------------------------------------------------------------------
#7 Central European Distribution Corp
Bankruptcy risk: 7.9%
Market cap ($MM): $228
Founded: 1990
Industry: Beverages - Distillers / Wineries
Central European Distribution Corporation is also in a highly competitive business. The company’s management has proven time and time again that its business decisions are inept. There are many questions surrounding the quality of their accounting.
----------------------------------------------------------------------------------------------------
#6 Coldwater Creek Inc.
Bankruptcy risk: 8.9%
Market cap ($MM): $79
Founded: 1984
Industry: Retail - Apparel / Accessories
Like Pacific Sunwear, Coldwater Creek is an apparel company that seems to be on the wrong side of the marketplace. Introducing new products may save them, but that's still a very risky venture.
----------------------------------------------------------------------------------------------------
#5 Republic Airways Holdings Inc.
Bankruptcy risk: 10.8%
Market cap ($MM): $268
Founded: 1973
Industry: Airlines
Debt-laden airline Republic Airways is very dependent on the price of jet fuel, which tracks the cost of oil. There are accounting questions here as well.
----------------------------------------------------------------------------------------------------
#4 Beazer Homes USA, Inc.
Bankruptcy risk: 11.0%
Market cap ($MM): $263
Founded: 1985
Industry: Home-building
Companies in the home-building industry, like Beazer Homes USA, have been suffering in this economy. Although many people believe that the home-building market is turning around, the rate of change may not be sufficient to support the very large debt levels associated with Beazer over the next 12 months.
----------------------------------------------------------------------------------------------------
#3 Complete Genomics, Inc.
Bankruptcy risk: 13.3%
Market cap ($MM): $64
Founded: 2006
Industry: Biotechnology
Biotechnology is a highly competitive industry dependent on successful product launches. For companies like Complete Genomics, product failure can mean financial disaster.
----------------------------------------------------------------------------------------------------
#2 Globalstar, Inc.
Bankruptcy risk: 15.7%
Market cap ($MM): $106
Founded: 1991
Industry: Wireless Telecommunications Services
Many years ago, Globalstar chose a technology that is no longer mainstream. They become more marginalized as a business with the passage of time.
----------------------------------------------------------------------------------------------------
#1 MEMC Electronic Materials, Inc.
Bankruptcy risk: 23.3%
Market cap ($MM): $388
Founded: 1959
Industry: Semiconductors
MEMC has substantially shifted its focus to the solar power industry and away from semi-conductor subcontracting. The risk of success is extremely high, not only for MEMC but for any company that makes such a dramatic change in its core business.
Following is a list of ten of the U.S. companies which GMI Ratings (a governance research firm) has identified as having a high likelihood of insolvency in the next twelve months.
This list is by no means comprehensive, nor are these the companies at greatest risk. Rather, they present potential solvency issues that have not yet been identified by the marketplace.
Analysis using GMI Ratings’ Bankruptcy Risk Model places the probability of insolvency of the listed companies in a range from 6.5 percent to 23.3 percent, or a one in four chance. Another dozen companies tested with similar results, but were removed from the list because they are late filers and probabilities of bankruptcy could not be determined without more recent data.
The likelihood of insolvency during the next one-year period is a function of a company’s exposure in four areas:
• Macro-economic events (i.e., the state of the overall economy). The U.S. may still be in the throes of recession, with added alarm over the debt crises in Europe, and the pace of recovery is lethargic.
• Micro-economic events (i.e., the state of the industry). The home building industry has suffered greatly in the past four years. Airlines are at the mercy of fluctuating oil prices. Bookstores and paper products are fighting to overcome reduced demand. Other industries may find themselves disproportionately affected.
• Specific product events, such as product failure.
• The company’s ability to finance continuing operations.
All these factors are intertwined, and impact each company in varying degrees.
(All bankruptcy risks were calculated by GMI Ratings.)
----------------------------------------------------------------------------------------------------
#10 Targacept, Inc.
Bankruptcy risk: 6.5%
Market cap ($MM): $140
Founded: 1997
Industry: Biotechnology
Targacept is in Biotechnology, a highly competitive industry dependent on successful product launches. Product failure can be a disaster.
----------------------------------------------------------------------------------------------------
#9 KB Home
Bankruptcy risk: 7.7%
Market cap ($MM): $592
Founded: 1957
Industry: Home-Building
KB Home is in home building. The market is convinced that this industry is turning around. That may be true, but the rate of change may not be sufficient to support the very large debt levels associated with KB Home over the next 12 months.
----------------------------------------------------------------------------------------------------
#8 Pacific Sunwear of California, Inc.
Bankruptcy risk: 7.9%
Market cap ($MM): $112
Founded: 1980
Industry: Retail - Apparel / Accessories
The Retail Apparel industry is constantly faced with winners and losers. It is highly dependent on second-guessing the latest fad. Pacific Sunwear (PacSun) seems to be on the wrong side of the marketplace. New product introduction may save them but that, in itself, is associated with substantial risk.
----------------------------------------------------------------------------------------------------
#7 Central European Distribution Corp
Bankruptcy risk: 7.9%
Market cap ($MM): $228
Founded: 1990
Industry: Beverages - Distillers / Wineries
Central European Distribution Corporation is also in a highly competitive business. The company’s management has proven time and time again that its business decisions are inept. There are many questions surrounding the quality of their accounting.
----------------------------------------------------------------------------------------------------
#6 Coldwater Creek Inc.
Bankruptcy risk: 8.9%
Market cap ($MM): $79
Founded: 1984
Industry: Retail - Apparel / Accessories
Like Pacific Sunwear, Coldwater Creek is an apparel company that seems to be on the wrong side of the marketplace. Introducing new products may save them, but that's still a very risky venture.
----------------------------------------------------------------------------------------------------
#5 Republic Airways Holdings Inc.
Bankruptcy risk: 10.8%
Market cap ($MM): $268
Founded: 1973
Industry: Airlines
Debt-laden airline Republic Airways is very dependent on the price of jet fuel, which tracks the cost of oil. There are accounting questions here as well.
----------------------------------------------------------------------------------------------------
#4 Beazer Homes USA, Inc.
Bankruptcy risk: 11.0%
Market cap ($MM): $263
Founded: 1985
Industry: Home-building
Companies in the home-building industry, like Beazer Homes USA, have been suffering in this economy. Although many people believe that the home-building market is turning around, the rate of change may not be sufficient to support the very large debt levels associated with Beazer over the next 12 months.
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#3 Complete Genomics, Inc.
Bankruptcy risk: 13.3%
Market cap ($MM): $64
Founded: 2006
Industry: Biotechnology
Biotechnology is a highly competitive industry dependent on successful product launches. For companies like Complete Genomics, product failure can mean financial disaster.
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#2 Globalstar, Inc.
Bankruptcy risk: 15.7%
Market cap ($MM): $106
Founded: 1991
Industry: Wireless Telecommunications Services
Many years ago, Globalstar chose a technology that is no longer mainstream. They become more marginalized as a business with the passage of time.
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#1 MEMC Electronic Materials, Inc.
Bankruptcy risk: 23.3%
Market cap ($MM): $388
Founded: 1959
Industry: Semiconductors
MEMC has substantially shifted its focus to the solar power industry and away from semi-conductor subcontracting. The risk of success is extremely high, not only for MEMC but for any company that makes such a dramatic change in its core business.
Monday, November 19, 2012
Bankruptcy for AMF Bowling
story first appeared in Wall Street Journal
AMF Bowling Worldwide Inc., the world's largest operator of bowling alleys, filed for bankruptcy-court protection Tuesday after being squeezed by a cash crunch and failing to find a buyer for its business.
The filing marks AMF's second trip through bankruptcy since 2001. The company, which employs 7,000 people, has struggled with both a heavy debt load and a shift in the sport.
The bowling industry has been in flux for decades. Once largely a blue-collar pastime dominated by leagues, it has shifted to a sport aimed at middle-class players, who seek amenities and attractive facilities and are generally averse to joining the teams that provide bowling alleys with steady income.
Tom Clark, the commissioner of the Professional Bowlers Association, said that even as the number of people bowling at least once a year is at a high of about 70 million, only about two million are competing regularly in leagues.
AMF, which sold off its bowling alleys overseas in a previous restructuring, operates 262 bowling centers in the U.S. Small chains and mom-and-pop operators now dominate the industry, which includes more than 5,000 bowling alleys.
AMF said that it would have upgraded its facilities to cater to today's bowlers, but the economic downturn reduced its revenue, thwarting its plans. The company does have nine bowling centers with lounges and modern décor, a response to competitors like Lucky Strike, a chain of upscale bowling centers with a dress code.
Facing what it called "unmanageable" debt levels, AMF began searching for a buyer last year. After an unsuccessful hunt, it instead began reaching out to creditors to discuss a restructuring.
The deal, which will be subject to bankruptcy-court approval, calls for AMF to exit Chapter 11 under the ownership of its senior lenders, subject to rival bids at a court-overseen auction. Either way, the lenders, which are owed more than $216 million, would see their claims paid in full.
AMF said it expects to emerge from bankruptcy protection within the next five months. Steve Satterwhite, AMF's chief financial officer and chief operating officer, said they'd be recapitalizing their balance sheet and reducing debt.
AMF, which said it hosts more than 20 million bowlers a year, said its financial troubles are tied to the bowling industry's shift to open play from leagues. It also attracted fewer bowlers during the economic downturn, which slashed revenue while the company's fixed costs remained high.
Tuesday's bankruptcy filing came about a week after AMF defaulted on its debt obligations, according to Standard & Poor's.To ensure its uninterrupted operations while it restructures, AMF won court approval Tuesday afternoon to tap $35 million of a $50 million bankruptcy loan from some of its existing senior lenders, a group led by Credit Suisse .
The Mechanicsville, Va., company reported assets and debts that were each in the range of $100 million to $500 million in its bankruptcy petition, which court papers show was filed with the U.S. Bankruptcy Court in Richmond, Va.
In 1996, Goldman Sachs Group Inc. led a $1.37 billion leveraged buyout of AMF from Richmond, Va., businessman William Goodwin. The firm went public in November 1997 but was delisted from the New York Stock Exchange three years later.
AMF first sought Chapter 11 protection in July 2001 to address declining revenue and its acquisition of 260 additional bowling centers, which the company said it struggled to manage. AMF emerged from bankruptcy protection the following year under the ownership of its secured lenders, though it quickly sought a new owner.
Chicago private-equity firm Code Hennessy & Simmons bought the bowling company in a $670 million deal and presided over what AMF called a "simplify and transform" strategy that involved shedding foreign assets and installing new management. According to the company, its financial results showed improvements between 2005 and 2008.
Steve Johnson, executive director of the Bowling Proprietors' Association of America, said the bowling industry has been making a comeback in recent years.
Tom Clark, the commissioner of the Professional Bowlers Association, said that even as the number of people bowling at least once a year is at a high of about 70 million, only about two million are competing regularly in leagues.
AMF, which sold off its bowling alleys overseas in a previous restructuring, operates 262 bowling centers in the U.S. Small chains and mom-and-pop operators now dominate the industry, which includes more than 5,000 bowling alleys.
AMF said that it would have upgraded its facilities to cater to today's bowlers, but the economic downturn reduced its revenue, thwarting its plans. The company does have nine bowling centers with lounges and modern décor, a response to competitors like Lucky Strike, a chain of upscale bowling centers with a dress code.
Facing what it called "unmanageable" debt levels, AMF began searching for a buyer last year. After an unsuccessful hunt, it instead began reaching out to creditors to discuss a restructuring.
The deal, which will be subject to bankruptcy-court approval, calls for AMF to exit Chapter 11 under the ownership of its senior lenders, subject to rival bids at a court-overseen auction. Either way, the lenders, which are owed more than $216 million, would see their claims paid in full.
AMF said it expects to emerge from bankruptcy protection within the next five months. Steve Satterwhite, AMF's chief financial officer and chief operating officer, said they'd be recapitalizing their balance sheet and reducing debt.
AMF, which said it hosts more than 20 million bowlers a year, said its financial troubles are tied to the bowling industry's shift to open play from leagues. It also attracted fewer bowlers during the economic downturn, which slashed revenue while the company's fixed costs remained high.
Tuesday's bankruptcy filing came about a week after AMF defaulted on its debt obligations, according to Standard & Poor's.To ensure its uninterrupted operations while it restructures, AMF won court approval Tuesday afternoon to tap $35 million of a $50 million bankruptcy loan from some of its existing senior lenders, a group led by Credit Suisse .
The Mechanicsville, Va., company reported assets and debts that were each in the range of $100 million to $500 million in its bankruptcy petition, which court papers show was filed with the U.S. Bankruptcy Court in Richmond, Va.
In 1996, Goldman Sachs Group Inc. led a $1.37 billion leveraged buyout of AMF from Richmond, Va., businessman William Goodwin. The firm went public in November 1997 but was delisted from the New York Stock Exchange three years later.
AMF first sought Chapter 11 protection in July 2001 to address declining revenue and its acquisition of 260 additional bowling centers, which the company said it struggled to manage. AMF emerged from bankruptcy protection the following year under the ownership of its secured lenders, though it quickly sought a new owner.
Chicago private-equity firm Code Hennessy & Simmons bought the bowling company in a $670 million deal and presided over what AMF called a "simplify and transform" strategy that involved shedding foreign assets and installing new management. According to the company, its financial results showed improvements between 2005 and 2008.
Steve Johnson, executive director of the Bowling Proprietors' Association of America, said the bowling industry has been making a comeback in recent years.
Tuesday, June 12, 2012
Allied Systems Consent to Involuntary Chapter 11
Story first appeared in The Wall Street Journal.
Allied Systems Holdings Inc., which specializes in transporting cars from manufacturers to dealerships, on Sunday put itself and 17 related companies into bankruptcy-court restructuring, consenting to a involuntary Chapter 11 petition filed against it last month.
Allied stopped making interest payments on its first lien credit facility in 2009 as Chrysler and General Motors entered bankruptcy and reduced production, it said in court documents filed with the U.S. Bankruptcy Court in Wilmington, Del. It had previously been out of compliance with the loan with a current balance of $244 million and hasn't made payments on it since.
Private-equity firm Yucaipa Cos., which owns a majority stake in Allied as the result of Allied's 2005 Chapter 11 reorganization, purchased the majority of Allied's first lien exposure in 2009 and entered into an agreement that gave it control of dealings with lenders.
Allied is asking the court to approve $20 million in bankruptcy financing being provided by Yucaipa. It plans to eliminate debt and strengthen its balance sheet while in Chapter 11. The company said it expects existing operations to continue during restructuring.
After exploring all of the options with respect to the company's current financial position and the involuntary petitions, it became clear that implementing the financial restructuring through a court proceeding presents the most effective means to improve the balance.
Earlier this year three lenders sued Yucaipa, in New York State Supreme Court, saying the firm was violating legal debt protections.
Yucaipa caused Allied to default on numerous provisions of the credit agreement and other agreements and then interfered with and frustrated the lenders' ability to exercise their rights.
That case is still pending, but these same lenders, Black Diamond Capital Management LLC and Spectrum Investment Partners LP, filed an involuntary Chapter 11 petition on behalf of Allied in May.
The involuntary filing came as the Atlanta company's revenues fell to $543 million in 2010 from $823 million in 2007, it said, a result of the slowdown in the automotive industry. Allied also lost the business of General Motors, Chrysler, Toyota and Honda when it implemented rate increases in March 2011.
At the same time, labor costs shot up 15%, it said. An agreement with Teamsters to lower costs, negotiated during its previous Chapter 11 case, expired in May 2010. The union insisted on an immediate snapback of wage rates, it said in court documents.
As of December 2011, Allied employed 1,835 and operated 2,400 tractors that transport cars out of 44 terminals. Of those, 1,062 are union employees.
Allied Systems Holdings Inc., which specializes in transporting cars from manufacturers to dealerships, on Sunday put itself and 17 related companies into bankruptcy-court restructuring, consenting to a involuntary Chapter 11 petition filed against it last month.
Allied stopped making interest payments on its first lien credit facility in 2009 as Chrysler and General Motors entered bankruptcy and reduced production, it said in court documents filed with the U.S. Bankruptcy Court in Wilmington, Del. It had previously been out of compliance with the loan with a current balance of $244 million and hasn't made payments on it since.
Private-equity firm Yucaipa Cos., which owns a majority stake in Allied as the result of Allied's 2005 Chapter 11 reorganization, purchased the majority of Allied's first lien exposure in 2009 and entered into an agreement that gave it control of dealings with lenders.
Allied is asking the court to approve $20 million in bankruptcy financing being provided by Yucaipa. It plans to eliminate debt and strengthen its balance sheet while in Chapter 11. The company said it expects existing operations to continue during restructuring.
After exploring all of the options with respect to the company's current financial position and the involuntary petitions, it became clear that implementing the financial restructuring through a court proceeding presents the most effective means to improve the balance.
Earlier this year three lenders sued Yucaipa, in New York State Supreme Court, saying the firm was violating legal debt protections.
Yucaipa caused Allied to default on numerous provisions of the credit agreement and other agreements and then interfered with and frustrated the lenders' ability to exercise their rights.
That case is still pending, but these same lenders, Black Diamond Capital Management LLC and Spectrum Investment Partners LP, filed an involuntary Chapter 11 petition on behalf of Allied in May.
The involuntary filing came as the Atlanta company's revenues fell to $543 million in 2010 from $823 million in 2007, it said, a result of the slowdown in the automotive industry. Allied also lost the business of General Motors, Chrysler, Toyota and Honda when it implemented rate increases in March 2011.
At the same time, labor costs shot up 15%, it said. An agreement with Teamsters to lower costs, negotiated during its previous Chapter 11 case, expired in May 2010. The union insisted on an immediate snapback of wage rates, it said in court documents.
As of December 2011, Allied employed 1,835 and operated 2,400 tractors that transport cars out of 44 terminals. Of those, 1,062 are union employees.
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Tuesday, May 22, 2012
Education Textbook Giant Files Bankruptcy
Story first appeared in USA Today.
Houghton Mifflin Harcourt Publishers Inc. has filed for Chapter 11 bankruptcy protection after reaching an agreement to eliminate $3.1 billion of its debt, according to a Boston Bankruptcy Lawyer.
The textbook publisher's move Monday came as little surprise as it announced earlier in the month that it was planning to reorganize under a prepackaged bankruptcy plan. Such plans are made with creditors and shareholders ahead of the filing for bankruptcy to speed the process.
Houghton Mifflin said Monday that its plan is supported by the vast majority of its stakeholders and will help strengthen its financial position so it is better positioned for the future. It made the filing in U.S. Bankruptcy Court for the Southern District of New York.
The privately held company, based in Boston, has been struggling with heavy debt for years. Houghton Mifflin said last year that it was trying to reorganize its finances to improve its balance sheet, said Raleigh Bankruptcy Lawyers.
The company acquired Harcourt Education in 2007 for roughly $4 billion. While that deal helped make it one of the top sellers of kindergarten through 12th grade books, tough economic times brought cuts in public funding for education and hurt its textbook sales.
A Philadelphia Bankruptcy Lawyer noted that Houghton Mifflin has said its day-to-day operations will continue as normal under bankruptcy protection, and it expects to complete the process by the end of June.
Houghton Mifflin Harcourt Publishers Inc. has filed for Chapter 11 bankruptcy protection after reaching an agreement to eliminate $3.1 billion of its debt, according to a Boston Bankruptcy Lawyer.
The textbook publisher's move Monday came as little surprise as it announced earlier in the month that it was planning to reorganize under a prepackaged bankruptcy plan. Such plans are made with creditors and shareholders ahead of the filing for bankruptcy to speed the process.
Houghton Mifflin said Monday that its plan is supported by the vast majority of its stakeholders and will help strengthen its financial position so it is better positioned for the future. It made the filing in U.S. Bankruptcy Court for the Southern District of New York.
The privately held company, based in Boston, has been struggling with heavy debt for years. Houghton Mifflin said last year that it was trying to reorganize its finances to improve its balance sheet, said Raleigh Bankruptcy Lawyers.
The company acquired Harcourt Education in 2007 for roughly $4 billion. While that deal helped make it one of the top sellers of kindergarten through 12th grade books, tough economic times brought cuts in public funding for education and hurt its textbook sales.
A Philadelphia Bankruptcy Lawyer noted that Houghton Mifflin has said its day-to-day operations will continue as normal under bankruptcy protection, and it expects to complete the process by the end of June.
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Thursday, April 19, 2012
Former Ball Player Files for Bankruptcy
Story first appeared in Yahoo.
A former Pro football player says a bad construction deal at the worst possible time sent him spiraling into debt that led him to file for bankruptcy last week.
He made his first comments on the situation to Tampa Bay Times columnist and said he was motivated to file for bankruptcy with $6.7 million worth of debt because he didn’t want to go to jail.
He estimates he grossed about $60 million during his playing days, primarily with the Tampa Bay Buccaneers, and now he’s reduced to not much. It’s a little hard to believe one failed investment project, building homes in Fort Pierce, Fla., broke him. But that’s what he explains.
Since, he’s become the butt of plenty of jokes. He claims he’s lost not only his Super Bowl XXXVII ring but also his ring he earned as a member of a national championship team at the University of Miami. Losing one ring? OK. Losing two rings? Come on. They’ve really been misplaced?
He states that he thought he handed it to someone at the Super Bowl.
Prior to the bankruptcy news, he never publicly asked for anyone to assist him in a search for his missing jewelry.
He says he may be down financially but he’s not letting it keep him down. He promises that he will never go to jail.
In legal documents, he did claim 240 pairs of Nike shoes and a painting of a naked woman as assets.
Unfortunately, he looks a little bare right now as a man with public and real financial issues.
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A former Pro football player says a bad construction deal at the worst possible time sent him spiraling into debt that led him to file for bankruptcy last week.
He made his first comments on the situation to Tampa Bay Times columnist and said he was motivated to file for bankruptcy with $6.7 million worth of debt because he didn’t want to go to jail.
He estimates he grossed about $60 million during his playing days, primarily with the Tampa Bay Buccaneers, and now he’s reduced to not much. It’s a little hard to believe one failed investment project, building homes in Fort Pierce, Fla., broke him. But that’s what he explains.
Since, he’s become the butt of plenty of jokes. He claims he’s lost not only his Super Bowl XXXVII ring but also his ring he earned as a member of a national championship team at the University of Miami. Losing one ring? OK. Losing two rings? Come on. They’ve really been misplaced?
He states that he thought he handed it to someone at the Super Bowl.
Prior to the bankruptcy news, he never publicly asked for anyone to assist him in a search for his missing jewelry.
He says he may be down financially but he’s not letting it keep him down. He promises that he will never go to jail.
In legal documents, he did claim 240 pairs of Nike shoes and a painting of a naked woman as assets.
Unfortunately, he looks a little bare right now as a man with public and real financial issues.
For more national and worldwide related business news, visit the Peak News Room blog.
For local and Michigan business related news, visit the Michigan Business News blog.
For healthcare and medical related news, visit the Healthcare and Medical blog.
For law related news, visit the Nation of Law blog.
For real estate and home related news, visit the Commercial and Residential Real Estate blog.
For technology and electronics related news, visit the Electronics America blog.
For organic SEO and web optimization related news, visit the SEO Done Right blog.
Monday, January 16, 2012
In the Past?: the Post Office and Kodak
First appeared in Jewish World Review
The news that Eastman Kodak is preparing to file for
bankruptcy, after being the leading photographic company in the world for more
than a hundred years, truly marks the end of an era.
The skills required to use the cameras and chemicals
required by the photography of the mid-19th century were far beyond those of
most people — until a man named George Eastman created a company called Kodak,
which made cameras that ordinary people could use.
It was Kodak's humble and affordable box Brownie that put
photography on the map for millions of people, who just wanted to take simple
pictures of family, friends and places they visited.
As the complicated photographic plates used by 19th century
photographers gave way to film, Kodak became the leading film maker of the 20th
century. But sales of film declined for the first time in 2000, and sales of
digital cameras surpassed the sales of film cameras just 3 years later. Just as
Kodak's technology made older modes of photography obsolete more than a hundred
years ago, so the new technology of the digital age has left Kodak behind.
Great names of companies in other fields have likewise
vanished as new technology brought new rivals to the forefront, or else made
the whole product obsolete, as happened with typewriters, slide rules and other
products now remembered only by an older generation. That is what happens in a
market economy and we all benefit from it as consumers.
Unfortunately, that is not what happens in government. The
post office is a classic example. Post offices were once even more important
than Eastman Kodak, and for a longer time, as the mail provided vital
communications linking people and organizations across thousands of miles. But,
today, technology has moved even further beyond the post office than it has
beyond Eastman Kodak.
The difference is that, although the Postal Service is
technically a private business, its income doesn't cover all its costs — and
taxpayers are on the hook for the difference.
Moreover, the government makes it illegal for anyone else to
put anything into your mail box, even though you bought the mail box and it is
your property. That means you don't have the option to have some other private
company deliver your mail.
In India, when private companies like Federal Express and
United Parcel Service were allowed to deliver mail, the amount of mail
delivered by that country's post offices was cut in half between 2000 and 2005.
What should be the fate of the Postal Service in the United
States? In a sense, no one really knows. Nor is there any reason why they
should.
The real answer to the question whether the Postal Service
is worth what it is costing can be found only when various indirect government
subsidies stop and when the government stops forbidding others from carrying
the mail — if that ever happens.
If FedEx, UPS or someone else can carry the mail cheaper or
better than the Postal Service, there is no reason why the public should not
get the benefit of having their mail delivered cheaper or better.
Politics is the reason why no such test is likely any time
soon. Various special interests currently benefit from the way the post office
is run — and especially by the way government backing keeps it afloat.
Junk mail, for example, does not have to cover all its
costs. You might be happy to get less junk mail if it had to pay a postage rate
that covered the full cost of delivering it. But people who send junk mail
would lobby Congress to stay on the gravy train.
So would people who live in remote areas, where the cost of
delivering all mail is higher. But if people who decide to live in remote areas
don't pay the costs that their decision imposes on the Postal Service, electric
utilities and others, why should other people be forced to pay those costs?
A society in which some people make decisions, and other
people are forced to pay the costs created by those decisions, is a society
where a lot of decisions can be made despite their costs being greater than
their benefits.
That is why the post office should have to face competition
in the market, instead of lobbying politicians for government help. We cannot
preserve everything that was once useful.
Friday, January 6, 2012
Bankruptcy for Kodak
First appeared in Wall Street Journal
Eastman Kodak Co. is preparing to seek bankruptcy protection in the coming weeks, people familiar with the matter said, and a move that would cap a stunning comedown for a company that once ranked among America's corporate titans.
The 131-year-old company is still making last-ditch efforts to sell off some of its patent portfolio and could avoid Chapter 11 if it succeeds, one of the people said. But the company has started making preparations for a filing in case those efforts fail, including talking to banks about some $1 billion in financing to keep it afloat during bankruptcy proceedings, the people said.
A Kodak spokesman said the company "does not comment on market rumor or speculation."
A filing could come as soon as this month or early February, one of the people familiar with the matter said. Kodak would continue to pay its bills and operate normally while under bankruptcy protection, the people said. But the company's focus would then be the sale of some 1,100 patents through a court-supervised auction, the people said.
That Kodak is even contemplating a bankruptcy filing represents a final reversal of fortune for a company that once dominated its industry, drawing engineering talent from around the country to its Rochester, N.Y., headquarters and plowing money into research that produced thousands of breakthroughs in imaging and other technologies.
The company, for instance, invented the digital camera—in 1975—but never managed to capitalize on the new technology.
Casting about for alternatives to its lucrative but shrinking film business, Kodak toyed with chemicals, bathroom cleaners and medical-testing devices in the 1980s and 1990s, before deciding to focus on consumer and commercial printers in the past half-decade under Chief Executive Antonio Perez.
None of the new pursuits generated the cash needed to fund the change in course and cover the company's big obligations to its retirees. A Chapter 11 filing could help Kodak shed some of those obligations, but the viability of the company's printer strategy has yet to be demonstrated, raising questions about the fate of the company's 19,000 employees.
Such uncertainty was once unthinkable at Kodak, whose near-monopoly on film produced high margins that the company shared with its workers. On "wage dividend days," a tradition started by Kodak founder George Eastman, the company would pay out bonuses to all workers based on its results, and employees would use the checks to buy cars and celebrate at fancy restaurants.
Former employees say the company was the Apple Inc. or Google Inc. of its time. Robert Shanebrook, 64 years old, who started at the company in 1967 and was most recently world-wide product manager for professional photographic film, recalls young talent traipsing through Kodak's sprawling corporate campus. At lunch, they would crowd the auditorium to watch a daily movie at an on-site theater. Other employees would play basketball on the company courts.
"We had this self-imposed opinion of ourselves that we could do anything, that we were undefeatable," Mr. Shanebrook said.
Kodak's troubles date back to the 1980s, when the company struggled with foreign competitors that stole its market share in film. The company later had to cope with the rise of digital photography and smartphones.
It wasn't until 10 years ago that the mood began to sour, said Mr. Shanebrook. By 2003, Kodak announced it would stop making investments in film. "I didn't want to stick around for the demise," he said.
Kodak shares closed Wednesday at 47 cents, down 28% after The Wall Street Journal reported the company was preparing a Chapter 11 filing.
Kodak has lost money each year but one since Mr. Perez, who previously headed the printer business at Hewlett-Packard Co., took over in 2005. The company's problems came to a head in 2011, as Mr. Perez's strategy of using patent lawsuits and licensing deals to raise cash ran dry.
Hoping to plug the hole, Kodak put some of its digital patents up for sale in August. Efforts to sell the portfolio have been slowed by bidders' concerns that Kodak might seek bankruptcy protection. The company has talked to hedge funds about borrowing hundreds of millions of dollars to bridge its finances until the patents sell, but the talks have faltered, people familiar with the matter said.
The first sign of acute cash pressure came in late September, when Kodak drew $160 million from its credit line at a time when it had told investors it would be building cash. The move sent Kodak's stock tumbling and raised fresh concerns about the company's viability.
Soon after, Kodak hired restructuring lawyers and advisers to help shore up its finances.
The company and its board have weighed a potential bankruptcy filing for months. Advisers told Kodak a filing would make its patent sale easier and likely allow the company to command a higher price, people familiar with the matter have said. The obligation to cover pension and health-care costs for retirees could also be purged through bankruptcy proceedings, the people said.
Those obligations—which run to hundreds of millions of dollars a year—as well as the unprofitable state of Kodak's new businesses, have made the company undesirable as a takeover target, people familiar with the matter said.
During a two-day meeting of the company's board, management and advisers in mid-December, executives were briefed on how Kodak would fund itself during bankruptcy proceedings should efforts to sell its patents fall short, a person familiar with the matter said.
Kodak is in discussions with large banks including J.P. Morgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. for so-called debtor-in-possession financing to keep the company operating in bankruptcy court, people familiar with the matter said.
Kodak has also held discussions with bondholders and a group led by investment firm Cerberus Capital Management LP about a bankruptcy financing package, the people said.
Should it seek bankruptcy protection, Kodak would follow other well-known companies that have failed to adapt to rapidly changing business models. They included Polaroid Corp., which filed for bankruptcy protection a second time in December 2008; Borders Group Inc., which liquidated itself last year; and Blockbuster Inc., which filed for bankruptcy protection in 2010 and was later bought by Dish Network Corp. A bankruptcy filing would kick off what is expected to be a busier year in restructuring circles, as economic growth continues to drag and fears about European sovereign debt woes threaten to make credit markets less inviting for companies that need to refinance their debts.
Mr. Perez decided to base the company's future on consumer and commercial inkjet printing. But the saturated market has proved tough to penetrate, and Kodak is paying heavily to subsidize sales as it builds a base of users for its ink.
The company remains a bit player in a printer market dominated by giants like H-P. Kodak ranks fifth world-wide, according to technology data firm IDC, with a market share of 2.6% in the first nine months of 2011.
As the company works on a restructuring plan, a key issue for creditors is whether the printer operations are worth supporting, or whether the bulk of the company's value is in its patents.
Nortel Networks Corp., a company that also had fallen behind the technology curve, opted to liquidate itself in bankruptcy court rather than reorganize, raising a greater than expected $4.5 billion for its patent trove.
Kodak's founder, Mr. Eastman, took his life at the age of 77 in what is now a museum celebrating the founder and Kodak's impact on photography. His suicide note read: "To my friends, my work is done. Why wait?"
Thursday, September 15, 2011
Solar Energy Company Goes Bankrupt After $535 Million Government Loan
Story first appeared in USA TODAY.
White House officials on Wednesday defended a decision to award a now-bankrupt solar energy company a $535 million loan as House Republicans released Obama administration e-mails suggesting that the loan was rushed despite deep internal skepticism about the government investment.
Excerpts of administration e-mails released by the House Energy and Commerce Committee from late August and September 2009 show that White House officials were anxious about the Office of Management and Budget (OMB) timeline for finalizing a loan to Fremont, Calif.-based Solyndra. Vice President Biden was traveling to California when Solyndra was scheduled to hold a groundbreaking on their new facility, and the White House wanted Biden to attend to tout the project as an example of President Obama's $787 billion stimulus putting America back to work, the e-mails suggest.
Just days before the groundbreaking, the OMB staff wrote in an e-mail that the Solyndra deal should be notched down because of a lack of firm performance data on the company's solar panels and weakening world market prices for solar generally.
The groundbreaking went on as planned, with Biden, Energy Secretary Stephen Chu and California's then-governor, Republican Arnold Schwarzenegger, in attendance.
Obama later visited Solyndra and hailed it as a green energy company that would help lead America's economic recovery.
Things hardly turned out so rosy. Last month, Solyndra announced it was laying off its 1,100 workers, and it filed for bankruptcy on Sept. 6. Two days after the bankruptcy filing, FBI agents raided the company's headquarters.
The White House said that the e-mail exchange only showed urgency about a scheduling decision and that the Bush administration initially pursued loaning the money to Solyndra. The Obama administration dispatched senior OMB and Energy officials to a House hearing to defend the White House's evaluation of Solyndra.
OMB Deputy Director Jeffrey Zients said iit's a disappointing outcome but it comes with the terrain of backing innovative technology.
Rep. Cliff Stearns, R-Fla., noted that Solyndra's financial troubles became clear just six months after the loan closed when an independent auditor noted recurring losses from operations and negative cash flows. Stearns, who chairs the House subcommittee on investigations and oversight, said Energy Department correspondence indicated Solyndra was a model for companies that should get stimulus-backed loans.
If so, Stearns said, he is very concerned about where the rest of the $10 billion that the Energy Department has left to spend before the Sept. 30 deadline is going.
Committee Republicans have implied the administration failed to conduct due diligence on Solyndra because a major company investor was a foundation controlled by the family of Tulsa billionaire and Obama fundraiser George Kaiser. However, Rep. Henry Waxman, D-Calif., and others say other private investors in Solyndra included Madrone Capital Partners, a venture capital firm tied to the GOP-leaning Walton family, the founders of Wal-Mart.
White House officials on Wednesday defended a decision to award a now-bankrupt solar energy company a $535 million loan as House Republicans released Obama administration e-mails suggesting that the loan was rushed despite deep internal skepticism about the government investment.
Excerpts of administration e-mails released by the House Energy and Commerce Committee from late August and September 2009 show that White House officials were anxious about the Office of Management and Budget (OMB) timeline for finalizing a loan to Fremont, Calif.-based Solyndra. Vice President Biden was traveling to California when Solyndra was scheduled to hold a groundbreaking on their new facility, and the White House wanted Biden to attend to tout the project as an example of President Obama's $787 billion stimulus putting America back to work, the e-mails suggest.
Just days before the groundbreaking, the OMB staff wrote in an e-mail that the Solyndra deal should be notched down because of a lack of firm performance data on the company's solar panels and weakening world market prices for solar generally.
The groundbreaking went on as planned, with Biden, Energy Secretary Stephen Chu and California's then-governor, Republican Arnold Schwarzenegger, in attendance.
Obama later visited Solyndra and hailed it as a green energy company that would help lead America's economic recovery.
Things hardly turned out so rosy. Last month, Solyndra announced it was laying off its 1,100 workers, and it filed for bankruptcy on Sept. 6. Two days after the bankruptcy filing, FBI agents raided the company's headquarters.
The White House said that the e-mail exchange only showed urgency about a scheduling decision and that the Bush administration initially pursued loaning the money to Solyndra. The Obama administration dispatched senior OMB and Energy officials to a House hearing to defend the White House's evaluation of Solyndra.
OMB Deputy Director Jeffrey Zients said iit's a disappointing outcome but it comes with the terrain of backing innovative technology.
Rep. Cliff Stearns, R-Fla., noted that Solyndra's financial troubles became clear just six months after the loan closed when an independent auditor noted recurring losses from operations and negative cash flows. Stearns, who chairs the House subcommittee on investigations and oversight, said Energy Department correspondence indicated Solyndra was a model for companies that should get stimulus-backed loans.
If so, Stearns said, he is very concerned about where the rest of the $10 billion that the Energy Department has left to spend before the Sept. 30 deadline is going.
Committee Republicans have implied the administration failed to conduct due diligence on Solyndra because a major company investor was a foundation controlled by the family of Tulsa billionaire and Obama fundraiser George Kaiser. However, Rep. Henry Waxman, D-Calif., and others say other private investors in Solyndra included Madrone Capital Partners, a venture capital firm tied to the GOP-leaning Walton family, the founders of Wal-Mart.
Tuesday, July 19, 2011
BORDERS CLOSING ALL ITS STORES
Borders Group Inc. said it would liquidate after the second-largest U.S. bookstore chain failed to receive any offers to save it.
Borders, which employs about 10,700 people, scrapped a bankruptcy-court auction scheduled for Tuesday amid the dearth of bids. It said it would ask a judge Thursday to approve a sale to liquidators led by Hilco Merchant Resources and Gordon Brothers Group.
The company said liquidation of its remaining 399 stores could start as soon as Friday, and it is expected to go out of business for good by the end of September.
Borders filed for bankruptcy-court protection in February. It has since continued to bleed cash and has had trouble persuading publishers to ship merchandise to it on normal terms that allowed the chain to pay bills later, instead of right away.
Boarders said it is following the best efforts of all parties, that they are saddened by this development. They also stated they were all working hard toward a different outcome, but the head winds they have been facing for quite some time, including the rapidly changing book industry, [electronic reader] revolution and turbulent economy, have brought them to where they are now.
Borders's best chance for survival fell apart last week when talks with private-equity investor to buy the company collapsed. Borders scrambled unsuccessfully over the weekend to find other potential buyers who would keep the chain alive.
The chain's demise could speed the decline in sales of hardcover and paperback books as consumers increasingly turn to downloading electronic books or having physical books mailed to their doorsteps.
The loss of Borders may also make it more difficult for new writers to be discovered. The liquidation of Borders is an irreplaceable loss of a big part of the book-discovery ecosystem. Thousands of people whose job consisted of talking up and selling books will eventually being doing something else, and that's bad for authors, agents, and everyone associated with the value chain in books.
Other booksellers, including Barnes & Noble Inc. and Amazon.com Inc., will go after the shoppers who formerly considered themselves Borders customers. They won't be able to pick up everyone. If shopping at your local Borders is part of your weekly routine, and then Borders is gone, you may end up doing something other than buying books.
Borders, which employs about 10,700 people, scrapped a bankruptcy-court auction scheduled for Tuesday amid the dearth of bids. It said it would ask a judge Thursday to approve a sale to liquidators led by Hilco Merchant Resources and Gordon Brothers Group.
The company said liquidation of its remaining 399 stores could start as soon as Friday, and it is expected to go out of business for good by the end of September.
Borders filed for bankruptcy-court protection in February. It has since continued to bleed cash and has had trouble persuading publishers to ship merchandise to it on normal terms that allowed the chain to pay bills later, instead of right away.
Boarders said it is following the best efforts of all parties, that they are saddened by this development. They also stated they were all working hard toward a different outcome, but the head winds they have been facing for quite some time, including the rapidly changing book industry, [electronic reader] revolution and turbulent economy, have brought them to where they are now.
Borders's best chance for survival fell apart last week when talks with private-equity investor to buy the company collapsed. Borders scrambled unsuccessfully over the weekend to find other potential buyers who would keep the chain alive.
The chain's demise could speed the decline in sales of hardcover and paperback books as consumers increasingly turn to downloading electronic books or having physical books mailed to their doorsteps.
The loss of Borders may also make it more difficult for new writers to be discovered. The liquidation of Borders is an irreplaceable loss of a big part of the book-discovery ecosystem. Thousands of people whose job consisted of talking up and selling books will eventually being doing something else, and that's bad for authors, agents, and everyone associated with the value chain in books.
Other booksellers, including Barnes & Noble Inc. and Amazon.com Inc., will go after the shoppers who formerly considered themselves Borders customers. They won't be able to pick up everyone. If shopping at your local Borders is part of your weekly routine, and then Borders is gone, you may end up doing something other than buying books.
Friday, October 1, 2010
Video Stores Fading to Black
The Wall Street Journal
Even Before Blockbuster's Bankruptcy, In-Home Movie Options Battered Rental Shops
Blockbuster Inc.'s bankruptcy last week has made it official: Technology is killing the video-rental store—and a piece of American culture with it.
Alan Sklar feels it. The 61-year-old has stood behind the counter of Alan's Alley Video in Manhattan's Chelsea neighborhood for 22 years. Revenue is down, and his staff, which reached 10 a few years ago, is now about five. "If we pay the bills we're happy," he said.
Many nights, like last Thursday, are very quiet.
He lists the culprits. "Netflix, Redbox and on demand," he said, over Audrey Hepburn's voice emanating from a television in the corner playing "Funny Face."
"People like things being given to them. We don't see as many warm bodies."
Since the first video-rental shops emerged in the late 1970s, they have served as shrines to films and created new social spaces for neighborhoods, often reflecting their personalities. They drew cinephiles, rebellious teens seeking movies of which their parents might not approve, and budding young actors and directors who canonized them in their work.
The shops made accessible high quality films, or quirky or foreign ones, that weren't likely to be broadcast on TV—and on customers' own schedules. Brought down off the silver screen, movies were artifacts people could swap, study and recommend. A generation of movie buffs and cultural critics collected copies of films the same way art and books were amassed.
But new movie-delivery methods have made bricks-and-mortar stores obsolete. In 1998, Netflix started shipping DVDs to consumers at home. Cable companies expanded their on-demand movie offerings, making it easier to find a movie from the couch.
In 2007, there were 16,237 video-rental stores in the country, according to the latest data from the U.S. Census Bureau, down from 23,036 in 1997.
"The video store became inconvenient," said Joshua Greenberg, a program director at the Alfred P. Sloan Foundation, who wrote a book about the history of video stores.
It all began in the late 1970s. A few studios began releasing video cassettes and budding entrepreneurs—including George Atkinson—saw an opportunity. He opened Los Angeles-based Video Station in 1977, renting films to people who didn't want to own them.
Hollywood was leery, fearing that rentals of movie cassettes could eclipse sales of them, and tried to fight the video stores.
The market developed slowly because video cassette players weren't cheap. But as prices dropped, the market flourished, and by the mid-'80s, the country was full of mom and pop stores, with their own local flavors, from independent films to racy ones.
Shops such as Kim's Video in Manhattan's East Village became a home for a new generation of reference-spouting film fans. Patrons there and elsewhere came to love their quirky "dude behind the counter" keen to help them sift through what was new, good and suited to their tastes.
Quentin Tarantino spent several years working at a shop called Video Archives in Hermosa Beach, Calif., while writing his first screenplays.
"I got to be little Mr. Critic at the store, putting films in peoples hands, and arguing my points about why this movie was good and this movie was bad," the director told Charlie Rose in a 1994 interview.
Alan's Alley Video and others held on as the chains swept in. Blockbuster, founded in 1985, had thousands of stores and Hollywood Entertainment was chasing it. Boasting cheaper rentals than mom and pops, they played up their selection, not their expertise. Rental stores branched out beyond movies to videogames, music and mammoth cartons of Milk Duds.
Some filmmakers celebrated the rental megaplexes by writing them into their scripts.
One fan was Kevin Smith. In his 1994 release "Clerks," and its follow-ups, one of the main characters is a video-store clerk—a classic movie-obsessed slacker. Later, in his 2004 film "Jersey Girl," Liv Tyler plays a video-store clerk who meets a publicist played by Ben Affleck in the shop.
At its apex, the video-rental stores culture was seamlessly embedded into the era's top television comedy. In "Seinfeld," the character Elaine becomes romantically obsessed with an employee at a video store because his rack of recommendations closely matches her taste. The clerk turns out to be a 15-year-old movie geek.
Rental revenue at U.S. video shops climbed through much of the 1990s and peaked in 2001 at $8.37 billion, according to SNL Kagan, a research firm.
Blockbuster was flying high. Viacom Inc. bought the chain for around $8 billion in 1994. It made deals with the Hollywood studios and became the destination for consumers seeking new releases.
But as Netflix and cable entered the fray, consumers turned away from video stores and spent more entertainment time online, on sites such as YouTube and early services that streamed movies to computers. Automated DVD-rental kiosks have taken a bite, too.
By 2007, the number of video-rental shops in New York halved from its 1997 level of 1,206, according to census data. In Los Angeles, stores fell to 595 in 2007, down from 1,047 a decade earlier.
In 2010, physical rentals from U.S. video shops are expected to be down 56% to $3.65 billion, from the 2001 peak, according to SNL Kagan. In the wake of this week's bankruptcy filing, Blockbuster is expected to close a big chunk of its roughly 3,000 stores (a few years ago it had more than 5,800). Movie Gallery, the owner of Hollywood Entertainment, liquidated in February.
As video shops, like record stores before them, began to vanish, trips to Blockbuster or the corner rental shop were reserved for "old times' sake" or a novel date night.
"There is something wonderful about walking into a video store and seeing all the titles lined up on a shelf, said Mr. Greenberg. "You don't get that with an iTunes interface or a cable on-demand menu."
"Taking it in in one glance," he added, "is such an incredibly nostalgic thing."
As for Mr. Sklar, he said he wasn't surprised by the Blockbuster bankruptcy and is trying to look on the bright side. After a Blockbuster store in the neighborhood closed recently, he thinks traffic in his business has edged up. Still, he added, "There is no way to know" how long he will be around.
Last Thursday, George Heussner, who works for a film production company, swung by to pick up a DVD. He and his girlfriend wanted to watch a movie. "Sweet romantic?" Mr. Sklar asked him. A regular at the store, Mr. Heussner nodded and Mr. Sklar handed him "Letters to Juliet." Mr. Heussner said his girlfriend would be pleased.
Blockbuster Inc.'s bankruptcy last week has made it official: Technology is killing the video-rental store—and a piece of American culture with it.
Alan Sklar feels it. The 61-year-old has stood behind the counter of Alan's Alley Video in Manhattan's Chelsea neighborhood for 22 years. Revenue is down, and his staff, which reached 10 a few years ago, is now about five. "If we pay the bills we're happy," he said.
Many nights, like last Thursday, are very quiet.
He lists the culprits. "Netflix, Redbox and on demand," he said, over Audrey Hepburn's voice emanating from a television in the corner playing "Funny Face."
"People like things being given to them. We don't see as many warm bodies."
Since the first video-rental shops emerged in the late 1970s, they have served as shrines to films and created new social spaces for neighborhoods, often reflecting their personalities. They drew cinephiles, rebellious teens seeking movies of which their parents might not approve, and budding young actors and directors who canonized them in their work.
The shops made accessible high quality films, or quirky or foreign ones, that weren't likely to be broadcast on TV—and on customers' own schedules. Brought down off the silver screen, movies were artifacts people could swap, study and recommend. A generation of movie buffs and cultural critics collected copies of films the same way art and books were amassed.
But new movie-delivery methods have made bricks-and-mortar stores obsolete. In 1998, Netflix started shipping DVDs to consumers at home. Cable companies expanded their on-demand movie offerings, making it easier to find a movie from the couch.
In 2007, there were 16,237 video-rental stores in the country, according to the latest data from the U.S. Census Bureau, down from 23,036 in 1997.
"The video store became inconvenient," said Joshua Greenberg, a program director at the Alfred P. Sloan Foundation, who wrote a book about the history of video stores.
It all began in the late 1970s. A few studios began releasing video cassettes and budding entrepreneurs—including George Atkinson—saw an opportunity. He opened Los Angeles-based Video Station in 1977, renting films to people who didn't want to own them.
Hollywood was leery, fearing that rentals of movie cassettes could eclipse sales of them, and tried to fight the video stores.
The market developed slowly because video cassette players weren't cheap. But as prices dropped, the market flourished, and by the mid-'80s, the country was full of mom and pop stores, with their own local flavors, from independent films to racy ones.
Shops such as Kim's Video in Manhattan's East Village became a home for a new generation of reference-spouting film fans. Patrons there and elsewhere came to love their quirky "dude behind the counter" keen to help them sift through what was new, good and suited to their tastes.
Quentin Tarantino spent several years working at a shop called Video Archives in Hermosa Beach, Calif., while writing his first screenplays.
"I got to be little Mr. Critic at the store, putting films in peoples hands, and arguing my points about why this movie was good and this movie was bad," the director told Charlie Rose in a 1994 interview.
Alan's Alley Video and others held on as the chains swept in. Blockbuster, founded in 1985, had thousands of stores and Hollywood Entertainment was chasing it. Boasting cheaper rentals than mom and pops, they played up their selection, not their expertise. Rental stores branched out beyond movies to videogames, music and mammoth cartons of Milk Duds.
Some filmmakers celebrated the rental megaplexes by writing them into their scripts.
One fan was Kevin Smith. In his 1994 release "Clerks," and its follow-ups, one of the main characters is a video-store clerk—a classic movie-obsessed slacker. Later, in his 2004 film "Jersey Girl," Liv Tyler plays a video-store clerk who meets a publicist played by Ben Affleck in the shop.
At its apex, the video-rental stores culture was seamlessly embedded into the era's top television comedy. In "Seinfeld," the character Elaine becomes romantically obsessed with an employee at a video store because his rack of recommendations closely matches her taste. The clerk turns out to be a 15-year-old movie geek.
Rental revenue at U.S. video shops climbed through much of the 1990s and peaked in 2001 at $8.37 billion, according to SNL Kagan, a research firm.
Blockbuster was flying high. Viacom Inc. bought the chain for around $8 billion in 1994. It made deals with the Hollywood studios and became the destination for consumers seeking new releases.
But as Netflix and cable entered the fray, consumers turned away from video stores and spent more entertainment time online, on sites such as YouTube and early services that streamed movies to computers. Automated DVD-rental kiosks have taken a bite, too.
By 2007, the number of video-rental shops in New York halved from its 1997 level of 1,206, according to census data. In Los Angeles, stores fell to 595 in 2007, down from 1,047 a decade earlier.
In 2010, physical rentals from U.S. video shops are expected to be down 56% to $3.65 billion, from the 2001 peak, according to SNL Kagan. In the wake of this week's bankruptcy filing, Blockbuster is expected to close a big chunk of its roughly 3,000 stores (a few years ago it had more than 5,800). Movie Gallery, the owner of Hollywood Entertainment, liquidated in February.
As video shops, like record stores before them, began to vanish, trips to Blockbuster or the corner rental shop were reserved for "old times' sake" or a novel date night.
"There is something wonderful about walking into a video store and seeing all the titles lined up on a shelf, said Mr. Greenberg. "You don't get that with an iTunes interface or a cable on-demand menu."
"Taking it in in one glance," he added, "is such an incredibly nostalgic thing."
As for Mr. Sklar, he said he wasn't surprised by the Blockbuster bankruptcy and is trying to look on the bright side. After a Blockbuster store in the neighborhood closed recently, he thinks traffic in his business has edged up. Still, he added, "There is no way to know" how long he will be around.
Last Thursday, George Heussner, who works for a film production company, swung by to pick up a DVD. He and his girlfriend wanted to watch a movie. "Sweet romantic?" Mr. Sklar asked him. A regular at the store, Mr. Heussner nodded and Mr. Sklar handed him "Letters to Juliet." Mr. Heussner said his girlfriend would be pleased.
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