Stein Mart Files for Bankruptcy, Begins to Wind Down
Florida discount retailer Stein Mart Department Stores is only the latest business to file for bankruptcy protection. According to the Jacksonville Daily Record, Stein Mart could not find a buyer, so the company will begin winding down even though it filed for Chapter 11 protection, which allows debtors to continue to operate as they try to raise new funds.
This is a difficult time for businesses. Stein Mart was established in 1902 and had managed to survive many economic downturns, even the Great Depression. If you would like to discuss possibly filing for bankruptcy protection, contact one of our lawyers today.
Pandemic Prevents Merger
Stein Mart has been struggling for years, with sales declining since at least 2016. We aren’t surprised. Stein Mart was not immune to the gradual shift from shopping in brick-and-mortar stores to online retail, especially Amazon. Stein Mart tried to turn around the company and even found a buyer in early 2020. However, the COVID-19 pandemic put the merger on hold, and it eventually fell through.
Still, the company remained optimistic that it could find someone else to rescue the company, but the second coronavirus wave this summer hammered the company. Stein Mart has most of its stores in Florida, Texas, California, and other Sunbelt states, which has been the epicenter of the summer COVID-19 wave. Stein Mart’s sales continued to fall, and bankruptcy emerged as the only sensible option.
Chapter 11 Liquidation?
Stein Mart chose to file for Chapter 11 protection. However, it also stated in its court filing that it is unlikely to find a buyer and it anticipates closing the business.
Many companies file for Chapter 11 because they can continue to operate as they reorganize their debts. Some companies are even able to obtain new financing, which allows them to hit the ground running when they emerge from bankruptcy court. Instead of filing for Chapter 11, Chapter 7 liquidation is often the first choice when a company is going to close.
However, Stein Mart chose the Chapter 11 route because of its size, and Chapter 11 will make the liquidation process more orderly. The company is using five different liquidators to get rid of its assets before the company can close. The company’s attorneys expect that it will take 10 weeks to liquidate the entire business. Whatever funds are generated should be distributed to shareholders.
Can You Save Your Business?
Small and family businesses face many of the same pressures that giant retailers like Stein Mart face. Many companies continue to struggle in this tough economic climate, particularly restaurants and bars. The decision to liquidate is never easy, but business owners should work with an experienced South Florida bankruptcy attorney to make the process as smooth as possible. Even closely-held businesses owe many obligations in the winding-down process.
If you have questions, call one of our Plantation bankruptcy attorneys at Nowack & Olson, PLLC. We can help you to decide whether to file and whether to seek Chapter 7 or Chapter 11 protection. Please call us at 800-813-4737 to schedule an initial consultation.