Something to Remember: The Flexibility of Chapter 11 in Retail Situations

In the Things Remembered case, the Bankruptcy Court for the District of Delaware, with Judge Kevin Gross presiding, recognized the business rationale for the company's expedited timeline. At the company's request, the court appointed a consumer privacy ombudsman on the first day of the case, and subsequently on shortened notice approved a process that paved the way for a sale in 30 days. Without this expedited timeline — and the cooperative and constructive approach taken by the company's lenders, the official creditors' committee, the U.S. Trustee, landlords, and other parties in interest — Things Remembered would likely have liquidated. And with it, thousands of employees would be without jobs and yet another retailer would fall victim to the times. This case demonstrates that going-concern retail sales are possible to save businesses, even in the current retail climate, if debtors can articulate a sufficient business need for speed.

The Business

Things Remembered is a 53-year-old business that sells personalized gifts such as jewelry, drinkware, kitchen and home accessories, and business-recognition gifts through two main channels — stores and direct website sales. At the time of its Chapter 11 filing, Things Remembered employed over 4,000 employees and had over $140 million in debt. It operated approximately 400 locations in shopping malls across 43 states, with an additional 19 locations in Canada.

A confluence of factors contributed to the company's need to commence its Chapter 11 case, including the macroeconomic factors impacting retailers and certain other microeconomic factors, all of which culminated in a liquidity crisis by December 2018, when Things Remembered faced inaccessible inventory, tightening trade credit, and winter holiday sales below historical numbers. As a struggling mall-based retailer facing a liquidity crisis, Things Remembered faced the real prospect of a full-scale liquidation. The jobs of thousands of Things Remembered employees were in serious peril. To plan for this prospect, Things Remembered took the novel step of pre-funding severance payments for its rank-and-file employees to demonstrate its commitment to their well-being.

Prepetition Marketing Process

Even while preparing for the worst, Things Remembered worked with its advisers to test the market. These robust efforts yielded only a handful of offers to buy the business as a going-concern. More specifically, the company received two written proposals in early January 2019 to acquire Things Remembered's direct business — it's e-commerce and business-to-business operations — but no physical store locations. A transaction that only saved the direct business would mean that all of the company's approximately 400 stores would close, resulting in job losses for thousands.