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BY THE NUMBERS<br />
The face value of “distressed”<br />
bonds—with credit ratings of<br />
triple-C or below—issued by<br />
retail and apparel companies,<br />
according to Moody’s Investors<br />
Service:<br />
$3.7 BIL<br />
The number of retail and<br />
apparel companies that have<br />
issued such bonds. The total is<br />
the highest since the recession<br />
year of 2009:<br />
19<br />
An inability to pay distressed<br />
retail bond debt could trigger<br />
restructurings or default. The<br />
amount of distressed retail<br />
bond debt obligated to be<br />
repaid by year-end 2018:<br />
30%<br />
PRIVATE EQUITY DEALS CREATE DEBT WORRIES . . .<br />
PetSmart. Neiman<br />
Marcus. J. Crew. These<br />
retailers and many<br />
others have gone<br />
private or recapitalized<br />
via private equity deals,<br />
taking on extra debt<br />
in the process. When<br />
operating results are<br />
strong, debt gets paid<br />
down and investors<br />
win. But the current<br />
climate, in conjunction<br />
with the previous<br />
lack of investment in<br />
innovation, threatens<br />
to push numerous<br />
retailers into a debtdriven<br />
death spiral.<br />
25<br />
20<br />
15<br />
10<br />
5<br />
$0<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
DEAL FLOW<br />
In Billions of Dollars<br />
DEAL COUNT<br />
2011<br />
2010<br />
2009<br />
2008<br />
2007<br />
2006<br />
20<strong>13</strong><br />
2012<br />
<strong>2017</strong> 1<br />
2016<br />
2015<br />
2014<br />
1<br />
As of 5/4/<strong>2017</strong><br />
Source: PitchBook.<br />
LEADING TO A SURGE IN<br />
CHAPTER 11 AND CLOSINGS<br />
At least 12 retailers have announced sizable store-closing plans since the start of<br />
<strong>2017</strong>. As of May 5, 19 retailers have sought Chapter 11 bankruptcy protection from<br />
creditors this year, already surpassing the number of filings (18) for full-year 2016.<br />
550<br />
500<br />
450<br />
400<br />
350<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
RadioShack<br />
rue 21<br />
STORES CLOSING<br />
The Limited<br />
Payless ShoeSource<br />
hhgregg<br />
Family Christian<br />
Wet Seal<br />
bebe<br />
Crocs<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
J.C. Penney<br />
CHAPTER 11<br />
2016<br />
2015<br />
2014<br />
20<strong>13</strong><br />
2012<br />
2011<br />
2010<br />
Kmart<br />
BCBG Max Azria<br />
<strong>2017</strong> 1<br />
1<br />
Year to date<br />
Source: S&P Global Market Intelligence.<br />
Sources: Company announcements; <strong>Forbes</strong> estimates.<br />
JUNE <strong>13</strong>, <strong>2017</strong> FORBES | 99
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