Pier 1 Imports, Inc. has said it will close as many as 450 stores and lay off thousands of employees as part of a bankruptcy plan it has presented to investors. Pier 1 Imports, a retail chain specializing in home decorations, has had difficulty maintaining its profitability in the face of the shift from physical retail locations to online shopping. If the bankruptcy plan is accepted, it is not clear whether Pier 1 will survive.
The bankruptcy plan presented to Pier 1’s investors involves the company declaring Chapter 11 bankruptcy. In a Chapter 11 bankruptcy, a company seeking bankruptcy protection will usually follow one of two paths in a federal bankruptcy court, either continue operating its business and proposing a reorganization plan to restructure its debt, or eventually ceasing operations and proposing a liquidation plan to wind down the business. A reorganization plan attempts to satisfy, to some extent, the demands of creditors, while allowing the company to continue doing business to the greatest extent possible. When a reorganization is successful, Chapter 11 bankruptcy allows a company to return to doing business as it did prior to the bankruptcy; when it fails, it can often result in the liquidation and closure of the company.
Some financial analysts are skeptical about the bankruptcy plan presented by Pier 1 to investors. There are concerns that its store closures, layoffs and other cost-cutting measures will not be enough to satisfy investors or creditors, and that Pier 1 might need to resort to a Chapter 7 form of liquidation. If that were to happen, Pier 1 itself might need to sell off all its assets to satisfy its debts, and for all intents and purposes would cease to exist as an independent entity. Much rests on whether the Chapter 11 bankruptcy plan is accepted by a sufficient number of creditors and the bankruptcy court.
The attorneys at the firm understand that financial distress is an extremely emotional and difficult time for anyone to go through, whether as an individual or as a business. If you are experiencing severe financial distress and may be considering bankruptcy as an option, or want to know more about what a bankruptcy filing may do to help you or your business, call The Law Offices of Hunziker, Jones & Sweeney at (973) 256-0456 or fill out our contact form for a consultation.