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AIG: Europe’s Lethal Loophole European firms are being battered because they used AIG’s complex financial instruments to skirt capital rules * Plus: AIG Borrows Another $12 Billion





As the checks got cashed and consumer prices surged, however, large numbers of Americans spent the money in May and June on such basic needs as food, utilities, and gasoline. Sales at nearly all retailers—save for those selling low-cost food—were dismal. And that’s proving to be a source of deep worry for a broad array of retailers of everything from electronics and autos to home furnishings. “There are already too many building material suppliers than there are buyers, and auto dealers who have their parking lots full of SUVs they can’t sell,” says Brian Bethune, chief U.S. financial economist at Global Insight, a market analysis firm.

The bulk of the money, which started going out in May, has been disbursed, with the last checks already in the mail. Since May 1, the Treasury has pumped out $78 billion as tax rebates and transfers. But U.S. retail sales rose a mere 0.1% in June, after a 0.8% jump in May caused by the stimulus checks, according to the Commerce Dept. Specialty retail and department stores reported dismal sales: Limited Brands’ (LTD) sales fell 9% in June and 6% in May, J.C. Penney’s (JCP) fell 2.4% and 4.4%, while Abercrombie & Fitch’s (ANF) sales declined 3% and 1%, respectively.

[ and more . . . ]

by Pallavi Gogoi

Retailing July 21, 2008, 12:01AM EST
Gloomy Days Ahead for Retailers
If sales weaken further after the stimulus checks are spent, a wave of bankruptcies may be forthcoming



Ultimately, though, it’s all a question of control, says Elizabeth Warren, law professor at Harvard University. She says that the impact of store closings is bound to be felt across the broader U.S. economy in coming months. “This will have a ripple effect through communities with hundreds of job losses, loss of taxes, and suppliers going out of business,” says Warren, who in 2005 testified to Congress against changes to the bankruptcy law.

But mall owners don’t like to house bankrupt retailers. An extended, court-run reorganization can hurt the landlord’s chance of securing positive financing terms. The real estate industry lobbied successfully for the 210-day cap on how long companies have to assume or reject leases. “Macy’s got at least two Christmas seasons, but today if a company files in January, they don’t even have until Christmas to decide what they will do,” says lawyer Gottlieb.

For some chains, times are even more desperate, and the drumbeat of retail bankruptcies grows louder by the day. So far this year, 15 retailers with assets of $100 million or more have filed for Chapter 11 bankruptcy, up from seven for all of 2007, according to Bankruptcydata.com, which tracks such filings. On Aug. 4, Boscov’s, a department-store chain with 49 stores in the Northeast, filed for Chapter 11, just a week after the 177-store Mervyn’s chain in California filed for protection from creditors.

Retailers already face strong headwinds. Consumers’ appetite for discretionary purchases has dwindled sharply, and credit conditions are tight. That has led to shrinking sales month after month at most retailers and a string of store closings. Foot Locker (FL) is closing 140 stores; Wilson’s Leather is closing 160; Ann Taylor (ANN), 117; and jeweler Zales (ZLC) has closed 105.

The rapid dissolution of Sharper Image took many in the bankruptcy industry by surprise. But that chain isn’t alone. Several retailers that have filed for Chapter 11 protection (BusinessWeek.com, 7/21/08) since the economy started swooning have unraveled just as quickly: Wickes Furniture closed down its 36 stores. Friedman’s is in the process of selling off jewelry and is closing its 377 stores, while Whitehall Jewelers is liquidating its 300 stores. All these companies filed for bankruptcy reorganization in 2008. And in December 2007, Bombay Co. and Levitz closed all their stores.

by Pallavi Gogoi

Retail August 11, 2008, 12:01AM EST

Bankrupt Retailers: Pushed to the Brink
Changes in the law have sharply reduced retailers’ ability to reorganize, driving many to liquidate quickly


*** How could they have been allowed to run all or nearly all their operating costs on credit? That isn’t solvency – AND – what happened to all the money they did make already, where did it go?***

(my note)

What happens when everyone is a seller and no one is a buyer? This isn’t a matter of credit – it is a matter of having devalued the actual foundation of the consumer, the US dollar and currency values in general.


And, I’m sick of hearing these people in government, news, stock market, banking and business, say that those people who’ve lost their homes “will just have to rent” – in a manner that is so cavalier that it is overtly obvious the degree of ignorance they have about it and about the ripples of loss being created.

– Cricket Diane C Sparky Phillips, 10-17-08, USA