Superstorm Hurricane Sandy’s Impact Upon Business & Retailers – Bankruptcy and Alternatives

In the wake of Hurricane Sandy many businesses have been negatively impacted financially throughout  regions from  Connecticut, New York, New Jersey, Pennsylvania and Delaware.  Hardest hit are businesses located not only along the New Jersey, Staten Island and  Long Island  NY  coasts but in areas  that  have never experienced such a devastating disaster.  Areas  such as  Hoboken NJ, lower Manhattan and the NYC East Side.  Even  businesses  located  in  inland  communities.

Not  only small “Mom & Pop” businesses but large businesses  as well have been severely  impacted by what  many  have referred  to as Superstorm Sandy.  For  example a large retailer headquartered  in New Jersey was  forced to file for Chapter 11 relief  under  11 USC 101 et seq. recently as a direct  consequence of  Superstorm Sandy and its aftermath.  Big M, Inc. which operates  a retail clothing store chain doing business under the  trade names Mandee Store, Annie sez and Afaze  filed  for Chapter 11 on January 6, 2013.  Big M operates stores located in Connecticut, Delaware, Florida, Illinois, Michigan, New Jersey, New York and Pennsylvania.  It  employed approximately 1,200 people.

Big M in recent years took measures to implement and carry out various critical cost-cutting and income producing measures.  As a result of these efforts in 2012  Big M was tracking  a positive $1.9 million EBITDA  versus the negative EBITDA  of  $8.9 million the  year prior.  As a result of  Superstorm Sandy practically all  of Big M’s retail stores  were  closed in the New York, New Jersey and Connecticut Tri State area.  A majority of its stores were closed for over a week.  Does this sound familiar to other businesses?  Big M’s business did not return to pre-Superstorm levels.  Its customers were struggling with their own personal issues and Big M allegedly was not able to obtain insurance proceeds from its carriers in a reasonable and timely matter.  Big M filed for Chapter 11.

Small businesses as well have experienced  the same impact  from Superstorm  Sandy.  All businesses whether retail, manufacturing or service businesses, large and small should consider seeking protection and relief under a Chapter 11  filing to  save  and salvage their business.  Or consider other alternatives such as Out of Court work outs with creditors, Assignments for the Benefit of Creditorsjudicial receiverships. One of these could be a viable option for a business either small, large  or a sole proprietorship.

Finally, there are various Federal and State funds available to assist business recoveries such as the Hurricane Sandy Recovery Act and  Community Development Block Grants. However, many business owners have little or no experience in participating in these programs. Businesses should seek immediate guidance from professionals who can help them comply with the Federal and  State requirements to access these funds.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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