As retail clothing stores continue to drop like flies amid increased competition from discount retailers and e-commerce companies, A’Gaci filed for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court for the Western District of Texas this week. A’gaci is a San Antonio-based women’s apparel and accessory retailer
Chapter 11 Reorganization Bankruptcy
Chapter 11 reorganization bankruptcy begins with the filing of a petition with the bankruptcy court and includes a schedule of assets and liability, current income and expenditures, contracts and leases, and a statement of financial affairs. Chapter 11 bankruptcy is designed to allow a struggling business to restructure their finances and maximize their return to creditors and owners. A’Gaci filed for bankruptcy protection in order to reorganize $62 million in debt caused by poor sales performance of expansions compounded by the hurricane that hit Texas, Florida, and Puerto Rico in 2017. When a company enters in Chapter 11 bankruptcy they generally must seek court approval for the right to liquidate assets and A’Gaci has asked the Texas bankruptcy courts to approve the closure of 49 out of 78 stores that it operates, twenty-one of which are located in Texas.
A’Gaci Bankruptcy Case
Store closures amid a Chapter 11 bankruptcy case aren’t uncommon, and executives at A’Gaci hope that closing less profitable stores will allow them to earn additional income to finance their bankruptcy case. The Chief Merchandising Officer for A’Gaci also mentioned that it hopes it can negotiate more favorable lease terms on several of its stores to keep them running. In bankruptcy documents submitted to the courts, the company declared nearly $82 million in assets and around $62 million in liabilities.
No Slowing Down of Retail Bankruptcies
A’Gaci, like most retailers that have filed voluntary petitions for Chapter 11 bankruptcy protection over the last 18 months cited increased competition from online retailers as a major source of financial pain. A’Gaci plans to utilize its reorganization bankruptcy to shift attention to more profitable stores and focus more on online sales.