Shopko stores are gone, there’s no more Shopko gate at Lambeau Field, yet Shopko optical lives on. How is this possible? Dividing up or selling off parts of a business is a common practice in the bankruptcy courts.
When Shopko filed for bankruptcy last year, its plan was to downsize, reorganize, and regroup while remaining in business. To that end, the company filed for bankruptcy under Chapter 11 of the bankruptcy code.
What Is Chapter 11?
Chapter 11 is used by companies who are not ready to throw in the towel just yet. While a Chapter 11 case is pending, a filer has the freedom to attempt to negotiate new contracts with creditors, landlords, and labor unions. It may also settle pending litigation if it is facing unknown liability. The fear that the business will completely shut down if negotiations are unsuccessful gives the filer some leverage and motivates everyone to make a deal.
Contrast this with a Chapter 7 bankruptcy, where the goal is winding down operations. Assets are sold off, creditors paid whatever is possible, and then the business is shuttered. There is no attempt to keep the business going, even though parts of it might be profitable if they are sold off.
Why Did shopko file for bankruptcy
Shopko was unable to find a way to restructure its business so it could be successful going forward. It’s only choice was to shut down. It ended up being more like a Chapter 7 case than a Chapter 11 case.
While Shopko as a whole was going through the bankruptcy process, Shopko Optical was spun off as a separate entity. The people who worked in these locations kept their jobs, and the patients kept their access to care. It is a bankruptcy success story. And it is not an unusual one. It is common for bits and pieces of businesses to be bought and sold while their parent company is going through the bankruptcy process. Some businesses will file for bankruptcy just for the flexibility it gives them to restructure in this manner.
How We Can Help You
Our firm frequently helps Wisconsin business owners sell or acquire a piece of a larger company. We have helped negotiate such sales, and done due diligence checks for buyers, sellers, and commercial lenders. We also have extensive experience protecting the interests of lenders in these situations. At the time a commercial loan is written, we anticipate problems and make sure that the loan documents adequately protect our client in the event its customer falls into insolvency.
Our well-established ability to protect our clients’ interests and keep them informed of what to expect in an insolvency proceeding is what drives businesses and commercial lenders from all over Wisconsin to rely on Hanson & Payne when they find themselves in the unfamiliar territory of a state court receivership or a bankruptcy court. If you are in this situation, we are ready to help. Please contact our office today to schedule an initial consultation.