In November 2008, Circuit City filed for
bankruptcy protection. Circuit City had the same business
model as Best Buy: selling electronic equipment in large
retail stores. Other retailers with that business model are
finding it increasingly difficult to compete with online sales from
companies such as Amazon, eBay, or Walmart. Best Buy�s store
sales have fallen for the last eight quarters while expenses
increase. Although Best Buy has a large cash buffer, many
analysts believe it is only a matter of time before Best Buy also
files for bankruptcy, perhaps in 2013.
To the extent they have not already done so,
companies that sell products to Best Buy should consider how their
rights will be affected in a bankruptcy case and what they can do
now to minimize future losses and avoid litigation. Issues
that should be considered are, among others, whether to retain or
change existing credit terms, how to collect on unpaid invoices, how
to reclaim goods in the event of bankruptcy filing, how to stop
goods in transit, how to protect rights to be paid for goods
delivered in the 20 days before any bankruptcy filing, whether to
file a proof of claim, whether to accelerate termination of
contracts, and the impact on intellectual property rights.
Companies should also review their credit insurance
policies to assess potential coverage and ensure compliance with
notice requirements and other conditions.
Orrick�s restructuring lawyers can help companies navigate
through these issues, having worked on numerous retail bankruptcies,
as both creditors� and debtors� counsel, including the Circuit City
and Kodak bankruptcies. If you have questions or concerns
about the Best Buy situation, please do not hesitate to reach out to
any one of the following lawyers:
Jonathan
Guy Partner 202-339-8516 [email protected]
James
Burke Managing Associate 202-339-8529 [email protected]
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