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January and early February have yielded a slew of "Chapter 22s," so-named for companies' return to Chapter 11. What's really troubling is that many of the petitions have been filed by companies that were bought out of bankruptcy only within the past two years and, in some cases, just the past few months. There were four repeat filings in the past few days alone.
On Tuesday, it was retailer Right Start Acqusition Co. Right Start and toy seller FAO Inc.were part of the same entity when FAO filed for bankruptcy twice in 2003. FAO first filed for bankruptcy on Jan. 13, 2003, left on April 13, and then returned on Dec. 4, 2003, with Right Start going in, too. Right Start was then sold to Hancock Park Associates. On Wednesday, there was the filing of Autobacs Strauss Inc., formerly known as Strauss Discount Auto. The aftermarket retailer with a heavy Northeastern presence was bought out of bankruptcy by Japan's Autobacs Seven Co. Ltd . in April 2007 in a deal worth about $60 million. Autobacs Seven poured millions into the company in trying to revamp its outlets, overhaul management and expand. Only 22 months after buying up Strauss, however, Autobacs Seven pulled its financial support, leaving the company in a lurch. Autobacs Strauss is still on the hook for more than $8 million in payments due to unsecured creditors in its first reorganization plan. Thursday actually brought with it two repeat Chapter 11 filings. One was by retailer Fortunoff Fine Jewelry and Silverware LLC, which submitted its petition almost a year to the day after filing its last bankruptcy petition on Feb. 4, 2008. NRDC Equity Partners LLC paid $80 million for Fortunoff in March, joining Autobachs Seven and a growing list of others to pay for a bankruptcy buyout only to see it collapse shortly thereafter. Joining Fortunoff on Thursday was Bruno's Supermarkets LLC, which first filed for bankruptcy way back in 1998. The Southern supermarket chain has lived a nomadic corporate life since, from being owned first by global grocery giant Royal Ahold NV and then by private equity firm Lone Star Funds. Now it's just hoping to survive as the economic slump deepens and competition increases from Wal-Mart Stores Inc. At this rate, what will happen Friday? - Ben Fidler Categories Deal Video
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If 2008 was dominated by prenegotiated bankruptcy sales, 2009 is shaping up to be something more ominous: the year of the repeat Chapter 11 offender.
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