The 7 biggest retail bankruptcies of 2017

They leave a combined $35.5B in CMBS debt exposed

TRD New York /
Dec.December 15, 2017 11:30 AM

The Limited

In 2017, more than 30 name-brand retailers have filed for bankruptcy, some for good, some in an effort to save themselves, including Payless Shoe Source, RadioShack and Toys “R” Us. Many others avoided bankruptcy but closed hundreds of stores nationwide. Three big department stores, Sears, Macy’s and JCPenney, closed over 500 locations in total, affecting the malls and retail corridors across the country.

When retailers go down, they leave billions in CMBS debt exposed. In some cases, they are key tenants at properties backed by CMBS debt, making the damage more difficult to contain.

But it’s not all doom and gloom. Some see these casualties not as an extinction event, but natural selection that will make the retail sector ultimately stronger. Retail sales were up 2.8 percent in 2016 and 5.6 percent in the first half of 2017, according to data cited by Trepp. Retail landlords and real estate investment trusts are responding by focusing on Class-A malls, shedding Class-B and C assets, and investing in experiential retail, such as food, fitness and entertainment.

These are the seven retailers with more than $1 billion in CMBS debt that filed for bankruptcy in 2017, according to a report from Trepp. Smaller, but higher-end brands that didn’t make the list include True Religion, BCBG Max Azria and Aerosoles.

1. The Limited – $14.7 billion

The Ohio-based apparel company The Limited, which specializes in career clothes for women, declared bankruptcy in January and closed all 250 of its stores. It was purchased by private-equity firm Sycamore Partners and relaunched online in October. About $14.7 billion of CMBS debt is exposed to The Limited, more than double the next most-exposed retailer.

2. Toys “R” Us – $5.6 billion

Toys “R” Us filed for bankruptcy in September in order to restructure its debt ahead of the holiday season, and will continue to operate its 885 stores in US and Canada. The New Jersey-based firm is a top-five tenant in the majority of the properties with exposed CMBS debt.

3. Gymboree – $5.4 billion

Gymboree, a children’s apparel company, filed for bankruptcy in June, and will close 450 of its 1,281 stores. There are 75 CMBS loans backed by properties where Gymboree is a tenant.

4. Payless Shoe Source – $3.9 billion

Shoe retailer Payless Shoe Source filed for bankruptcy in April and emerged form Chapter 11 in August. In the interim, it had closed about 700 stores while continuing to operate more than 2,700.

5. RadioShack – $2.4 billion

Stalwart RadioShack declared its second bankruptcy in March, and in the ensuing months closed 1,000 stores, leaving only 70 remaining stores in seven states.

6. HHGregg – $1.8 billion

Appliance retailer HHGregg filed for bankruptcy after four years of declining sales, and announced the closure of all 220 stores, after failing to find a buyer in Bankruptcy Court. The Indianapolis-based firm is listed as a top tenant in properties backing 42 CMBS loans.

7. Rue21 – $1.7 billion

Teen clothing chain Rue21 filed for bankruptcy in May after announcing the closure of 400 of 1,218 stores nationwide. Rue21 emerged from bankruptcy in September with 758 stores remaining.

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