By  on March 30, 2010

Don’t expect any major retail bankruptcies this year.

That was the conclusion of Gregg M. Galardi, a corporate restructuring partner at the Skadden law firm, who spoke on a Webinar panel on “What’s in Store for the Retail Industry in 2010?” hosted by the Turnaround Management Association.

Other participants included Jeffrey C. Bloomberg, Gordon Brothers Group; Joel Glasky, Financo Inc., and David Myles, Boston Apparel Group. Kenneth T. Latz, Conway MacKenzie Inc., moderated the panel.

Galardi said the bankruptcy filings in 2008 and 2009 were choices of last resort by retailers that were “on the margin and didn’t have enough financing to make it through.”

That isn’t likely to happen in 2010.

The bankruptcy attorney said there is a reluctance among companies to restructure through a Chapter 11 filing, with many doing all they can to avoid one.

He said many will “muddle their way through on their advance rates,” or financing lines. “They are prejudiced not to file unless they run out of money. I do not expect major [retail] filings.”

He did hint that, depending on how the year progresses, perhaps there might be an uptick in bankruptcies in 2011 after the all-important Christmas shopping season.

Bloomberg also told the audience he doesn’t expect to see many large retail bankruptcies.

“People are kicking the can down the alley. This is an extend-and-pretend universe. They look at past bankruptcies and see what the unsecured [creditors got]. It was disastrous,” Bloomberg said.

He noted the sponsors of leveraged buyouts from two to three years ago, when transactions were done at 8, 9 or 10 times multiples, now see that their “equity is wiped out.” The unsecured lenders, if they can tread water, are looking at their options and hoping for better times ahead, he concluded.

What companies have learned since the heavy discounting that was done in late 2008 should help them through 2010.

“The level of promotional activity, the problem in 2008, has mitigated to a great extent,” said Financo’s Glasky. He added, “The caution flag is still up. The lessons learned in the last year-and-a-half are not forgotten. Companies are building inventory [because] they still need it, but [they remain] cautious.”

Myles, whose firm is the retail and apparel platform for Monomoy Capital, and which operates the Chadwick’s, Metrostyle and Casual Living catalogue brands, said many firms are trying to work around factors by dealing directly with wholesalers. Chadwick’s in 2008 did about 15 percent of their purchases through factors, which has since been reduced to less than 5 percent, Myles said.

Myles said he thinks that, despite the recent popularity of social networks, mobile applications could be the great wave of the future, making the shopping experience two-way. “It’ll change the dynamic of the way people shop,” he said. “I don’t think retailers are ready.”

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