904 356-JOBS (5627)

904 356-JOBS (5627)

Sept. 25, 2020 (Courtesy of the Jacksonville Business Journal) As Covid-19 rages on throughout the country, coupled with continued closures and a disruption to supply chains, many businesses are being forced into bankruptcy. The Jacksonville Business Journal caught up with one of Florida’s most preeminent bankruptcy litigators — Steve Busey, chairman of Jacksonville-based Smith Hulsey & Busey — to find out how Jacksonville is faring and what businesses need to know.

Now that the COVID-19 pandemic, closures and partial re-openings have gone on for about six months, what is the state of play in the world of business bankruptcy?

Nationally, business bankruptcy filings are up 43% in 2020 compared to the same period last year. Cash flows for retailers, hospitality companies and the like have been hit early and hard. Prominent examples we have seen include the bankruptcies of Brooks Brothers, Neiman Marcus, Lord & Taylor, Hertz, Virgin Atlantic, J. Crew, Ann Taylor, JCPenney, Chuck E. Cheese, among others, and most recently, our very own Stein Mart.

Florida business bankruptcy filings this year are behind in national bankruptcy filings, likely because of a strong Florida economy entering into the pandemic, and the state putting debt collection efforts on hold (government-directed eviction and foreclosure relief) and other factors. There should be no mistake, however, that Florida will be substantially impacted by a wave of Covid-driven insolvencies by the end of 2020.

What, if anything, do the number of bankruptcies tell us about the fundamentals of the U.S., Florida or Jacksonville economies?

The national economy, as well as Florida’s, was strong entering into 2020. Realization of the financial impact of the pandemic was probably delayed somewhat because of the strong economy. In spite of the government’s multifaceted financial assistance in 2020, the economy is going to have to come to grips sooner or later with the real and lasting impact of so many people out of work for so long, and so many businesses having inadequate capital to recover. There will be a foreseeable economic tsunami resulting from Covid that will dominate the nation’s and Florida’s financial picture through 2021.Do you anticipate further small business relief coming from the state or federal government? What about larger corporations?

I am not able to predict whether the state or federal government will be forthcoming with meaningful further relief for businesses. I suggest we not count on additional government help and begin the process of stabilization and recovery in light of current and foreseeable circumstances.

From what you’ve read, studied or learned from colleagues around the country, how has Jacksonville fared overall?

National and local bankruptcy statistics suggest Jacksonville has fared better than the rest of the country to date. But as government relief subsides, as business tenants go out of business, as landlords suffer the loss of rent to pay their own mortgages and as so many service industry workers remain unemployed or underemployed, bankruptcy filings in Jacksonville — both business and consumer — will inundate the United States Bankruptcy Courts in Jacksonville and throughout Florida this year and next. In fact, the Bankruptcy Courts in Florida are already considering adding new judges to address the anticipated filings.

What advice would you give a small business struggling to fulfill financial obligations or considering bankruptcy?

The United States Bankruptcy Code is designed to provide consumers with a fresh start and businesses with an opportunity to restructure their financial obligations in light of their circumstances. Early consultation with financial planners and reputable bankruptcy professionals is critical to address and start the process of financial recovery.

This is a great country, with a strong and resilient economy. We have seen and weathered calamities and major economic disruptions before, and we continue to renew. This too, will one day be behind us.