April 2025 has marked a pivotal moment for the retail industry, with the bankruptcy filings of three high-profile companies: Forever 21, Hudson’s Bay Company (HBC), and Publishers Clearing House (PCH). These collapses not only symbolize the end of an era for each brand but also highlight broader issues plaguing the retail sector—ranging from digital disruption and shifting consumer behavior to unsustainable business models and mounting operational debt.

Forever 21: Fast Fashion’s Unraveling

Forever 21, once a staple of American mall culture and a powerhouse in the fast fashion industry, filed for Chapter 11 bankruptcy protection for the second time in March 2025. This time, the company announced its complete exit from the U.S. market, with plans to close all 350 domestic locations by May 1, 2025. The decision follows years of declining mall foot traffic, growing competition from digital-first brands like Shein and Temu, and an inability to pivot effectively to e-commerce.

The brand’s financial condition underscores its precarious position: it owes approximately $433 million to unsecured creditors, many of whom are small and midsize suppliers in the U.S. and abroad. Under the proposed restructuring plan, these creditors are projected to recover just 3% to 6% of their claims. This development has raised significant concerns across the fashion supply chain, particularly for vendors reliant on timely payments from large retail clients.

Forever 21 has advised customers to redeem gift cards and store credits before the May 1 shutdown date. Notably, international operations in regions like Latin America and Asia remain unaffected, suggesting a possible pivot to markets where mall culture still holds sway.

Hudson’s Bay Company: The End of a 355-Year Canadian Legacy

Hudson’s Bay Company, the oldest company in North America with a history dating back to 1670, filed for creditor protection under Canada’s Companies’ Creditors Arrangement Act (CCAA) in March 2025. Facing $950 million in debt, the company announced plans to shutter all 80 Hudson’s Bay stores, as well as its Canadian Saks Fifth Avenue and Saks Off 5th outlets.

Initial restructuring plans proposed keeping six profitable locations open; however, a series of court rulings in April made clear that such efforts were unlikely to succeed. By April 25, liquidation sales had commenced, and all remaining stores are scheduled to close by June 15, 2025.

The company’s downfall has been attributed to a 33% decline in year-over-year sales and a 50% collapse in e-commerce revenue in 2024. These losses were further exacerbated by financing difficulties and operational delays, particularly in supplier payments. The collapse of such an enduring institution is a sobering reflection of how even legacy retailers with centuries of history are not immune to modern economic and technological pressures. 

Publishers Clearing House: Reinvention Amid Collapse

Publishers Clearing House, a name long synonymous with direct mail sweepstakes and television commercials featuring oversized checks, filed for Chapter 11 bankruptcy in April 2025. The filing revealed a steep imbalance between assets ($11.7 million) and liabilities ($65.7 million).

In response, the company announced a major pivot away from its traditional print-based operations, including direct mail and magazine subscriptions. Instead, PCH plans to double down on its digital transformation strategy, with renewed focus on online sweepstakes, digital advertising, and interactive gaming.

A $5.5 million debtor-in-possession loan from Prestige Capital is helping keep the company afloat during its reorganization. Executives at PCH have emphasized their intent to modernize the brand while preserving its core identity—an effort that reflects broader market trends toward mobile-first consumer engagement and the phasing out of legacy marketing methods. 

Lessons from April’s Bankruptcy Wave: A Call to Action for Retail

The near-simultaneous collapse of three well-known retail entities is not a coincidence; it is a warning. These cases serve as a stark reminder that resilience in the retail sector requires more than just brand recognition or historical prestige. Companies must innovate continuously, remain responsive to consumer needs, and embrace operational agility.

Key takeaways from this month’s retail bankruptcies include:

• Digital Urgency: The failure to invest in and scale digital operations continues to separate thriving companies from those in decline.

• Financial Fragility: High levels of debt, when combined with cash flow disruptions, create a recipe for rapid collapse.

• Consumer-Centric Strategy: Shoppers today prioritize personalized, frictionless experiences—especially online. Legacy models anchored in in-store sales and traditional marketing are no longer sufficient.

• Vendor Relations: The fallout from these bankruptcies underscores the systemic risks vendors face when dealing with large, financially unstable retailers.

As retail continues to evolve, businesses that succeed will be those that act decisively, invest in technology, and build stronger relationships with their consumers and supply chain partners. The stories of Forever 21, Hudson’s Bay, and PCH offer both a cautionary tale and a strategic blueprint for those able to adapt.

By Deanna Rahmani
The author interacted with the following artificial intelligence tools to create or assist in the creation of content included in this blog: ChatGPT

In a landmark decision on December 31, 2024, the U.S. Court of Appeals for the Fifth Circuit addressed the contentious 2020 uptier transaction executed by Serta Simmons Bedding (Serta). This ruling has significant implications for liability management exercises (LMEs) and the interpretation of credit agreements in corporate finance.

Background of the 2020 Uptier Transaction

Facing financial challenges in June 2020, Serta entered into a transaction with a majority of its first and second lien lenders. This deal introduced two new tranches of debt that took precedence over existing first-lien loans:

1. $200 Million New-Money Financing: Fresh capital provided by participating lenders.
2. $875 Million Debt Exchange: Participating lenders exchanged their existing first and second-lien loans for new super-priority loans.

This arrangement effectively subordinated the interests of non-participating, or “excluded,” lenders.

Legal Challenges and Bankruptcy Proceedings

The excluded lenders contested the transaction, alleging it breached the “sacred right” provisions of the existing credit agreement, which mandate equal or pro-rata treatment among lenders. They argued that the privately negotiated exchange did not qualify as an “open market purchase,” a recognized exception to the pro-rata sharing requirement.

In early 2023, Serta and its affiliates filed for Chapter 11 bankruptcy in the Southern District of Texas. The bankruptcy court initially sided with Serta, ruling that the 2020 transaction was a permissible open market purchase under the credit agreement.

Fifth Circuit’s Reversal

Upon appeal, the Fifth Circuit reversed the bankruptcy court’s decision. The appellate court concluded that the transaction did not constitute an open market purchase as intended in the credit agreement. The court emphasized that such purchases should occur within established secondary markets for syndicated loans, not through private negotiations that exclude certain lenders.

Additionally, the Fifth Circuit addressed an indemnity provision in Serta’s plan of reorganization, which aimed to shield participating lenders from liabilities arising from the transaction. The court found this indemnity improper, ruling it an attempt to circumvent provisions of the Bankruptcy Code that disallow certain contingent claims for reimbursement. Consequently, the indemnity was excised from the plan.

Implications for Future Liability Management Exercises

This decision signals growing judicial skepticism toward aggressive LMEs that prioritize certain creditors over others, without clear contractual authorization. The ruling underscores the importance of adhering to the explicit terms of credit agreements and ensuring the equitable treatment of all lenders.

For law firms advising clients in corporate finance and restructuring, this case highlights the necessity of:

• Careful Drafting – ensuring that credit agreements clearly define permissible transactions and exceptions;
• Equitable Treatment – advising clients to consider the rights of all lenders to avoid potential legal challenges; and
• Judicial Trends – staying informed about evolving case law that may impact the interpretation of financial agreements.

As the case returns to the bankruptcy court to address the excluded lenders’ breach of contract claims, the final outcomes may further influence the structuring of future debt transactions and the enforcement of lender rights.

By Deanna Rahmani
The author interacted with the following artificial intelligence tools to create or assist in the creation of content included in this blog: ChatGPT

In 2024, the Nevada Supreme Court reviewed the case Ene v. Graham, which has become a significant point of discussion in the legal community regarding personal injury liability, the concept of “alter ego,” and corporate protections.  546 P.3d 1232 (2024).  The case arose after Laura Graham sustained injuries on real property owned by International Property Holdings, LLC (“IPH”), where Ovidiu Ene was the sole member.  Id. at 1235.  This case explores the boundaries of personal liability for corporate owners and limited liability company (“LLC”) members and serves as a reminder of the importance of understanding the legal structure of companies.

 Background of the Case

The incident began when Laura Graham tripped over a sprinkler box on property owned by IPH. Id. Graham sued Ene, IPH, and others for negligence, seeking compensation for her injuries.  Id. Initially, the case seemed to hinge on simple premises liability issues.  Id. As the trial proceeded, however, Graham moved to amend her complaint to introduce the argument that Ene, as the sole owner of IPH, was personally liable because he was the alter ego of IPH – the limited liability company.  Id.

Although the court initially did not allow the motion, alter ego liability became a central point of discussion when Ene testified about his relationship with the property and IPH. Id.  The jury eventually found Ene and IPH partially liable, and Ene appealed the decision, challenging the trial court’s application of the alter ego doctrine.  Id.

Understanding the Alter Ego Doctrine

The legal doctrine of “alter ego” allows courts to hold an individual personally liable for corporate or LLC obligations if it can be proven that the company is merely a facade for personal dealings. Piercing the corporate veil is not a common occurrence; typically, courts respect the separate legal identity of a corporation or LLC. In situations where there is a unity of interest and ownership, however, and where failure to treat the company as a separate entity would promote fraud or injustice, courts may decide to pierce the corporate veil.

In Ene v. Graham, the district court found evidence supporting the argument that Ene and IPH were not truly separate entities.  Id. at 1238. The court cited several factors:

1. Ene had his own personal gate code and accessed the property frequently for personal use;
2. He did not pay IPH for his personal use of the property;
3. Insurance for the property was in Ene’s name, and he was the guarantor on the mortgage loan; and
4. Ene’s father maintained a garden and chicken coop on the property, indicating personal, rather than strictly business-related use of the property.

These facts suggested a lack of separation between Ene’s personal affairs and those of his LLC, leading the court to conclude that treating IPH as a separate entity would lead to an injustice.  Id.

The Appeal and Its Legal Significance

Ene’s appeal was grounded in his argument that the district court improperly introduced the alter ego theory mid-trial and that there was insufficient evidence to support the jury’s finding.  Id. at 1236.  The Nevada Supreme Court focused on Ene’s primary contention that the evidence admitted did not meet Nevada’s legal standard for piercing the corporate veil.  Id.  The Nevada Supreme Court’s decision in affirming the trial court highlights several key legal principles:

1. Corporate Veil Protections: LLCs, like corporations, offer limited liability to their owners, protecting personal assets from business liabilities. As seen in this case, however, those protections can be stripped away if the LLC is found to be a mere extension of the owner’s personal interests;
2. Procedural Due Process: The case underscores the importance of adhering to procedural rules during litigation and trial. Ene argued that the alter ego issue was improperly introduced during the trial, raising questions about the fairness of the proceedings and subsequent jury instructions; and
3. Statutory Interpretation of LLC Law: This case also illuminates how courts interpret Nevada’s statutes governing LLCs and corporate veil piercing. Although NRS 86.376 provides protections to LLC members, the court applied the same “alter ego” standard used for corporations under NRS 78.747, because the statutes are identical in all material ways.

Broader Implications for Business Owners

The procedural history of Ene v. Graham serves as a cautionary tale for business owners, particularly those who operate single-member LLCs. While LLCs offer significant legal protections, these protections are not absolute.  Moreover, even when the evidence of alter ego is tenuous, plaintiffs can subject business owners to months or years of litigation before a court ultimately rejects alter ego.  Thus, business owners must ensure that they maintain clear separations between their personal and business activities to avoid having a plaintiff challenge, and, potentially pierce, the corporate veil.

Here are some best practices for LLC owners to avoid similar legal pitfalls:

1. Maintain Formality: LLC owners should maintain distinct records, accounts, and formalities that separate personal activities from business operations. This includes using separate bank accounts, maintaining detailed financial records, and adhering to corporate governance practices;
2. Avoid Commingling Assets: Business owners should refrain from using company property or assets for personal purposes without proper compensation or record-keeping; and
3. Insurance and Liability Coverage: Ensure that insurance policies are correctly listed under the LLC and that all legal documents, including mortgages and leases, are in the company’s name.

Conclusion

Ene v. Graham is a critical examination of when the corporate veil cannot be pierced to hold LLC owners personally liable for a company’s liabilities. It reinforces the notion that while the protections to LLC members are not absolute, conclusory and unrelated allegations of injustice remain insufficient.  These protections are not bulletproof, however. Owners must adhere to strict separations between personal and business activities, or they risk being exposed to personal liability in the event of a lawsuit.

As Nevada courts continue to refine the application of the alter ego doctrine for LLCs, Ene v. Graham will remain a touchstone in discussions about corporate law and personal liability.  For business owners and legal practitioners, the case underscores the importance of vigilance in maintaining the integrity of legal structures, especially in the realm of limited liability companies with a single member.

By Deanna Rahmani
The author interacted with the following artificial intelligence tools to create or assist in the creation of content included in this blog: ChatGPT

In today’s rapidly evolving digital landscape, artificial intelligence (AI) has emerged as a powerful tool that can revolutionize the way bankruptcy attorneys operate. AI technologies have the potential to streamline processes, enhance accuracy, and provide invaluable insights, allowing legal professionals to deliver more efficient and effective services to their clients.  However, as with any transformative technology, it is essential for legal professionals to understand and navigate the potential risks associated with AI implementation.

In this article, we will explore the applicability of currently available AI tools that can significantly benefit bankruptcy attorneys. Additionally, we will consider some of the risks and challenges bankruptcy attorneys face in the application of AI tools.

Automated Document Analysis

One of the most time-consuming tasks for bankruptcy attorneys is the analysis of vast volumes of documents. AI-powered tools can greatly assist in this area by automating document review processes. Natural Language Processing (NLP) algorithms can accurately extract and classify relevant information from legal documents, contracts, court records, and financial statements. These tools help attorneys quickly identify key details, flag potential risks, and focus their attention on critical aspects of a bankruptcy case.

Specifically, bankruptcy attorneys often encounter a multitude of contracts and agreements that need to be carefully reviewed. AI tools equipped with contract analysis capabilities can significantly speed up this process. These tools employ NLP techniques to extract and interpret key provisions, identify potential risks, and flag non-compliant clauses. By automating contract analysis and risk assessment, bankruptcy attorneys can streamline their workflow, reduce errors, and ensure thorough contract review.

While AI tools can analyze vast amounts of data and extract relevant information, they may encounter challenges in accurately interpreting complex legal language and context. Legal documents often contain nuanced language and require subjective analysis, which can be difficult for AI algorithms to comprehend accurately. Misinterpretation or incomplete analysis may lead to erroneous conclusions or misinformed decisions. It is crucial for bankruptcy attorneys to review AI-generated insights carefully and ensure they align with legal expertise.

Predictive Analytics

Bankruptcy attorneys often face the challenge of predicting the outcome of a case based on various factors. AI-driven predictive analytics tools utilize machine learning algorithms to analyze historical bankruptcy data, identify patterns, and make accurate predictions. By leveraging these tools, attorneys can assess the likelihood of success, make informed decisions, and provide clients with more accurate projections of potential outcomes. This empowers attorneys to develop effective strategies and manage client expectations more efficiently. 

AI algorithms often operate as “black boxes,” meaning they provide results without clear explanations of how they reached those conclusions. This lack of transparency can pose challenges for bankruptcy attorneys who need to justify their legal strategies or decisions to clients, opposing parties, or the court. The inability to explain the reasoning behind AI-generated insights may lead to skepticism and mistrust. Attorneys must be cautious and aware of this limitation, ensuring they can provide adequate justifications for decisions made based on AI tools.

Further, AI tools learn from historical data, which can inadvertently perpetuate biases present in the data itself. If the training data used to develop an AI tool reflects biased patterns, the tool may produce biased results. This can have serious implications in bankruptcy cases where fair and unbiased decision-making is crucial. Bankruptcy attorneys must critically evaluate the training data used by AI tools and actively mitigate any potential bias to ensure equitable outcomes for their clients.

Legal Research and Case Law Analysis

AI-powered legal research tools have transformed the way bankruptcy attorneys conduct legal research. These tools apply advanced algorithms to sift through vast databases, court rulings, and legal precedents to provide attorneys with relevant and up-to-date information. NLP and machine learning capabilities enable attorneys to access comprehensive legal insights, identify relevant case law, and strengthen their arguments. These tools save valuable time, allowing attorneys to focus on higher-value tasks and deliver more comprehensive legal counsel.

AI tools can be incredibly powerful, but they should not replace the expertise and judgment of bankruptcy attorneys. Overreliance on AI-generated insights without proper scrutiny or critical analysis can be detrimental. Attorneys must exercise caution and ensure that AI tools are used as aids rather than substitutes. Ethical considerations surrounding the use of AI, such as ensuring accountability for AI-generated decisions, fall on the attorneys employing these tools.

Due Diligence and Fraud Detection

During bankruptcy proceedings, conducting thorough due diligence and detecting potential fraud are crucial for attorneys. AI tools can automate due diligence processes by analyzing financial records, transaction histories, and other relevant data to identify potential irregularities or suspicious activities. By employing machine learning algorithms, bankruptcy attorneys can more effectively identify hidden patterns or red flags, enhancing their ability to uncover fraudulent activities and protect the interests of their clients.

AI tools heavily rely on data, including sensitive and confidential client information, to perform their tasks effectively. This poses potential risks in terms of data privacy and security. If an AI tool is not properly secured, it may be vulnerable to hacking or unauthorized access, potentially compromising client confidentiality. Bankruptcy attorneys must ensure that any AI tool they employ adheres to stringent data protection measures and compliance with legal and ethical obligations to safeguard client information.

Conclusion

The integration of artificial intelligence tools into bankruptcy legal practice is transforming the way attorneys operate. By leveraging the power of AI, bankruptcy attorneys can optimize their workflow, enhance accuracy, and deliver more effective services to their clients. While AI is not a replacement for human expertise, it is an invaluable ally that can augment the capabilities of bankruptcy attorneys, enabling them to navigate complex bankruptcy proceedings more efficiently and effectively. As technology continues to advance, the role of AI in the legal field is likely to expand further, empowering attorneys and reshaping the bankruptcy landscape.

Bankruptcy attorneys should approach AI implementation with a critical mindset, actively monitoring and validating the insights provided by AI tools against legal expertise. By understanding these risks, attorneys can make informed decisions, ensure ethical practice, and effectively leverage AI tools to enhance their services while safeguarding the interests of their clients. Striking the right balance between the benefits and risks of AI will be crucial in maximizing the potential of this technology in the field of bankruptcy law.

By Stephen Cane
The author interacted with the following artificial intelligence tools to create or assist in the creation of content included in this blog: ChatGPT

Introduction

This memorandum addresses the reversal by the United States Court of Appeals for the Eighth Circuit of a $78.75 million attorney fee award in the T-Mobile data breach litigation. The primary issue is the reasonableness of the fee, particularly the use of a 9.6 multiplier, under the Eighth Circuit’s jurisdiction. The analysis will focus on the legal standards and precedents governing attorney fee awards in the Eighth Circuit, particularly the lodestar method and relevant factors considered by the courts.

Statement of Facts

On July 29, 2024, the Eighth Circuit reversed a $78.75 million attorney fee award issued by the United States District Court for the Western District of Missouri in the T-Mobile data breach litigation. The fee award was based on a multiplier of 9.6, which the Eighth Circuit found to be unreasonable.

Legal Standards/Rules

In the Eighth Circuit, the lodestar method is typically used to determine a reasonable attorney fee. This method involves multiplying the number of hours reasonably expended by a reasonable hourly rate. Courts have broad discretion in awarding attorney fees and may consider various factors to determine reasonableness.

These factors include: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorney; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. These factors are derived from the lodestar method and the Johnson factors, which are frequently used by district courts in the Eighth Circuit. Adventure Creative Grp., Inc. v. CVSL, Inc., 412 F. Supp. 3d 1065Cokem Int’l, Ltd. v. MSI Entm’t, LLC, 2022 U.S. Dist. LEXIS 244602.

Analysis

The Eighth Circuit employs the lodestar method to determine reasonable attorney fees, which involves multiplying the number of hours reasonably expended by a reasonable hourly rate. This method is designed to provide an objective basis for determining fees and to prevent excessive awards.  Adventure Creative Grp., Inc. v. CVSL, Inc., 412 F. Supp. 3d 1065Cokem Int’l, Ltd. v. MSI Entm’t, LLC, 2022 U.S. Dist. LEXIS 244602. In the T-Mobile data breach litigation, the district court awarded $78.75 million in attorney fees based on a 9.6 multiplier. The Eighth Circuit, however, found this multiplier to be unreasonable. The court considered several factors in making this determination, including the time and labor required, the novelty and difficulty of the questions, and the customary fee for similar cases. Adventure Creative Grp., Inc. v. CVSL, Inc., 412 F. Supp. 3d 1065. The lodestar method allows for adjustments based on various factors, but a multiplier of 9.6 is exceptionally high and suggests that the district court may have overemphasized certain factors, such as the results obtained or the complexity of the case, while underestimating others, such as the customary fee and awards in similar cases. Adventure Creative Grp., Inc. v. CVSL, Inc., 412 F. Supp. 3d 1065Cokem Int’l, Ltd. v. MSI Entm’t, LLC, 2022 U.S. Dist. LEXIS 244602. The Eighth Circuit’s decision underscores the importance of maintaining a balanced approach when applying the lodestar method. While the court has broad discretion in awarding fees, it must ensure that the final award is reasonable and consistent with established legal standards. Cokem Int’l, Ltd. v. MSI Entm’t, LLC, 2022 U.S. Dist. LEXIS 244602.

Conclusion

The Eighth Circuit’s reversal of the $78.75 million attorney fee award in the T-Mobile data breach litigation highlights the court’s commitment to ensuring reasonable fee awards. The use of a 9.6 multiplier was deemed excessive under the lodestar method, which remains the primary standard for determining attorney fees in the Eighth Circuit. Courts must carefully consider all relevant factors to arrive at a fair and reasonable fee award.

 

By Deanna Rahmani
Edits by Bryan Lindsey, Esq.
The author interacted with the following artificial intelligence tools to create or assist in the creation of content included in this blog: LexisAI

Content Supporting AI-Generated Response:

In re T-Mobile Customer Data Sec. Breach Litig., 2024 U.S. App. LEXIS 18598 | United States Court of Appeals for the Eighth Circuit | Jul 29, 2024 | Cases

McKeage v. Bass Pro Outdoor World, L.L.C., 2015 U.S. Dist. LEXIS 195232 | United States District Court for the Western District of Missouri, Southern Division | Aug 11, 2015 | Cases

Benson v. City of Lincoln, 2024 U.S. Dist. LEXIS 85705 | United States District Court for the District of Nebraska | May 13, 2024 | Cases

Association for Retarded Citizens v. Olson, 561 F. Supp. 470 | United States District Court for the District of North Dakota, Southwestern Division | Nov 13, 1981 | Cases

Hashw v. Dep’t Stores Nat’l Bank, 182 F. Supp. 3d 935 | United States District Court for the District of Minnesota | Apr 26, 2016 | Cases

For those vintage enough to remember, “Video Killed the Radio Star” was released by a little-known band called The Buggles way back in 1979.  The hypnotic anthem, which incidentally sounded like it was mixed using telephone audio, was a cautionary tale of how emerging video-based media could (and would) consume the color-less sounds emitting from our radios.  We were officially on notice, the days of tuning into our favorite frequency modulation (FM) radio station to hear the latest from our most beloved artists were about to be barred by the statute of technology. Like a child absorbed by an iPad, even adults would succumb to the delight of ‘listening’ to music brought to life by visual stimulation.  During the era in which MTV ruled the airwaves, The Buggles’ prophecy may have actually come to fruition.  Ironically, the music video that accompanied “Video Killed the Radio Star” was the very first on MTV in the United States, airing at 12:01am on August 1, 1981.  For the next several decades, teenagers and adults alike would be influenced by the savvy marketing of popular artists, from hair bands to boy bands. Likewise, when the intoxicating beats stopped tantalizing our ears, and the grandiose productions departed from our view, the commercials that followed were carefully crafted and time-tailored to hit their targeted demographic like an arrow from Robin Thicke Hood himself.  RIP radio, and those daring enough to bootleg the weekly top 10 tracks onto a cassette tape.

More recently, one could argue the pendulum returned to a time when provocative visuals were not necessary to grab our attention.  The popularity of streaming music platforms, and the white rabbit hole of endless podcasts, pose viable evidence that, perhaps, the attempted assassination of the Radio Star missed its mark.  What this counter argument fails to contemplate is the old adage of ‘following the money.’  Just because the sonic youth of today may satisfy their latest craving for Taylor Swift via the modern-day garden hose of streaming music, that does not necessarily mean that the big-business advertising money came along for the ride. Despite the medium’s widespread popularity, the power-house advertisers were on the road again.

Introduce: Audacy; previously known as ‘Radio.com.’ This free broadcast and internet radio platform was originally launched 14 years ago under CBS radio and was later acquired by Entercom in late 2017.  Rebranded as ‘Audacy’ – the streaming radio giant was traded on the New York Stock Exchange and enjoyed partnerships with CNN, Bloomberg, Turner, Cox, and Disney.   Audacy owns some of the most visible (the irony is not lost on us) radio stations in Los Angeles and New York including KROQ, KCBS, KNX, 1010 WINS, WCBS, WFAN, and at least 200 more stations across the country.  Indeed, the radio gods had poured some sugar on Audacy’s empire.

As recently as 2019 Audacy generated $1.5 billion in revenue.  Fast forward to 2024, with an approximated $1.9 billion in debt, Audacy announced that it would file for protection under Chapter 11  as a result of a sharp decline in radio ad spending.  In a historic bankruptcy benchmark, Audacy (now, the “Debtor”) recently secured an impressive $57 million of debtor-in-possession financing, and will effectively reduce its debt load by 80%, from $1.9 billion to $350 million.  In exchange, and if approved by the Bankruptcy Court, debtholders would receive equity in the newly resurrected Audacy, pursuant to the Debtor’s Chapter 11 plan of reorganization. 

Lawyers for Audacy advised that the self-described ‘multiplatform audio powerhouse’ intends to operate normally during the restructuring process, that employee wages and benefits will not be impacted, and that unsecured creditors will not be impaired.  By equitizing over 80% of their debt, and through optimistic financing, Audacy and its ‘new’ equity holders will look to continue its innovation and growth in the digital transformation. While hurdles remain, including regulatory approval by the FCC, such a well-funded restructuring certainly offers meaningful hope to creditors (err – soon to be equity holders) who have a vested common interest in the success of the ‘audio powerhouse.’ 

For the uninitiated, the term ‘bankruptcy’ can understandably have some negative connotations.  But in practice, the various levers of bankruptcy can afford an otherwise failing business (and its creditors) a second chance at getting back in the black.  The noteworthy circumstances here are not always duplicable, but the principle remains: rather than allow a sinking ship to also claim its crew, lifeboat options exist with the purpose of living to sail another day in another seaworthy vessel.  

While advertising may have (almost) killed this Radio Star, it is reassuring to see the welcomed reprieve that Chapter 11 protection and reorganization can offer.  Perhaps with a little help from Audacy’s friends, the newly united equity holders can come together and declare they are the champions of the radio world. Likewise, perhaps our old friends The Buggles were right to be concerned about the murderous intent of music videos, but the admittedly less glamorous protections of the US Bankruptcy code (when wielded by experienced attorneys) may have provided the crescendo of resurrection in the 11^th hour.    

Written by Lucas Mundell, Esq.