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Liquidators’ Listings, Prices Spike on More Covid Bankruptcies

July 1, 2021, 3:41 PM

Liquidators and auctioneers saw a booming business during the Covid-19 pandemic even as other companies faced financial distress.

Many floundering businesses—including Century 21 Department Stores and Christopher & Banks Inc. to Loves Furniture Inc.—were forced to sell off their inventory, equipment and other assets, often in bankruptcy.

The large volume of business owners’ assets that cycled through online auctions, while underscoring their struggles, is also likely to leave a lasting imprint on more efficient liquidation processes, industry executives say.

Gyms unloaded treadmills and barbells. Restaurants shed tables and commercial gas ranges. Tree service trucks, wedding dresses, art works, real estate and even entire businesses were found at online auctions.

Meanwhile, companies that saw robust demand during the pandemic—such as to-go food container manufacturers and medical supplies makers—essentially had to turn to liquidated, second-hand goods and equipment, because their pandemic-disrupted suppliers couldn’t serve them.

“It’s absolutely a moment in time, where it’s a unique pinch point from the supply side that’s given momentum for people to be much more creative or resourceful,” said Matthew Clemente, a partner with Sidley Austin LLP’s restructuring team in Chicago.

Bankrupt companies, or trustees running their bankruptcy proceedings, frequently turn to auctioneers and liquidators—often the same company—to turn inventory or equipment into cash as efficiently as possible.

Liquidators may serve as consultants or take over going-out-of-business sales. Auctioneers will run sales for goods or equipment for a percentage, or sometimes elect to buy assets themselves and keep the proceeds from what they sell later.

Higher Sales

The pandemic initially brought everything to a screeching halt. Liquidators couldn’t even access the inventory or equipment to sell, said Jeff Tanenbaum, president and CEO of Westlake Village, Calif.-based liquidator ThreeSixty Asset Advisors.

But business would soon pick up as more companies declared bankruptcy or closed shop.

Items at ThreeSixty Asset Advisors were selling for 10% to 40% greater than its projections, Tanenbaum said.

“We’ve all been quite shocked,” Tanenbaum said. “Participation is way up, and price follows,” he said.

Certain industries acutely affected by Covid-driven closures tapped liquidators’ services more often than others.

Auction Advisors had never conducted fitness center liquidations prior to the pandemic, but did 14 of them in the last year, said Joshua Olshin, the firm’s managing director.

Buyer Side

The buyer side has increased as well, industry officials say. Businesses that fared well last year sought out more used goods and equipment through auctions when virus-spurred manufacturing and mining shutdowns prevented them from buying new ones.

Auction participation at Rabin Worldwide Inc, a liquidator and auctioneer in Mill Valley, Calif., rose about 25% during the pandemic from a year earlier, said Shira Weissman, the firm’s COO and general counsel.

“The challenges in the supply chain and the long lead time to get new equipment is certainly a factor in increased value for used equipment,” Weissman said. “There seems to be shortages in nearly every industrial sector, which again, helps the used equipment market.”

Small auctions at ThreeSixty Asset Advisors nowadays draw about 200 participants, up from 50 to 100 that they typically drew in the past, Tanenbaum said. Large auctions could draw as many as 500, up from 200 to 300 pre-pandemic, he said.

An Online Future

Buyers also enjoyed the convenience of online auctions, Weissman said. “Being able to work from their desks led to many more participants,” she said.

Forcing auctions into cyberspace accelerated and cemented what had been a 20-year trend away from in-person liquidations, Tanenbaum said. Now it looks like online auctions are here to stay.

There’s always been a “certain demographic that likes to come and kick the tires” before making a purchase. “Covid has helped convert that last tranche of holdouts and make them believers,” he said.

To contact the reporters on this story: Daniel Gill in Washington at dgill@bloomberglaw.com; Claire Hao at chao@bloombergindustry.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com

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