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Bankruptcy claims by American, European retailers worry Indian creditors

American and European retailers filing for bankruptcies in the wake of Covid-19 pandemic has worried Indian creditors as their unsecured outstanding dues are estimated to be in excess of $50 million.

In the past two weeks, leading retailers like JC Penney, J Crew, Neiman Marcus and Stage Stores have filed for Chapter 11 bankruptcy protection in the US. True Religion filed for Chapter 11 protection last month. In Europe, Debenhams, Esprit, Oasis and Warehouse have gone into administration.

These companies import about $150-200 million worth of apparels and home furnishing products from India annually, said people in the know. As per industry estimates, the outstanding dues from these companies to Indian suppliers were well over $50 million since the January to March period is the busiest in terms of apparel exports due to high demand for summer collections.

These companies also outsource their back-end information technology operations to Indian firms.

J Crews owes over $21 million (Rs 159 crore) to three Indian apparel exporters, namely Fashion Accessories, RK Industries and Gaurav International, according to the list of the company’s 30 largest unsecured creditors given in its bankruptcy court filing. The top 30 creditors of True Religion include five Indian firms whom it owes $4.3 million (Rs 32.5 crore), as per the US bankruptcy court records.

JC Penney owes $6.7 million (Rs 50 crore) to Tata Consultancy Services (TCS) and $3.5 million (Rs 26.5 crore) to Delhi-based Elkay Overseas. Neiman Marcus owes TCS over $1.6 million (Rs 12 crore).

There could be several more Indian creditors to these companies whom they owe smaller sums and hence were not mentioned individually in their bankruptcy. For example two creditors to JC Penney who claim to have outstanding dues of about $4 million but were not mentioned individually in the claim.

Retailers across the world have been stressed due to lockdowns to contain the Covid-19 pandemic. Indian exporters say that many more could be in the pipeline to come up for bankruptcy.

 
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