July 19, 2012
By: John Clark
Car parts retailer Strauss Auto may have set a record last month when it filed for bankruptcy for the fifth time in its relatively short history, according to a recent report from the Wall Street Journal.
Sources say that Strauss Auto, which was founded by the brother of the man who established the company’s chief rival, Pep Boys, has filed for Chapter 11 bankruptcy more times than any other company in U.S. history.
And this filing may be the last for the company, which was founded in 1929, as it plans to close its remaining 46 retail outlets, and is looking to sell the rest of its assets in a bankruptcy sale. Strauss Auto isn't necessarily unique in its need to file for bankruptcy more than once.
In recent years, large companies like Hostess Brands and Buffets Restaurants Holdings have filed for bankruptcy multiple times. But no company has ever filed for bankruptcy five different times, according to Edward Altman, a finance professor at New York University and a self-described bankruptcy expert.
In the last 26 years, more than 240 companies have filed for bankruptcy twice, while roughly 11 companies have filed three times, and two companies (TransTexas Gas Corp. and a casino venture owned by Donald Trump) have filed four times, according to Altman.
So it seems that Strauss Auto holds the record for financial volatility, and its need to take advantage of bankruptcy laws on five different occasions has established a precedent that Altman describes as "quite remarkable."
The company first filed for bankruptcy in 1979, just one year after the modernization of the U.S. Bankruptcy Code. This filing seemed to set Strauss Auto on the path of prosperity, as it grew its business substantially over the course of the next decade, with revenues totaling nearly $100 million by 1988, according to sources.
But the owner at the time decided to cash out on his success and sold the auto parts retailer to a British holding company, which triggered a long series of sales to various investors as the company couldn’t find a consistent owner.
This, sources say, was the “beginning of the end” for the company, which quickly lost market share to its competitors, including Pep Boys, Advance Auto Parts Inc., and Moe & Jack. And it seems these companies will ultimately outlast their troubled rival.
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