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Amid a doubling of corporate filings in the U.S. Bankruptcy Court for the District of New Jersey over the past year, retail-related cases – like Bed Bath & Beyond and David’s Bridal – dominated the docket, according to a newly released report.

An analysis by global leveraged credit news platform Debtwire found that the number of companies with funded debt over $10 million that commenced bankruptcy cases in New Jersey jumped from four cases in 2022 to eight cases in 2023.

Additionally, total funded debt exploded, with $10.4 billion in cases filed this year compared with just $401 million in 2022 and $75 million in 2021.

At least four of this year’s cases involved a minimum $1 billion in total funded debt: WeWork, Rite Aid, Bed Bath & Beyond and Cyxtera Technologies. Last year, only one case, BlockFi, fell into that category.

Of the cases in New Jersey, Chapter 11 remained the most common type of filing and most companies entered the process in free fall – without a negotiated or agreed-upon path through and out of bankruptcy.

Some of the biggest retail cases included:

• Wedding gown seller David’s Bridal – liabilities between $100 million and $500 million
• Home goods retailer Bed Bath & Beyond – liabilities between $1 billion and $10 billion
• Pharmacy chain Rite Aid – liabilities between $1 billion and $10 billion
• Home furnishing company Z Gallerie – liabilities between $50 million and $100 million

Within the real estate space, major filings included coworking space giant WeWork Inc. (liabilities between $10 billion and $50 billion) and developer 87 Jacobus Ave LLC (liabilities between $50 million and $100 million).

The Garden State was also the venue of choice for Johnson & Johnson subsidiary LTL Management’s second attempt to resolve its mass talc liabilities via bankruptcy.

On the docket

Of the large bankruptcy cases, 53% were assigned to just two judges: Chief Judge Michael Kaplan and Judge John Sherwood.

A bankruptcy judge since 2006 who was designated chief judge in 2020, Kaplan has a caseload that included LTL Management, Rite Aid and BlockFi.

Sherwood, who was appointed to the bench in 2015 after 25 years of experience as an attorney in bankruptcy and debtor-creditor matters, is handling cases such as Cyxtera Technologies Inc. and WeWork.

Hackensack-based firm Cole Schotz PC led the pack as the busiest debtor counsel, with 11 debtor-side representations, followed by Kirkland & Ellis in New York (seven cases) and Lowenstein Sandler LLP in Roseland (five cases). Pachulski Stang Ziehl & Jones was the top firm for official committee representations with six mandates.

As for financial advisors, investment bankers and restructuring advisory roles, BRG Capital Advisors LLC took on five cases while FTI Consulting leads for official committee representations with eight cases.

Why here?

While it is unclear what is driving the recent spike of mega filings in New Jersey, the report speculates that the selection of venue “may be as simple as the company’s decision to file in the jurisdiction in which it is incorporated or where it has its headquarters.”

For example, at least two of the mega cases involved New Jersey-based companies – Bed Bath & Beyond in Union and LTL Management in New Brunswick.

“Filing where they conduct the larger part of their business and where most of their creditors are located might simplify case administration and reduce the costs of bankruptcy. Debtors filing in the location where they have their principal place of business might also hope to get a more sympathetic court,” the report said.

However, large companies may look to file in a prominent jurisdiction like New York, Delaware or the Southern District of Texas “because of their relatively greater experience with and specialized procedures for the handling of complex bankruptcy cases,” the report said.

That may be the case for Woodcliff Lake-based specialty retailer Party City, which sought Chapter 11 relief in the Southern District of Texas in January. Or why Bedminster sustainable meat producer Do Good Foods and Newark vertical farming venture AeroFarms opted to commence proceedings in Delaware.

Debtwire suggested that the greater volume of cases handled by those jurisdictions may mean they have “more developed, and thus more predictable, case law on issues that are anticipated to be important in the debtor’s bankruptcy case.” Additionally, “depending on the degree of randomization with which judges are assigned in a given jurisdiction, the debtor may file in a particular district with the hope of having a preferred judge assigned to their case.”

The report does question what kind of impact the resignation of Judge David Jones in the Southern District of Texas – one of the nation’s busiest bankruptcy judges in one of the most popular venues for Chapter 11 debtors – would have on other bankruptcy courts, including New Jersey.

When Jones stepped down in November after being accused of not disclosing a romantic relationship with an attorney whose law firm regularly appeared in his court, he left behind nearly two dozen active cases, Debtwire said.