Carnage in retail sector means more pain to come for shareholders and bondholders

The bloodletting in the retail sector is expected to create a wave of bankruptcies, debt restructurings and defaults in the next 12 months, and shareholders and bondholders should brace for more pain.

Rating agencies are forecasting a sharp spike in the retail default rate, while turnaround experts are warning that companies that fail to react to the changes in the business are unlikely to survive.

“There’s widespread panic across the board,” said Larry Perkins, chief executive of SierraConstellation Partners, a financial advisory and turnaround firm. “Whether that leads to bankruptcies or not, there will be a shakeout, and retailers are going to have to respond to the changes.

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