Emmanuel Dunand / AFP / Getty A Circuit City store in New York City shuts down in November.

They're the undertakers of the retail business, charged with giving stores a graceful exit from this earth (at 60% off!). And when they tell strangers what they do for a living, it's sometimes hard to do it with great gusto. "'Liquidator' sure has a negative connotation, doesn't it?" admits Paul Erickson, CFO of the Great American Group, one of the largest liquidation firms in the country. The wife of Jim Schaye, CEO of Hudson Capital Partners, another major liquidator, didn't want her husband to broadcast his career when they first met. "She thought people would think I'm a vulture," he says with a laugh (she has since changed her tune. Honey, you're not a vulture). At parties, Steve Fried is very careful when describing his career. "I do not tell people I'm a liquidator," says Fried, 60, a 13-year vet of the clearance business. "I'm a retail consultant who specializes in liquidations. Liquidator, that's like the Terminator."

Sure, liquidators can seem ghoulish  after all, they depend on companies to perish. And the job doesn't sound dignified or sexy. But it surely pays these days; the going-out-of-business business is booming. Circuit City, which announced its shutdown last week after filing for bankruptcy in November, is the latest prime catch. The four liquidation firms that scored the Circuit City contract  it's too big for one company to handle  must clear $1.7 billion worth of merchandise out of 567 stores nationwide. (See the top 10 financial collapses of 2008.)

As the economy has spiraled down over the last few months, firms have executed a laundry list of liquidations. The Mervyn's department store chain, Levitz furniture outlet, Steve & Barry's apparel stores, Whitehall Jewelers and Linens n' Things have all shut down. KB Toys, the second largest toy retailer behind Toys R' Us, and Boot Town, a Western clothes outfitter, are running liquidations now, along with Circuit City. Look for more to come. Schaye says Hudson Capital's revenues increased tenfold in 2008. According to Erickson, the Great American Group saw a 300% revenue jump in 2008. He predicts similar growth for the first three months of this year. "The numbers are higher than we ever could have imagined," Erickson says.

A lethal combination of mismanagement, overexpansion and economic gloom is driving the boom in retail liquidations. During better days, a company could file for Chapter 11 bankruptcy, and the banks would finance its operations until the shops could restructure. These so-called debtor-in-possession, or DIP, loans kept the company operating. In the early 1990s, for example, Macy's spent nearly two years in Chapter 11. Today, banks aren't keen to lend to anyone, least of all a retailer in miserable shape. (See the worst business deals of 2008.)

Plus, amendments to the bankruptcy code, put in place in 2005, create another hurdle for distressed retailers. Under the new rules, a retailer now has only 210 days after filing for Chapter 11 to accept or reject its existing lease agreements (pre-2005, the companies could liberally extend a 60-day time limitation). Clearance sales typically give the bankrupt company a cash infusion to help pay off the DIP loans. But if a company can't reorganize in 210 days, and is forced to cancel its leases, it won't have a place to sell its goods. No sale means no cash, and the banks will be stuck with toxic debt. Faced with this tight time frame, the banks might not risk a DIP financing even when things are flush; in down times, forget about it. Once bankrupt and unable to find a buyer, a company must dissolve immediately, and recoup what it can through liquidation. "Retailers can't get access to financing, just when they need it most," says Larry Gottlieb, a bankruptcy lawyer at Cooley Godward Kronish. (Read "Why Circuit City Busted, While Best Buy Boomed.")

So the third-party liquidators step in. Creditors don't want to see the stores themselves running clearance. Why trust the executives who put a company in bankruptcy to manage a sale that covers their losses? Plus, soon-to-be unemployed managers are busy fishing for other jobs. They don't have a real stake in the sale. (Read "Q&A with Best Buy CEO Brad Anderson.")

The liquidation firms certainly do. In many deals, they pay the bankrupt company for access to the merchandise, and only profit if they sell enough stuff. These "guarantee" deals carry lots of risk. Take Circuit City. The four liquidation companies, the Great American Group, SB Capital Group, Tiger Capital Group and Hudson Capital Partners, together paid some $800 million for Circuit City's merchandise, which is worth around $1.7 billion at retail. The firms must also pay the company's expenses  payroll, rent and store operating costs  for the duration of the liquidation, which will likely take eight weeks. Here, Circuit City shifts the risk to the liquidators. Sure, the company is offering the liquidators $1.7 billion worth of electronics at a very deep discount. But Circuit City now has $800 million to give its creditors. Plus, the deal is usually structured so that the bankrupt company sees some portion of the liquidator's profit.

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