Oct. 22--Tribune reporter

With pundits forecasting the toughest holiday selling season in recent memory, odds are a swath of familiar store names are going to disappear.

In past economic downturns, troubled retailers could file for bankruptcy protection from creditors, shed leases on stores that weren't making money and re-emerge a smaller, more profitable firm.

Things are much different now.

The credit crunch, combined with the fact that consumers have significantly pulled back on buying, means retailers limping into the crucial holiday season probably won't survive.

Experts are counting on 2008 and 2009 to rival the 2001-02 recession, when 32 retailers filed for Chapter 11 bankruptcy, according to New Generations Research Inc., a Boston firm that compiles information for BankruptcyData.com. That period included filings from the likes of Crown Books, Frank's Nursery & Crafts and HomeLife.

"We have dropped a pebble in a well and haven't heard the bottom yet," said Howard Brod Brownstein, principal at HachmanHaysBrownstein Inc., a turnaround firm in Philadelphia, and the administrator who oversaw Montgomery Ward's bankruptcy in 2000.

"The best retailers are monitoring the health of their vendors and good vendors are looking hard at the creditworthiness of retailers. Everybody's at Defcon 3."

So far this year, 17 major retailers have filed for bankruptcy reorganization, up from seven in 2007 and six in 2006, according BankruptcyData.com.

Wickes Furniture and Sharper Image have already gone away. Whitehall Jewelers, Linens 'n Things and Shoe Pavillion are liquidating. And California discount department store Mervyns decided last week that it would go out of business after failing to find a buyer.

Private-equity firms, once flush with cash and eager to buy retailers for their real estate, aren't in the hunt.

And big chains that had been obvious buyers in the past, such as Nordstrom, Target, J.C. Penney and Kohl's, are cutting back expansion plans.

"There is less of a population of people to sell these things to and it is creating more difficulty for those retailers to get out of those leases," said Jeffrey Hecktman, chairman and chief executive of Hilco Trading LLC in Northbrook, one of the nation's largest liquidation firms. "And that's a big problem right now."

Linens 'n Things, for example, held a bankruptcy auction for 85 leases and sparked interest in only five, according to Laura Davis Jones, managing partner of Pachulski Stang Ziehl & Jones LLP, a Wilmington, Del.-based law firm that represented secured noteholders in the bankruptcy.