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JC Penney could join a growing list of bankruptcies during the coronavirus pandemic


A person walks previous a retailer going out of enterprise on May 5, 2020 in the Brooklyn borough in New York City.

Angela Weiss | AFP | Getty Images

The coronavirus pandemic has pushed many struggling corporations over the edge and into chapter 11.

Stay-at-home orders compelled many nonessential companies to shut and weakened demand for every type of items and providers in a single day. During the previous eight weeks, 36.5 million individuals have filed for jobless advantages. The slowdown has hit some industries more durable than others.

The quantity of chapter filings has risen sharply, with little income coming in, based on knowledge from the American Bankruptcy Institute. The group reported 560 business Chapter 11 filings in April, a 26% enhance from final 12 months. 

“As financial challenges continue to escalate amid this crisis, bankruptcy is sure to offer a financial safe harbor from the economic storm,” the institute’s government director, Amy Quackenboss, mentioned in a assertion

Companies that headed into this downturn with out a monetary cushion are already feeling the toll of the abrupt downturn. That’s evident amongst retailers, which had been affected by on-line competitors and excessive debt previous to the pandemic. Retail gross sales tumbled 16.4% in April, with outfitters taking this largest hit. 

This month, Neiman Marcus and J.Crew have filed for Chapter 11 safety. J.C. Penney can also be weighing a chapter submitting, which could come as quickly as Friday, based on individuals aware of the matter. 

However, with states starting to reopen companies and elevate stay-at-home restrictions, shops could see clients return. The query is, will these gross sales be sufficient to make a distinction. Apparel retailers comparable to Ascena, Tailored Brands and Lands’ End are amongst these being watched fastidiously.

Even industries on strong footing previous to the outbreak could also be endlessly modified. The cruise business is a good instance. Would-be vacationers might have a onerous time shaking the pictures of the Diamond Princess, which had greater than 700 passengers and crew contaminated with the coronavirus.

Members of media collect at the Diamond Princess cruise ship, operated by Carnival Corp., docked in Yokohama, Japan, on Friday, Feb. 7, 2020.

Toru Hanai | Bloomberg Getty Images

Then there are the regular shocks that companies can normally deal with, however the Covid-19 disaster makes these disruptions all the tougher. The oil sector matches into this class. 

Employers began limiting enterprise journey in late February. By mid-March, employees began to log in from residence to do their jobs. Oil demand plummeted with the decline in enterprise and private journey. The power business has additionally grappled with a tense value conflict between Russia and Saudi Arabia. Diamond Offshore Drilling and Whiting Petroleum cited these elements of their latest chapter filings, whereas different corporations like Chesapeake Energy stay in misery. However, with the value conflict over and journey restrictions lifting, oil costs are starting to rally.

Here is a rundown of the main corporations coping with the monetary fallout of the coronavirus.

Notable chapter filings

Diamond Offshore Drilling

Employees connect hooks from a crane to a set of chains on the quay facet, in view of the Ocean Vanguard cellular offshore drilling unit, operated by Diamond Offshore Drilling Inc. in the Port of Cromarty Firth in Cromarty, U.Ok., on Tuesday, July 26, 2016.

Matthew Lloyd | Bloomberg | Getty Images

The contract drilling firm filed for Chapter 11 chapter on April 26. The Houston-based firm named low oil demand amid the coronavirus outbreak and the “price war” between OPEC and Russia as elements that brought about its enterprise to say no. 

Prior to submitting for chapter, Diamond Offshore skipped an curiosity fee and secured restructuring advisers. The firm additionally not too long ago drew down $400 million beneath a revolving credit score facility. Diamond Offshore at present has sufficient capital to proceed regular operations because it undergoes restructuring efforts, based on a firm assertion.

Diamond Offshore reported $981 million in income in 2019. The firm had employed 2,500 employees at the finish of final 12 months. 

Frontier Communications

The high-speed web firm announced April 14 that it was initiating chapter proceedings. Frontier Communications additionally mentioned it was continuing with the sale of its Washington, Oregon, Idaho and Montana operations and belongings to Northwest Fiber for round $1.35 billion in money.

The firm expects its restructuring plan to scale back its debt by greater than $10 billion. It additionally mentioned it has obtained $460 million in debtor-in-possession financing. Combined with the firm’s greater than $700 million in money, the DIP financing will permit Frontier to have greater than $1.1 billion in liquidity that can assist it meet operational wants.

Frontier has fiber-optic and copper networks in 29 states. The firm mentioned it had $8.1 billion in annual income in 2019, based on an SEC submitting.

Gold’s Gym

The health chain filed for chapter on May 4. Gold’s Gym plans to completely shut round 30 company-owned gyms, however its franchised places will reopen as coronavirus restrictions are lifted.

The Dallas-based firm expects to emerge from chapter by Aug. 1. It was purchased in 2004 by TRT Holdings for $158 million. Gold’s Gym operates almost 700 gyms round the world. 

Intelsat

The satellite tv for pc operator introduced Wednesday that it filed for chapter safety. The firm reported virtually $15 billion in debt at the finish of 2019, based on an SEC submitting, and beforehand signaled bother when it skipped a $125 million curiosity fee in April.

Intelsat, which supplies satellite tv for pc providers to clients in the media and authorities sectors, mentioned it noticed important reductions in demand as a result of of the pandemic.

The firm secured $1 billion in debtor-in-possession financing, which is able to assist present liquidity during the restructuring course of. Intelsat reported income of $2.1 billion at the finish of 2019.

J.Crew

A J. Crew retailer on fifth Avenue stays closed on May 4, 2020 in New York City.

Bryan Thomas | Getty Images

The New York attire firm filed for chapter on May 4 after scuffling with slumping gross sales and large debt.

Its debt was largely the legacy of a leveraged buyout by private-equity corporations TPG Capital and Leonard Green & Partners, which purchased it for $Three billion in 2011. J.Crew had hoped to ease some of its debt burden by taking its extra profitable Madewell model public this spring. But the preliminary public providing was nixed in March as coronavirus slowed down the economic system and sparked a enormous market sell-off. 

The retailer had roughly $2.5 billion in annual gross sales, based on Moody’s. But with all its places compelled to shut quickly to halt the unfold of Covid-19, gross sales slowed to a trickle. 

As half of the chapter proceedings, J.Crew’s lenders will convert round $1.65 billion of its debt into fairness. The retailer additionally secured $400 million in financing from present lenders in an effort to keep in operation during its restructuring.

John Varvatos Enterprises

The menswear model filed for Chapter 11 chapter on May 6 as half of an settlement to promote all of its enterprise and belongings to British personal fairness agency Lion Capital. John Varvatos mentioned that together with the relaxation of the luxurious retail business, it had “been greatly impacted by the negative effects of the coronavirus pandemic.” The outbreak compelled the firm to quickly shut its shops.

As half of the sale settlement, Lion Capital will present debtor-in-possession financing that can assist help the firm’s operations when mixed with its projected money flows. The personal fairness agency was already an investor in John Varvatos, having bought a majority stake in the firm in 2012 for an undisclosed quantity. 

Neiman Marcus

The luxurious division retailer managed to restructure its large debt outdoors of chapter proceedings final 12 months, however that was not the case in 2020. The Dallas-based firm filed for chapter on May 7 after skipping hundreds of thousands of {dollars} in debt funds in April. All of of its shops, together with its iconic Bergdorf Goodman shops in New York City, closed March 17 as a result of the coronavirus pandemic, and the firm furloughed most of its 14,000 employees. Even earlier than the outbreak, the retailer confronted competitors from on-line rivals and had restricted entry to money. 

But do not count on large going-out-of-business gross sales, which adopted the Barney’s chapter final 12 months. Neiman Marcus has obtained funding and expects to reopen its shops. It has $675 million in financing from collectors, which is able to permit it to function during restructuring. Its will obtain $750 million in funding when it exits chapter, which it hopes to do in the fall. In submitting for chapter, the firm must deal with the greater than $Four billion in debt left over from it was bought to non-public fairness agency Ares Management and the Canada Pension Plan Investment Board through a $6 billion leveraged buyout in 2013.

The retailer operates 43 Neiman Marcus shops and two Bergdorf Goodman shops. In March, it mentioned it deliberate to shutter its off-price Last Call places. Neiman has began to reopen shops for curbside pick-up or by means of personal appointment. 

Stage Stores

The firm, which operates malls beneath manufacturers comparable to Gordmans, Bealls and Goody’s, filed for chapter on May 10 and is at present winding down its operations. It is searching for potential consumers of its enterprise and belongings, based on a firm assertion.

The retailer beforehand struggled with competing in opposition to large-scale retailers in addition to e-commerce sellers. The pandemic additional burdened the retailer by inflicting Stage Stores to quickly shut all of its 738 places and furlough nearly all of its retailer and distribution workers. The retailer is now in the course of of starting to reopen shops to conduct liquidation gross sales, based on Stage Stores President and CEO Michael Glazer.

Stage Stores operates the chains in principally rural areas throughout 42 states. The firm had roughly 13,600 full-time and part-time workers as of February 2019 and reported $1.58 billion in gross sales in the final fiscal 12 months.

True Religion Apparel

The denim retailer filed for Chapter 11 chapter for the second time in lower than three years on April 13. Known for its premium denims, the firm has struggled in recent times with competitors from low cost retailers and the rise of athleisure put on. With the retail business onerous hit by the coronavirus, True Religion mentioned in its court docket submitting that it might’ve most well-liked to attend out the monetary instability and stay-at-home restrictions prompted by the outbreak, however “simply could not afford to do so.”

The firm’s largest lenders, ABL and Term Loan, are offering extra capital to assist with its restructuring. True Religion mentioned it had belongings and liabilities starting from $100 million to $500 million, based on the submitting. Until its shops open up, the firm plans to proceed specializing in its e-commerce gross sales. 

True Religion was taken personal when it was purchased by funding administration agency TowerBrook Capital Partners in 2013 by means of a transaction valued at $824 million. 

Ultra Petroleum

The power firm mentioned Thursday it has filed for chapter and agreed to a balance-sheet restructuring with its collectors. Ultra Petroleum beforehand entered Chapter 11 proceedings in 2016.

Ultra Petroleum beforehand warned of a potential submitting in its fourth-quarter earnings launch from April 14. On high of the firm’s roughly $2 billion in debt as of Dec. 31, Ultra Petroleum mentioned in one other SEC submitting it confronted “business disruption” from the coronavirus.

Through the restructuring settlement, Ultra Petroleum secured financing of as much as $25 million and a revolving credit score facility with an preliminary borrowing base of $100 million from lenders. The firm mentioned it is going to be capable of eradicate $2 billion in debt.

Ultra Petroleum’s operations are primarily targeted on pure fuel reserves in Wyoming. The firm reported $742 million in income for 2019.

Virgin Australia 

Australia’s second-biggest airline introduced April 21 that it’s present process third party-led restructuring that could probably result in a sale.

The pandemic has crippled the journey business as airways search authorities support to remain afloat. Virgin Australia was rejected for a 1.Four billion Australian greenback ($897 million) authorities mortgage earlier than coming into into the Australian equal of Chapter 11 chapter proceedings. However, Virgin Australia was struggling even earlier than the pandemic hit and has posted an annual loss for seven consecutive years. 

The firm at present has debt of AU$5 billion ($3.2 billion) and greater than 10 events have expressed curiosity in restructuring the firm. Sir Richard Branson, founder of Virgin Group, a main shareholder of Virgin Australia, mentioned in a tweet that his firm would work to make Virgin Australia wholesome once more. 

Virgin Australia has a share of round one-third of Australia’s home airline market. If the firm ceased operations, its rival Qantas Airways would have a digital monopoly. The firm employs 10,000 individuals instantly and 6,000 individuals not directly.

Whiting Petroleum

Whiting Petroleum filed for chapter on April 1, the first shale firm to take action after the Saudi-Russia value conflict and the drop in oil demand pushed by the Covid-19 pandemic. Whiting mentioned each of these elements contributed to its choice to file for chapter.

The oil and fuel firm mentioned it plans to transform greater than $2.Three billion in senior notes into new fairness, which might account for 97% of the reorganized firm’s possession. Whiting plans to offer fee in full of its revolving credit score facility and be out of Chapter 11 proceedings inside 5 months. The firm mentioned it has $585 million of money on its stability sheet and can proceed regular enterprise operations.

Whiting’s enterprise is concentrated in the Rocky Mountain area of the U.S., with its largest tasks in North Dakota and Colorado. The firm’s market valuation has shrunk to $32 million from its $15 billion peak in 2011. 

Nearing potential bankruptcies

The oil and fuel firm is reportedly getting ready a chapter submitting after its enterprise took a hit from the Saudi-Russia value conflict and declining demand for oil amid the coronavirus pandemic. The Oklahoma City-based firm was as soon as at the forefront of the U.S. shale growth.

The firm was burdened with $9 billion in debt even earlier than the pandemic and value conflict. Chesapeake is in talks to safe $1 billion in debtor-in-possession financing that may assist it fund operations and is contemplating skipping a $192 million fee due in August. It additionally faces a July 1 fee of $136 million.

Founded in 1989, Chesapeake has operations in 5 U.S. states, together with Pennsylvania, Texas and Louisiana. It employed about 2,300 individuals as of the finish of 2019. 

Hertz

The automotive rental firm mentioned there are doubts about its capability to proceed as a going concern. It has secured debt restructuring advisers and is getting ready for negotiations with collectors over its $17 billion in debt.

The automotive rental business has taken critical blows from the coronavirus pandemic, and Hertz laid off 10,000 individuals amid the disaster, incurring worker termination prices of $30 million. Even earlier than the outbreak, Hertz and different rental corporations confronted competitors from rideshare corporations like Uber

The Estero, Florida-based firm is now working with restructuring consultants at regulation agency White & Case and funding financial institution Moelis & Co. in an effort to deal with its debt points. Another issue weighing on the firm’s funds is that Hertz borrows in opposition to the worth of its used automobiles. The worth of used vehicles has plunged amid declining demand attributable to the pandemic. 

The firm’s largest shareholder is billionaire investor Carl Icahn and its shares have misplaced greater than three-quarters of their worth since late February. Hertz had about 38,000 workers as of the finish of 2019 with 29,000 at its U.S. places. The firm operates roughly 10,200 company and franchisee places, together with these beneath its Dollar and Thrifty manufacturers.

JC Penney

Signage is displayed outdoors a JC Penney Co. retailer in Chicago, Illinois.

Christopher Dilts | Bloomberg | Getty Images

The clothes retailer is exploring filing for chapter safety and could file as quickly as Friday.

The Plano, Texas-based firm faces quite a few challenges, together with slumping gross sales and almost $Four billion in debt. Most of J.C. Penney’s shops have been closed since March 18 as a result of of the coronavirus. The firm determined to furlough most of its hourly employees beginning April 2. Penney additionally not too long ago had to go to court docket to maintain make-up vendor Sephora from pulling out of its shops. 

One of the most tell-tale indicators of Penney’s troubles was its choice to skip a $12 million curiosity fee due on April 15 and a $17 million one due May 7. Upon lacking the first fee, the firm entered a 30-day grace interval “in order to evaluate certain strategic alternatives,” based on a SEC submitting. CNBC reported it has since made the $17 million fee, however that could be the end result of talks with its lender. J.C. Penney is hoping to safe about $450 million to fund its operations in chapter.

The firm operates about 850 shops in the U.S. and employs almost 90,000 employees. However, the retailer might must completely shut 200 of these shops as half of its chapter course of. Penney noticed whole web gross sales for the fourth quarter ended Feb. 1 fall 7.7% to $3.38 billion from a 12 months earlier.

Lord & Taylor

The division retailer operator is reportedly getting ready for chapter and plans to liquidate stock in its all of its shops as soon as restrictions to curb the unfold of Covid-19 are lifted. The retailer doesn’t count on to outlive the chapter course of, sources advised Reuters, which first reported the information.

Founded in 1826, Lord & Taylor was as soon as a main retailer in the U.S., nevertheless it had issue standing out amongst rivals comparable to Macy’s and off-price retailers comparable to TJX Companies, which operates TJ Maxx and Marshalls. Department shops typically have confronted challenges from on-line retailers and customers buying much less attire.

Lord & Taylor proprietor Le Tote owes 33.2 million Canadian {dollars} ($23.53 million) from a promissory observe to Hudson’s Bay Company after shopping for the retailer from the Canadian division retailer chain for CA$100 million in 2019. Hudson’s Bay, which owns Saks Fifth Avenue, maintained possession of some of Lord & Taylor’s actual property and took on accountability for its lease funds. The firm could use a chapter submitting to take some of its leases again from Lord & Taylor. 

Lord & Taylor operates 38 malls in the U.S., the majority of that are concentrated in the Northeast, a area hard-hit by the coronavirus. It continues to be potential the firm could search different choices outdoors of chapter, Reuters reported. 

Mohegan Gaming & Entertainment

The gaming firm owns the Mohegan Sun on line casino in Connecticut, which closed March 17 after the state shuttered nonessential companies amid the pandemic. MGE mentioned that as a end result of the uncertainty attributable to the virus, it deferred making an curiosity fee of roughly $19.7 million due on April 15, based on an SEC submitting. The firm additionally furloughed about 98% of workers, based on one other submitting

Sur La Table

The premium cookware vendor is getting ready for chapter after it was compelled to shut shops and cancel cooking courses, based on a Bloomberg report. Sur La Table can also be reportedly pursuing a sale. The chain, which has round 125 shops, was bought by Investcorp for $146 million in 2011.



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