Major Companies That Have Filed For Bankruptcy Since The Pandemic Began

By Ellen Kershner on June 1 2020 in Economics

Photo by Melinda Gimpel on Unsplash
Photo by Melinda Gimpel on Unsplash
  • Some retailers were already facing hard times, as foot traffic in shopping malls has declined in recent years.
  • Filing for bankruptcy is not a death sentence for struggling companies.
  • Companies that file Chapter 11 do so with the goal of returning to sound financial operations
  • the Gold’s Gym chain filed for Chapter 11 during the first week of May
  • at the end of March, they had $18.7 billion in debt, and $1 billion in cash available.

As the world economy slowly returns to business as usual, some familiar companies may remain shuttered for a while with others never to reopen again. To save themselves, some have had to file for bankruptcy. This does not necessarily mean that they are not coming back; it can be a measure to protect their futures. Some retailers were already facing hard times, as foot traffic in shopping malls has declined in recent years. Consumer buying had already shifted from browsing in brick-and-mortar stores to the Internet. For companies already in these weakened states, the coronavirus shutdowns were a tough blow.

How Does Bankruptcy Work?

Filing for bankruptcy is not necessarily a death sentence for struggling companies. It can be a lifeline, providing the opportunity to manage debt and restructure the business’ operations. There are two types of corporate bankruptcy filings, Chapter 7 and Chapter 11. In Chapter 7, a company must halt operations, and goes out of business for good. The company’s assets are sold (liquidated), and these monies are used to pay off any debt.

Chapter 11 bankruptcies can salvage companies. They do not have to go out of business and can take steps to restructure. Companies that file Chapter 11 do so with the goal of returning to sound financial operations. It is a complex undertaking, with the goal of restructuring unmanageable liabilities. The business can remain open while the reorganization is taking place. If things do not work out, the company’s assets may be liquidated. These are some of the companies that have filed for bankruptcies, related to the pandemic.

Neiman Marcus

Neiman Marcus' in-store foot traffic has been declining for years. Image credit: businessoffashion.com

This high-end department store was heavy in debt when COVID-19 came to the United States. With retail customers turning more and more to e-commerce, their in-store foot traffic had been declining for years. They filed for Chapter 11 on May 7 at the Southern District of Texas Bankruptcy Court. They have $675 million worth of debtor-in-possession financing lined up and were able to agree on a restructuring support agreement with most of their lenders.

J. Crew

During the pandemic, J. Crew had to close down almost 500 J. Crew, Madewell, and J. Crew Factory locations. Image credit: businessoffashion.com

    New York-based preppy-clothing retailer J. Crew was also treading rough waters when it filed for Chapter 11 on May 4. The company also owns the Madewell women’s clothing brand. J. Crew’s lenders are preparing to take over control, and are offering approximately $400 million in financing to help with operations. During lockdowns, the company had to close down almost 500 J. Crew, Madewell, and J. Crew Factory locations.

    CMX Cinemas

    CMX Cinemas was hit hard when it was forced to close locations. Image credit: linkedin.com

    As the eighth-largest movie theater chain in the United States, CMX Cinemas was hard hit when it had to shutter its locations. The company also has dine-in options, and is owned by Cinemex Holdings. CMX filed for Chapter 11 on April 25, while the company was in the process of expanding. CMX had planned to acquire the Star Cinema Grill. A company representative stated that CMX could not forecast “when — if ever — customer numbers will return to pre-crisis levels.”

    Virgin Australia

    Virgin Australia was one of many airlines hit hard by the pandemic. Image credit: dmarge.com

    The travel industry was one of the hardest hit, including hotels, travel agencies, and airlines. Virgin Australia is Australia’s second-largest airline and it filed for bankruptcy in April. Virgin Australia was being considered for an $888 million bailout, but the Australian government decided against that. The airline’s founder even offered his own private island estate as collateral. The company plans to recapitalize the company and reemerge after the crisis.

    Tuesday Morning

    Tuesday Morning has reopened 80% of its stores. Image credit: wkbn.com

    Tuesday Morning is a Texas-based, off-price retailer that operated close to 700 stores in 39 different states. The company was already in trouble when the pandemic started. Tuesday Morning filed for Chapter 11 in late May, seeking protection from creditors. The company is hoping to remain in business, with about 80% of its stores reopened after temporary shutdowns.

    Dean & Deluca

    Dean & Deluca owed creditors close to $275 million. Image credit: timeout.com

    This New York gourmet grocery chain began closing stores last year, and filed for bankruptcy protection on March 31. Founded in 1977, they are hoping to gain a restructuring deal with their creditors, with an eye on eventually reopening their stores. At the time of filing, the company listed about $500 million in liabilities and approximately $50 million in assets. The grocery chain owed creditors close to $275 million.

    Gold's Gym

    Gold's Gym has closed 30 locations worldwide in an attempt to remain profitable. Image credit: desertsun.com

    Gyms may be one of the last businesses to reopen, and the Gold’s Gym chain filed for Chapter 11 during the first week of May. The gym closed 30 of its 700 worldwide locations for good in April, but are hoping to remerge out of the bankruptcy come August. Company representatives stated that the filing will not impact current operations, and will “ensure the continued viability of the company for decades to come."

    Pier 1 Imports

    Pier 1 Imports will be shutting down entirely because of COVID-19. Image credit: victoriabuzz.com

    Texas-based retailer Pier 1 Imports filed for Chapter 11 back in February, planning to shut down about 450 stores and keeping a few hundred open. This was before the coronavirus was seen as a threat to the economy. Things went downhill after the filing, and the company later announced that it would close all of its 900 stores. Pier 1 was not able to find a buyer, and on May 19 the company announced that it was trying to get bankruptcy court approval and would be shutting the company down.

    Hertz

    Hertz filed for Chapter 11 on May 22. Image credit: autoweek

    The Hertz Corporation has been in business for over 100 years but was not immune to the economic impacts of the COVID-19. Hertz, also owns Thrifty Car Rental and Dollar Rent a Car, filed for Chapter 11 on May 22. Its lenders would not grant Hertz an extension on its debt payments.

    Other Companies in the Red

    GameStop and many other companies are facing financial hardship because of COVID-19. Image credit: polygon

    MSN reported that other companies who have filed for bankruptcy include Frontier Communications, SpeedCast International, Aldo, and True Religion. There are additional companies who are also in hot water, including GNC, Sears, Party City, Rite Aid, Game Stop, Victoria’s Secret, and Forever 21.

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