14 Bankruptcy Filings Chalked Up to COVID-19
Bankruptcy filings are piling higher in the wake of the COVID-19 pandemic. Here, we look at a number of companies that have been forced to seek out bankruptcy protection.
The COVID-19 coronavirus outbreak has sent global markets into bear territory and economies into recession. And as the pandemic stretches on, it’s inducing a growing number of bankruptcy filings.
Though, in most cases, COVID-19 has simply acted as the straw that broke the camel's back.
Consider the retail industry, which has endured a particularly difficult past two months. Most "non-essential" retailers are feeling the pain, However, those that were already overloaded with debt, as well as suffering from long-term declines amid changing tastes and Americans' swelling adoption of online shopping, have been pushed over the edge.
But it's not just retail. COVID-19 is forcing companies across several industries to seek out Chapter 11 bankruptcy protection and other types of relief. Consider the energy sector, where the oil declines of 2014-16 weakened a number of exploration and production companies, only to have coronavirus-sparked demand slumps finish off the job. Financially wobbly companies in the restaurant and entertainment industries are starting to collapse, too.
Just remember: Bankruptcy filings aren't always "the end." In many cases, Chapter 11 reorganizations and other maneuvers help companies shed significant amounts of debt, allowing them to continue operating as they try to find a new way forward. That said, COVID-19 is threatening to knock a few well-known brand names out of existence entirely.
Here are 14 companies whose recent bankruptcy filings can be chalked up to the COVID-19 outbreak. In most cases, these businesses were already showing signs of financial duress – the coronavirus merely delivered the coup de grâce.
Data is as of May 21. Companies listed in alphabetical order.
Apex Parks Group
- Headquarters: Aliso Viejo, California
- Number of employees: Unknown
- Number of locations: 2 water parks, 10 family entertainment centers
- Filing date: April 8, 2020
Apex Parks Group is a privately held operator of water parks and family entertainment centers in California, Florida and New Jersey.
Apex Parks already was struggling thanks to competition and consolidation in the industry. However, the coronavirus pandemic hit just in time to disrupt prime spring break and summer vacation business. Facing park closures because of the coronavirus lockdowns and uncertainty in what reopening would look like, the company filed for Chapter 11 bankruptcy protection on April 8.
A lender group led by private equity firm Cerberus Capital Management is purchasing Apex Group for $45 million in a deal that will relieve it of some of its debt. The company expects to eventually reopen its parks.
Art Van Furniture
- Headquarters: Warren, Michigan
- Number of employees: 3,100
- Number of locations: 190
- Filing date: March 8, 2020
Art Van Furniture is a privately held Michigan-based furniture and mattress retailer that got its start in East Detroit in 1959, and has since expanded its presence to nine states.
However, Art Van Furniture has been circling the drain since founder Art Van Elslander sold it to private equity firm Thomas H. Lee Partners three years ago. After the chain lost money in 2019 and credit card companies demanded collateral for continued support, the company began preparing for liquidation. An attempt to refinance and save the business collided head-on with the coronavirus pandemic.
"However, due to a number of factors, including the impact of the coronavirus outbreak on investor confidence, the consortium was unable to secure needed investment in late February and last week some master lessors pulled out of the deal," Crain's Detroit Business writes.
The company filed for Chapter 11 bankruptcy protection on March 8, but the COVID-19 pandemic killed its ability to reorganize under Chapter 11, forcing it to convert to a Chapter 7 liquidation. Love's Furniture has since bought 27 of its stores and plans to reopen them under its own brand. Meanwhile, Robert Levin, who sold his operations to Art Van in 2017, has agreed to a $26 million deal to buy Levin inventory in Pennsylvania and Ohio. He plans to reopen some Levin locations.
- Headquarters: Miami, Florida
- Number of employees: 2,750
- Number of locations: 41
- Filing date: April 25
Privately held Cinemex Holdings USA was building a small empire of upscale dine-in movie theaters, with 41 CMX theaters in 12 states. But even though it was in expansion mode, it also was in distress before COVID-19 squeezed the economy.
"Even prior to filing for bankruptcy, we were spending over 30 percent of our revenues on lease-related expenses while studios ended up with 60 percent of every ticket sold," Cinemex told Deadline.
Cinemex had been in negotiations to buy Houston-based Star Cinema Grill when the coronavirus lockdown hit. The deal would have made Cinemex the seventh largest U.S. movie theater chain. However, with theaters shut down, rent due and an uncertain future thanks to COVID-19 concerns, the deal was scuttled. Shortly after, Cinemex filed for Chapter 11 bankruptcy protection.
"We are in a state of complete uncertainty as to when we can re-open our theaters and when our customers will feel safe and secure in returning to them given that there is presently no vaccine against the virus," Cinemex Holdings USA said in a statement. "We cannot forecast when – if ever – customer numbers will return to pre-crisis levels."
Diamond Offshore Drilling
- Headquarters: Houston, Texas
- Number of employees: 2,500
- Number of locations: 15 drilling rigs
- Filing date: April 26
Texas-based Diamond Offshore Drilling Inc (DOFSQ, $0.19) is one of several energy stocks hit hard by the one-two punch of reduced oil demand thanks to the coronavirus, and the brief Saudi-Russian price war.
As demand dried up, U.S. oil producers began shutting off their oil wells in the Gulf of Mexico, which killed demand for Diamond's drilling rigs. The company had been borrowing heavily, and S&P Global Ratings downgraded the company's debt for a skipped interest payment before Diamond ultimately filed for Chapter 11 bankruptcy protection April 26.
"Like many companies, Diamond has been impacted by the continued downturn in the oil and gas industry," the company said in a release. "Restructuring our finances will allow us to build a bridge to the upturn in the industry when fleet utilization and day rates return to more normal levels."
Diamond has since been delisted from the New York Stock Exchange and now trades on the OTC Pink markets (or "pink sheets").
FoodFirst Global Restaurants
- Headquarters: Orlando, Florida
- Number of employees: 6,000+
- Number of locations: 92
- Filing date: April 11
FoodFirst Global Restaurants is the privately held parent company of Italian-themed restaurant chains Bravo and Brio.
The restaurants once belonged to Bravo Brio Restaurant Group, which was founded in 1992. The company went public in 2010 but went private in 2018 via a sale to Spice Private Equity, which renamed the company FoodFirst Global Restaurants. Because of struggles at Bravo and Brio, FoodFirst hired a new CEO in January 2020 to implement a turnaround, with a goal of improving efficiency.
But that turnaround was kneecapped by forced restaurant closures on the heels of the COVID-19 pandemic. FoodFirst Global Restaurants filed for bankruptcy on April 11, writing in its filing:
"The improvement process was radically altered due to the current international health crisis, creating massive restaurant closings and employee losses throughout the country via state ordered shelter-in-place requirements, which exacerbates the need to reduce the Restaurants' footprint in order to maintain the strongest and most viable locations."
FoodFirst had already closed 10 locations permanently in early January and expects to close more as their leases expire.
- Headquarters: Dallas, Texas
- Number of employees: Unknown
- Number of locations: Approximately 700
- Filing date: May 4
Unlike many companies on this list, privately held Gold's Gym wasn't struggling prior to the coronavirus pandemic. In fact, the company specifically discounts any prior issues as being a factor in its bankruptcy:
"2019 was our strongest year of worldwide growth in company history," the company writes." No single factor has caused more harm to our business than the current COVID-19 global pandemic and the temporary closures required to protect the safety of our members, team members and communities."
Instead, the May 4 bankruptcy was meant to help the company financially restructure. Gold's says it will permanently close 30 company-owned gyms, but it does expect its early 700 global franchised and licensed gyms to reopen.
- Headquarters: McLean, Virginia
- Number of employees: 1,100 (estimate)
- Number of locations: Three U.S. offices
- Filing date: May 13
Intelsat (INTEQ, $0.16) isn't one of the kinds of businesses you'd imagine falling to the COVID-19 outbreak. The company helps broadcast and cable TV providers distribute content to customers, as well as provides communications services, via a fleet of 50 satellites.
Intelsat wants to launch new satellite technology that would allow it to sell off part of its C-Band spectrum as part of an FCC airwave auction. That spectrum would be sold to wireless companies as they bulk up their 5G service.
However, "to meet the FCC's accelerated clearing deadlines and ultimately be eligible to receive $4.87 billion of accelerated relocation payments, Intelsat needs to spend more than $1 billion on clearing activities," the company writes. But Intelsat also is servicing nearly $15 billion in debt that previous private equity owners saddled the company with, and the coronavirus pandemic further cramped its financial flexibility.
So, on May 13, the company filed for Chapter 11 bankruptcy protection, which should help relieve some of that debt burden. In fact, CEO Stephen Spengler gave the announcement a positive twist, calling the filing "a transformational moment in the history of our company."
"This will position us to invest and pursue our strategic growth objectives, build on our strengths, and serve the mission-critical needs of our customers with additional resources and wind in our sails," he writes.
- Headquarters: Plano, Texas
- Number of employees: 95,000
- Number of locations: 846
- Filing date: May 15
J.C. Penney (JCPNQ, $0.15), one of the nation's largest department-store chains with nearly 850 locations, has long faced the same uphill battle as many of its brick-and-mortar competitors. The launch of its own e-commerce site, as well as experimenting with new store formats, hasn't been enough to reinvigorate the retailer.
Even during the 2019 holiday season, which saw record consumer spending, J.C. Penney's same-store sales (stores and websites open for at least 12 months) declined 7.5% year-over-year.
Store closures due to the COVID-19 pandemic were the final straw. On May 15, the company was forced to seek out Chapter 11 bankruptcy protection, and it also announced a restructuring support agreement that would help it "reduce several billion dollars of indebtedness."
Several days after that filing, the company said it plans to permanently close 242 J.C. Penney locations by 2021.
- Headquarters: New York, New York
- Number of employees: 13,000
- Number of locations: 491
- Filing date: May 4
American clothing retailer J. Crew began life as Popular Merchandise in 1947 before taking on its current name in 1983. It initially was a catalog operation, but it expanded into J. Crew retail stores and eventually added the Madewell brand. Then in 2011, private equity firms TPG Capital and Leonard Green & Partners paid $3 billion to acquire J. Crew.
The company known for its "preppy" clothing has been accumulating debt ever since, owing roughly $1.7 billion as of Feb. 1. Declining sales have dogged the legacy brand, but Madewell was growing so much that J. Crew considered "unlocking" value by spinning it off via an initial public offering.
The coronavirus lockdown and resulting store closures derailed that plan, at least temporarily. J. Crew filed for Chapter 11 bankruptcy protection on May 4, though the company expects to bounce back.
"We are and will remain fully operational throughout this restructuring process," J. Crew states. "We will continue operating under the COVID response measures currently in place and look forward to reopening our stores in accordance with CDC guidance as quickly and safely as possible."
- Headquarters: Dallas, Texas
- Number of employees: 13,500
- Number of locations: 67
- Filing date: May 7
Privately held Neiman Marcus is an iconic, luxury retail chain that was founded in 1907. Its latest store, which opened in 2018, was a three-floor, 188,000-square-foot location in Manhattan's Hudson Yards development. In addition to 43 Neiman Marcus locations, it also owns 22 Last Call outlets and two Bergdorf Goodman stores.
But the company has been struggling under about $5 billion in debt, as well as watching customers abandon its lavish department stores for the comfort of online shopping.
COVID-19 forced Neiman Marcus to temporarily close all of its stores, which ultimately was the company's breaking point. Neiman Marcus filed for Chapter 11 bankruptcy protection on May 7, with CEO Geoffroy van Raemdonck writing:
“Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth. … However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business.”
Neiman Marcus should be able to shed about $4 billion in debt through the process. Ten of its stores have since reopened for curbside pickup.
Pier 1 Imports
- Headquarters: Fort Worth, Texas
- Number of employees: Unknown
- Number of locations: 540
- Filing date: Feb. 17
Many of the companies on this list expect to continue operating during and after their bankruptcy reorganizations. But Pier 1 Imports (PIRRQ, $0.07) could be done for good.
Pier 1 Imports, which has already closed hundreds of stores over the past few years, has simply been unable to fight the one-two punch of growing online competition from e-commerce stocks such as Amazon.com (AMZN) and Wayfair (W), as well as big-box stores such as Target (TGT) and Walmart (WMT).
Pier 1 had already closed 402 of its more than 940 stores before filing for Chapter 11 bankruptcy protection on Feb. 17, before COVID-19 started hammering U.S. retail.
But the coronavirus nonetheless dealt the death blow. On May 19, Pier 1 announced it was giving up on its previous bankruptcy plans and simply liquidating, shutting down its remaining 540 or so stores.
"This decision follows months of working to identify a buyer who would continue to operate our business going forward," CEO Robert Riesbeck said in a press release. "Unfortunately, the challenging retail environment has been significantly compounded by the profound impact of COVID-19, hindering our ability to secure such a buyer and requiring us to wind down."
- Headquarters: Houston, Texas
- Number of employees: 13,600
- Number of locations: 738
- Filing date: May 11
Houston-based Stage Stores (SSINQ, $0.03) operates hundreds of stores across 42 states under banners including Stage, Bealls, Palais Royal, Peebles, Goody's and Gordmans. These stores focus on moderately priced and discount goods, and are predominantly located in small towns and rural areas.
Most of Stage Stores' brands were previously snapped up in bankruptcy sales, and the company had been planning to convert all stores to the Gordmans banner. Stage had a considerable debt load and suffered poor holiday sales in 2019, but it was working on strengthening its financial position and seeking prospective buyers when the COVID-19 pandemic forced it to shutter its stores.
On May 11, it threw in the towel and declared bankruptcy:
"The increasingly challenging market environment was exacerbated by the COVID-19 pandemic, which required us to temporarily close all of our stores and furlough the vast majority of our associates," Stage Stores wrote in a release. "Given these conditions, we have been unable to obtain necessary financing and have no choice but to take these actions."
- Headquarters: Vernon, California
- Number of employees: 1,000
- Number of locations: 87
- Filing date: April 13
California-based jeans maker True Religion, the California-based maker of high-end jeans, filed for bankruptcy on April 13. That's the second time it has done so in three years; it also filed in 2017 and re-emerged with $390 million less in debt.
Sales of True Religion jeans have been hit by slowing spending at department stores including Macy's (M) and the aforementioned Neiman Marcus. The rise in popularity of athleisure wear was also putting pressure on demand for denim.
The coronavirus outbreak sealed its fate, however. The company was forced to close its 87 retail stores and its wholesaling arm. "These closings have caused a sudden and unplanned elimination of approximately 80% of the Company's revenue, making a chapter 11 filing unavoidable," Interim CFO Richard Lynch wrote in court documents.
Lynch said True Religion will open its stores "as soon as practical."
- Headquarters: Denver, Colorado
- Number of employees: Unknown
- Number of locations: N/A
- Filing date: April 1, 2020
Many U.S. shale oil producers were already under financial pressure before the start of 2020. Thanks to low oil prices and high debt loads, 41 oil companies filed for bankruptcy protection in 2019.
More of the same is likely on the way. A report by Norwegian energy research firm Rystad Energy says that if oil prices remain low, more than 240 U.S. energy firms might have to seek out bankruptcy protection by the end of 2021.
Whiting Petroleum (WLL, $0.95) managed to make it to 2020, but the U.S. fracker finally succumbed on April 1, when it filed for Chapter 11 bankruptcy protection. That comes alongside an agreement that saw Whiting debtholders acquire a 97% equity stake in the company in exchange for taking $2.2 billion in debt off the books.
"Given the severe downturn in oil and gas prices driven by uncertainty around the duration of the Saudi / Russia oil price war and the COVID-19 pandemic, the Company's Board of Directors came to the conclusion that the principal terms of the financial restructuring negotiated with our creditors provides the best path forward for the Company," Whiting Petroleum wrote in a press release.
The company will continue to operate its business normally as it restructures.