AsiaTechDaily – Asia's Leading Tech and Startup Media Platform
The economic uncertainty driven by the coronavirus pandemic has pushed some big companies over the edge into filing for bankruptcy proceedings.
Economies across the globe have been bruised and beaten due to the COVID-19 pandemic. Stay-at-home guidelines have forced many non-essential businesses to close, and there has been a severe impact on demand for all types of goods and services. Millions of people across the world have become jobless. The slowdown has hit some companies harder than others.
As financial challenges continue to accelerate amidst the COVID-19 crisis, big players are finding filing for bankruptcy as a financial safe harbor from the economic storm.
Here are some of the big firms that have filed for bankruptcy in the wake of coronavirus pandemic.
After being in business for 100 years, Hertz, one of the largest car rental companies in the US, has filed for bankruptcy in May 2020. The company has been burdened with approximately $19 billion in debt, and about 700,000 vehicles have been idled due to the coronavirus outbreak. According to reports, the company has been losing money for the last 4 consecutive years that includes $58 million in 2019. In March 2020, the company laid off 12000 employees and furloughed additional 4000 workers- 25% of its workforce.
Car rental companies largely depend on travel, and with travel bans and people staying at home, the need for car rental has dropped. However, according to experts, Hertz was already suffering long before the coronavirus pandemic. The company was facing tough competition in car rental space beside the onslaught from Uber and Lyft. Customers preferred using these apps since they find it more convenient to open an app and request a ride without going through the hassle of filling long and one-sided contracts to hire a car.
The bankruptcy of Hertz will have a huge impact, and there will likely be more layoffs, and the hours of the remaining workers would be reduced. There is a possibility that the company will have to sell a part of its fleet of cars. All we can say is that the COVID-19 pandemic has added fuel to an already burning situation.
This 118-year-old entity is another casualty of the coronavirus pandemic. One of the largest clothing retailers had to temporarily close 850 stores across the US. At the beginning of May 2020, the company started to open a few stores by implementing all safety measures. However, JCPenny was already facing struggles for many years since shoppers were increasingly turning to online options. Besides that, the company also faced stiff competition from off-price retailers like Ross Stores and TJ Maxx. The frequent changes made in the executive team and shifting strategies did not help either to cover the slump in sales.
One of the largest airlines of Latin America has also filed for bankruptcy this month. With all passenger flights grounded since mid of March 2020, Avianca becomes another company that succumbed to the pandemic. Air travel has been one of the hardest-hit industries in this pandemic. With the virus spreading from Asia to Europe, followed by America, the travel demand dropped significantly. Notably, people also stopped buying tickets for future travel due to uncertainty. Like many airlines across the globe, including the European Union, Asia, and the United States, Avianca is seeking financial support from the government of the countries where it provides essential services. According to the company’s statement, once the mandated air travel restrictions are lifted, the airline plans to resume its passenger flights gradually and welcome back its furloughed employees.
ALDO Group, Montreal-based leading fashion footwear and accessory brand that operates in more than 100 countries in about 3000 locations, has also filed for bankruptcy proceedings. The impact of the COVID-19 pandemic has put pressure on the business. With store closures across the world, there has been an impact on the cash flow according to a company’s statement. The company has filed under CCAA and related proceedings to protect itself in the long term.
After struggling with slumping sales and huge debt, J.Crew, the New York apparel company, has also filed for bankruptcy. Temporary closure of all locations to contain the spread of COVID-19, the sales reduced significantly. Additionally, the major part of the debt was due to leveraged buyout by private equity firms- Leonard Greens & Partners and TPG Capital, which bought it in 2011 for $3 billion. The company planned to ease some part of its debt by taking Madewell, its most successful brand public in spring 2020. However, the pandemic slowed down the economy, and the business suffered.
Intelsat has filed for bankruptcy as it has reported almost $15 billion in debt by the end of last year, according to an SEC filing. Additionally, the company has also skipped a $125 million interest payment in April 2020, which added to its trouble.
The satellite operator that offers its services to clients in the government sectors and media faced a significant reduction in demand due to the outbreak of COVID-19.
Midwest’s top mattress and furniture retailer with 169 stores and approximately 3000 employees have recently filed a mass layoff. According to reports, the estimated liabilities of Art Van Furniture is between $100 million to $500 million. The company already began with liquidation sales in March 2020. With a worsening economic crisis, the company converted from Chapter 11 reorganization to Chapter 7 liquidation in April.
This chain of movie theaters with dine-in options also filed for bankruptcy in April 2020. The parent company Cinemex Holdings controls CMX Cinemas in 41 locations. According to a report in the Wall Street Journal, the company hopes to gain concessions from movie studios and landlords by filing for bankruptcy. Cinemex USA Real Estate Holdings Inc., real estate affiliate of the company, has also filed for bankruptcy.
Amidst the coronavirus outbreak, the luxury department store, Neiman Marcus, also filed for bankruptcy in May 2020. This more than a century-old retailer said that it has entered into a restructuring agreement with creditors that will help them significantly reduce debt and future growth.
In April 2020, Diamond Offshore Drilling, a Houston-based contract drilling company, filed for bankruptcy. The company claims that the low demand for oil during this pandemic and the ‘price war’ between Russia and OPEC were the factors that lead to the decline of business. According to reports, before the bankruptcy, the company had also skipped an interest payment and secured restructuring advisers. Besides that, the company recently had drawn out $400 million under a revolving credit facility.
Stage Stores operates department stores under the brand name- Bealls and Goody’s and Gordman’s has filed for bankruptcy in May 2020. The company is in the process of winding up its operations and is looking for potential buyers of its assets and business. Before this, the company was struggling to compete against e-commerce sellers and large-scale retailers. Due to the pandemic, Stage Stores has closed all of its 738 locations and has furloughed almost all of its distribution and store employees.
Virgin Australia, the second-largest airline, announced in April 2020 that it is undergoing a third-party restructuring. With pandemic paralyzing the travel industry, many airlines are seeking government aid for support. The company was rejected for a government loan of 1.4 billion Australian dollars before it filed for bankruptcy proceedings. However, according to reports the company was already struggling before the onset of this pandemic, it has reported a loss for seven consecutive years.
These were a few notable bankruptcy filings. According to experts, with this abrupt downturn, it is expected that the number of filings for bankruptcy proceedings may increase further.
The bottom line is that this pandemic has apparently spared no one, whether it is a multinational or an iconic departmental store or entertainment business. The devastation of the economies across the world is evidence of that.
Even though now as the economies are gradually opening up and lockdowns begin to lift, social distancing measures will continue for a long time. This will impact many businesses and could bring in bigger problems. While filing for bankruptcy doesn’t essentially mean that companies will go out of business- it’s more of financial restructuring to adapt to the changes that will come in the near future.