Monthly Archives: May 2020

No one knows with certainty when the economy will return to pre-pandemic levels or if phased re-openings will be extended or reversed. Business revenue may be a trickle of what it was this time last year if you even have revenue. If you lease your office, storefront, or restaurant building, what does the current economic reality mean for your lease obligations? And if you file bankruptcy, how will the bankruptcy courts handle your lease?

A recent decision from the Bankruptcy Court for the Eastern District of Virginia involving the home furnishing chain Pier 1 Imports provides one example of a bankruptcy court navigating these extraordinary times. Pier 1 was struggling before the pandemic not selling enough futons or candles and deep in debt. When they filed Chapter 11 in February 2020, their biggest coronavirus-related concern was probable, but temporary, delays in inventory shipments from China.

What a difference three months makes. Their Chapter 11 plan did not anticipate a complete freeze on economic activity or shelter-in-place orders to citizens and closure orders for non-essential businesses. Pier 1 closed stores, furloughed employees, and took other measures to survive. Revenue tanked. They obtained rent deferrals from some lessors for their retails stores, but others demanded payment. So Pier 1 asked the bankruptcy court to allow them to defer rent payments for a few months. The lessors objected.

Filing bankruptcy does not give you the automatic right to stop paying rent. Under the Bankruptcy Code, a Chapter 11 debtor must assume or reject its unexpired leases. There are conditions. First, assumption or rejection is subject to court approval. Second, the debtor must decide within 120 days of filing bankruptcy or the date of an order confirming a plan of reorganization whichever is earlier. The debtor may get a 90-day extension if he can show good cause to do so, but any further extensions are subject to court approval and the lessor's written consent. Third, to assume a lease, the debtor must cure all defaults. So if the lease is three months past due, the lessee must bring it current as a condition of assumption. Finally, and most problematic for Pier 1, before assuming or rejecting a lease, the debtor must "timely perform" all its obligations under the lease.

The Bankruptcy Court sided with Pier 1. The Court held that if a debtor fails to timely perform under a lease, the lessor does not have an automatic right to compel payments. Rather, the lessor has an administrative claim in the bankruptcy for post-petition unpaid rent a consolation prize redeemed at the end of the case if the debtor confirms a reorganization plan.

The Court stated that if it required Pier 1 to pay its lessors now, it would grant the lessors a super-priority status as to post-petition rent. Had the lessors shown that Pier 1 was decreasing the value of their interest in their properties during the deferral period, then they may have been entitled to adequate protection. But that was unnecessary because there was no loss of value. Although Pier 1 would not be paying rent, they would pay all insurance, utility, and other payments associated with the properties. Pier 1 also represented that they could catch up all rent payments within around 45 days after they re-opened.

The Bankruptcy Court emphasized that the coronavirus was unforeseeable and temporary. (Let's hope so.) It was persuaded by Pier 1's plan to weather the storm and resume their obligations when the economy returned to some semblance of normal. The Court pointed out there was no feasible alternative. Pier 1 could not open their stores without breaking the law and, even if they did, no one was lining up to buy papasans. They could not even liquidate their inventory effectively. Pier 1's plan would cause temporary rent loss for the lessors, but they were one of many categories of creditors not to mention Pier 1's 17,000 employees. Pier 1 had limited resources and limited options, and this short-term solution was the best way to preserve the company's value for all its creditors.

This is only one decision. Pier 1 sought rent deferrals (not rent forgiveness) for two months only. They agreed to pay insurance and utilities. They convinced the Court they could make catch-up payments 45 days after normal operations resumed. All things considered, Pier 1 made it easy for the Court to grant them relief. Over the next year, we anticipate many more disputes between lessors and lessees. And if those disputes arise in bankruptcy (or the shadow of bankruptcy), lessors and lessees would be wise to consult with counsel to compare their situation to this one.

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Leases and Bankruptcy in a Time of Coronavirus - JD Supra

JCPenney filed for bankruptcy last month and now the retailer is holding a huge online sale.

Some of those sales will continue in stores as the company is beginning to open brick-and-mortar shops around the country as local governments permit as the coronavirus winds down.

Old Navy is selling a five-pack of face masks at a great price.

The sale begins today.

At the moment, JCPenney is trying to drum up business following the Memorial Day holiday.

Promo code sales

Before you go in sale-hunting, make sure youre equipped with the promo code 7NEWLOOK, which will knock 25% off orders under $75 as well as an extra 40% on St. Johns Bay items. For orders above $75, that discount increases to 30%. Additionally, JCPenney offers free shipping on orders over $49.

This four-piece bedroom set for kids is discounted by 62%.

Theres deals all over the website from kitchen and dining products and accessories to furniture to mens and womens jewelry.

But theres more, so much more like big sales on kids and baby products to salon deals.

And while youre shopping, dont forget about a gift for that special man for Fathers Day. Theres plenty of gift ideas for dad in various price ranges.

There is also clearance sales in every section of the store, which offer big steals.

Spruce up your patio at Wayfair.

With 65% off some items, Wayfairs outdoor patio sale is one of the best around.

Read more here:

JCPenneys bankruptcy filing leads to big online sale as everything must go - silive.com

The list is growing: J.C. Penney, Neiman Marcus, Diamond Offshore Drilling, Alta Mesa Resources, Echo Energy, Alta Petroleum, TriPoint Oilfield Services, Sheridan Holding and Stage Stores.

More Texas businesses are filing for bankruptcy this year than during the Great Recession or anytime in the past two decades, and legal experts said the wave of insolvencies and restructurings is still far from breaking or hitting their peak.

Between Jan. 1 and May 5, more than 545 Texas companies filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code up from 234 such filings during the same period in 2019, a 133 percent jump, according to new data provided exclusively to The Texas Lawbook by Androvett Legal Media & Marketing.

ENERGY CARNAGE: More than 240 U.S. energy bankruptcies forecast by 2021

And bankruptcy courts in the Southern District of Texas specifically Houston are the epicenter for the historic number of corporate restructurings expected to be filed this year. So far in 2020, five times more business bankruptcies have been filed in Houston than in any of the other three federal district courts in the state. The Northern District of Texas is a distant second.

There is a tsunami coming, said Foley bankruptcy partner Holly ONeil. For tens of thousands of retailers and restaurants and other businesses, their incoming revenue completely stopped, but their expenses kept coming. The options for many of these businesses are running out.

The Androvett data show that an average of 32 Texas companies has filed to restructure each week this year, compared with an average of 13 companies a week last year and 23 corporate bankruptcies each week in the first half of 2017, which was the previous high in the state.

If you are a restructuring lawyer, you are going to be very busy, said Lou Strubeck, head of the bankruptcy and restructuring practice at Norton Rose Fulbright. Oil and gas and the retail sector had a whole lot of stress even before COVID-19. The only surprising thing is that we havent seen the explosion of bankruptcy filings already. But they are still coming.

Several other prominent companies including CEC Entertainment and Chesapeake Energy are reportedly preparing bankruptcy filings.

I expect the volume will go up significantly. We are in the early stages, said Duston McFaul, a partner at Sidley Austin in Houston. This has the makings to be a long, several-year cycle with widespread imbalances to address.

The surge of bankruptcies by small-business owners also has been delayed because the stay-at-home orders have prevented owners from finding and meeting with lawyers to handle their filings.

Creditors are being patient with retailers and restaurants, at least for a short time, according to McFaul.

Lessors are not rushing to push out distressed businesses because theres currently no one lined up to replace tenants, he said. A strained revenue stream is better than none at all.

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The same is true in the oil industry, except that energy company restructurings tend to be significantly more complicated because there are so many parties and because the price of oil continues to be unstable.

Lenders arent going to be too aggressive in forcing energy companies into court to reorganize, Strubeck said, because they dont know what they would do with the assets and they dont want to run these companies.

The big question is, will private equity jump in or are they gun-shy about oil and gas? said Bill Wallander, a partner at Houston-based Vinson & Elkins.

Matthew Cavenaugh, a bankruptcy partner with Jackson Walker in Houston, said the answer to that question is a reason why courts may have seen fewer prepackaged bankruptcies and more free fall bankruptcies.

In 2015 and 2016, there was a lot of capital waiting to invest, which was important for exiting bankruptcy, he said. Right now, theres not a lot of access to capital.

Cavenaugh said there is another underlying factor that needs to be considered.

Theres been so much money pumped into the system by the feds, he said. Theres no way to know the impact.

For a longer version of this article, please visit TexasLawbook.net.

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Texas bankruptcies are up, and Houston is the epicenter - Houston Chronicle

Tuesday Morning declared bankruptcy Wednesday morning. The off-price home decor store filed court proceedings, telling a judge its struggles before the pandemic hit only grew worse in recent months.

The company says it hopes to stay in business, but will close nearly a third of its locations this summer. Tuesday Morning currently operates five stores in Idaho, and two in Boise.

[Penneys, Pier 1, Gordmans & more: chains shutter some stores what we know now about local outlets]

According to bankruptcy documents reviewed by BoiseDev, two of those stores will close in the first wave. Store locations in Pocatello and Idaho Falls will close, starting as early as June 1. The company and its debtors said they looked at store profitability, sales trends, geography and the possibility of renegotiating leases as factors in the stores it chose to close.

The first wave includes 133 locations. Two stores in Boise, on Boise Ave. at Apple St., and on Milwaukee St. will remain open. Tuesday Morning did say in filings that up to 100 additional stores could close depending on attempts to renegotiate lease agreements.

Tuesday Morning joins other retailers like Pier 1, JCPenney, Neiman Marcus, and J Crew in bankruptcy court in the wake of the pandemic. So far, just Pier 1 announced it would totally shut down, including its Boise locations.

Original post:

Tuesday Morning will close some Idaho stores in bankruptcy - boisedev.com

WASHINGTON When the history of the COVID-19 pandemic is written, there will be more than a few words devoted to the retailers the virus decimated as it pounded the economy. The last month, in particular, has brought bankruptcies from well-known brands with deep roots around the country. This weekend, Hertz, the rental car giant, joined the list.

But the impacts of the coronavirus are only half the story. In some cases, such as restaurants and travel companies, the virus is undoubtedly the primary cause of trouble, but in others it looks more like an accelerant gas on a retail fire that has been burning for quite some time.

The last month has been particularly noteworthy. In the space of just two weeks, some of the best-known brands in America declared they were entering Chapter 11 bankruptcy and closing outlets across the country.

Back on May 4, Golds Gym, the national chain of exercise facilities, announced it was headed to Chapter 11, a move affecting roughly 4,000 employees and 700 locations in more than 20 states. The company said it was planning to permanently shutter 30 locations. And J. Crew, the well-known purveyor of preppy attire, also filed for Chapter 11, a move affecting 500 locations and 13,000 employees in 44 states.

On May 7, Neiman Marcus said it was entering Chapter 11, directly affecting roughly 13,000 employees at 68 stores in 18 states. And on May 14, JC Penney, the long-beleaguered legacy retail giant with 850 stores in 49 states said the same thing, a move affecting some 90,000 employees.

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Those are some well-known names, but in some ways their bankruptcies may not be shocking. Gyms and clothing stores are exactly the kinds of businesses that the coronavirus lockdown seems designed to damage. Raising ones heart rate and sweating are at-home activities these days and apparel shopping is done with a few clicks of a mouse.

But even before May, there were signs of trouble for the brick-and-mortar commerce world this year.

Back in mid-February, Pier One entered Chapter 11, a move that affected roughly 970 locations and 18,000 employees scattered around the United States with some in Canada. Art Van Furniture, said it would be shuttering on March 8, affecting 3,000 employees and 169 locations around the Midwest. And on March 11, Modells, which claimed to be the oldest sporting goods store in America said it was entering Chapter 11, closing the doors of about 140 locations with 3,600 employees on the East Coast.

And even beyond retail, there were signs of trouble elsewhere in the economy. In January, Bar Louie, the trendy upscale chain of bar/bistros, announced it would begin a bankruptcy restructuring hitting 90 locations and 1,500 employees.

In other words, even before the COVID-19 pandemic hit the United States, there were signs that 2020 might not be shaping up to be a great year for merchants with real-world physical locations. Part of that may have been economic exhaustion. The post-Great Recession expansion had been unfolding for more than 10 years (since 2009) when 2020 arrived. Some retrenching may have been inevitable.

But on the retail side there was also the steady march of e-commerce, which has been battering brick-and-mortar stores especially hard for a decade now. Consider the numbers from recent years.

In 2018, retailers closed nearly 6,000 brick-and-mortar locations permanently, according to Coresight Research. In 2019, the figure was even higher, 9,300 locations were shuttered. And, of course, all of those closures had nothing to do with the coronavirus pandemic.

For months now, much of the COVID conversation has centered on how the pandemic might change the nation. How deep will the changes be? What will the post-pandemic United States look like, particularly economically?

But even before the virus, the nation and its economy were going through major changes. Keep in mind all those closures in 2018 and 2019 came as the economy was booming.

There is no question that the coronavirus is hammering the U.S. economy and that it is taking a toll on some healthy businesses and employers. But the biggest economic impact from COVID-19 may be that it is pushing the economy into the future much faster than before, striking hard at businesses that were already weak from other challenges.

It all serves as a reminder that even after the pandemic is controlled, the road back to normal is not going to be easy, and normal may look very different.

Dante Chinni

Dante Chinni is a contributor to NBC News specializing in data analysis around campaigns, politics and culture.

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Hertz, JCPenney, JCrew join list of businesses filing bankruptcy - NBCNews.com

Related Cos. Chairman Stephen Ross said the hotel and retail industries are being hit the hardest by the coronavirus pandemic, as travel has been dramatically curtailed and retail businesses have been forced to close up shop.

The crisis will force many retailers into bankruptcy, he said. That would add to a number of them, including department store chains Neiman Marcus, J.C. Penney and Stage Stores, and apparel maker J.Crew, that have already filed.

"You are going to have such a flood of cases going to the bankruptcy court," Ross told CNBC Tuesday morning during an interview on "Squawk Box."

"And these aren't really the type of bankruptcies that were induced by bad practices," he said. "It's really all driven by the pandemic."

In addition to malls and shopping centers, Related owns residential and office space across the U.S. In New York City, it operates the glitzy Hudson Yards mall and the Shops at Columbus Circle both of which remain shuttered as the city, the hardest hit in the nation, continues to employ drastic measures meant to curb the spread of the virus. Hudson Yards, notably, is anchored by the now-bankrupt Neiman Marcus.

Ross added he is most concerned about small business owners in the retail and restaurant business not being able to turn their lights back on. "Many of them probably don't have the wherewithal to reopen," he said.

The retail bankruptcy filings also threaten thousands of more workers in an economy that has already suffered tens of millions of lost jobs.

Meantime, Related's CEO, Jeff Blau, recently told CNBCthat many of the company's retail tenants had been deferring rent payments, as they try to work through the crisis.

By mid-April, he said Related had collected about 35% of April rents from its retail tenants overall. In its enclosed shopping malls, only about 20% of rent checks had come in, Blau said at the time.

Retail real estate landlords such as Simon, Brookfield and Macerich have been grappling with how to operate their businesses when rent is not being paid on time.

Read the rest here:

Related Chairman Stephen Ross: Expect a 'flood' of retail bankruptcies because of the pandemic - CNBC

From iconic department stores to entertainment giants, the coronavirus has seemingly spared no one in its devastation of the U.S. economy.

Falling consumer demand, reduced entertainment spending, and stay-at-home orders mandating certain businesses stay closed continue to take their toll on a retail industry that has been struggling for the past several years as consumers pivot to online shopping.

Even with the slow reopening of the economy as lockdowns beginning to lift, social distancing measures may continue for months. That will impact store capacity for retail and restaurants. For some businesses, these temporary changes could indicate bigger problems.

While bankruptcy doesnt inherently mean that a company will go out of business it's more a financial restructuring it does spell news of changes to come.

Heres a list of all the major companies to have filed for bankruptcy so far since the start of coronavirus.

Dean & Deluca

The New York City-based gourmet foods retailer filed for bankruptcy on March 31, one of the first businesses to show signs of trouble due to coronavirus impact. The company was founded in 1977 and was acquired by Pace Food Retail in 2014.

Apex Parks

Apex Parks, which owns and operates 14 family entertainment and water parks in New Jersey, California, and Florida, filed for Chapter 11 bankruptcy on April 8. A release from the company indicated that they do not intend to close.

FoodFirst, Bravo and Brio Restaurant Parent

FoodFirst Global Holdings, the parent company of restaurant chains Bravo Cucina Italiano and Brio Tuscan Grille, filed for Chapter 11 bankruptcy on April 10. FoodFirst acquired the brands in 2018.

True Religion Apparel

True Religion, a clothing brand known for its jeans, filed for Chapter 11 bankruptcy on April 13. The company, whose trendy denim rose to popularity in the 2000s, also filed for bankruptcy in 2017.

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CMX Cinemas

CMX Cinemas, a chain of movie theaters with dine-in options, filed for Chapter 11 bankruptcy on April 25. The theaters, owned by parent company Cinemex Holdings, was in the process of acquiring the Star Cinema Grill, a deal that was inked only six weeks prior.

Rubies Costume Company

Rubies, which manufactures costumes, wigs, and other festive gear, filed for Chapter 11 bankruptcy on April 30. Rubies claims to be the worlds largest designer and manufacturer of Halloween costumes.

J. Crew

The preppy retailer worn by celebrities and shoppers alike filed for bankruptcy on May 4. The company also owns Madewell, a womens clothing and accessory brand.

Golds Gym

Golds Gym, which owns and operates over 700 gyms in the U.S. and internationally, filed for Chapter 11 bankruptcy on May 4. The company said in a release they hope to be through the filing by Aug. 1, if not sooner.

Neiman Marcus

Luxury department store Neiman Marcus filed for Chapter 11 bankruptcy on May 7. The century-old retailer is one of several traditional department stores that could be headed for trouble.

Stage Stores, (Bealls, Goody's, Palais Royal, Peebles, Gordmans, and Stage Parent)

Stage Stores, which owns and operates almost 800 locations in smaller and more rural communities, filed for Chapter 11 bankruptcy on May 10. The brands sell a variety of goods, including apparel, cosmetics, and home goods.

JCPenney

Based in Plano, Texas, the retailer was founded more than a century ago as one of the countrys first department stores. But it has been on a downturn as people turn to online retailers and fast fashion to shop. JCPenney has faced financial trouble for several years, and filed for Chapter 11 on May 15. The retailer said it will announce the first phase of store closures in the coming weeks.

Pier 1 Imports

Home goods retailer Pier 1 Imports, which filed for Chapter 11 bankruptcy in February, announced May 19 that it is seeking bankruptcy court approval and plans to start a wind-down of business as soon as possible. The company was unable to find a buyer due to coronavirus impact. Pier 1 operates more than 900 stores nationwide.

Hertz

The Hertz Corporation, known for its car rental services, filed for Chapter 11 bankruptcy on May 22. Hertz, which owns other brands including Dollar and Thrifty, underwent a CEO change last week, its fourth in six years.

Tuesday Morning

Discount homewares retailer Tuesday Morning filed for Chapter 11 bankruptcy on May 27. The Texas-based company operates almost 700 stores in 39 states.

This list will be updated on a weekly basis.

Read the rest here:

Which major retail companies have filed for bankruptcy since the coronavirus pandemic hit? Here's the list. - NBCNews.com