The COVID-19 Pandemic Forces Some Companies into Bankruptcy
Bankruptcy lawyers have been expecting a wave of filings due to the COVID-19 pandemic. According to media reports, that wave is beginning to hit shore.
The business press has reported that many prominent companies have recently filed for Chapter 11 protection due to financial distress from the coronavirus pandemic. Although Chapter 11 allows these companies to continue to operate as they try to work out debt reorganization plans, some might still face a rocky time going forward. And many companies are waiting to file in the weeks ahead.
Clothing retailer J. Crew became the first large retailer to file for Chapter 11 protection when it headed to court on May 4. J. Crew has significant debts, with one estimate topping out at $10 billion owed to over 25,000 creditors.
According to Forbes, the company plans to convert $1.65 billion of this debt into equity. They are also seeking $400 in financing through their existing lenders to help them operate as they work their way through bankruptcy proceedings. J. Crew plans to reopen its existing 500 stores once the coronavirus pandemic has passed and nonessential businesses are given the green light to open their doors.
Gyms have been another victim of the lockdown orders issued coast to coast. Started in 1965 in Venice, California, Golds Gym had many famous clients, including Arnold Schwarzenegger, and had expanded into a franchise with almost 700 gyms across the country. Unfortunately, the company filed for bankruptcy on Monday, May 4.
In court filings, the company listed over $100 million in assets and liabilities. According to the Washington Business Journal, they plan to permanently close about 30 stores through the bankruptcy process and reopen the remaining 700 gyms on August 1, 2020.
According to word on the street, retailer Neiman Marcus is preparing to file for bankruptcy protection and is working out the details as we write. The company’s debt pile stands at a staggering $4.3 billion (possibly more). The company has been hammering out a deal with an investor to exchange debt for ownership and control of the company. According to press reports, Neiman Marcus would then obtain $600 million from lenders to keep running as it works through the Chapter 11 process.
The company closed many of its stores when the pandemic first broke in the middle of March, and they have furloughed most of their staff. A completed Chapter 11 would give them a chance to hit the ground running when the lockdowns lift across the country and people return to shopping.
Nowack & Olson Represents Small and Family Businesses in South Florida
If your business is struggling, discuss your options with us today. We understand the unique needs that our business clients have, and we will work with you to determine whether filing for bankruptcy is the best path for your company. With experience in both Chapter 7 liquidations and Chapter 11 reorganizations, we can guide you through the entire process. Contact our Plantation bankruptcy lawyers at Nowack & Olson, PLLC us today to schedule a confidential consultation.