32 Bankruptcy Filings Chalked Up to COVID-19 | Kiplinger

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Wall Street successfully fought off the bear market spurred by the COVID-19 coronavirus outbreak. But the American economic recovery is far from complete, and the virus continues to induce bankruptcy filings across the country.

Research from investment bank Jefferies shows that large-firm bankruptcies more than tripled year-over-year between July and August 2020, and that large-firm bankruptcies had more than doubled through the end of August. By the end of 2020, corporate bankruptcies in the U.S. hit a 10-year high.

2021 hasn’t been as bad thanks to an economic recovery built on the back of stepped-up vaccinations – the 183 filings through April 30 of this year were fewer than the 207 filings to this point in 2020, says S&P Global. Still, COVID-19 is clearly taking its toll.

In many cases, COVID has simply been the straw that broke the camel’s back. The retail industry in particular endured a harrowing past year-plus. Many of these chains were already overloaded with debt and had been suffering from long-term declines amid changing tastes and Americans’ swelling adoption of e-commerce, and were finally pushed over the edge.

But the explosion in bankruptcies hasn’t been limited to retail. COVID-19 has forced companies from several industries to seek out Chapter 11 bankruptcy protection and other types of relief. The energy sector, where the oil declines of 2014-16 weakened several exploration and production companies, saw the coronavirus-sparked oil-demand slump finish off the job in several cases. A few financially wobbly companies in the restaurant and entertainment industries have collapsed, 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. Indeed, our most recent update to this list includes a number of companies that filed for Chapter 11 bankruptcy protection in 2020, but have sinced emerged with a second lease on life.

Here are 32 companies whose 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 forced their hands. Fortunately, for several of these companies, bankruptcy was indeed not the end.

Number of employees and locations as of bankruptcy filing date. All other data is as of July 26 unless otherise indicated.

1 of 32

Washington Prime Group

Outdoor shopping centerOutdoor shopping center
  • Headquarters: Columbus, Ohio
  • Number of employees: Unknown
  • Number of locations: Over 100 properties
  • Filing date: June 13, 2021

Washington Prime Group (WPG, $1.65), a shopping-center real estate investment trust (REIT), describes itself as a “recognized leader in the ownership, management, acquisition and development of retail properties.” The company says its properties attract more than 400 million guests every year.

However, 2020 was anything but a normal year, and its number of guests plummeted.

The pandemic forced temporary mall and store closures and kept shoppers at home. Retailers pushed for rent relief and some shut down altogether. That in turn put pressure on retail landlords such as WPG.

Washington Prime Group filed for Chapter 11 bankruptcy protection on June 13. Its proposal will see $950 million of WPG’s debt restructured, while creditors have agreed to $100 million in financing to allow the company to operate during the bankruptcy proceedings.

As it reorganizes, Washington Prime says it will be business as usual:

“The Company expects operations to continue in the ordinary course for the benefit of our guests, tenants, vendors, stakeholders and colleagues,” WPG says.

2 of 32

Paper Source

Fancy stationeryFancy stationery
  • Headquarters: Chicago, Illinois
  • Number of employees: 1,700
  • Number of locations: 158
  • Filing date: March 2, 2021

Paper Source, which was founded in 1983, sells greeting cards, invitations, gift wrap, paper craft kits, crafting supplies and related products. Most of its stores were forced to temporarily close during the pandemic, putting the squeeze on the retailer.

The company reportedly sought rent breaks from landlords and stretched payment terms with vendors. However, with more than $100 million in debt and $36 million in annual lease costs, Paper Source was forced to file for Chapter 11 bankruptcy protection. The plan was to shutter 11 stores but continue running remaining locations and its e-commerce operations.

In May, Elliott Investment Management, which owns Barnes & Noble, said it would acquire Paper Source, providing it with the necessary funding to exit Chapter 11.

While many retail bankruptcies can be chalked up to the pandemic, this one stood out for its poor optics.

Dozens of greeting card vendors reported Paper Source placed unusually large orders (some reportedly quadruple the normal size) just prior to filing. In addition, company executives were paid $1.47 million in bonuses during the pandemic. After it filed for bankruptcy, company executives sought an additional $1 million in bonuses – even as hundreds of small vendors went unpaid.

3 of 32

Cici’s

Cici's restaurantCici's restaurant
  • Headquarters: Coppell, Texas
  • Number of employees: Unknown
  • Number of locations: 318
  • Filing date: Jan. 25, 2021

Many pizza chains thrived during the pandemic. Pizza was always a popular takeout option, and with many pizza chains already specializing in delivery, they were perfectly positioned for a lockdown. 

Cici’s was different. The Texas-based chain is a pizza buffet restaurant. And while sit-down restaurants struggled, buffet-style eateries were squeezed to the point that many might not recover.

COVID-19 proved deadly to the chain. Parent company Cici’s Holdings saw its revenue decline by more than 50% in 2020. Citing the “unpredictable and unprecedented scale” of the pandemic, the company filed for Chapter 11 bankruptcy protection on Jan. 25, carrying between $50 million to $100 million in liabilities.

At the same time, D&G Investors, which acquired Cici’s debt last December, said it would acquire the company in a debt-for-equity deal. Cici’s quickly emerged from Chapter 11 in March 2021.

4 of 32

Christopher & Banks

A woman looks through clothingA woman looks through clothing
  • Headquarters: Plymouth, Minnesota
  • Number of employees: 3,000
  • Number of locations: 400
  • Filing date: Jan. 14, 2021

Minnesota-based Christopher & Banks joined the long list of clothing retailers that have been pushed into bankruptcy by the pandemic.

The women’s clothing company entered into Chapter 11 bankruptcy protection on Jan. 14, the result of “financial distress resulting from the pandemic and its ongoing impact.” Christopher & Banks faced a lack of foot traffic in malls, yes, but it also suffered from a shift toward more casual clothing as many people began working from home.

Unable to find a buyer, the company said in January that it planned to close its 400 stores across 44. However, in March, a federal bankruptcy court green-lit the $12.7 million unloading of its e-commerce business to ALCC, an affiliate of Hilco Merchant Resources. Store closing sales – including fixtures (never a good sign) – started immediately.

5 of 32

FHC Holdings

Clothes on a rackClothes on a rack
  • Headquarters: Houston, Texas
  • Number of employees: 5,955
  • Number of locations: 700
  • Filing date: Dec. 3, 2020

Houston-based FHC Holdings (FRANQ, $0.20), parent of Francesca’s, filed for Chapter 11 bankruptcy protection on Dec. 3. The boutique women’s clothing seller had reportedly been struggling for several years, but the pandemic proved insurmountable. With half of its stores located in shopping malls which suffered shit-downs and massive declines in foot traffic, Francesca’s saw first-quarter sales drop by 50%.

The company has been trying to catch up in online sales, and marketing to a younger 18-35 demographic. It also deferred nearly $37 million in rent payments. None of this was enough to ward off the inevitable. In December the company said it planned to shutter 140 of its 700 stores. It later added an additional 97 stores to the closure list.

In early February, Francesca’s was sold for $18 million to a group comprised of TerraMar Capital, Tiger Capital Group and SB360 Capital Group. With a new $25 million asset-based revolving credit facility, Francesca’s plans to keep at least 275 boutiques open, along with its e-commerce business and its Houston headquarters.

6 of 32

Guitar Center

Guitar Center signGuitar Center sign
  • Headquarters: Westlake, California
  • Number of employees: 13,000+
  • Number of locations: 269
  • Filing date: Nov. 21, 2020

Guitar Center, the largest retailer of musical instruments in the U.S. filed for Chapter 11…

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