Connect with us


14 of the biggest bankruptcies of 2020—and who might be next in 2021



14 of the biggest bankruptcies of 2020—and who might be next in 2021

One industry after another saw activity grind to a near halt in March as the pandemic broke out in the United States. Retailers contended with stores closed for weeks and shoppers too shellshocked to spend on anything but essentials; energy companies faced big declines in demand and, by extension, prices; health care companies dealt with the sector’s shift toward addressing COVID and away from more standard care—and the list goes on.

The result has been 610 bankruptcies as of Dec. 13, according to S&P Global Market Intelligence. That statistic is the highest it’s since 2012, according to the ratings agency and compares to 552 bankruptcies over the same period last year. (S&P tracks companies, private or publicly traded, with debt traded on the markets.)

Few sectors were spared by the pandemic-fueled recession, judging by the roster of 2020 bankruptcies. That list includes retailers such as J.C. Penney, Neiman Marcus, and J.Crew, car rental giant Hertz, mall operator CBL & Associates Properties, Internet provider Frontier Communications, oilfield services provider Superior Energy Services, and hospital operator Quorum Health.

The wave of bankruptcies was particularly brutal for department stores, clothing companies, and other retailers selling nonessential goods. Consumers gravitated to big-box stores where they could do all their shopping under one roof, and they focused on things like food and home improvements. About 20% of the bankruptcy filings were by nonessential retailers, according to S&P—far more than any other category.

Even as the rollout of vaccines begins in the United States, giving people a much needed morale boost, 2021 will still be a tough one for U.S. companies overall.

Retail, in particular, is likely in for additional pain. As November’s soft consumer spending numbers show, Americans are quick to hold back in the absence of support for the millions without work, or in the presence of new restrictions. And mass vaccinations, which may alleviate the situation, are still months away.

The ratings agencies are keeping a close eye on companies they consider distressed to see how they fare in 2021. On the retail side, that means businesses such as Jo-Ann Stores, Rite-Aid, Party City, and Belk; in the restaurant sector, they include Potbelly and Noodles & Co.

The agency expects overall profits to be up in 2021 since retailers won’t have to invest as much in things like plexiglass dividers, curbside pickup areas, and other such items. But companies that were struggling before the pandemic, and somehow slogged through 2020, are very far from being out of the woods.

“You’re going to see some weaker players fall off,” Moody’s vice president Mickey Chadha tells Fortune.

Here are some of the most notable 2020 bankruptcy filings across different industries, with size of liabilities at the time of a company’s Chapter 11 petition:

  1. Frontier Communications ($17.1 billion): The phone and Internet service provider choked under an enormous debt load and investments in fiber infrastructure that came too late. Yet Frontier is poised to emerge from Chapter 11 soon.
  2. Neiman Marcus ($5.3 billion): The luxury department store’s weak balance sheet proved untenable at a time of declining store sales and upscale brands getting more aggressive about selling via their own stores and sites. It has emerged from bankruptcy protection but faces more of the same tough landscape.
  3. Diamond Offshore Drilling ($6.3 billion): A record drop in crude oil prices as the global economy practically shut down in spring destroyed demand for oil exploration at sea.
  4. Tailored Brands ($1.5 billion): With millions of men working from home during the pandemic, the parent company of suit purveyor Men’s Wearhouse, still struggling to digest its 2014 acquisition of Jos. A. Bank, experienced an untenable sales plunge.
  5. The McClatchy Co. ($1.5 billion): The newspaper company had been struggling with declining print subscriptions for years, leading to its bankruptcy filing in February.
  6. CBL & Associates Properties (more than $1 billion): The mall operator’s second-tier properties have been grappling with declining shopper visits for some time, and COVID-19 pushed the company over the edge.
  7. 24 Hour Fitness Worldwide (more than $1 billion): Gyms were among the first businesses closed during lockdowns and the last to be allowed to reopen, leading to enormous strains on the finances of chains like 24 Hour Fitness.
  8. Hertz (more than $1 billion): The near halt in travel, particularly business travel, proved too much for a company struggling to deal with threats to its business model, forcing it to restructure its debt.
  9. Quorum Health (more than $1 billion): The operator of 24 hospitals struggled with a heavy debt load made tougher to bear as the COVID-19 pandemic reduced its ability to perform elective procedures that are most profitable to hospitals. (It exited Chapter 11 in June.)
  10. J.C. Penney, J.Crew, Ascena Retail (Ann Taylor), Stage Stores, and Stein Mart: These retailers had been wobbly long before COVID-19 arrived and decimated apparel spending, exposing their weaknesses.

More must-read retail coverage from Fortune:

  • Could Biden finally get the national minimum wage to $15?
  • Inside the cottage industry trying to revive Aunt Jemima and other brands with racist roots
  • Poshmark, newly profitable, files for IPO
  • How FedEx, UPS, and Amazon prepared for holiday shipping deadlines this year
  • Why Adidas is finally putting Reebok up for sale


Coinbase’s near-term outlook is ‘still grim’, JPMorgan says, while BofA is more positive about firm’s ability to face crypto winter



Coinbase's near-term outlook is 'still grim', JPMorgan says, while BofA is more positive about firm's ability to face crypto winter

Coinbase is well positioned to successfully navigate this crypto winter and take market share, Bank of America said in a research report Tuesday. It maintained its buy recommendation following the exchange’s second-quarter results.

The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus estimates, while its adjusted $151 million loss before interest, tax, depreciation and amortization was better than the street expected. Importantly, the company remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.

Coinbase shares fell almost 8% in premarket trading to $80.74.

Bank of America notes that Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.

JPMorgan said Coinbase had endured another challenging quarter, while noting some positives.

Trading volume and revenue were down materially. Subscription revenue was also lower, but would have been much worse were it not for higher interest rates, it said in a research report Wednesday.

The company is taking steps on expense management, and in addition to the June headcount reductions, is scaling back marketing and pausing some product investments, the note said.

The bank says the company’s near-term outlook is “still grim,” noting that the exchange expects a continued decline in 3Q 2022 monthly transacting users (MTUs) and trading volumes, but says Coinbase could take more “cost actions” if crypto prices fall further.

JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July, and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.

The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.

Continue Reading


Elon Musk sold $6.9B in Tesla stock in case he’s forced to buy Twitter



Elon Musk sold $6.9B in Tesla stock in case he's forced to buy Twitter

Elon Musk sold $6.9 billion of his shares in Tesla Inc., the billionaire’s biggest sale on record, saying he needed cash in case he is forced to go ahead with his aborted deal to buy Twitter Inc.

“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted late Tuesday after the sales were disclosed in a series of regulatory filings. 

Asked by followers if he was done selling and would buy Tesla stock again if the $44 billion deal doesn’t close, Musk responded: “Yes.”

Tesla’s chief executive officer offloaded about 7.92 million shares on Aug. 5, according to the new filings. The sale comes just four months after the world’s richest person said he had no further plans to sell Tesla shares after disposing of $8.5 billion of stock in the wake of his initial offer to buy Twitter.  

Musk last month said he was terminating the agreement to buy the social network where he has more than 102 million followers and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service. Twitter has since sued to force Musk to consummate the deal, and a trial in the Delaware Chancery Court has been set for October. 

In May, Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5 billion. He had previously announced that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital, and Binance. 

“I’ll put the odds at 75% that he’s buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. “This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”

At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms.” 

Musk, 51, has now sold around $32 billion worth of stock in Tesla over the past 10 months. The disposals started in November after Musk, a prolific Twitter user, polled users of the platform on whether he should trim his stake. The purpose of the latest sales wasn’t immediately clear.  

Tesla shares have risen about 35% from recent lows reached in May, though are still down about 20% this year. 

With a $250.2 billion fortune, Musk is the world’s richest person, according to the Bloomberg Billionaires Index, but his wealth has fallen around $20 billion this year as Tesla shares declined.    

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.

Continue Reading


The rent is too d*mn high for Gen Z: Younger generations are ‘squeezed the most’ by higher rents, BofA says



The rent is too d*mn high for Gen Z: Younger generations are 'squeezed the most' by higher rents, BofA says

Most of Gen Z is too young to remember the 2010 New York gubernatorial candidate Jimmy McMillan.

But over a decade later, they would probably agree with his signature issue (and catchphrase): the rent is too damn high.

This July, median rent payments were 7.4% higher than during the same period last year, according to a Bank of America report released Tuesday. 

The national median price for a one-bedroom apartment has been hitting new highs nearly every month this summer. It was $1,450 for July, according to rental platform Zumper. In the country’s largest city, New York, average rent exceeded a shocking $5,000 a month for the first time ever in June. 

But inflation in the rental market hasn’t hit each generation equally, and no one is getting squeezed harder by the higher monthly payments as Gen Z. Those born after 1996 have seen their median rent payment go up 16% since last July, compared to just a 3% increase for Baby Boomers, BofA internal data shows. 
“Younger consumers are getting squeezed the most by higher rent inflation,” BofA wrote.

The great rent comeback

Early in the pandemic, landlords slashed rents and gave significant COVID discounts to entice tenants to stay instead of leaving urban areas. Once those deals started expiring in 2021, many landlords suddenly raised payments once again, sometimes asking for over double their pandemic value. 

Young people across the board have been hit hard, and rent burdens compared to age can be seen even within a single generation. Younger millennials had their median rent payment grow 11% from last year, while the median payment for older millennials rose 7%. Gen X experienced a 5% median rent increase, according to BofA. 

It’s not a surprise, then, that Gen Z feels so strapped for cash. The majority of young people, 61%, said they want to receive their wages daily instead of twice a week, a practice typically reserved for workers living paycheck to paycheck, according to a report from the Center for Generational Kinetics, which specializes in research across the generations. Rising rent inflation has even priced nearly a third of Gen Zers out of the apartment search altogether. Around 29% of them have resorted to living at home as a “long-term housing solution,” according to a June survey from personal finance company Credit Karma.

It’s no wonder—the rent really is too high.

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.

Continue Reading

Copyright © 2021 Seminole Press.