JCPenney files for bankruptcy protection

BY Richard Summerfield

JCPenney, one of the largest and most historic clothing and homeware retailers in the US, has filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of Texas.

JCPenney had about 846 stores, an e-commerce site and about 95,000 employees around the world, prior to the filing. In response to the COVID-19 outbreak, in March, the company announced the temporary closure of its stores and business offices. Though some of its locations recently reopened, the majority are still closed. Under the terms of the company’s business plan, which was filed with the US Securities and Exchange Commission (SEC), JCPenney plans to permanently close 242 stores, about 30 percent. It has yet to disclose which locations will be shuttered.

The company has reached an agreement with most of its lenders on the turnaround plan that will allow it to stay in business as a more financially healthy company. In a statement announcing the filing, JCPenney confirmed it had approximately $500m in cash on hand as of the Chapter 11 filing date. The company has also received commitments for $900m in debtor-in-possession (DIP) financing from its existing first lien lenders, which includes $450m of new money.

Though the company cited the COVID-19 outbreak for its filing, in reality JCPenney has suffered many years of mismanagement and decline. The company’s most recent profitable year was 2010, and its net losses since have totalled $4.5bn. In 2019, JCPenney suffered a 5.5 percent decline in first quarter sales and was forced to close 27 stores across the country.

“The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country,” said Jill Soltau, chief executive of JCPenney. “As a result, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company.

She continued: “Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy – and our efforts had already begun to pay off. While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.”

JCPenney became the fourth national retailer to file for bankruptcy in the US in May, following J.Crew Neiman Marcus and Stage Stores (SSI).

News: JCPenney files for bankruptcy

Satellite operator Intelsat files for Chapter 11

BY Fraser Tennant

In a move to enable its financial restructuring ahead of C-band spectrum changes for 5G services, as well cut some of its $15bn of debt, communications satellite services provider Intelsat and certain of its subsidiaries have filed for Chapter 11 bankruptcy.

The restructuring process is intended to enhance Intelsat’s liquidity and substantially reduce its legacy debt burden, allowing the company to emerge from Chapter 11 with a strengthened balance sheet to complement its strong operating model and future growth plans.

To help provide sufficient liquidity during the restructuring process to support ongoing operations, Intelsat has secured a commitment for $1bn of debtor-in-possession (DIP) financing, subject to court approval.

“This is a transformational moment in the history of our company,” said Stephen Spengler, chief executive of Intelsat. “Intelsat is the pioneer and foundational architect of the satellite industry. For more than 50 years, we have been respected for quality, innovation, sector leadership and premium services. Our success has come despite being burdened in recent years by substantial legacy debt. Now is the time to change that.”

One of the primary catalysts for restructuring the balance sheet now is Intelsat’s desire to participate in the accelerated clearing of C-band spectrum under the Federal Communications Commission (FCC) order in support of a build-out of 5G wireless infrastructure in the US.

“We intend to move forward with the accelerated clearing of C-band spectrum in the US and to achieve a comprehensive solution that would result in a stronger balance sheet,” continued Mr Spengler. “This will position us to invest and pursue our strategic growth objectives, build on our strengths, and serve the mission-critical needs of our customers with additional resources and wind in our sails.”

While it moves through the Chapter 11 restructuring process, Intelsat’s day-to-day operations, engagement with customers and partners, and capital investments will continue as usual. At the same time, the company is also managing the economic slowdown impacting several of its end markets caused by the coronavirus (COVID-19) global health crisis.

Mr Spengler concluded: “At the end of the Chapter 11 process, we will be on stronger financial footing for the future, further enhancing our industry-leading portfolio of space-based communications services and paving the way for our continued innovation and investments to benefit our customers.”

News: Intelsat files for Chapter 11 bankruptcy

Covéa’s $9bn deal to acquire PartnerRe called off

BY Fraser Tennant

Citing market dislocation caused by the coronavirus (COVID-19) pandemic, French insurer Covéa has abandoned a $9bn deal to purchase PartnerRe, a Bermuda-based reinsurer owned by investment holding company Exor.

The deal to acquire PartnerRe is the biggest involving a European buyer to collapse due to the COVID-19 pandemic, which has made it increasingly difficult for bidders to close pre-crisis transactions due to drops in share price.

“In view of the unprecedented current conditions and the significant uncertainties weighing on the global economic outlook, we have told Exor that the context does not allow the proposed acquisition of PartnerRe to be carried out on the terms initially envisaged,” explained Covéa in a statement.

In response, Exor, the holding firm of Italy’s Agnelli family, acknowledged the French insurer’s notice that it will not honour its commitment to acquire PartnerRe in accordance with the terms of the Memorandum of Understanding (MOU) announced on 3 March 2020. Furthermore, the Exor board of directors expressed its strong belief that a sale of PartnerRe on terms inferior to those established in the MOU fails to reflect the value of the reinsurer.

“In attempting to renegotiate the agreed deal terms, Covéa has never suggested the existence of a material adverse change, including pandemic risk, or any other issues at PartnerRe that would explain its refusal to honour its commitments under the MOU and we believe that no such basis exists,” said Exor in a separate statement.

The Exor board also stated that PartnerRe, which enjoys one of the highest capital and liquidity ratios in the global reinsurance industry, is not expected to be significantly affected by the COVID-19 outbreak.

An Exor spokesperson said that Covéa is required to pay an indemnity, although the amount due is confidential. However, the MoU between Covéa and Exor stipulated a $175m penalty should Covéa pull out of the deal.

News: France's Covea backs out of $9 billion purchase of Exor's PartnerRe

Avianca files for Chapter 11 bankruptcy

BY Richard Summerfield

Avianca Holdings, the second largest airline in Latin America, has filed for Chapter 11 bankruptcy protection after failing to meet a bond payment deadline, while its pleas for COVID-19 aid from Colombia’s government have so far been unsuccessful.

The company filed for bankruptcy in a court in New York on Sunday as the coronavirus outbreak continues to impact the aviation industry. Global air travel has fallen by 90 percent since the outbreak, according to the International Air Transport Association. The body predicts Latin American airlines will lose $15bn in revenues this year – the biggest drop in the industry’s history.

“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic,” said Anko van der Werff, chief executive of Avianca. “Despite the positive results yielded by our ‘Avianca 2021’ plan, we believe that, in the face of a complete grounding of our passenger fleet and a recovery that will be gradual, entering into this process is a necessary step to address our financial challenges.

“When government-mandated air travel restrictions are lifted and we are able to gradually resume our passenger flights, we look forward to welcoming back our furloughed employees and playing a leading role in restarting the economy in Colombia and our other key markets,” he continued. “We greatly appreciate the dedication of our employees to Avianca and to serving the more than 30 million passengers that fly our airline each year. We remain committed to our purpose to connect people, families and businesses.”

Undoubtedly, the COVID-19 crisis has not helped matters. Avianca has not flown a regularly scheduled passenger flight since late March and most of its 20,000 employees have gone without pay through the crisis. Furthermore, the pandemic has cut more than 80 percent of Avianca’s income, and the company has been struggling with high fixed costs. It had debts of $7.3bn in 2019.

Avianca previously filed for bankruptcy in the early 2000s and was rescued by a deal with Bolivian oil tycoon German Efromovich.

News: World's second-oldest airline, Avianca, driven to bankruptcy by coronavirus

Gold’s Gym files for Chapter 11 bankruptcy

BY Richard Summerfield

Prominent US gym chain Gold’s Gym has filed for Chapter 11 bankruptcy protection in Dallas as it has been unable to keep up with debt payments after the prolonged shutdown caused by the COIVD-19 outbreak. The company listed assets and liabilities of around $100m, according to court papers.

In April, Gold’s Gym permanently closed about 30 company-owned locations due to the COVID-19 outbreak and said that the decision to close the locations was made “to maintain the strength and growth of the potential of the brand as well as ensure the continued viability of the company for decades to come”.

According to Gold’s Gym, the Chapter 11 filing will not have a further impact on its current operations and it plans to emerge from bankruptcy by August.

“We want to be 100 percent clear that Gold’s Gym is not going out of business,” said Adam Zeitsiff Gold’s Gym’s president and chief executive. “The brand is strong, and we’ll continue to innovate and grow our digital business, our licensing program and our global footprint as we focus on serving our millions of members across the world.”

“The company will be seeking court approval to continue paying suppliers, vendors, and employees in the ordinary course on a go-forward basis,” the company said in a statement. “No single factor has caused more harm to our business than the current COVID-19 global pandemic. This has been a complete and total disruption of every one of our business norms, so we needed to take quick, decisive actions to enable us to get back on track.”

Gold’s Gym operates more than 700 gyms around the world, according to its website, which also noted that gyms owned by franchisees will not be affected by the restructuring.

The company will also try to sell itself under terms proposed by TRT Gym Asset Holdings LLC, according to the court documents. TRT Holdings Inc., the majority shareholder of Gold’s Gym, is in discussions with the company over the terms of a debtor-in-possession and exit loan to get it through the restructuring.

News: Gold’s Gym files for bankruptcy protection