JC Penney could join a growing list of bankruptcies during the coronavirus pandemic

Key Points
  • The economic uncertainty driven by the Covid-19 pandemic has pushed struggling companies over the edge into bankruptcy proceedings.
  • There has been a notable increase in bankruptcy filings during the pandemic, according to the American Bankruptcy Institute.
  • The group reported 560 commercial Chapter 11 filings in April, a 26% increase from last year. 
A man walks past a store going out of business on May 5, 2020 in the Brooklyn borough in New York City.
Angela Weiss | AFP | Getty Images

The coronavirus pandemic has pushed many struggling companies over the edge and into bankruptcy.

Stay-at-home orders forced many nonessential businesses to close and weakened demand for all types of goods and services overnight. During the past eight weeks, 36.5 million people have filed for jobless benefits. The slowdown has hit some industries harder than others.

The number of bankruptcy filings has risen sharply, with little revenue coming in, according to data from the American Bankruptcy Institute. The group reported 560 commercial Chapter 11 filings in April, a 26% increase from last year. 

"As financial challenges continue to escalate amid this crisis, bankruptcy is sure to offer a financial safe harbor from the economic storm," the institute's executive director, Amy Quackenboss, said in a statement

Companies that headed into this downturn without a financial cushion are already feeling the toll of the abrupt downturn. That's evident among retailers, which had been suffering from online competition and high debt prior to the pandemic. Retail sales tumbled 16.4% in April, with clothing stores taking this biggest hit. 

This month, Neiman Marcus and J.Crew have filed for Chapter 11 protection. J.C. Penney is also weighing a bankruptcy filing, which could come as soon as Friday, according to people familiar with the matter. 

However, with states beginning to reopen businesses and lift stay-at-home restrictions, stores could see customers return. The question is, will these sales be enough to make a difference. Apparel retailers such as Ascena, Tailored Brands and Lands' End are among those being watched carefully.

Even industries on solid footing prior to the outbreak may be forever changed. The cruise industry is a good example. Would-be travelers may have a hard time shaking the images of the Diamond Princess, which had more than 700 passengers and crew infected with the coronavirus.

Members of media gather at the Diamond Princess cruise ship, operated by Carnival Corp., docked in Yokohama, Japan, on Friday, Feb. 7, 2020.
Toru Hanai | Bloomberg Getty Images

Then there are the normal shocks that businesses can usually handle, but the Covid-19 crisis makes those disruptions all the more challenging. The oil sector fits into this category. 

Employers started limiting business travel in late February. By mid-March, workers started to log in from home to do their jobs. Oil demand plummeted with the decline in business and personal travel. The energy industry has also grappled with a tense price war between Russia and Saudi Arabia. Diamond Offshore Drilling and Whiting Petroleum cited these factors in their recent bankruptcy filings, while other companies like Chesapeake Energy remain in distress. However, with the price war over and travel restrictions lifting, oil prices are beginning to rally.

Here is a rundown of the major companies dealing with the financial fallout of the coronavirus.

Notable bankruptcy filings

Diamond Offshore Drilling

Employees attach hooks from a crane to a set of chains on the quay side, in view of the Ocean Vanguard mobile offshore drilling unit, operated by Diamond Offshore Drilling Inc. in the Port of Cromarty Firth in Cromarty, U.K., on Tuesday, July 26, 2016.
Matthew Lloyd | Bloomberg | Getty Images

The contract drilling company filed for Chapter 11 bankruptcy on April 26. The Houston-based company named low oil demand amid the coronavirus outbreak and the "price war" between OPEC and Russia as factors that caused its business to decline. 

Prior to filing for bankruptcy, Diamond Offshore skipped an interest payment and secured restructuring advisers. The company also recently drew down $400 million under a revolving credit facility. Diamond Offshore currently has enough capital to continue normal operations as it undergoes restructuring efforts, according to a company statement.

Diamond Offshore reported $981 million in revenue in 2019. The company had employed 2,500 workers at the end of last year. 

Frontier Communications

The high-speed internet company announced April 14 that it was initiating bankruptcy proceedings. Frontier Communications also said it was proceeding with the sale of its Washington, Oregon, Idaho and Montana operations and assets to Northwest Fiber for around $1.35 billion in cash.

The company expects its restructuring plan to reduce its debt by more than $10 billion. It also said it has received $460 million in debtor-in-possession financing. Combined with the company's more than $700 million in cash, the DIP financing will allow Frontier to have more than $1.1 billion in liquidity that will help it meet operational needs.

Frontier has fiber-optic and copper networks in 29 states. The company said it had $8.1 billion in annual revenue in 2019, according to an SEC filing.

Gold's Gym

The fitness chain filed for bankruptcy on May 4. Gold's Gym plans to permanently close around 30 company-owned gyms, but its franchised locations will reopen as coronavirus restrictions are lifted.

The Dallas-based company expects to emerge from bankruptcy by Aug. 1. It was bought in 2004 by TRT Holdings for $158 million. Gold's Gym operates nearly 700 gyms around the world. 


The satellite operator announced Wednesday that it filed for bankruptcy protection. The company reported almost $15 billion in debt at the end of 2019, according to an SEC filing, and previously signaled trouble when it skipped a $125 million interest payment in April.

Intelsat, which provides satellite services to customers in the media and government sectors, said it saw significant reductions in demand because of the pandemic.

The company secured $1 billion in debtor-in-possession financing, which will help provide liquidity during the restructuring process. Intelsat reported revenue of $2.1 billion at the end of 2019.


A J. Crew store on 5th Avenue remains closed on May 4, 2020 in New York City.
Bryan Thomas | Getty Images

The New York apparel company filed for bankruptcy on May 4 after struggling with slumping sales and huge debt.

Its debt was largely the legacy of a leveraged buyout by private-equity firms TPG Capital and Leonard Green & Partners, which bought it for $3 billion in 2011. J.Crew had hoped to ease some of its debt burden by taking its more successful Madewell brand public this spring. But the initial public offering was nixed in March as coronavirus slowed down the economy and sparked a huge market sell-off. 

The retailer had roughly $2.5 billion in annual sales, according to Moody's. But with all its locations forced to close temporarily to halt the spread of Covid-19, sales slowed to a trickle. 

As part of the bankruptcy proceedings, J.Crew's lenders will convert around $1.65 billion of its debt into equity. The retailer also secured $400 million in financing from current lenders in order to stay in operation during its restructuring.

John Varvatos Enterprises

The menswear brand filed for Chapter 11 bankruptcy on May 6 as part of an agreement to sell all of its business and assets to British private equity firm Lion Capital. John Varvatos said that along with the rest of the luxury retail industry, it had "been greatly impacted by the negative effects of the coronavirus pandemic." The outbreak forced the company to temporarily close its stores.

As part of the sale agreement, Lion Capital will provide debtor-in-possession financing that will help support the company's operations when combined with its projected cash flows. The private equity firm was already an investor in John Varvatos, having purchased a majority stake in the company in 2012 for an undisclosed amount. 

Neiman Marcus

Bankruptcy consultant on the lasting scars of Covid-19 on retail sector

The luxury department store managed to restructure its massive debt outside of bankruptcy proceedings last year, but that was not the case in 2020. The Dallas-based company filed for bankruptcy on May 7 after skipping millions of dollars in debt payments in April. All of of its stores, including its iconic Bergdorf Goodman stores in New York City, closed March 17 due to the coronavirus pandemic, and the company furloughed most of its 14,000 workers. Even before the outbreak, the retailer faced competition from online rivals and had limited access to cash. 

But don't expect massive going-out-of-business sales, which followed the Barney's bankruptcy last year. Neiman Marcus has received funding and expects to reopen its stores. It has $675 million in financing from creditors, which will allow it to operate during restructuring. Its will receive $750 million in funding when it exits bankruptcy, which it hopes to do in the fall. In filing for bankruptcy, the company will have to address the more than $4 billion in debt left over from it was sold to private equity firm Ares Management and the Canada Pension Plan Investment Board through a $6 billion leveraged buyout in 2013.

The retailer operates 43 Neiman Marcus stores and two Bergdorf Goodman stores. In March, it said it planned to shutter its off-price Last Call locations. Neiman has started to reopen stores for curbside pick-up or through private appointment. 

Stage Stores

The company, which operates department stores under brands such as Gordmans, Bealls and Goody's, filed for bankruptcy on May 10 and is currently winding down its operations. It is looking for potential buyers of its business and assets, according to a company statement.

The retailer previously struggled with competing against large-scale retailers as well as e-commerce sellers. The pandemic further burdened the retailer by causing Stage Stores to temporarily close all of its 738 locations and furlough virtually all of its store and distribution employees. The retailer is now in the process of beginning to reopen stores to conduct liquidation sales, according to Stage Stores President and CEO Michael Glazer.

Stage Stores operates the chains in mostly rural areas across 42 states. The company had roughly 13,600 full-time and part-time employees as of February 2019 and reported $1.58 billion in sales in the last fiscal year.

True Religion Apparel

The denim retailer filed for Chapter 11 bankruptcy for the second time in less than three years on April 13. Known for its premium jeans, the company has struggled in recent years with competition from discount retailers and the rise of athleisure wear. With the retail industry hard hit by the coronavirus, True Religion said in its court filing that it would've preferred to wait out the financial instability and stay-at-home restrictions prompted by the outbreak, but "simply could not afford to do so."

The company's largest lenders, ABL and Term Loan, are providing more capital to help with its restructuring. True Religion said it had assets and liabilities ranging from $100 million to $500 million, according to the filing. Until its stores open up, the company plans to continue focusing on its e-commerce sales. 

True Religion was taken private when it was bought by investment management firm TowerBrook Capital Partners in 2013 through a transaction valued at $824 million. 

Ultra Petroleum

The energy company said Thursday it has filed for bankruptcy and agreed to a balance-sheet restructuring with its creditors. Ultra Petroleum previously entered Chapter 11 proceedings in 2016.

Ultra Petroleum previously warned of a potential filing in its fourth-quarter earnings release from April 14. On top of the company's approximately $2 billion in debt as of Dec. 31, Ultra Petroleum said in another SEC filing it faced "business disruption" from the coronavirus.

Through the restructuring agreement, Ultra Petroleum secured financing of up to $25 million and a revolving credit facility with an initial borrowing base of $100 million from lenders. The company said it will be able to eliminate $2 billion in debt.

Ultra Petroleum's operations are primarily focused on natural gas reserves in Wyoming. The company reported $742 million in revenue for 2019.

Virgin Australia 

Australia's second-biggest airline announced April 21 that it is undergoing third party-led restructuring that could potentially lead to a sale.

The pandemic has crippled the travel industry as airlines seek government aid to stay afloat. Virgin Australia was rejected for a 1.4 billion Australian dollar ($897 million) government loan before entering into the Australian equivalent of Chapter 11 bankruptcy proceedings. However, Virgin Australia was struggling even before the pandemic hit and has posted an annual loss for seven consecutive years. 

The company currently has debt of AU$5 billion ($3.2 billion) and more than 10 parties have expressed interest in restructuring the company. Sir Richard Branson, founder of Virgin Group, a major shareholder of Virgin Australia, said in a tweet that his company would work to make Virgin Australia healthy again. 

Virgin Australia has a share of around one-third of Australia's domestic airline market. If the company ceased operations, its rival Qantas Airways would have a virtual monopoly. The company employs 10,000 people directly and 6,000 people indirectly.

Whiting Petroleum

Whiting Petroleum filed for bankruptcy on April 1, the first shale company to do so after the Saudi-Russia price war and the drop in oil demand driven by the Covid-19 pandemic. Whiting said both of these factors contributed to its decision to file for bankruptcy.

The oil and gas company said it plans to convert more than $2.3 billion in senior notes into new equity, which would account for 97% of the reorganized company's ownership. Whiting plans to provide payment in full of its revolving credit facility and be out of Chapter 11 proceedings within five months. The company said it has $585 million of cash on its balance sheet and will continue normal business operations.

Whiting's business is concentrated in the Rocky Mountain region of the U.S., with its largest projects in North Dakota and Colorado. The company's market valuation has shrunk to $32 million from its $15 billion peak in 2011. 

Nearing potential bankruptcies

Chesapeake Energy

Chesapeake Energy considers bankruptcy restructuring of its $9 billion debt

The oil and gas company is reportedly preparing a bankruptcy filing after its business took a hit from the Saudi-Russia price war and declining demand for oil amid the coronavirus pandemic. The Oklahoma City-based company was once at the forefront of the U.S. shale boom.

The company was burdened with $9 billion in debt even before the pandemic and price war. Chesapeake is in talks to secure $1 billion in debtor-in-possession financing that would help it fund operations and is considering skipping a $192 million payment due in August. It also faces a July 1 payment of $136 million.

Founded in 1989, Chesapeake has operations in five U.S. states, including Pennsylvania, Texas and Louisiana. It employed about 2,300 people as of the end of 2019. 


The car rental company said there are doubts about its ability to continue as a going concern. It has secured debt restructuring advisers and is preparing for negotiations with creditors over its $17 billion in debt.

The car rental industry has taken serious blows from the coronavirus pandemic, and Hertz laid off 10,000 people amid the crisis, incurring employee termination costs of $30 million. Even before the outbreak, Hertz and other rental companies faced competition from rideshare companies like Uber

The Estero, Florida-based company is now working with restructuring experts at law firm White & Case and investment bank Moelis & Co. in order to address its debt issues. Another factor weighing on the company's finances is that Hertz borrows against the value of its used vehicles. The value of used cars has plunged amid declining demand caused by the pandemic. 

The company's largest shareholder is billionaire investor Carl Icahn and its shares have lost more than three-quarters of their value since late February. Hertz had about 38,000 employees as of the end of 2019 with 29,000 at its U.S. locations. The company operates approximately 10,200 corporate and franchisee locations, including those under its Dollar and Thrifty brands.

JC Penney

Signage is displayed outside a JC Penney Co. store in Chicago, Illinois.
Christopher Dilts | Bloomberg | Getty Images

The clothing retailer is exploring filing for bankruptcy protection and could file as soon as Friday.

The Plano, Texas-based company faces numerous challenges, including slumping sales and nearly $4 billion in debt. Most of J.C. Penney's stores have been closed since March 18 because of the coronavirus. The company decided to furlough most of its hourly workers starting April 2. Penney also recently had to go to court to keep makeup seller Sephora from pulling out of its stores. 

One of the most tell-tale signs of Penney's troubles was its decision to skip a $12 million interest payment due on April 15 and a $17 million one due May 7. Upon missing the first payment, the company entered a 30-day grace period "in order to evaluate certain strategic alternatives," according to a SEC filing. CNBC reported it has since made the $17 million payment, but that could be the result of talks with its lender. J.C. Penney is hoping to secure about $450 million to fund its operations in bankruptcy.

The company operates about 850 stores in the U.S. and employs nearly 90,000 workers. However, the retailer may have to permanently close 200 of these stores as part of its bankruptcy process. Penney saw total net sales for the fourth quarter ended Feb. 1 fall 7.7% to $3.38 billion from a year earlier.

Lord & Taylor

The department store operator is reportedly preparing for bankruptcy and plans to liquidate inventory in its all of its stores once restrictions to curb the spread of Covid-19 are lifted. The retailer does not expect to survive the bankruptcy process, sources told Reuters, which first reported the news.

Founded in 1826, Lord & Taylor was once a major retailer in the U.S., but it had difficulty standing out among rivals such as Macy's and off-price retailers such as TJX Companies, which operates TJ Maxx and Marshalls. Department stores in general have faced challenges from online retailers and consumers purchasing less apparel.

Lord & Taylor owner Le Tote owes 33.2 million Canadian dollars ($23.53 million) from a promissory note to Hudson's Bay Company after buying the retailer from the Canadian department store chain for CA$100 million in 2019. Hudson's Bay, which owns Saks Fifth Avenue, maintained possession of some of Lord & Taylor's real estate and took on responsibility for its rent payments. The company could use a bankruptcy filing to take some of its leases back from Lord & Taylor. 

Lord & Taylor operates 38 department stores in the U.S., the majority of which are concentrated in the Northeast, a region hard-hit by the coronavirus. It is still possible the company could seek other options outside of bankruptcy, Reuters reported. 

Mohegan Gaming & Entertainment

The gaming company owns the Mohegan Sun casino in Connecticut, which closed March 17 after the state shuttered nonessential businesses amid the pandemic. MGE said that as a result of the uncertainty caused by the virus, it deferred making an interest payment of approximately $19.7 million due on April 15, according to an SEC filing. The company also furloughed about 98% of employees, according to another filing

Sur La Table

The premium cookware seller is preparing for bankruptcy after it was forced to close stores and cancel cooking classes, according to a Bloomberg report. Sur La Table is also reportedly pursuing a sale. The chain, which has around 125 stores, was purchased by Investcorp for $146 million in 2011.

A huge increase in U.S. bankruptcies has further to go: Attorney