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Reorg Radio
Americas Core Credit: Navigating Chapter 11 When Short on Financing Options (May 10, 2020)
May 10, 2020
39:58
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Mark Fischer, a director of credit research with expertise in distressed companies, and Sean Daly, a legal analyst specializing in bankruptcy issues, delve into navigating Chapter 11 amid financial strains. They analyze J. Crew and Neiman Marcus's bankruptcy strategies, highlighting challenges exacerbated by COVID-19. The duo discusses Puerto Rico's revised fiscal plan and the impacts on pensioners versus bondholders. They also explore broader trends in significant bankruptcy cases and the struggles facing the coal industry, emphasizing the delicate balance between creditors and debtors.
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Quick takeaways
- J. Crew and Neiman Marcus both filed for Chapter 11, driven by pandemic-related shifts in retail and substantial debt obligations.
- Companies face severe liquidity challenges during bankruptcy, leading to negotiations with landlords and courtroom disputes over lease terms.
Deep dives
J. Crew's Chapter 11 Filing
J. Crew filed for Chapter 11 bankruptcy in Virginia, addressing a substantial debt of $1.65 billion by converting it into equity through a transaction support agreement with its lenders and sponsors. The company's Madewell division will remain intact, with Libby Waddle continuing as CEO. A significant aspect of J. Crew's strategy includes securing a $400 million dip facility aimed at providing liquidity during the restructuring. The filing was largely attributed to the adverse effects of the COVID-19 pandemic, particularly the forced closure of retail stores and a considerable drop in sales, leading to expected losses nearing $900 million.
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