By Jack Kelly
We are living in a parallel universe. In one world, we see over 50 million people have lost their livelihoods. Millions of Americans are frantically worried about how they will pay their rent or mortgages. Parents and kids don’t know what’s going to happen with schools. Worries abound over whether they’ll stay open or send the students home. Parents may be forced to juggle childcare, homeschooling and holding onto their jobs for dear life.
Meanwhile, in another world, the Dow Jones Industrial Average rallied more than 250 points midday Monday. Apple stock jumped as much as 5%, hitting new highs. Microsoft’s up about 5%, as it may be the buyer of Tik Tok. President Donald Trump views this as a great solution to making the kids happy, screwing over China and further enriching the Tech illuminati.
If Microsoft is handed Tik Tok on a silver app, it signals what we’ve already surmised—the beginning of a new era in which a handful of powerful oligarchical companies control their respective sectors. Midsize, small and family-run companies are crushed and forced out of business or will limp along wounded until they’re put out of their misery.
In only the last few weeks, there was a slew of bankruptcies. The oldest retailer in the nation that was founded in 1826, Lord & Taylor, known for its relatively higher-end fashions filed for bankruptcy protection. How could a chain of shopping stores be expected to compete with Amazon when they’ve been forced to shut down for months on end? The federal and state governments have cherry picked the winners and losers. Presumably, Lord & Taylor didn’t have the political connections and clout to keep their doors open and now they’ll be closed shut.
The clothing retailer has 38 stores and 651 employees, as of the filing (there were prior layoffs), and is now a member of a large and growing group of department-store related bankruptcies, including J.C. Penney, J. Crew, Brooks Brothers, Lucky Dungarees, Neiman Marcus, Lucky Brand, True Religion and others.
The operator of Ann Taylor and Lane Bryant filed for Chapter 11 bankruptcy protection last Thursday, the latest retailer to do so during the pandemic. Mahwah, New Jersey-based Ascena Retail Group, which operates nearly 3,000 stores mostly at malls, had been dragged down by debt and weak sales for years. As part of its bankruptcy plan, the company said that it would close all of its Catherines stores, a “significant number” of Justice stores and a select number of Ann Taylor, Loft, Lane Bryant and Lou & Grey stores.
Tailored Brands joins the growing list of companies paying its top executives nearly $3.3 million in incentives to stay on just ahead of their bankruptcy court protection. Tailored Brands, which owns Men’s Wearhouse and Jos. A. Bank, has filed for bankruptcy, becoming the latest U.S. retail casualty of the coronavirus pandemic that wiped out demand for office attire. The “you’re gonna like the way you look, I guarantee it” guy who founded the company and was unceremoniously kicked out must be rolling over in his grave—even though I don’t think he’s dead.
It’s not just the retailers. U.S. cities are fast running out of cash and face financial ruin. As thousands of companies were forced to shut down, some are now permanently closed, along with millions of people out of work—tax revenue has fallen off a cliff. Local governments’ revenues are thought to be down by about $11.6 billion in 2020 with no end in sight.
For cities in the poorest shape, the pandemic could mean bankruptcy. Those who are a little better off will see a degradation in the quality of the lives of their citizens, as police, teachers, garbage collectors, firemen and other public employees will be terminated to save costs.
California Pizza Kitchen is the latest fast-casual chain to file for bankruptcy, as the pandemic and its debt burden hampers its operations. The 35-year-old pizza chain filed for Chapter 11 Thursday, explaining that the process will help it “reduce its long-term debt load, and quickly emerge from bankruptcy as a much stronger company.” It warned that it will close unprofitable locations, but didn’t say how many of its 200 global restaurants will be affected.
Like the retailers, food-related companies, such as Chuck E. Cheese, Italian chain Vapiano, Le Pain Quotidien’s U.S. unit and FoodFirst Global Restaurants, which owns Bravo and Brio and the largest franchisee of Pizza Hut and Wendy’s with thousands of locations.
Noble Corp., an operator of offshore oil-and-gas drilling rigs, filed for bankruptcy Friday. It is the latest victim of falling oil demand, as the coronavirus pandemic ravages the global economy.
Some of the largest oil and gas companies that have filed for Chapter 11 in 2020, including Chesapeake Energy, Ultra Petroleum, Whiting Petroleum, Denbury Resources, Extraction Oil & Gas and others.
No one is safe, not even the company that provides us with the soft, pleasant and sometimes irritating elevator music. The owner of Muzak has filed quick bankruptcy to cut $400 Million in debt.
Mood Media—a provider of background music for stores, restaurants and hotels—has filed a prepackaged Chapter 11 bankruptcy, intending to cut roughly $400 million in debt from its balance sheet and to hand control to lenders.
The bankruptcies will shutter thousands of stores, restaurants and facilities and lay off tens of thousands of workers. As part of the parallel universe, it’s interesting to note that nearly a third of more than 40 large companies seeking U.S. bankruptcy protection during the coronavirus pandemic awarded bonuses to executives within a month of filing their cases, according to Reuters.
This is done through a loophole. Under a 2005 bankruptcy law, companies are banned, with few exceptions, from paying executives retention bonuses while in bankruptcy. As you can already guess, many firms made payouts before filing.