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The pandemic has devastated many of the country’s small-business owners; nearly a quarter of companies closed either temporarily or permanently in March and April, according to a study published by the National Bureau of Economic Research. But for firms that have been part of their communities for 100 years or more, there’s more at stake than livelihood — there’s legacy and, in some cases, generations of family ties, the New York Times reported. Since March, the pandemic has claimed at least a half-dozen businesses in or near the century club. For example, the Boston Hotel Buckminster, which opened in 1897, closed its doors; Ritz Barbecue, which opened in a small shed in Allentown, Pa., in 1927, served its last ribs and ice cream last month; Hickory Grove Greenhouses, just north of Allentown, decided to close after 103 years; and Michigan Maple Block Company, a wood products company in northern Michigan, is shuttering its manufacturing plant and laying off 56 workers after 139 years. For business owners trying to chart the future — whether they’re the fifth generation or the second — Jennifer Pendergast, executive director of the Center for Family Enterprises at Northwestern University recommends that they find someone who can be their “truth teller,” who will look at the numbers and the emotions of continuing. If the math doesn’t work and the business isn’t viable, there’s no point in keeping it alive. But if it is, then she encourages owners to ask themselves if the work is still meaningful to the family.

Cirque du Soleil Entertainment Group said yesterday it reached a new purchase agreement with its secured lenders, in a move that would help kick-start the bidding process for the financially strapped circus troupe, Reuters reported. The Cirque said in a statement that it entered into a new stalking-horse purchase agreement with its first-lien and second-lien secured lenders, confirming earlier reports. The Montreal-based Cirque, which grew from a troupe of street-performers in the 1980s to a company with global reach, has slashed about 95 percent of its workforce and suspended shows due to the COVID-19 pandemic. The creditors’ agreement replaces an earlier deal with Cirque shareholders including TPG Capital and Fosun International Ltd which included debt financing from a Quebec government body. A court in the Canadian province of Quebec will be asked on Friday to approve the stalking-horse agreement, which is an opening offer that other interested bidders must surpass if they want to buy the company. The deal allows the creditors to acquire the Cirque’s assets while largely cutting down the company debt, the statement said. Cirque has $1.1 billion in debt across first-lien and second-lien creditors.

Aeromexico, Mexico’s largest airline, defaulted on interest payments for two debt issuances, a representative for the debt holders said yesterday, Reuters reported. Like other airlines, Aeromexico has been suffering from a drop in demand caused by the coronavirus pandemic. Late last month, the company said it had initiated chapter 11 bankruptcy proceedings. The default was for a total amount of 3 million Mexican pesos ($135,000), financial group CI Banco said in a statement sent to the Mexican stock exchange.

The International Monetary Fund warned that the rate of bankruptcy for small- and medium-sized businesses may triple this year in the absence of sufficient government support, threatening to stall the economic recovery and cause financial instability, Bloomberg News reported. A staff analysis of 17 countries suggests that bankruptcies for the firms could surge to 12 percent, from 4 percent before the pandemic, the IMF said in a report today. Italy would see the biggest increase due to a large drop in aggregate demand and high share of production in contact-intensive industries. Across the Group of 20, relief from taxes and social security contributions, grants and interest rate subsidies have been an important salve, the IMF said. Bankruptcy rates in the services sector in the average country may climb by more than 20 percentage points in administration services, arts, entertainment and recreation, and education. Essential activities like agriculture, water and waste may experience only small growth in bankruptcy rates, the IMF said. More than one third of small businesses in Canada, South Korea, the U.K. and U.S. worry about viability or expect to close permanently within the next year, according to the Washington-based fund. While the fiscal costs of support for firms are substantial and rising debt levels are a serious concern, the costs of premature withdrawal are greater than the cost of continued support where needed, Managing Director Kristalina Georgieva said in a related blog post.

More and more hospitals are in danger of going bankrupt the longer the coronavirus surge lasts. Through June of this year, 29 hospitals have declared bankruptcy. During the full 2019 calendar year, there were 30 such bankruptcies, the Washington Examiner reported. As the pandemic grew in March, hospitals saw steep revenue declines in their most profitable areas. Many states restricted the ability of hospitals to perform elective surgeries and outpatient procedures. Additionally, emergency room volumes dropped as more people did not visit the hospital for fear of COVID infection. "Hospitals were left with critical care and inpatient services, and that is the least profitable revenue for hospitals," said Nathan Kaufman, managing director of Kaufman Strategic Advisors. "That puts hospitals in a very precarious financial position … hospitals in difficult financial condition prior to COVID are now in dire straits." The hospital industry has been on rocky terrain financially for years. The Posnelli-TrBK Distress Index measures the distress in an industry based on recent chapter 11 filings in that industry. The closer the index is to zero, the healthier the industry. In the first quarter of 2020, the index for hospitals stood at 233. More than 260 hospitals furloughed employees to make ends meet between March and June. Most notably, the esteemed Mayo Clinic furloughed and reduced the hours of 30,000 employees to offset an estimated $3 billion in losses. According to the American Hospital Association, hospitals nationwide lost over $161 billion due to canceled surgeries and other services from March to June of this year. In March and April, 55 percent fewer people sought care at hospitals, while visits from the uninsured rose 114 percent, according to Strata Decision Technology. Yet hospitals are still struggling with ER volume, even in areas where the pandemic has abated. Read more. 

Don't miss the "The Pros and Cons of Transactions Involving Distressed Hospitals and Health Care Providers" session at ABI's Mid-Atlantic Virtual Bankruptcy Workshop on August 6-7. Sessions offer up to 4/4.5 hours of CLE/CPE credit, including 1 hour of ethics credit, for a total price of $100. Register today. 

California Resources Corp. filed for chapter 11 yesterday after defaulting on interest payments, becoming the latest U.S. energy company to seek bankruptcy protection in recent months following the slump in oil prices, Reuters reported. The oil and gas producer reached an agreement for $1.1 billion debtor-in-possession financing package, which also refinances the company’s current revolving loan facility. The oil driller filed for pre-arranged restructuring in the bankruptcy court in the Southern District of Texas, and listed both assets and liabilities in the range of $1 billion to $10 billion. California’s biggest oil and natural gas producer has been weighed down by massive borrowings since its spinoff from Occidental Petroleum in 2014. Like many of its peers, California Resources cut its production and capital spending, and also told investors in May that the company might not be able to continue operations without restructuring its debt. The pre-arranged restructuring will eliminate more than $5 billion of debt, and term lenders have agreed to backstop a $450 million equity rights offering and a $200 million second lien exit financing facility, California Resources said.

The New York University professor who developed one of the best-known formulas for predicting corporate insolvencies has a warning for U.S. credit investors: this year’s spate of “mega” bankruptcies is just getting started, Bloomberg News reported. More than 30 American companies with liabilities exceeding $1 billion have already filed for chapter 11 since the start of January, and that number is likely to top 60 by year-end after businesses piled on debt during the pandemic, according to Edward Altman, creator of the Z-score and professor emeritus at NYU’s Stern School of Business. Companies globally have sold a record $2.1 trillion of bonds this year, with nearly half coming from U.S. issuers, data compiled by Bloomberg show. While the stimulus-fueled rally in credit markets since March has helped borrowers stay afloat during the coronavirus crisis, Altman and others have warned that many companies are just delaying an inevitable reckoning. Fitch Ratings estimates worldwide corporate bond defaults this year could exceed levels reached during the global recession in 2009. “There was a huge buildup in corporate debt by the end of 2019 and I thought the market would gain some much needed de-leveraging with the Covid-19 crisis,” said Altman, who is also director of credit and debt market research at the NYU Salomon Center. “Now, [it] seems like companies again are exploiting what seems to be a crazy rebound.” As new waves of the coronavirus keep planes from flying and curb consumer spending, pressures on the global economy are increasing. The International Monetary Fund downgraded its outlook for the world economy in June, projecting a deeper recession and slower recovery than it previously anticipated. Man Group Plc, the world’s largest publicly listed hedge fund, has warned of the risk to bond buyers. The World Bank has also forecast that more than 90 percent of economies will experience contractions this year, higher than the rate seen at the height of the Great Depression.

J.C. Penney Co. Inc. said yesterday that it would cut about 1,000 jobs and shutter 152 stores as the U.S. department store chain looks to emerge from chapter 11 protection and the COVID-19 crisis, Reuters reported. The layoffs would impact corporate, field management, and international roles and eligible departing employees would receive a severance package. The company is also in talks with its landlords regarding store closures. Penney filed for bankruptcy protection in May, with plans to explore a possible sale, joining a spate of brick-and-mortar retailers to crumble under the pressure brought on by the COVID-19 pandemic. On Tuesday, Calvin Klein owner PVH Corp. also announced a reduction in the number of office employees.