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Department stores, once a middle-class mainstay of convenience and indulgence, had been spiraling downward long before the pandemic turbocharged online shopping and helped tip a number of big-name retailers into bankruptcy. Nearly 200 department stores have disappeared in the past year alone, and another 800 — or about half the country’s remaining mall-based locations — are expected to shutter by the end of 2025, according to commercial real estate firm Green Street Advisors, the Washington Post reported. Those closures, analysts say, will have a cascading effect on American shopping malls, which already are battling record-high vacancy rates and precipitous drops in foot traffic, as well as on the commercial real estate market and the broader economy. The pandemic set off an economic chain reaction that rippled through the country’s department store chains, forcing several into chapter 11 proceedings. Neiman Marcus, Stage Stores and J.C. Penney filed for bankruptcy last May, followed by Lord & Taylor and, most recently, Belk in February. Even companies on relatively stable footing, like Macy’s, are shuttering dozens of stores as they try to move away from traditional shopping malls. Overall sales at department stores plunged more than 40 percent at the beginning of the pandemic and have yet to make up for lost ground, according to Commerce Department data, as Americans do more of their shopping online and gravitate to specialty brands and discount chains. 

Despite a rebound in the U.S. travel industry, bankrupt Hertz Global Holdings Inc. said it is still insolvent and that its stockholders will come away empty-handed in its proposed reorganization, WSJ Pro Bankruptcy reported. The rental car provider made the statement Thursday in a court filing that rebuts the claims of a committee of hedge-fund shareholders that Hertz equity is in the money. Hertz today is scheduled to appear in the U.S. Bankruptcy Court in Wilmington, Del., to seek approval of a blueprint for a chapter 11 reorganization that began last year. Such disclosure statements are required to include sufficient information to allow creditors of bankrupt companies to make informed decisions on whether to vote for a proposed restructuring. Hertz, which hopes to exit bankruptcy by June as the travel industry rebounds from a downturn brought on by the COVID-19 pandemic, said a valuation analysis expected to be filed publicly will show the company is insolvent, with insufficient value to cover its debt and no surplus left over for stockholders. The company also said it has conducted a competitive process seeking bids for control of the reorganized business. Neither of the two serious proposals that have surfaced have yielded enough proceeds for shareholders to receive a recovery, Hertz said.

Luckin Coffee Inc. said it has secured a $260 million investment from two Chinese private-equity firms, funding that the troubled coffee chain operator said would support its debt restructuring and help pay a U.S. regulatory penalty over allegations it fabricated sales to make its growth appear stronger, WSJ Pro Bankruptcy reported. The investment is led by Centurium Capital, a Luckin shareholder, which has agreed to invest $240 million in senior convertible preferred shares, Luckin said. Fellow shareholder Joy Capital has agreed to invest $10 million in senior preferred shares. The private-equity firms also have an option to increase their investment by $150 million. The transaction is subject to customary closing conditions, including completion of a planned restructuring of Luckin’s $460 million senior secured notes through a court-supervised scheme of arrangement in the Cayman Islands, similar to chapter 11 bankruptcy in the U.S. The investment will help pay off a $180 million settlement it struck last year to resolve accounting fraud charges brought by the U.S. Securities and Exchange Commission. The SEC said in December that Luckin fabricated more than $300 million in retail sales from at lea st April 2019 through January 2020.

Nearly four years after an infamous festival that was billed as an ultraluxurious musical getaway in the Bahamas left attendees scrounging for makeshift shelter on a dark beach, a court has decided how much the nightmare was worth: approximately $7,220 apiece, the New York Times reported. The $2 million class-action settlement, reached Tuesday in U.S. Bankruptcy Court in the Southern District of New York between organizers and 277 ticket holders from the 2017 event, is still subject to final approval, and the amount could ultimately be lower depending on the outcome of Fyre’s bankruptcy case with other creditors. But Ben Meiselas, a partner at Geragos & Geragos and the lead lawyer representing the ticket holders, said on Thursday that he was happy a resolution had at last been reached. “Billy went to jail, ticket holders can get some money back, and some very entertaining documentaries were made,” Meiselas said in an email mentioning Billy McFarland, the event’s mastermind. “Now that’s justice.” Lawyers representing the trustee charged with Fyre’s assets did not immediately respond to a request for comment. McFarland and the festival’s co-founder, the rapper Ja Rule, have faced more than a dozen lawsuits against their company, Fyre Media, in the event’s aftermath. The plaintiffs have sought millions and alleged fraud, breach of contract and more. McFarland is serving a six-year prison sentence after pleading guilty to wire fraud charges. In 2018, a court ordered him to pay $5 million to two North Carolina residents who spent about $13,000 apiece on VIP packages for the Fyre Festival.

Hospitality Investors Trust Inc. is nearing a deal that would hand control of the debt-laden hotel operator to Brookfield Asset Management as part of a pre-packaged bankruptcy, Bloomberg News reported. HIT, which owns about 100 hotels across the U.S., has been getting advice from law firm Proskauer Rose and investment bank Jefferies Financial Group Inc. on the restructuring talks. The real estate investment trust said in a regulatory filing last week that it was negotiating with Brookfield, its largest investor, over a potential chapter 11 filing. Hospitality Investors Trust is the latest U.S. hotel operator to consider bankruptcy after the COVID-19 pandemic spurred a slowdown in global travel. REIT Eagle Hospitality Trust filed for chapter 11 earlier this year, as have several individual hotels across the country. The REIT owns older hotels with Marriott International Inc., Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp. branding. Its top markets by room are Orlando, Florida, Atlanta, and West Palm Beach/Boca Raton, Florida, according to its website and annual report. Hospitality Investors Trust no longer has sufficient cash fund its obligations and Brookfield is the only likely provider of additional liquidity, according to its 2020 annual report. Brookfield holds all of its preferred equity, worth about $441 million, and Hospitality Investors Trust converted the cash payment to payment-in-kind in December to preserve liquidity. Read more. 

Hotel debtors were the focus of a session at ABI’s Annual Spring Meeting going on now through April 22. Register today to access live programming, replays of past sessions and tap in to unparalleled networking. 

The Collected Group, which owns lifestyle brands Joie, Current/Elliott and Equipment, has filed a petition under chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware, Fibre2Fashion.com reported. The U.S. company, which closed stores even before the pandemic, plans to focus on e-commerce and wholesale, according to the company’s filings on April 12. The company plans to use the bankruptcy proceedings to facilitate those store closures and cut more than 80 percent of its debt, it said in a statement. James Miller, the chief executive officer since 2017, will step down and take on an advisor title and be on the company’s board. The new CEO will be Silvia Mazzucchelli, a board member who was also the former CEO of Modcloth. The bankruptcy filing follows dwindling sales, liquidity issues and a disrupted sale process, all of which have been attributed to the COVID-19 pandemic. The company, which was founded in 2001 and is owned by private equity firm KKR, owned 33 branded stores across the US at its peak. With store closures during the pandemic, retail revenues fell by 85 percent in 2020 and wholesale revenues by 70 percent. E-commerce, however, grew 37 percent during the year to $27.8 million, which was about half the company’s revenues for the year.

Fast-casual chain Meatheads Burgers & Fries, which has received more than $2.4 million in PPP funding, has declared bankruptcy, Restaurant Business reported. The chain, which lists 13 locations around the Chicago area on its website, filed for chapter 11 protection in the Northern District of Illinois on Friday, as did its owner Crave Brands, LLC. But the company's lender is not so sure. LQD Financial Corp. filed a motion to dismiss the case on Tuesday, saying that the bankruptcy filing was a “stunt Crave’s former manager pulled to stay in charge” and that the filings were made in bad faith. In its chapter 11 filing, Meatheads said it had liabilities totaling $8.4 million with total assets of $6.7 million. The chain received a Paycheck Protection Program loan of $982,112 in 2020 and nearly $1.44 million in PPP funding during the second round this year. Crave Brands, LLC, the owner of Meatheads which also filed for bankruptcy protection on Friday, received an Economic Injury Disaster Loan for $149,000.

Wayne LaPierre runs the National Rifle Association as his personal kingdom, overriding checks and balances and making critical decisions about the gun group’s future without consulting or informing its board, a director who is also a Kansas judge testified yesterday, Bloomberg News reported. Any efforts to challenge LaPierre’s decisions and empower the association’s 76-member governing board are “essentially nonexistent,” Phillip Journey, a family court judge in Wichita and member of the board, said at a bankruptcy trial. “It essentially operates as a kingdom rather than a corporation,” Journey said of the NRA. “Wayne’s kingdom.” LaPierre’s long tenure atop the association is under attack in a bankruptcy case filed in Dallas. U.S. Bankruptcy Judge Harlin D. “Cooter” Hale is holding a trial to decide whether to appoint a trustee to run the NRA while it’s in bankruptcy, or throw the case out, as the New York Attorney General has requested. Judge Hale will also consider Journey’s request for a so-called examiner to look into allegations of financial impropriety leveled against LaPierre and other senior association officers. Journey testified that hundreds of NRA members have donated money to help with court costs. Journey rejoined the board of directors last year after being off the governing body for about 25 years, he said. He returned to an organization that he didn’t recognize he said. “All of the safety switches in corporate governance needed to be turned back on,” he said. “They were off.” LaPierre put the gun rights group into bankruptcy a few months after New York Attorney General Letitia James filed a lawsuit seeking to dissolve the organization. LaPierre said in court last week that the bankruptcy was necessary to get a “fair legal playing field.” James’s lawsuit in New York seeks to dismantle the NRA and redistribute its $200 million worth of assets to other nonprofits. Should Judge Hale dismiss the bankruptcy, James would have an easier time seizing those assets if she wins her lawsuit, which may not come to trial until next year, according to testimony.

The coronavirus pandemic made the legal system in New York much friendlier toward commercial property owners with assets in default who are facing a foreclosure sale under the Uniform Commercial Code (UCC). But, it looks as though the empathy is starting to run out, according to a commentary in the Commercial Observer reported. A ruling by Justice Jennifer Schecter in the First Department of the Appellate Division of the New York Supreme Court last month has made it more difficult for borrowers and their counsel to claim hardship and economic uncertainty caused by the pandemic as a reason to enjoin, or avoid, a UCC Article 9 foreclosure auction. The decision, in Shelbourne BRF LLC et al. v. SR 677 Bway LLC, has also likely “opened the floodgates” to a potential wave of last-resort chapter 11 bankruptcy filings from borrowers who fail to receive injunctive relief to stop UCC auction sales and save their interests in properties, according to lawyers and brokers who examined the decision. Through the pandemic, market volatility made it easier for courts to deem a UCC foreclosure sale “commercially unreasonable,” thus hampering a lender’s ability to work through default scenarios. Typically, if a borrower seeks injunctive relief to halt a UCC foreclosure sale, it’s up to them to showcase the possibility of irreparable harm as a result of it — by detailing to the court the negative effects of the loss of equity interest in a property’s controlling entity from the foreclosure sale. Judge Schecter essentially stamped that out last month, determining that a borrower’s threatened loss of equity interest does not represent irreparable harm.

The judge overseeing the bankrupt Zohar investment funds refused their request to block their founder, turnaround manager Lynn Tilton, from buying one of their portfolio companies in a sale that leaves them with a roughly $150 million loss on loans to the business, WSJ Pro Bankruptcy reported. Judge Karen Owens of the U.S. Bankruptcy Court in Wilmington, Del., approved the sale of Global Automotive Systems LLC for $32 million to an affiliate of Ms. Tilton, giving her control of the auto supplier but leaving little for the Zohar funds that own the company. The judge’s decision overruled the Zohars, which objected to the sale terms. In court papers, the Zohars alleged that Ms. Tilton used her position as a lender to GAS to skew the sale process in her favor, manipulating the company’s finances to make herself the only viable bidder. She denied that, saying her bid was the best available and blamed the Zohars’ “own poor decision-making” in rejecting earlier bids she made. GAS is among the many businesses financed by the Zohars, vehicles Ms. Tilton created to channel investor capital into loans to troubled companies she hoped to improve. Value unlocked from her turnaround efforts were supposed to repay the Zohars and their investors. Many of the businesses in her portfolio have shut down, with or without the benefit of bankruptcy, leaving the Zohars with mounting losses. She placed the Zohars under chapter 11 protection in 2018.