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With each week, more data emerges to show how the COVID-19 pandemic is permanently reshaping the restaurant industry, Bloomberg News reported. The world is currently on track for a radical overhaul of its food-service landscape: Hundreds have filed for bankruptcy over the last three months, according to consulting firm Aaron Allen & Associates, and the situation is poised to keep worsening. “Based on our estimates, we believe up to 10% of all restaurants globally will disappear, with 20% or more also going through a restructuring process,” said founder Aaron Allen. “This is a conservative case, in our view.” Allen estimates there are about 22 million restaurants worldwide, so the projection implies that 2.2 million of them will close. In the U.S., the industry employs 15.6 million workers, according to the National Restaurant Association. OpenTable, which tracks restaurant activity via reservations, estimates the failure rate could be even higher. Even before the global pandemic caused a dramatic and unprecedented shift in consumer behavior, the restaurant industry was suffering from rising debt and too much competition.

Unsecured creditors of Neiman Marcus Group Ltd. will challenge the bankrupt retailer’s restructuring plan, seeking to file a competing proposal that would take aim at Neiman’s private-equity owners over a spinoff of the MyTheresa e-commerce business, WSJ Pro Bankruptcy reported. Neiman filed for bankruptcy in May, proposing to put lenders and bondholders in control of the department-store chain and cancel more than $5 billion in debt. Under the company plan, Neiman’s lenders would also provide a $750 million loan to the retailer when it exits bankruptcy. MyTheresa, a fast-growing European business, isn’t part of Neiman’s bankruptcy and is partly owned by Neiman’s private-equity backers, Ares Management Corp. and the Canada Pension Plan Investment Board. The official unsecured creditors' committee is seeking permission to file a competing proposal that would overlap with the company’s in most respects — but would preserve the right to sue the shareholders over MyTheresa, according to court papers filed on Sunday. The creditors’ committee includes Marble Ridge Capital LP, a bondholder that has been battling the company over that asset transfer, and other Neiman creditors such as Chanel Inc. Judge David Jones of the U.S. Bankruptcy Court in Houston said yesterday in a hearing that the creditors committee may only file a rival plan under seal. The plan, to be filed by July 15, will be viewed only by the judge, Neiman Marcus, its lawyers and advisers. The committee is seeking to end Neiman’s sole right to set its restructuring terms at a hearing scheduled for July 17.

Bed Bath & Beyond Inc. is looking to sell its Christmas Tree Shops and Cost Plus World Market chains, part of an ongoing makeover of the home-goods company, Bloomberg News reported. Activist investors pressured the company to oust Chief Executive Officer Steven Temares last year, part of an overhaul to reverse flagging sales amid competition from discount chains and online merchants. Since then, the company has replaced its management team, including the appointment of former top Target Corp. executive Mark Tritton, cut its workforce and said it would consider asset sales. The company said last year it would review its portfolio of brands. It announced the sale of its One Kings Lane home decor brand and PersonalizationMall.com, along with a $250 million sale-leaseback deal, this year. Bed Bath & Beyond bought Christmas Tree, the Cape Cod, Massachusetts-based knickknack and housewares chain, in 2003. It now operates more than 70 stores in 21 states, according to its website. Cost Plus began as a store at San Francisco’s Fisherman’s Wharf in 1958 that promoted goods from around the world. It now operates about 260 stores selling furniture and other home items. Bed Bath purchased the chain in 2012.

Chuck E. Cheese, the troubled restaurant chain and children’s party venue, is fielding interest from creditors and other potential suitors, according to people familiar with the matter, as some bricks-and-mortar establishments struggle to survive the coronavirus pandemic, WSJ Pro Bankruptcy reported. The chain, owned by private-equity firm Apollo Global Management Inc., has drawn interest from potential buyers including New York grocery magnate John Catsimatidis. Chuck E. Cheese’s parent company, CEC Entertainment Inc., is also in talks with a group of bondholders who have offered to invest more than $100 million in the company and keep it out of bankruptcy. Catsimatidis, who has scooped up some CEC bonds, is exploring a possible offer for the family-entertainment company. CEC is now reopening venues and planned to have 100 of its 741 Chuck E. Cheese and Peter Piper Pizza restaurants open by mid-June, according to a letter to employees sent last week by Chief Executive David McKillips. While the doors were closed, Chuck E. Cheese was burning too much cash to continue operating without raising additional capital, according to Moody’s Investors Service. Still, the company had enough of a cash cushion to keep its doors closed until the fall, Moody’s said. CEC has close to $1 billion in debt stemming from Apollo’s leveraged buyout in 2014, but faces no debt maturities until 2022. CEC’s top-ranking loans traded at about 59 cents on the dollar of face value on Friday, according to IHS Markit.

The parent of New York & Co. is preparing for a bankruptcy filing that would include plans to shut all of the discount apparel chain’s stores, Bloomberg News reported. RTW Retailwinds Inc., which also owns Fashion to Figure and Happy x Nature, warned earlier this month that a bankruptcy filing was probable, citing a loan default, and said that it could close a significant portion, if not all, of its 387 stores. Founded more than a century ago as Lerner Shops, the company changed its name to New York & Co. in the late 1990s and became a mall mainstay, teaming up with celebrities like Eva Mendes and Kate Hudson. The company’s former president and chief marketing and customer officer, Traci Inglis, said in March that it was time to transition to a “digitally-dominant” brand. But the pandemic forced all its stores to temporarily close the same month, according to the company’s annual report, making it impossible to turn around what RTW called substantial and recurring losses from operations. Some stores began to re-open in the first week of June. To deal with the cash crunch, RTW didn’t pay vendors and withheld April and May rent to its landlords, leading to a flurry of default notices, the company said. What’s more, the store closings cut into inventory values and other assets. Bankers at Wells Fargo & Co. gave the company until June 30 to make good on its defaulted loan.

Hertz Global Holdings Inc. is in talks to obtain a bankruptcy loan to fund its business reorganization after scrapping a controversial sale of potentially worthless stock, WSJ Pro Bankruptcy reported. The rental-car company on Wednesday called off a potentially unprecedented sale of up to $500 million in shares, leaving it in need of an alternative source of financing to keep its business afloat through its chapter 11 restructuring. Bankruptcy is expensive, and Hertz was counting on raising capital from speculative day traders that have shown a strong interest in the company despite its financial strain. Hertz scrapped the planned stock sale after the Securities and Exchange Commission said it had concerns. SEC Chairman Jay Clayton had said on CNBC that regulators expected Hertz to answer additional questions before it started selling shares. With the stock deal shelved, Hertz is in discussions with a group of top lenders, including a number of hedge funds, to supply a financing package, people familiar with the matter said. This bankruptcy loan could approach $1 billion.

Creditors to CEC Entertainment Inc., which runs Chuck E. Cheese and Peter Piper Pizza, are weighing restructuring options including bankruptcy as the company seeks to get through the pandemic that has shuttered its locations, Bloomberg News reported. Lenders and bondholders are considering putting new money into the business to keep it afloat, according to people familiar with the matter who asked not to be identified discussing a private matter. Both in and out-of-court options to tame the company’s debt load are being discussed, said the people, noting that the situation is evolving as states across the country mull whether to lift stay-at-home orders. A chapter 11 filing would allow CEC, acquired by private equity firm Apollo Global Management Inc. in a 2014 leveraged buyout, to keep some locations operating and permanently close weaker ones to minimize costs. Chuck E. Cheese alone has over 600 outlets, which would be evaluated for closures as part of the potential court-supervised process, the people said. A group of bondholders has suggested putting $100 million of new money into the firm, extending maturities and adding a payment-in-kind option to give the firm more flexibility. While a proposal was sent to the company, holders haven’t been asked to sign non-disclosure agreements, the people added. PIK notes allow companies to borrow more in lieu of making interest payments, which can help firms facing liquidity pressure. Lenders also organized with advisers and are contemplating putting in new money to support their investment in the company. The group hasn’t sent any formal proposals to CEC, but some parties have discussed new financing of around $200 million as an option to rework the balance sheet.

Barry Sternlicht’s Starwood Capital Group missed two monthly payments on securitized debt tied to five shopping malls anchored by bankrupt department stores including Sears and J.C. Penney, Bloomberg News reported. The delinquent May and June payments are further signs of the damage wrought by the COVID-19 pandemic and economic shutdown, especially to retail. The missed payments total $2.7 million on the $549 million commercial mortgage-backed security, according to data compiled by Bloomberg. Debt delinquencies have soared for mall owners, which lost market share to e-commerce and were hit with tenant bankruptcies even before the pandemic forced shoppers and diners to stay home. By last month, more than 9 percent of retail commercial mortgage-backed securities were managed by special servicers, the workout firms that handle delinquent debt, up from about 5 percent before the pandemic, according to property data firm Trepp. Landlords collected an average 61 percent of rent from retail tenants in June, down from 88 percent in March before the crisis, according to Datex Property Solutions. Starwood Capital, which Sternlicht founded in 1991 as a distressed real estate investing firm, now manages about $60 billion in assets. Read more. 

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

Bankrupt Hertz Global Holdings Inc. yesterday suspended its plan to sell up to $500 million in new shares after the U.S. Securities and Exchange Commission (SEC) raised objections to the sale, Reuters reported. The move comes after SEC Chairman Jay Clayton told CNBC television that the agency has some issues with Hertz's share sale plan, without elaborating on what the problems were. "After discussions with the (SEC) staff, sales under the...program were promptly suspended pending further understanding of the nature and timing of the staff’s review," Hertz said in a filing. Last week, Hertz won bankruptcy court approval to sell up to $1 billion in stock. It announced on Monday plans to sell up to $500 million in new shares, as it takes advantage of a strong rally in its stock since filing for bankruptcy last month. Hertz has warned that its shares would be eventually “worthless”, but the stock sale could benefit creditors seeking to recover more of their claims during the bankruptcy process.

Going-out-of-business sales at 136 closing J.C. Penney stores began yesterday, USA Today reported. The discounts range from 25 to 40 percent off original prices storewide. All sales will be final starting on June 25, according to the company. The retailer, which filed for chapter 11 protection May 15, also updated its list of stores that will permanently close in its first wave of closures. J.C. Penney announced June 4 that 154 stores would close in its first wave of closings but now 136 stores are on the list. However, the removed locations may still close."A handful of previously announced store closing locations remain on hold pending further review," J.C. Penney said in a blog post. The retailer is expected to close 242 stores for good, or about 29 percent of its 846 locations with 192 stores expected to close in the current fiscal year, which ends in February, and then 50 in the next fiscal year. After the closings, the company will have around 604 remaining locations.