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As many as 25,000 U.S. stores could close permanently this year after the coronavirus pandemic devastated an industry where many mall-based retailers were already struggling, Bloomberg News reported. The number would shatter the record set in 2019, when more than 9,800 stores closed their doors for good, according to a report from retail and tech data firm Coresight Research. Most of the closures are expected to occur in malls, with department stores and clothing shops predicted to be among the hardest hit. “If the anchor tenants close stores in the mall, other tenants are likely to follow suit,” Coresight Chief Executive Officer Deborah Weinswig said in the report, which put the expected range at 20,000 to 25,000. The U.S. has the most retail selling space per capita of any country and the lowest sales per square feet, according to commercial real estate company Cushman & Wakefield. American retailers went dark in mid-March in response to the Covid-19 outbreak, and — even though states are now beginning to ease restrictions — many shops are still shuttered or only providing limited service. As of June 5, retailers have planned about 4,000 permanent store closures, including hundreds by J.C. Penney, Victoria’s Secret and Pier 1 Imports. In March, before the extent and duration of the virus lockdown was clear, Coresight estimated that about 15,000 stores would shutter in 2020. 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. 

Tailored Brands Inc., the owner of Men’s Wearhouse and Jos. A. Bank, is considering a potential bankruptcy after the coronavirus lockdown kept America’s office workers at home, putting a damper on demand for new suits, Bloomberg News reported. The retailer and its advisers have started reaching out to interested parties about reworking its debts of more than $1 billion. Plans are in the early stages and could change, with Tailored Brands still seeking alternative forms of financing, according to sources. The restructuring plans could depend on market conditions and the outlook for stores to re-open. Sales have suffered because government officials were telling shoppers to stay home and nonessential businesses to stay shut to combat the Covid-19 pandemic. Tailored Brands was struggling even before the outbreak. Sales have fallen every year since 2016 as Men’s Wearhouse and Jos. A. Bank contended with changing consumer tastes and ecommerce rivals.

Ascena Retail Group, the owner of the Ann Taylor and Lane Bryant apparel chains, is discussing a potential bankruptcy filing with lenders after its business was thrown into disarray by the Covid-19 pandemic, Bloomberg News reported. The chapter 11 filing, which could come as soon as July, would allow the company to keep some of its brands operating while it seeks to sell others. Ascena is considering selling three of its brands in a court-supervised sale process, including Catherines, while keeping Ann Taylor and Loft as part of the company when it emerges from bankruptcy. Ascena’s lenders are starting confidential talks on a deal that would see their holdings exchanged for a majority stake in the reorganized company. The majority of Ascena’s about 2,800 stores remain closed. All its shops shut in mid-March due to the outbreak and the retailer began to re-open locations in early May as state authorities lifted restrictions. Foot traffic is much lower than normal at the revived stores, the company said in a filing last week.

Private equity firm Sycamore Partners is in preliminary talks to acquire J.C. Penney Co Inc. out of bankruptcy should the U.S. department store chain’s negotiations with its creditors fail, Reuters reported. J.C. Penney, which employs roughly 85,000 people, filed for bankruptcy protection in May after the coronavirus pandemic forced it to temporarily close its more than 800 stores across the United States, compounding financial woes that stemmed from years of dwindling sales. Sycamore is weighing acquiring J.C. Penney outright or making an investment in the troubled retailer. There is no certainty that the talks between Sycamore and J.C. Penney will result in a deal, which would require a bankruptcy judge’s approval. J.C. Penney is also in touch with some of its landlords, including Brookfield Asset Management Inc. and Simon Property Group, about possible transactions. Under one scenario being explored, Sycamore, Brookfield and Simon would join forces on a bid for J.C. Penney, two of the sources said. Wells Fargo & Co. is also involved in the discussions.

Chuck E. Cheese, the restaurant chain and popular children’s party venue, is in talks with its lenders to raise money to avoid filing for bankruptcy, the Wall Street Journal reported. At the same time the Irving, Texas-based food-and-games chain has also approached lenders in recent weeks to gauge their interest in providing a $200 million loan to finance a stay in bankruptcy. The discussions are taking place as a decision looms over whether to make a $1.9 million quarterly payment on loans due at the end of June. Some lenders and bondholders are trying to put together a deal to provide the company more capital to help it stay out of bankruptcy as locations have only begun to reopen, as well provide the company with some form of relief on interest payments on nearly $1 billion in debt.

For 20 years, Christopher Raynal ran the Montmartre bistro in Washington, D.C., but the restaurant closed its doors in March as the coronavirus shuttered popular eateries across the U.S., Bloomberg News reported. As stay-at-home orders end, Raynal has decided that Montmartre and its sister spot, Seventh Hill Pizza, won’t be coming back — in part because federal aid programs designed for small business won’t help enough. Raynal had explored pandemic relief loans created by Congress, yet found that bringing back staff to operate under new occupancy caps would boost labor costs and bring only a small gain in revenue, an unsustainable scenario that restaurateurs are wrestling with across the country. Raynal is one of thousands of restaurant owners nationwide stuck in the same trap: They’re desperate for assistance, but are reluctant to tap the Small Business Administration’s Paycheck Protection Program because of the strings attached to the relief loans. The economic pressure from the pandemic is hitting some of the country’s top-tier establishments, forcing some to close for good. The casualties include David Chang’s Momofuku in Washington, D.C., New York’s pioneering Pegu Club cocktail bar and John Fraser’s 701 West in the Times Square Edition hotel, which itself is scheduled to close in August. Many more establishments are teetering financially and may have to scale back their culinary ambitions just to survive.

Competing factions of J.C. Penney Co. lenders that were vying to finance the retailer’s restructuring efforts reached a deal yesterday, averting potential litigation between them, WSJ Pro Bankruptcy reported. Kris Hansen, a lawyer for creditors including Aurelius Capital Management LP, said at a court hearing his group had come to terms with rival lenders on a financing package that supplies Penney with up to $900 million to stay afloat through bankruptcy. The settlement avoided a possible fight between Hansen’s clients and rival lenders led by H/2 Capital Partners LLC that hold roughly three-quarters of Penney’s top real-estate loans. Penney filed for bankruptcy last month with a commitment from H/2, along with Silver Point Capital LP, Sculptor Capital Management and others, to cover its expenses while it attempts a complex financial restructuring. Other investors including Aurelius cried foul, saying the proposed terms were stacked against Penney and offering a competing loan proposal. Under the settlement announced Thursday, Aurelius and its allies can participate in the financing package. They will get to convert $53 million of their debt claims into top-ranking bankruptcy loans. The judge presiding over Penney’s bankruptcy approved the loan package, even as he acknowledged it was “expensive money” for the company. “If we were in a perfect world, this financing package would be highly objectionable,” Judge David Jones said from the bench. But he added he wouldn’t let the bankruptcy languish any longer without a financing source. “It is the only path forward that I see,” the judge said. Read more. 

In related news, J.C. Penney said yesterday that it will start closing 154 of its stores next week in what it is calling the first phase of its efforts to shrink its footprint, the Associated Press reported. The Plano, Texas-based retailer said that it could take about 10 to 16 weeks to complete the closures. A list of the stores closing was published on Penney’s website. Penney filed for bankruptcy protection last month, making it the biggest retailer to do so since the coronavirus pandemic forced non-essential stores to be shut down temporarily. J.Crew and Neiman Marcus sought bankruptcy protection days before J.C. Penney. All three were laden with debt and had trouble connecting with shoppers, who are increasingly skipping the mall and shopping online. As part of its bankruptcy reorganization, Penney said it planned to permanently close nearly a third of its 846 stores in the next two years. That would leave it with just over 600 locations. Read more. 

24 Hour Fitness Worldwide Inc. is in discussions with suitors as it seeks a potential buyer to serve as a stalking horse in a court-supervised bankruptcy process, Bloomberg News reported. The operator of more than 430 gyms is working with an adviser to solicit potential bidders ahead of a planned bankruptcy filing. “24 Hour Fitness is productively engaged with its creditors to explore strategic options and ensure the company is well positioned to serve its members nationwide for the long-term,” the San Ramon, California-based company said in a statement. 24 Hour Fitness — which has felt the brunt of nationwide shutdowns to curb the spread of Covid-19 — skipped a June 1 interest payment on its unsecured bonds due 2022, Bloomberg reported earlier this week. As it works out its borrowings, the fitness chain also started reopening certain locations in Texas under state and federal guidelines. The contemplated sale process of the company is one option 24 Hour is weighing as part of its restructuring efforts.

Tuesday Morning Corp. secured a new $25 million loan from a unit of B. Riley Financial Inc. to support the discount retailer through its bankruptcy restructuring, Bloomberg News reported. With the capital, Tuesday Morning has a total of $125 million of debtor-in-possession financing which will allow it to keep operating as stores across the country start to reopen, the company said yesterday. The $25 million financing from BRF Finance Co. was required under the terms of the company’s previously pledged $100 million DIP agreement provided by existing lenders. Dallas-based Tuesday Morning filed for bankruptcy last week after the coronavirus pandemic forced temporary store closures and drained revenue. The company plans to cut its debt and store-count through the court-supervised process which it expects to wrap up in the early fall. “This additional capital is an important milestone as it provides significant liquidity for us to continue operations throughout the reorganization process,” Chief Executive Officer Steve Becker said in a statement. Tuesday Morning’s new financing from B. Riley remains subject to certain conditions including approval from the bankruptcy court, the company said. The retailer won initial approval to access part of its bankruptcy financing at a hearing in front of Judge Harlin Hale.

Brooks Brothers, which has dressed all but four U.S. presidents, could end up closing its three American factories as it navigates the pandemic, the New York Times reported. Brooks Brothers plans to lay off nearly 700 employees this summer at factories in Massachusetts, New York and North Carolina. The company is also trying to find buyers for the factories by mid-July, and expects to close them if it can’t. The plans emerged through filings under the federal WARN Act, which requires companies to give workers at least 60 days’ notice before mass layoffs or plant closings. Shortly after, Gordon Brothers, the expert in retail liquidations, announced it would provide a $20 million secured loan to Brooks Brothers. Together the decisions left two towns with factories worried about their futures, and raised questions around the core financial health of the company, especially when retail sales have dropped sharply and brands like J. Crew, Neiman Marcus and J.C. Penney have filed for bankruptcy protection.