%1

Revlon Inc. is telling investors that if it can’t restructure its debt in the coming days, it could file for bankruptcy. But some bondholders may be banking on the makeup company’s majority owner, Ron Perelman, bailing it out, Bloomberg News reported. The makeup company has two weeks to complete a $343 million bond swap or otherwise eliminate the notes. If it fails, it would trigger a $1 billion loan repayment in mid-November. Revlon lacks the liquidity to pay down the debt if investors balk at the exchange, forcing it to weigh options including a chapter 11 filing to stay in business, according to company debt documents. So far, Revlon has had little luck convincing a majority of investors to sign onto a deal. It’s been extending deadlines and tweaking terms of the exchange. Its most recent effort garnered participation from holders of less than 14 percent of the bonds by an Oct. 23 early deadline that’s since been extended.

J.C. Penney Co. Inc. said yesterday that it has entered an asset purchase agreement with Brookfield Asset Management Inc., Simon Property Group and a majority of the company's first lien lenders, Reuters reported. The iconic 118-year-old retailer had filed for bankruptcy in a Texas court in May after the COVID-19 pandemic forced it to temporarily close its then nearly 850 stores. The company said it expects to operate outside chapter 11 before the holiday season. Under the agreement, Brookfield and Simon, which are the retailer’s two biggest landlords, will buy substantially all of J.C. Penney’s retail and operating assets through a combination of cash and new term loan debt. 

Tuesday Morning has declined to sell itself and will instead seek other paths for its financial reorganization, according to court filings, RetailTouchPoints.com reported. The retailer had planned to close on a sale of all its assets by today, but will now push back its hearing date until Nov. 6 as it considers alternatives. Tuesday Morning filed for bankruptcy protection in May 2020 with plans to close 230 of its 687 stores. The retailer was hit hard by the pandemic, which forced the temporary closure of all its locations. However, the company had hoped to fuel a turnaround after it began resuming brick-and-mortar operations on April 24, with sales at reopened stores up 10 percent year-over-year during the first month.

Clothing retailer rue21 has appointed a new CEO, the Cranberry, Pa.-based company’s third since 2018, the Pittsburgh Post-Gazette reported. Bill Brand is taking the reins from interim CEO John Fleming, who will return to his role as a board member. Brand most recently served as president of shopping channel HSN and as chief retail officer of cruise company Carnival Corp. Rue21 filed for chapter 11 bankruptcy protection in May 2017. It emerged from bankruptcy in September the same year. In February, CEO and board chairman Michael Appel returned to his consulting practice. Appel had served as interim CEO from October 2017 to June 2018. He was named chief executive effective Nov. 12, 2018. He had succeeded Laurie Van Brunt, who served as president and CEO for several months in 2018. In October 2019, after two years of refocusing itself, the fast-fashion apparel purveyor opened its first store since emerging from bankruptcy at the Mall at Robinson. Rue21 operates over 673 stores in 45 states.

Nick Bovis, the San Francisco restaurateur who was one of the first co-conspirators named in a federal indictment earlier this year stemming from an FBI probe of corruption in SF City Hall, has now filed for bankruptcy for one of this businesses, longtime hofbrau Lefty O'Doul's, SFist.com reported. The given reason for the chapter 7 bankruptcy filing for the sports bar/hofbrau more recently known as Lefty's Baseball Buffet & Cafe is the current city health ordinance "prohibiting self-serve and buffet-style service in restaurants," which has forced Lefty's to remain closed. But the place actually closed before the start of the pandemic sheltering orders, reportedly due to damage from a burst water pipe. Bovis had allegedly stopped paying rent on the space months before the federal indictment dropped, going back to November 2019 — incidentally about the same time that Bovis shuttered his other nearby business, the Gold Dust Lounge. Both bars used to reside in separate spaces owned by the same landlords, the Handlery family.

Retailers, pharmacies, liquor stores and other merchants across the U.S. are gobbling up insurance that protects buildings from damage caused by societal unrest, worried about possible street violence after the U.S. presidential election, insurers and brokers told Reuters. Many shops and offices are facing double-digit premium hikes for such policies but buying them anyway because the cost of not doing so might be higher, industry sources said. Sales of commercial policies that cover damage from societal unrest in the United States have already doubled in October from September levels, insurers and brokers said. That is partly because some providers, mainly in the Lloyd’s of London marketplace, stopped including “strikes, riots and civil commotion” coverage within general property policies for businesses such as retailers and pharmacies that were already hard-hit by civil commotion, forcing them to buy separate insurance, said a person familiar with the matter, who was not authorized to speak to the media about client policies. 

The coronavirus recession tipped dozens of troubled companies into bankruptcy, setting off a rush of store closures, furloughs and layoffs. But several major brands, including Hertz Global, J.C. Penney and Neiman Marcus, doled out millions in executive bonuses just before filing for chapter 11 protection, according to a Washington Post analysis of regulatory filings and court documents. Since the pandemic took hold in March, at least 18 large companies have rewarded executives with six- and seven-figure payouts before asking bankruptcy courts to shield them from landlords, suppliers and other creditors while they restructured, the Post review found. They collectively meted out more than $135 million, documents show, while listing $79 billion in debts. Labor experts and bankruptcy attorneys say that the payouts are particularly egregious — and unjustifiable — during an economic crisis, and were timed to bypass a 2005 law passed specifically to prevent executives from prospering while their companies failed. Many companies have homed in on retention to justify bonuses because they cannot be attached to traditional motivators such as sales targets or stock valuations during bankruptcy. Experts said retaining executives — even those who may have overseen a company’s decline — is often seen as a way to maintain consistency and raise the chances that the company will successfully emerge from bankruptcy. The rise of pre-bankruptcy bonuses corresponds with the passage of 2005 legislation meant to stamp out such payouts during reorganization, attorneys say. The Post’s review found that companies typically awarded bonuses within weeks — or days in several cases — of filing for chapter 11 protection. “It’s become a standard solution: Pay the bonus before bankruptcy, so bankruptcy law doesn’t apply,” said Adam Levitin, a Georgetown University law professor whose work focuses on bankruptcy and financial regulation.

More and more, bondholders are fighting for pennies on the dollar as companies go belly up, Bloomberg News reported. Bankruptcy filings are surging due to the economic fallout of COVID-19, and many lenders are coming to the realization that their claims are almost completely worthless. Instead of recouping, say, 40 cents for every dollar owed, as has been the norm for years, unsecured creditors now face the unenviable prospect of walking away with just pennies — if that. While few could have foreseen the pandemic’s toll on the economy, the depth of investors’ pain from corporate distress was all too predictable. Desperate to generate higher returns during a decade of rock-bottom interest rates, money managers bargained away legal protections, accepted ever-widening loopholes, and turned a blind eye to questionable earnings projections. Corporations, for their part, took full advantage and gorged on debt that many now cannot repay or refinance. Ultralow rates helped risky companies sell bonds with fewer safeguards, which creditors seeking higher returns were happy to accept. Now, amid a new bout of economic pain, the effects of those policies are coming to bear. Debt issued by the owner of Men’s Wearhouse, which filed for court protection in August, traded this month for less than 2 cents on the dollar. When J.C. Penney Co. went bankrupt, an auction held for holders of default protection found the retailer’s lowest-priced debt was worth just 0.125 cents on the dollar. For Neiman Marcus Group Inc., that figure was 3 cents.

A lawyer for J.C. Penney Co.’s top lenders accused a rival creditor group of “economic terrorism” during a court hearing on the escalating battle between hedge funds seeking bigger shares of the beleaguered department-store chain, WSJ Pro Bankruptcy reported. Andrew Leblanc, who represents the company’s top lenders, said a competing group of investors including Aurelius Capital Management LP was trying to tie up a planned sale of the company’s retail assets “so they can extract a premium.” Aurelius, Carlson Capital LP and other dissenters are challenging Penney’s preferred path out of bankruptcy, which is backed by top lenders and involves placing the retail operations and most of the company’s stores in the hands of mall owners Simon Property Group Inc. and Brookfield Property Partners LP. Under the restructuring proposal, the remaining stores and distribution centers would be transferred to top lenders including H/2 Capital Partners LLC, Sculptor Capital Management Inc. and Brigade Capital Management LP in exchange for $1 billion in debt forgiveness. At a hearing held via videoconference in the U.S. Bankruptcy Court in Corpus Christi, Texas, a judge authorized Penney to begin soliciting votes from creditors on the proposed restructuring, but not before pointed exchanges between lawyers for the two investor groups. The objecting group, which holds a minority of Penney’s first-priority loans, has said the credit bid is artificially low and designed to overpay the deal participants while siphoning value from the rest of Penney’s creditors.

Rubio’s Restaurants Inc., the fast-casual chain known for its fish tacos, filed for chapter 11 protection yesterday with plans to cut debt and hand ownership to its lenders, Bloomberg News reported. The company, which operates 167 restaurants in Arizona, Nevada and California, defaulted on some of its debt in June after pandemic-related shutdowns slammed sales. But the chain was already grappling with cutthroat competition in the fast-casual segment, increased labor costs and a faltering expansion to new markets, according to court papers. Golub Capital, the company’s pre-bankruptcy secured lender, has agreed to provide an $8 million loan to help Rubio’s cover expenses during bankruptcy. Private equity firm Mill Road Capital, which owns Rubio’s, has agreed to provide an additional $6 million of equity financing as part of its bankruptcy plan, court papers show. Rubio’s employs more than 3,400 people across its restaurants and corporate offices. Between May and June, the Carlsbad, California-based company permanently closed 26 under-performing stores in California, Arizona, Colorado and Florida, according to court papers.