Q2 League Tables: Covid Fuels Out-of-Court Restructurings
Financial distress as a result of the Covid-19 pandemic and ensuing economic downturn pushed many companies in the retail, restaurant and energy sectors to refinance debt and restructure their businesses out-of-court in the second quarter.
As many retailers and shopping malls began shutting down operations at the end of the first quarter as a result of the novel coronavirus outbreak, the lack of revenue generation forced many retail chains to pursue out-of-court restructurings in the second quarter to avoid Chapter 11 filings.
Wilsons Leather and G.H. Bass & Co. owner G-III Apparel Group Ltd. in June implemented a restructuring of its retail operations, which included the proposed closing of 110 Wilsons stores and 89 G.H. Bass locations. Party supplies retailer Party City Holdco Inc. launched an out-of-court restructuring in May that featured an exchange offer that would cut $450 million in debt.
Despite staying open for business throughout the Covid-19 pandemic, grocery chain Save A Lot Food Stores Ltd. in April completed a consensual out-of-court restructuring with its lenders with a debt-for equity swap.
Restaurants, which needed to cease operations temporarily during the Covid-19 outbreak, also planned out-of-court restructurings. California Pizza Kitchen Inc. in April said it needed to restructure out of court to avoid bankruptcy after Covid-19 had interrupted a sale process.
Chuck E. Cheese restaurants owner CEC Entertainment Inc. in April appointed a special board committee to investigate restructuring and financing opportunities, which led the company to eventually file for Chapter 11 on Wednesday, June 24.
A decline in demand for gasoline and oil during the Covid-19 pandemic and fallout from plummeting oil prices at the end of the first quarter led several oil and gas producers to restructure their debt and operations out of court to avoid filing bankruptcy.
Independent oil and gas producer Denbury Resources Inc. in May began a strategic review for an out of court restructuring of its debt. Also in May, oil and gas company Callon Petroleum Co. proposed a private exchange offer out of court to refinance its debt, and Chesapeake Energy Corp. (CHK) hired advisers to restructure its debt.
In April, Tapstone Energy LLC completed an out-of-court restructuring through a debt-for-equity swap.
As the airline industry nearly ground to a halt as a result of the Covid-19 pandemic, many air carriers resorted to out-of-court restructurings to avert bankruptcy filings. Norwegian Air Shuttle ASA in April completed a debt-for-equity swap of about 44.5 billion kroner ($4.3 billion) in debt.
Hainan Airlines Holding Co., a holding of Chinese conglomerate HNA Group Co. Ltd., also in April sought to delay a bond payment of about 750 million Chinese yuan ($106 million).