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Sur La Table became the latest retailer to fall victim during the pandemic, announcing Thursday it had filed for bankruptcy and had a buyout offer from Fortress Investment Group LLC. The chain plans to sell 70 stores to Fortress, close another 51, and keep operating cooking classes and its web business. A day earlier, preppy retailer Brooks Brothers, founded in 1818, also filed for bankruptcy.
“We are seeing an acceleration in bankruptcies that is unprecedented,” said James Hammond, CEO of New Generation Research, which runs BankruptcyData. For 2020, he says, “I’m pretty confident we will see more bankruptcies than in any businessperson’s lifetime.”
Ranked by assets alone, says Hammond, the magnitude of bankruptcies this year has already surpassed that of 2008. And that’s not including what could happen when the government’s Paycheck Protection Program, which aims to keep small businesses up and running with loans that can be converted to grants if certain terms are met, runs out.
The largest Chapter 11 bankruptcy so far has been that of car-rental company Hertz. Unable to hold on after the travel industry effectively hit the brakes, the company is now selling off much of its fleet in a bid to meet demands from creditors. Others in sectors ranging from oil and gas to retail and aviation have similarly suffered in navigating the pandemic.
Notably, a Chapter 11 bankruptcy filing means a company is struggling but doesn’t mean that it will cease operating.
“You have an enormous pile of corporate debt that has been accumulating, which the debt and restructuring world had been concerned about for a couple of years. And all of a sudden, in the space of almost no time at all, investors are asking questions about the ability to service debt,” says Hammond. “[From] 2008 to 2009 was a financial crisis. This is now everywhere.”
By sheer number of bankruptcies, restaurants have been the hardest hit, per rankings from BankruptcyData. Recently, CEC, the company behind restaurant and entertainment venue Chuck E. Cheese, closed down locations and filed for bankruptcy protection as the coronavirus shuttered restaurants and challenged live-events companies.
Even as the U.S. reopens, Hammond is not optimistic. Bankruptcy filings, he notes, are a lagging indicator. Now, he says, “we are at the waterfall.”