Once again, equity markets rise, and we hear comments from the people who destroyed the economy by locking it down, such as Governor Andrew Coumo, who is bragging, “You want to talk about a turnaround – this one, my friends, is going to go in the history books”… while ignoring the hard facts.
About 45 percent of rents due in April on retail storefronts are still unpaid, amounting to roughly $7.4 billion. Among shopping malls, the proportion of unpaid rent is 75 percent, according to data compiled by CoStar Group, a commercial real estate analysis firm.
Some landlords were lenient when the retail industry collapsed under states’ lockdown orders in March. But landlords, some of whom have gone unpaid for three months, have mortgage holders demanding payment and now landlords’ ability to be lenient has run out.
“Default letters from landlords are flying out the door,” said Andy Graiser, co-president of A&G Real Estate Partners, and that is forcing retailers to seek bankruptcy protection.
As a result, the number of businesses seeking Chapter 11 bankruptcy reached 722 in May, compared to 487 in May 2019, reported Epiq Global, a legal services firm. That represents a 48-percent rise year-on-year and a 28-percent jump from the 562 filings in April this year.
May’s bankruptcies were the highest since May 2011, as the Great Recession continued to fell businesses.
Among those companies going bust in May, 27 ranked as “major bankruptcies,” meaning that each of the companies owed at least $50 million. This also was the highest number since May 2009.
So far this year, there have been 98 major bankruptcies, a number not rivaled in 11 years. Marquee retailers bankrupted this year include J.C. Penney, J. Crew, and Neiman Marcus. Gold’s Gym and the U.S. bakery-restaurants of Le Pain Quotidien also have gone belly up.
“I think we’re going to see an extraordinary number of large corporate bankruptcies, not just in the U.S. but across the globe,” said James Conlan, a bankruptcy lawyer who is handling cases from airlines to retail.
Small businesses will not be spared either.
The federal Paycheck Protection Act requires that small-business borrowers spend at least 75 percent of the loans on payroll, leaving too little of the funds to help those businesses pay rent and other fixed costs. Also, government bailout money will run out as the summer progresses unless Senate Republicans relent and agree to add more rescue money.
“As this relief runs its course, mounting financial challenges may result in more households and companies seeking the shelter of bankruptcy,” said Amy Quackenboss, Executive Director of the American Bankruptcy Institute.

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