These Eight Retailers Will File For Bankruptcy Next, According To Fitch

Thursday, April 6, 2017
By Paul Martin

by Tyler Durden
Apr 6, 2017

The situation is rapidly deteriorating for America’s “bricks and mortar” retailers. As discussed earlier this week, some 9 retail outlets have already filed for bankruptcy protection in 1Q 2017 alone according to Alix Partners. That volume of filings matches the total number of retail bankruptcies for all of 2016 and puts the industry on pace to exceed even the ‘great recession’ highs.

Confirming that even more retail defaults are imminent was the following chart from Morgan Stanley according to which in just the first quarter there were nearly 2,100 store closures, nearly double the number from Q1 of last year.

Appropriately, one day after our Monday report, Payless ShoeSource filed for bankruptcy. Payless filed Chapter 11 on April 4 to facilitate a balance sheet debt restructuring and operational overhaul. The company became highly leveraged in a 2012 buyout and debt became unsustainable as sales and cash flows decreased. The company plans to have liquidation sales for 400 out of 4,400 underperforming stores that are earmarked for permanent closure and intends to try to re-negotiate leases or close other stores and to emerge as a smaller concern. Some more details: a $385 million DIP facility, which consists of a $305 million asset-backed loan (ABL) and an $80 million term loan, has been negotiated with existing lenders to refinance certain prepetition debt and provide $120 million of incremental liquidity during the bankruptcy.

Rating agency Fitch also noticed, saying that with this latest default, the TTM loan default rate rose to 1%. The rate fell to 0% in March and was 0.5% at the end of February.

It’s about to get worse, however, because in its report on the latest retail default, Fitch said it expects the rate to climb to 9%, equating to roughly $6 billion in defaults, over the next 12 months, fueled by continued challenges in the retail sector.

Fitch’s expectation of increasing retail defaults stems from increased discounter (including off-price and fast-fashion apparel) and online penetration, and shifts in consumer spending toward services and experiences. All of these factors have created a highly competitive retail environment and accelerated mall traffic declines. Retailers have also suffered from the ebb and flow of brand popularity. Negative comparable store sales and fixed-cost deleverage have led to negative cash flow, tight liquidity and unsustainable capital structures.

Going back to Payless, the company was listed on Fitch’s Loans of Concern list, which is a compilation of issuers with a significant risk of default within the next 12 months. And, just to make the tracking of future defaults easier, Fitch also provided the list of eight other retailers with term loan debt totaling nearly $6 billion, which are also its concern list, and are most likely to be in default in the not too distant future. They are as follows:

Sears Holdings Corp (roughly $2.5 billion);
99 Cents Only Stores LLC;
Charming Charlie LLC;
Gymboree Corp.;
Nine West Holdings Inc.;
NYDJ Apparel LLC;
rue21, Inc.; and
True Religion Apparel Inc.

The Rest…HERE

2 Responses to “These Eight Retailers Will File For Bankruptcy Next, According To Fitch”

  1. OlodReb

    I did not finish the video on Cancer as it is just another gimmick to sell a book. Learn for free @ I have no financial interest in the org, just a satisfied customer for 34 years.

  2. Sandra

    Malls are empty, restaurants are empty, HH Gregg went out of business…You know why? Their salesmen were sweet, but couldn’t speak or understand English. Clothes in malls are made out of paper from China in factories using slave labor. Salespeople in stores don’t speak English, have no customer service skills and they stink!

    Wearing underarm deodorant is unknown in the third world apparently.

    I went to a nail salon to prune my manicure, I was the only customer in the salon, operators beside me played cards! Others napped or ate their lunch in pedicure loungers.

    Parking lots are full–with commuter’s cars, not customers in shopping centers. Without them, centers would fold.

    We have the country we deserve, the world we deserve too, and no going back, as if there ever was a Paradise for mankind.


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