The Covid Bankruptcies: Guitar Center to Youfit

Adventurous tourists wanting an aerial view of New York can hire an Awesome Flight chopper to circle Central Park and downtown Manhattan.

A city tour goes for $850 for a party of four, while longer journeys to the Hamptons, Philadelphia and Washington are also on offer from the White Plains, New York-based company.

But the pandemic transformed the charter flight business as tourism slowed, even while demand for small-scale flights remained. The sector had been under pressure from New York’s 2016 decision to limit flights following resident complaints about the “non-stop din of helicopters” in the city.

Awesome Flight filed for bankruptcy Dec. 2, along with its owner, who listed the company as one of his largest creditors and said the pandemic has “negatively affected” his income and expenses. Awesome Flight is seeking to jointly administer the cases.

A representative for Awesome Flight and the company’s attorney didn’t respond to requests for comment.

Live events are the lifeblood of Hurdl, a New York-based audience engagement startup that has worked on performances for artists from Chris Young to deadmau5.

Through its main product—a wristband that creates light shows—the company connects with attendees and collects data about them, allowing organizers and performers to engage with their fans long after the event is over.

That all came to screeching halt in March, when venues across the U.S. were ordered shut. The pandemic “catastrophically affected” the company’s operations, its chief restructuring officer said in court documents.

Following a failed effort to sell itself, Hurld filed for pre-packaged bankruptcy in November after reaching an agreement with key creditors.

Guitar Center prides itself on its in-store experience, which lets customers “pick a guitar off the wall, plug into the amp of their choice, and rock out.”

In recent years, the chain had been adding more in-person offerings like music lessons and instrument repairs, making it all the more devastating when the Covid-19 pandemic forced the company to temporarily shut almost all of its more than 500 locations and furlough 8,750 staffers.

Would-be rockers placed a flurry of online orders, but they weren’t enough to offset the added costs of keeping stores safe when they were allowed to reopen, according to court papers. The loss of in-store purchases sent Guitar Center’s liquidity tumbling as the company was still struggling with debt it took on to fund a 2007 buyout.

Guitar Center ultimately filed for bankruptcy with a plan to cut its borrowings and receive new equity from certain investors. It emerged from Chapter 11 a month later, having slashed around $800 million of debt.

Nearly 100-year-old Italian leather goods brand Furla drew fans willing to plunk down $428 for a structured crossbody bag or $178 for a wallet. But the company’s U.S. unit saw its sales plunge 67% when the pandemic forced stores closed.

Furla USA had been struggling to stem declining sales even before the pandemic began, according to court papers. While its stores in tourist-heavy outlet malls in New York and Hawaii were performing well, locations that relied more on local shoppers had faltered, the company said.

Last year, Furla USA began shifting its strategy to focus on its online and wholesale businesses. The change proved “well-timed” given the pandemic, but Furla USA still faced “unprecedented liquidity and operational challenges” when it was forced to temporarily close its shops to comply with local health orders. Its wholesale business also took a beating when customers like department stores also shuttered.

Furla USA had most of its shops reopened by the summer, but eight were forced to close a second time amid a resurgence of the virus. The New York-based firm took steps to shore up liquidity like furloughing workers and asking for rent deferrals before filing for bankruptcy to re-work its borrowings.

Marilyn Monroe. Elton John. Jackie Kennedy Onassis.

So goes the client roster of T. Anthony, a posh Manhattan luggage-maker forced to shut its Park Avenue store and furlough all but one employee before filing for bankruptcy.

T. Anthony, whose offerings range from $65 passport covers to $17,000 alligator bags, saw sales collapse after the pandemic curtailed personal travel and kept businesspeople at home. The company was forced to surrender its office space on Madison Avenue and “dramatically” reduce orders for new merchandise, according to bankruptcy court papers.

The company has been a Manhattan mainstay since 1946, and founder Theodore Anthony Froitzheim made a name for himself supplying custom bags for the Duke and Duchess of Windsor, according to the company’s website. Billionaire New York real estate mogul Charles S. Cohen, who also owns Harrys of London, purchased T. Anthony in 2018.

T. Anthony plans to use Chapter 11 to get fresh financing for its online business and new store, just steps away from its old Park Avenue location in Manhattan.

For almost two decades, Diamond Coach Leasing provided transportation to the stars, ferrying celebrity concert headliners and other artists in luxury buses as they criss-crossed the U.S.

But revenue came to a grinding halt when the pandemic forced fans to stay home and venues to shut down.

In a usual year, Diamond would be coming off its peak season, with roughly 52% of earnings made in summer months. But pandemic-related cancellations and suspensions have cost the bus industry around $11 billion in all, the company said, citing the American Bus Association trade group.

The Nashville, Tennessee-based firm has pivoted by making its vehicles available for other uses. It’s also sold off assets, but the efforts were unsustainable without help from lenders and bankruptcy protection, the company said in court papers.

Diamond hopes the industry could return to normalcy by mid-2021. The company managers “do not desire to languish” in bankruptcy and Diamond “has the resources, management team, bank support, and industry relationships to reorganize and become a Chapter 11 success story,” attorney Griffin Dunham said.

Giant gummy bears and candy-scented hand sanitizer couldn’t help It’Sugar get through the pandemic. With most of its sales dependent on travel and tourism, the chain of specialty candy stores has been unable to recover since it was forced to shut its roughly 100 stores in March.

Even as its locations gradually reopened in recent months, the company couldn’t get significant rent abatements and deferrals from its landlords, leaving it in default on nearly half of its leases. It’Sugar had just $500,000 in cash and over $16 million of liabilities by the time it filed for bankruptcy at the end of September.

The chain said a unit of its owner will provide it with financing to keep stores open during the reorganization and that it expects to be in a better position to navigate the pandemic once it emerges from Chapter 11. In the meantime, fans of It’Sugar’s gummy creations—bears, worms, even pizza slices—are welcome back to the company’s 22,000-square foot department store in New Jersey’s American Dream Mall, which reopened in October.

For nearly 60 years, bargain-hunting New Yorkers and tourists flocked to Century 21 Department Stores in search of deep discounts on designer wares from the likes of Marc Jacobs, Versace and Fendi. The store was even memorialized in Sex and the City when Carrie Bradshaw declared the chain’s Lower Manhattan flagship “the best part of jury duty.”

But thrifty shoppers will soon have to search elsewhere for deals after the off-price retailer filed for bankruptcy Thursday with plans to permanently close its 13 stores. Like many peers, Century 21 had struggled to adapt to changing consumer tastes and the shift toward online shopping and was further hamstrung when it had to shutter stores in March to help slow the spread of Covid-19. But the company blamed its insurers—which failed to pay out some $175 million under business interruption policies—for its demise.

Without the funds, the company had “no viable alternative” other than shutting down, co-Chief Executive Officer Raymond Gindi said in a statement. Insurers came to Century 21’s rescue once before, in the aftermath of the Sept. 11 terrorist attacks that heavily damaged its location across the street from Ground Zero.

The Las Vegas Monorail usually shuttles 5 million people—mostly out-of-towners—up and down the city’s dazzling strip each year. That stopped when the likes of Harrah’s, Caesars Palace and the rest of the city’s casinos and bars shut their doors to quell the spread of Covid-19.

The four-mile, seven-stop train system stopped running on March 18, and the non-profit that runs it laid off almost all staff. Even after slashing expenses and cutting the pay of remaining employees, Las Vegas Monorail Co. was almost completely out of cash by the time it filed for bankruptcy on September 7.

A local government agency plans to buy the monorail out of bankruptcy for just $24 million—a pittance compared to the $650 million of municipal bonds sold to finance its takeover and expansion in 2000.

The new work-from-home reality has rocked the shared-office space market. Overnight, places that once seemed so hip, with espresso machines, plush lounges and treadmill desks, emptied out. Professionals paying for a small corner in a big office tower went home and companies that temporarily rented out entire floors canceled their contracts.

Since the end of July, co-working company Regus has put more than 100 of its U.S. properties into bankruptcy under its RGN-Group Holdings unit. The company is dealing with falling revenue and long-term leases that don’t reflect “Covid-19-adjusted market realities,” it said in court papers filed last month.

Regus and its parent, IWG, are not in bankruptcy. U.K.-based IWG is one of the biggest co-working space providers in the world and its Regus unit has more than 1,000 locations in the U.S. and Canada. Most locations are organized as separate companies, which allows Regus to put them in court protection individually.

Regus has loaned the offices more than $400 million to get them up and running. The company tried to keep desks filled by offering discounts and other incentives, but it hasn’t worked, according to court papers.

The company is trying to renegotiate leases to keep its troubled co-working centers operating even though it doesn’t know “when (and indeed, whether) the U.S. will return to something resembling the pre-pandemic ‘business as usual.”

Stein Mart’s bankruptcy might serve as a warning about the risks of re-opening the economy too soon.

The discount retailer survived early pandemic lockdowns, but was hobbled by a recent surge in cases in California and much of the southern U.S., forcing it to file for bankruptcy on Aug. 12.

“The resurgence of Covid-19 cases in the Southeast, Texas, Arizona and California, where the majority of the company’s stores are located, again materially, adversely impacted the company’s revenue” in July 2020, Chief Executive Officer D. Hunt Hawkins said in court documents.

When Jacksonville, Florida-based Stein Mart reopened stores, revenue and customer traffic were initially positive, albeit lower than pre-pandemic levels, Hawkins said. Now, going-out-of-business sales are underway at about 280 stores.

The retailer employed about 9,000 people as of Feb. 1, but furloughed “a significant number” of employees in March, according to court documents. It had reopened all its stores by June 15.

After the Covid-19 pandemic shut down schools and sent kids home, buses stopped running. That was bad news for ABA Transportation, which owns several bus lines that ferry children around Long Island.

Some school districts rejected contracts and stopped paying ABA, which serves Nassau and nearby counties under units including Baumann Bus Company, Baumann and Sons Buses, ACME Bus Corp. and Brookset Bus Corp., according to court documents. The lack of cash flow forced ABA to dismiss about 900 employees and shut down operations.

“For many it was a shock,” said Debra Hagan, president of the TWU Local 252, which represented about 220 bus drivers. She said that employees got abrupt notice in March that they would be permanently laid off.

ABA filed for Chapter 11 bankruptcy in the Eastern District of New York on Aug. 3. It estimated liabilities of $10 million to $50 million in court documents.

Customers at the upscale Florida Mall in Orlando once flocked to the shopping center’s LemonShark Poke outpost, crafting custom bowls of raw tuna or salmon to fuel up between visits to Apple or Zara. Then the Covid-19 pandemic swept the nation, forcing mall owner Simon Property Group to shut its retail properties in March. The move left business owners Bruce Galicia and Diana Viera stuck with a $16,000 monthly rent bill and no customers. The mall reopened in May, but customers didn’t rush back.

“It went from being an okay business to being a giant black hole money drain,” said lawyer Jeffrey Ainsworth, who represents the LemonShark restaurant in its bankruptcy. With no talk of rent concessions, the owners put their two LemonShark locations—one in the Florida Mall, the other elsewhere in Orlando—into bankruptcy protection to get out of the mall lease. Now the owners are looking to open another LemonShark restaurant outside the shopping center.

“Taking it from $16,000 a month to $3,000 a month, it gives them at least a puncher’s chance of success,” said Ainsworth. “They would not have been able to survive in the Florida Mall.

The class of 2020 will undoubtedly have some unique memories to hold onto: bedrooms turned classrooms, remote learning, virtual graduation. But one special high school event won’t have a page in many of their yearbooks: prom.

For Occasion Brands, a retailer that depends on that one night to drive nearly three-quarters of its revenue, the pandemic couldn’t have come at a worse time.

Occasion, the owner of PromGirl.com and a partner to Kleinfeld Bridal, was gearing up for its busiest time of the year in March when the pandemic first swept the U.S. What had been a $50 million-a-year business saw its revenue all but vanish seemingly overnight. Between lost sales and a surge in returns, Occasion filed for bankruptcy on July 22.

Born out of the dot-com bubble, Occasion shipped its first dresses for the 1999 prom season. That time of year accounts for roughly 70% of the company’s annual sales, according to court documents.

Covid-19 “was the proverbial ‘nail in the coffin’” for RTW Retailwinds, owner of apparel chain New York & Co. The 102-year-old retailer of women’s workwear filed for bankruptcy with plans to shut a significant portion, if not all, of its stores after the pandemic drove off customers. But RTW conceded in court papers that it had struggled for years to weather changing fashion tastes and declining foot traffic in malls. It called its brands “the latest victims of the retail apocalypse.”

In recent years, the company had relied on celebrity collaborations with the likes of Gabrielle Union, Kate Hudson and Eva Mendes to help drive sales among its core customer base of 25-to-49-year-old women. But the efforts fell short, and the company is aiming to run going-out-of-business sales while seeking a buyer for its e-commerce operations.

On game days for the University of Kentucky’s eight-time national champion basketball team, Two Keys Tavern in Lexington was the place to be. Before the pandemic, Wildcats fans could order a Caliparty, a boozy blue fishbowl named after legendary coach John Calipari. The walls were lined with jerseys and other memorabilia. Two Keys earned about 30 percent of its annual revenue during the annual March Madness basketball tournament. So the National Collegiate Athletic Association’s decision to cancel the event because of Covid-19 was a major blow.

Then the statewide closure of bars in mid-March, on top of a long-running landlord dispute, led Two Keys and its owner Seth Bennett’s Sethco LLC into bankruptcy court in July after more than 66 years in business. “March is what makes up for every slow month,” said J. Christian Dennery, the tavern’s lawyer. “So when it didn’t happen there was a real liquidity crunch.”

Two Keys hopes to either resolve the landlord dispute and reopen in its current building or sell the company’s assets to somebody willing to reopen the tavern in a nearby location, Dennery said.

The company, which has 26 facilities treating people with substance-abuse issues in eight states, was already having trouble servicing its debt payments when the coronavirus hit the U.S. Stay-at-home orders and travel restrictions helped drive a decline in outpatient visits and inpatient admissions, while the company was forced to spend time and resources keeping its facilities open with enough staff and personal protective equipment so they and the patients would be safe.

“In May, admissions started to improve but have not yet returned to pre-Covid-19 levels,” American Addiction Centers said in a court filing when it declared bankruptcy. All incoming patients are tested for the coronavirus and quarantined from the general population while awaiting test results, which restricts the number of available beds.

Chief Executive Officer Andrew McWilliams found a silver lining in the pandemic, noting that the grim national mood is actually good for the company. “The heightened stress, anxiety, fears and social isolation in this unprecedented time has prompted more patients and their families to seek treatment, pushing demand for our services higher,” he said in a statement announcing the bankruptcy.

For almost two decades, Bounce For Fun helped churches, schools and homeowner associations make their parties memorable for kids.

The Frisco, Texas-based company had amassed a catalog of more than a hundred attractions available for rent, including bounce houses, water slides and obstacle courses. It even offered a 24-foot rock-climbing wall and a trackless train.

But just as its peak season was about to kick off, states including Texas banned large gatherings, shut down schools and asked residents to stay at home.

“Before mid-March, we were on track to have a record year,” Paul Sumrow, the company’s owner, said in an interview. “When the coronavirus hit, we had 100% cancellations.”

Sumrow, who has only one full-time employee, obtained a loan through the Paycheck Protection Program but that was hardly enough to keep going with 85% to 90% of this year’s revenue gone.

“The numbers just don’t work,” he said. “I am not willing to go deeper and deeper when there is nothing on the horizon that says we are coming back or not coming back.”

For 45 years, Sugarloaf offered artists across the U.S. a market for their creations, including jewelry, pottery and textiles. Its 11 annual festivals, which featured demonstrations and hands-on workshops, ground to a halt in March as social gatherings were banned.

“We’ve survived through wars, recessions, terrorist attacks, political upheaval, hurricanes, tornadoes, blizzards and more,” the company wrote on its website as it announced it was shutting down. “With no cash flow coming in, even a well-managed company cannot survive indefinitely.”

Steve Andrews was a general contractor who built eateries for other people before he and his wife, Debbie, ran two of their own in Northern California. For 15 years, their Black Bear Diners were popular places to sip coffee and exchange local gossip in the two small towns where they operated before the pandemic hit.

Forced to close their doors, the couple furloughed 50 of their 65 employees and tried to offer takeout. But diner food is comfort food, Andrews said. People came for breakfast, lunch and company. Takeout didn’t work.

“We were hemorrhaging so much money, I just couldn’t do it anymore,” Andrews, 67, said in an interview.

They tried to borrow about $350,000 through the Paycheck Protection Program, but computer problems at their bank spit out the application before it could be processed in time to qualify. Their insurance company rejected their claim for damages, even though they had paid for loss-of-income coverage. He and Debbie, who is 68, were forced to put the diners into bankruptcy in June and walk away. They have since sold their house and moved to Southern California looking for a fresh start at a time when they had expected the diners to subsidize their retirement.

Specialty’s sandwiches, salads and pastries had become a staple for thousands of office workers in downtown San Francisco and across the Bay Area. On a typical day, its Mountain View location would be packed with tech workers from nearby companies including Alphabet Inc.’s Google and Samsung Electronics Co.

Yet after 33 years in business, shelter-in-place restrictions “essentially destroyed” Specialty’s market, according to the trustee for the estate. With some of its leases running more than $30,000 a month, the company saw no choice but to shut its doors for good.

In a bittersweet ending to its three-decade history, Specialty’s gave away frozen dough for some 180,000 cookies to customers who showed up at its Redwood City warehouse.

Retired Merchant Marine veteran Joe Gold launched his fitness empire in a rough cinder-block building near Muscle Beach in Venice in 1965 with weight-lifting equipment he built himself. Arnold Schwarzenegger joined that first Gold’s Gym a few years later, and over 55 years the business began to franchise and grew to 700 locations.

The company had its strongest-ever year of worldwide growth in 2019, but the coronavirus, social distancing and gym closures hit its business like a 500-pound dumbbell. “No single factor caused more harm to the debtors’ business than the current Covid-19 pandemic,” the company said in a court filing when it furloughed almost 4,600 employees and declared bankruptcy.

Gold’s closed about 30 gyms when it couldn’t renegotiate the leases with landlords, abandoning some equipment, and found other locations where members of its shuttered facilities could go to work out. The company is now planning to sell itself to German fitness company RSG Group GmbH for $100 million after it won a court auction. “We are absolutely not going anywhere,” Adam Zeitsiff, Gold’s CEO, told members and employees in a video in May.

Problems at the New Orleans Archdiocese started long before Covid-19. Allegations of sexual abuse had been piling up for decades, leading to the removal of dozens of priests and deacons, according to a report the Archdiocese released in 2018.

Like more than 20 other U.S. church districts that have sought bankruptcy protection to settle such claims in an orderly way, the Archdiocese - with roots that predate the 1718 founding of New Orleans - filed for Chapter 11 on May 1. It listed assets and liabilities of between $100 million and $500 million.

In the court documents, Father Patrick R. Carr said the Archdiocese faced financial challenges ranging from lawsuits alleging sexual abuse to a drop in “offerings and collections at Masses which are no longer publicly celebrated due to the Covid-19 pandemic.”

By early 2020, Klausner Group, a lumber producer based in Austria, was already running out of options to salvage its sawmill in Live Oak, Florida. Cost overruns and disappointing sales, combined with financial challenges at the Austrian parent, had forced executives in the U.S. to consider a bankruptcy filing or a liquidation. But as Covid-19 began to spread throughout America, those plans were quickly thrown out the window. The executives packed their bags, shut the plant and left the country.

The rushed shutdown left the sawmill with no security guards or insurance. Employees who had learned they would no longer need to show up for work sued the company, alleging they weren’t given enough notice and hadn’t received their final paychecks. The U.S. counsel resigned after being left with unpaid invoices.

The Florida sawmill eventually filed for bankruptcy protection on April 30. Its newly appointed chief restructuring officer later would explain to the court that the entire management team and various engineers had returned hastily to Europe “in order to avoid a dangerous health situation in the U.S. and potential long-term travel restrictions.”

Financial trouble at United Cannabis began with a classic imbalance between supply and demand. In November 2019, as the price of CBD plunged, the company laid off more than a third of its 150 employees, according to court documents.

Then came Covid-19. In dealing a blow to the global economy, the pandemic depressed sales of CBD, industrial hemp and derived products, leading to more job losses. A dispute with Ucann’s largest creditor, who tried to attach some of the company’s assets, eventually precipitated the bankruptcy filing on April 20.

The Houston Roughnecks were undefeated and had the best record in the inaugural season of the XFL, a new professional football league, when Covid-19 forced every major U.S. sports league to suspend their seasons. Alpha Entertainment, founded by World Wrestling Entertainment mastermind Vince McMahon, lost tens of millions of dollars in revenue when it canceled the remainder of the XFL season and fired about 500 football players.

As it prepared to file bankruptcy, McMahon lent the company $9 million with its assets as collateral, but he withdrew his bid to buy it out of bankruptcy in time for the 2021 season after other creditors complained. Now the company hopes to sell itself to another buyer in an auction next month. The premature demise of the league wasn’t bad news for everyone, though. Roughneck quarterback P.J. Walker, who led the XFL in touchdowns before the shutdown, signed with the NFL’s Carolina Panthers for a reported two-year $1.6 million contract.

Alaska is twice the size of Texas but with few roads and many remote villages that can be reached only by airplane. As fears of Covid-19 spread in mid-March, some towns and villages around the state barred passenger flights into their communities.

Ravn Air Group, the biggest regional carrier in the state, saw passenger revenue drop by 90 percent. The company quickly ran out of money and filed for bankruptcy in early April, sparking alarm that the rural villages on its routes would be stranded without medical care, mail service and other supplies.

A free-for-all broke out. The mayor of the borough covering 95,000 square miles across the state’s far north tried to commandeer Ravn assets to ensure residents had food, medical transport and supplies but was blocked by the state attorney general. A patchwork of other regional airlines stepped in to take over some Ravn routes and business. The bankrupt company was later approved for $30 million in federal coronavirus-relief funds and in early July it sold many of its planes and assets to other aviation companies.