Weekly Rundown: Bankruptcy Season

Last week we saw a wave of pandemic-related bankruptcies across sectors. 

The retail sector is facing one of its most challenging periods in history, with stores closing world-wide. Prominent retailers such as Neiman Marcus, JCrew, John Varvatos and True Religion all filed for Chapter 11 protection. Many retailers, such as JCrew, were already on thin ice before the pandemic, facing high levels of leverage and declining sales. JCPenny is also reported to be considering a filing. 

Car rental companies have had to deal with a decline in usage as their fleets lie dormant. The 102-year old industry leader, Hertz, is in active negotiations with creditors and may file for bankruptcy protection as soon as May 22nd. 

Restaurants are also struggling. Notably, FoodFirst Global Restaurants, which owns Bravo Fresh Italian and Brio Italian Mediterranean, filed for bankruptcy back in April. 

Gyms have been hit particularly hard. Gold's Gym filed for Chapter 11 bankruptcy protection last Monday. Its 700 gyms worldwide will stay open, however, as it looks to restructure.

Virgin Australia, one of the world’s largest airlines under founder Richard Branson, is set to seek bankruptcy protection in Australia, despite Branson offering his Carribean island estate as collateral for funding. The company’s plea for a $903 million (1.4 billion Australian dollars) loan from the Australian government was also denied.

This Week By The Numbers

Stocks entered an unexpected rally, ignoring subpar earnings and increasing unemployment numbers. We continue to see a decoupling of Wall Street and Main Street, and one has to wonder how long it will last. Bitcoin reached a price of over $10,000, finishing with a 9% weekly return on Saturday, before experiencing a 13% drop Saturday night, making investors weary heading in the halving on Tuesday. 

Top Stories of the Week

The market vs the real economy

Between February 19th and March 23rd, the S&P 500 index lost a third of its value. With barely a pause, it has since rocketed, recovering more than half its loss. The catalyst was news that the Federal Reserve would be buying corporate bonds, helping big firms finance their debts. Investors shifted from panic to optimism without missing a beat, while small businesses are left struggling. Read Full Story.

US weekly jobless claims hit 3.2 million, bringing the 7-week total to more than 33 million

It's the fifth straight week in which new unemployment-insurance claims have fallen, suggesting that the worst of the shock to the labor market has passed. But claims remain elevated at a level that dwarfs that of the largest week of US job losses — 665,000 — during the Great Recession. Read Full Story. 

Pandemic batters Silicon Valley

Uber lays off 14% of corporate employees. Lyft will lay off 982 members of its staff and furlough another 288. Airbnb lays off 1,900 people – roughly 25% of its staff. The vaping company Juul announced it would lay off 800 members of its staff and move its headquarters to Washington DC. Yelp will lay off 1,000 employees and furlough 1,100 more. WeWork announced in March it would lay off 250 employees and is expected to cut more jobs by the end of May. Read Full Story.

U.S. hospitals are losing millions of dollars per day amid pandemic

U.S. health systems make a sizable chunk of their revenues from high-priced, non-emergency procedures. Conservative estimates indicate that U.S. hospitals are losing more than a billion dollars per day by complying with the guidance given by policymakers and leading medical associations in order to preserve resources for Covid-19 patients. Read Full Story.

Virgin Galactic stock jumps after earnings - space tourism appears to be hot

People, it seems, can’t wait to leave Earth. That’s a good thing for a fledgling space-tourism company like Virgin Galactic, reporting $238,000 in first-quarter sales. The company is working with aviation authorities to approve both its spacecraft and its plans for ferrying customers to the edge of Earth’s atmosphere. It completed two successful test flights from its New Mexico spaceport in the first quarter. Read Full Story.

Facebook-backed Libra project gets new CEO

Libra is bringing on HSBC’s top attorney and former U.S. Treasury, Stuart Levey, to lead its efforts. The hiring of a prominent banking industry attorney with a background in compliance reflects the association’s commitment to overhaul its plans for the digital currency in ways that will make them more palatable to governments around the world. Read Full Story.

Product of Week: Aspiration Bank

We know times are tough for many families right now, so Aspiration is offering $50 for opening a new bank account and spending $250 on regular purchases. What I love about this product is that fees are optional (!), and they are completely fossil-free with their investments. 

Use this link to collect your $50. 

Thanks for reading this week’s edition of the Weekly Rundown! As always, reach out with any feedback and share with friends. 

Best,

Tatiana Koffman —> tatiana@tatianakoffman.com

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