Evening Note

As I express/explain our relatively bearish thesis during client review meetings I’ve been making reference to the coming wave of bankruptcies and the simple, apparently unbeknownst to many market participants, fact that the Fed cannot print sustainable corporate cash flow — nor jobs for that matter.

It seems to come as a surprise to clients when I suggest that, in fact, it’s already begun. I often get a “really, other than X, Y and Z (companies in the headlines), who?” response (*see list below).

Well, for starters, not only is it underway, the present wave of bankruptcies — as early in recession as we are — is already on the verge of setting records.

Take a look:

Seems crazy, given how busy credit markets are these days. I.e., Investment grade corps have literally issued a trillion dollars of fresh new debt so far this year. Again, crazy! And, yes, bubbly! In a really bad/risky way — in my humble view

Like I keep sayin, stocks are utterly unhinged from present economic reality, which means — on behalf of you clients — we’re going to continue to play it cautiously (hedged) for the time being.

As for today’s action, stocks pretty much closed where they opened; nicely higher. However, as is often the case on the up-days of late, on below-average volume, although today saw notably better breadth than yesterday. Only two of our core positions closed lower on the session; gold and ag commodities. As I signaled this morning, we added ever so slightly to our position in materials company stocks (up 2.1% today), as — while, again, we remain guarded right here — infrastructure as part of a future stimulus program implies a relative edge in the space…

*Here, per Forbes, is the list of “major companies with at least 500 employees that have filed bankruptcy in 2020:”

24 Hour Fitness filed on June 15 and announced that it will permanently close more than 100 of its roughly 400 gyms, citing the “disproportionate impact” of the coronavirus pandemic on the fitness industry.
Advantage Rent A Car filed on May 26, four days after its competitor Hertz, with global travel still ground to a halt.
Illinois-based pharmaceutical company Akorn filed on May 20, two years after Fresenius backed out of a planned $4.3 billion takeover over quality control concerns.
The ALDO Group, a Montreal-based shoe retailer that operates about 3,000 locations in more than 100 countries, filed on May 7 under pressure from store closures.
Private-equity-backed APC Automotive filed on June 3. Demand for auto parts has sunk during the pandemic and import tariffs on metals have cut into its margins as well.
Apex Parks Group, which had to close its 12 entertainment centers and water parks due to the pandemic, filed for a Chapter 11 reorganization on April 8.
Art Van Furniture, a midwestern retailer with 176 locations, filed on March 8. As the economic crisis worsened, it converted its Chapter 11 reorganization to a Chapter 7 liquidation in early April.
Avianca, which served more than 30 million passengers last year as one of Latin America’s largest airlines, filed on May 10 with all of its passenger flights grounded since mid-March due to Covid-19.
Bar Louie, a nationwide gastropub chain, filed on January 27 after closing 38 of its locations, leaving less than 100 remaining.
Bluestem Brands, the parent company of seven e-commerce subsidiaries, filed on March 9.
Borden Dairy followed competitor Dean Foods DF into bankruptcy on January 5, aiming to reduce its debt load while continuing normal operations.
British rent-to-own operation BrightHouse entered administration—the equivalent of a bankruptcy process—on March 30, immediately halting all new rent-to-own and cash loan lending activities.
U.K.-based Italian restaurant chain Carluccio’s entered administration on March 30, shortly after its 73 locations were required to close.
Centric Brands, an apparel manufacturer that licenses its clothing to designer brands like Calvin Klein and Tommy Hilfiger, filed on May 18. It aims to reduce its debt by $700 million and continue normal operations.
CMX Cinemas, a movie theater chain that also owns dine-in restaurants and bars, filed on April 25 with all 41 of its theaters closed nationwide during the pandemic.
Trucking conglomerate Comcar Industries filed on May 17 and announced it was selling its five operating companies.
Fast casual restaurant chain Cosi filed for Chapter 11 on February 24 for the second time since 2016 after shuttering 30 of its locations in December.
Restaurant franchisor CraftWorks filed on March 3 to reduce its debt by more than $140 million shortly after closing about 10% of its locations.
Dean & DeLuca, a luxury grocery store chain with 42 locations until it started downsizing in recent years, filed on April 1.
British fashion retailer Debenhams, which employs more than 20,000 people, entered administration on April 6 for the second time in the last year as it struggled to stay afloat with its stores closed. It is liquidating its business in Ireland, permanently closing its 11 stores there.
Diamond Offshore Drilling sought bankruptcy protection on April 27 after skipping a payment to bondholders. It had billions of dollars of debt even before oil prices plunged in recent weeks.
Jamaica-based telecom provider Digicel filed for Chapter 15, which allows foreign creditors to participate cases, on May 15.
Earth Fare, a North Carolina-based organic grocery chain, filed on February 4, a day after announcing it was closing all of its stores and liquidating its inventory.
South African retailer Edcon filed for business rescue on April 29, announcing that it had lost 2 billion rand in sales—equivalent to more than $100 million—due to coronavirus.
Industrial battery maker Exide Technologies, based in Georgia with more than 8,000 employees in 80 countries, filed on May 22 and agreed to sell its businesses in Europe and Asia.
Tri-state grocery chain Fairway Market filed on January 23 and announced it was selling up to five New York City stores and its distribution center to Village Super Market for $70 million.
British airline Flybe, one of Europe’s largest regional carriers, entered administration and grounded all flights on March 5.
Foodora, a food delivery app that is a subsidiary of Berlin-based Delivery Hero, filed for insolvency in Canada on April 27 and announced it’s ceasing operations in the country on May 11.
St. Louis-based coal miner Foresight Energy filed on March 10 with $1.4 billion in debt.
Frontier Communications FTR, one of America’s largest telecom companies, filed on April 14. Its reorganization plan is expected to reduce its sizable debt load by $10 billion.
Gold’s Gym filed on May 4 after having to close its 700 fitness centers due to coronavirus lockdowns. Thirty gyms will remain permanently closed.
Helios and Matheson, the parent of movie-theater subscription service MoviePass, filed for Chapter 7 bankruptcy on January 29. MoviePass had more than 3 million subscribers at its peak in 2018.
Car rental company Hertz filed on May 22 with nearly $18 billion in net debt on its balance sheet and coronavirus crushing business travel and tourism. It laid off 10,000 of its North American employees in April.
Singapore-based oil trader Hin Leong, founded by ex-billionaire Lim Oon Kuin, filed on April 18 as the company revealed it had $800 million in previously undisclosed losses.
Hornbeck Offshore Services, which operates a fleet of offshore oil supply ships in the Gulf of Mexico and Latin America, filed a prepackaged plan on May 19. Its shares peaked at about $60 in 2013, but have traded below $1 since July of last year.
IntegraMed America, which offers nearly 100 medical facilities and fertility centers in the U.S. services like egg freezing, filed on May 20.
Intelsat filed on May 13, though it said it will continue to launch new satellites. The pioneering company put the first commercial communications satellite in space in 1965.
Virginia-based cloud services provider Internap filed on March 16 to renegotiate its debt. It was delisted from the Nasdaq the next week.
JCPenney filed on May 15, weighed down by $4.2 billion in debt. The prominent department store chain has lost money for nine straight years, and its troubles were exacerbated by the pandemic that forced its 850 remaining locations to close.
J.Crew was the first big American retail domino to fall amid the pandemic, filing on May 4 to convert about $1.7 billion of debt to equity. It still plans to reopen its 181 J.Crew stores, 170 factory stores and 140 stores for its women’s clothing brand Madewell after coronavirus-related restrictions are lifted.
J.Hilburn, a Dallas-based luxury menswear retailer rooted in one-on-one contact with customers for its custom-made suits and shirts, filed on May 4.
Southeast burger chain Krystal filed on January 19, citing debts of between $50 million and $100 million.
Latam Airlines became the largest carrier yet to go bankrupt when it filed on May 26 with the pandemic suffocating demand, though it will continue operating its limited passenger and cargo stats as scheduled.
Le Pain Quotidien’s U.S. arm, PQ New York, filed on May 27 and announced plans to be sold to restaurant conglomerate Aurify Brands, which will keep 35 of its 98 bakeries in the U.S. open.
Libbey, an Ohio-based glass tableware manufacturer for restaurants and bars that no longer needed new drinking glasses while they were closed, filed on June 1.
Mexican energy company Libre Abordo announced it was bankrupt on May 31 after oil prices collapsed this spring.
Commercial magazine printer LSC Communications filed on April 13 with nearly $1 billion in debt after an antitrust lawsuit blocked an attempted $1.4 billion sale to competitor Quad/Graphics QUAD last year.
Organic grocer Lucky’s Market filed on January 27 and plans to sell most of its stores to Aldi, Publix and other winning bidders.
Pharmaceutical manufacturer Mallinckrodt submitted a Chapter 11 filing for its specialty generics unit on February 25 and offered to pay a $1.6 billion settlement under the weight of lawsuits related to opioid abuse.
McClatchy, which operates 30 newspapers in 14 states, filed on February 13, ending 163 years of family control of the business and signaling the continuing erosion of local news.
McDermott International, a commercial construction and engineering company, initiated a Chapter 11 process on January 21 to eliminate $4.6 billion in debt.
Modell’s Sporting Goods, a New York institution since 1889, filed for Chapter 11 on March 11 and announced plans to close all 153 of its stores spread throughout the northeast.
Swedish fashion retail chain MQ filed on April 16 as sales plunged at its physical locations while customers stayed home due to the pandemic.
Neiman Marcus filed on May 7, seeking to eliminate $4 billion in debt. The renowned luxury retailer has 43 Neiman Marcus locations as well as 22 stores for its Last Call discount brand and two Manhattan Bergdorf Goodman stores. Business at all of them has been upended by coronavirus shutdowns.
NMC Healthcare, a large hospital operator in the United Arab Emirates, filed for Chapter 15 in the U.S. on May 28 after revealing in March that it had under-reported its debt by $2.7 billion.
Clothing conglomerate Nygard Entities filed for Chapter 15 on March 19. The company was under fire after a class-action lawsuit filed in February levied sex-trafficking allegations against founder Peter Nygard.
OneWeb, a satellite internet startup backed by SoftBank that launched 74 satellites into space, filed on March 27.
Upscale stationary chain Papyrus’ parent company filed on January 24 and closed all 254 of its stores.
Pier 1, a home furniture chain with close to 1,000 locations at the beginning of the store, began a Chapter 11 reorganization on February 17, before the weight of the pandemic even reached the U.S. Shares were trading at more than $460 in 2013 before beginning a steep and steady decline.
San Antonio-based oil and gas servicer Pioneer Energy filed on March 2, though it is continuing operations.
Rural hospital chain Quorum Health filed a prepackaged chapter 11 plan on April 7 to reduce its debt by $500 million.
RavnAir, an intrastate airline in Alaska, ceased operations and laid off all staff when it filed for bankruptcy on April 5.
Reitmans, a prominent Canadian fashion retailer with 576 stores, began a restructuring process on May 19.
RentPath, an online search platform for rental homes, filed on February 11 while at the same time announcing it was being bought out of bankruptcy by competitor CoStar Group CSGP for $588 million.
Rubie’s Costume Company, the world’s largest Halloween costume manufacturer, filed on April 30 as sales declined while its retail customers are closed due to Covid-19.
Canadian retail superstore Sail Outdoors filed on June 2. It reopened its 14 locations in Quebec and Ontario in May after weeks of coronavirus-related closures.
New Zealand furniture and appliance retailer Smiths City entered receivership on May 21 to expedite its sale to Polar Capital.
Specialist Leisure Group, a British company with 44 hotel and travel brands like Shearings, a century-old tour bus operator, entered administration on May 22 and cut 2,460 jobs. Only 70 employees remained to wind down the business.
Canadian auto parts manufacturer Spectra Premium filed on March 10. In a press release, the company complained that efforts to cut supply chain costs were hampered by tariffs the U.S. imposed on China.
Speedcast International, a satellite internet company that provides connectivity to the embattled cruise industry when ships are out at sea and serves 80% of cruise brands globally, filed on April 23.
Discount retailer Stage Stores, which owns brands like Gordmans and Bealls, filed on May 10 and will begin to liquidate its inventory when 557 of its stores reopen from coronavirus shutdowns on May 15.
Wisconsin-based auto parts and plastics manufacturer Techniplas filed on May 6 as it hopes to find a buyer.
True Religion, a designer jeans retailer with locations of its own in 26 states and a presence in other major department stores, filed on April 13 for the second time in less than three years.
Discount retailer Tuesday Morning filed on May 27 and expects to close about 230 of its 687 stores nationwide. In the first phase of its reorganization, it will close at least 132 locations and its Phoenix distribution center.
Oklahoma shale driller Unit Corporation filed on May 22 during the global commodity price crunch, aiming to reduce its debt by $650 million.
Virgin Australia, one of Australia’s largest airlines co-founded by billionaire Richard Branson, filed on April 21 after the Australian government denied the company’s pleas for a bailout.
Vision Group Holdings, which pversees two Lasik eye surgery providers, filed on May 30 with demand for elective surgeries all but disappearing.

Whiting Petroleum filed on April 1, though it said it would continue to operate its business. Shares of the publicly-traded shale driller dipped below $1 in March after trading at more than $150 in 2015.


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