"It's A Perfect Storm": List Of Retailers In Danger Of Bankruptcy Hits Record 22

Tyler Durden's picture

The US retail sector continues to sink at an alarming rate, and according to the latest iteration of Moody's list of retailers who are in danger of filing for bankruptcy, there are now 22 distressed retailers whose troubled financials the rating agency believes could make them potential bankruptcy candidates in the near future, up substantially from just two months ago, and topping the 19 recorded at the peak of the Great Recession.

According to Moody's analyst Charles O'Shea, legacy retailers such as Sears, Neiman Marcus and others on the rating agency's retail distress list, face a "perfect storm" and warned that "you're on the Andrea Gail right now, and the water's starting to get very choppy." The worst could be yet to come as the Moody's analyst writes that "the ranks of distressed retailers is set to keep growing over the next 12 to 18 months amid a secular shift in the industry."

Moody's list consists of all retailers which have ratings of Caa or lower. That number has grown to 22, or approximately 15%, of the firm's retail and apparel universe. "When you're down there in C-a land, bankruptcy is a real possibility," O'Shea said.

"The majority of retailers remain fundamentally healthy," said O'Shea, "But as select groups of retailers continue to deteriorate -- in particular department stores and specialty retailers -- we believe the distressed ranks will keep growing, fueled in part by distinct vulnerabilities within the B2/B3 retail population."

Focusing on those retailers with imminent default risk, Moody's adds that of 42 B2/B3 rated issuers (as of April 30, 2017), seven face $1.1 billion of maturities for asset-based loans and revolving credit facilities over the next year- elevating the risk of default for already-stressed and distressed issuers should the strong refinancing pace driving recent high-yield issuance recede. Such a risk is underscored by Moody's US speculative-grade default forecast, which predicts a decline in the overall US speculative-grade default rate to 3% by April 2018 from 4.5% today, even as spec-grade retail and apparel default forecasts trend significantly higher, at 6.7% and 6.8%, respectively.

Some of the highliights from the latest Moody's report

  • Competitive challenges are intensifying and the credit erosion among more challenged retail sectors and individual retailers is crystallizing rapidly as more issuers file for bankruptcy and miss payments
  • The competitive challenges weighing on earnings performance for bigger retailers like Amazon.com, Walmart Stores, Best Buy and Target will have potentially devastating ripple effects for smaller, more challenged retailers over the next several quarters
  • Common characteristics of retail and apparel companies with lower credit ratings include stressed liquidity, weak quantitative credit profiles, challenged competitive positions, sponsor ownership and erratic management structure
  • Liquidity is typically the driving force in the assessment of credit risk, and a key determinant in any drop into Caa/Ca territory. “Risk becomes more acute when a company is facing a meaningful debt maturity."

Some names that figured previously on Moody's list have already filed for Chapter 11 protoection: among them discount footwear company Payless ShoeSource and Rue21, a teen fashion retailer, both filed for bankruptcy recently, while Gymboree, a specialty seller of children's apparel, missed its June 1 interest payment and is expected to announce its bankruptcy filing shortly.

While landing on the distressed list of "super fallen angels" is not a death sentence, recently JC Penney managed to crawl out of it, the probability that a company will end up in bankruptcy rather than get its financial in orders is orders of magnitude greater.  "There are companies that come out of that," said O'Shea, who noted that iconic retailer J.C. Penney "was down there, and is now out," with an improved rating.

Doing the math here, with one company "out" and everyone else eventually filing, restructuring lawyers are finally going to be busy after a nearly decade-long hiatus.

Below is the full list of deeply distressed retailers:

  • Boardriders SA  - sporting subsidiary of Quiksilver
  • The Bon-Ton Stores - parent of department store chain
  • Fairway Group Holdings - food retailer
  • Tops Holding II - supermarket operator
  • 99 Cents Only Stores - discount retailer
  • TOMS Shoes - footwear company
  • David's Bridal - wedding dresses and formalwear seller
  • Evergreen AcqCo 1 LP - parent of thrift chain Savers
  • Charming Charlie - women's jewelry and accessories
  • Vince LLC - clothing retailer
  • Calceus Acquisition - owner of Cole Haan footwear firm
  • Charlotte Russe - women's clothing
  • Neiman Marcus Group - luxury department store
  • Sears Holdings - owner of Sears and Kmart.
  • Indra Holdings - holding company owner of Totes Isotoner
  • Velocity Pooling Vehicle - does business as MAG, Motorsport Aftermarket Group
  • Chinos Intermediate Holdings - parent of J. Crew Group
  • Everest Holdings - manages Eddie Bauer brand
  • Nine West Holdings - clothing, shoes and accessories
  • Claire's Stores - accessories and jewelry
  • True Religion Apparel - men's and women's clothing
  • Gymboree - children's apparel

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ParkAveFlasher's picture

Husbands everywhere are celebrating these closures.

Cursive's picture

Not sure about that. The alternative is on-lone shopping.  At least this way, they get out of the house.

vato poco's picture

wait ... 99 cents only AND Nieman's are on that list? uh-oh

His name was Seth Rich

#PizzaGate

#WhatsontheLaptops

#WhyUNoIndictPodesta

#TheyAllHaveToGoBack

CheapBastard's picture

8 years of Obama, Hillary, Pelosi, Reed and Shumer have consequences.

NotApplicable's picture

I'd say it's more like a century plus of central banking, or at a minimum 40+ years of Keynesian tragedy.

Buck Johnson's picture

Everything is finally coming to it's conclusion.  This type of economy was never able to be sustained and the bankers knew it.  They used up the US and will move on to another plan/country next.

 

 

open calender's picture

you can add an extra 1200/USD a week to your account working at home for 3 hours a day... go here to this site... http://bit.ly/2jdTzrM

AGuy's picture

"8 years of Obama, Hillary, Pelosi, Reed and Shumer have consequences."

Probably more do to the demographics cliff as the boomers switch from their peak spending years to their peak frugal years.

Welcome to the Demographics Cliff. Don't look down as its nearly a bottomless pit. This is just the beginning as there is a massive wave of Boomers returning soon

Pooper Popper's picture

NOTICE:-gabby giffords gets shot ,,,and all dems SCREAM for guncontrol!!!!!!!

Seth Rich is Murdered with a "GUN",,,,,,,,and crickets......................

Hmmmmmmmmmmmmmmmmm???

Insurrexion's picture

P-l-le-e-a-s-e...

 

Of course you're right about the hypocratic party; however, we expect this from this scum of the earth.

They only scream when it is in their interest and they shut-the-fuck- up when they hide their guilt.

 

So what?

adanata's picture

Little hint of propaganda from the media seeping in; i.e. this only indicates competition from online sales... which is not true. Consumers are tapping out.

Give Me Some Truth's picture

watch restaurants too. People still want to dine out for a change of pace ... just not as often and they don't buy as much.

When I go to a "nice" restaurant I'm always struck by the age of the clientelle. Usually they are age 60 or older. Yes, there are some younger people, usually with the older people .. who are clearly the ones picking up the check.

 

 

NAVIGATOR0832's picture

Eating out has become really expensive lately. Even a big Mac meal will set you back $7

peippe's picture

both patties are really fitting nicely 

WITHIN the confines of the triple buns these days, aren't they?

missing 1/2 an ounce of beef at least since the early eighties.

the corporations, they depend on loss of memory/die off. 

Abbie Normal's picture

And the patties were probably cooked as many as 8 hours ago; then reheated when needed.

Lucretius's picture

Big Mac? Seriously, wtf, who eats that shit?

subversion's picture

True enough. Recently I noticed that Amazons prices are much higher than buying local.

95% of what is sold now seems to be Chinese re-sellers with their garbage and Amazon appears to be raising their prices.

 

Removing manufacturing, destroying the middle class and killing off your customer base just to make a few pennies more was always a bad business idea.

It's not like the new middle class (located in China) are interested in buying American.

matinee55's picture

today's msm whorellywood emasculated "men" not to sure!

Give Me Some Truth's picture

We are a "consumer based" economy, but the consumer is cutting back ... quite obviously. Signs. Signs. Everywhere the Signs ("For Lease", "Pay Day Loans!" ).

But the MSM can't talk about this. Or maybe there simply aren't any reporters to report this. 99 percent of the newspapers in the country have suffered massive down-sizing or already closed their doors.

 

 

Hitlery_4_Dictator's picture

I don't care about anything anymore, so make with the collapse already.

mike_king's picture

Hoping for deflation and civil war. The Left has to go.

Haus-Targaryen's picture

This is my "best case" scenario.  

Worst case is this shit prolonged out over the next 10 years. 

 

vato poco's picture

well, yeah, but ...

the *worst* case is this shit prolongs over 30 or 40 years. or more. look at Argentina; or Italy; or Greece. Spain. Portugal. India. etc etc  Hell, the UK has been slow-motion going-to-hell since 1914 and they look like they can keep doing this for the next thousand years.

I don't think that'll happen here, though. Bad Times & Big Trouble is coming - and everyone can feel it. Worse, it feels like they're *ready for the shit to start*

Haus-Targaryen's picture

Just the thought of ANTIFA getting lined up against a wall and shot makes me giddy. 

vato poco's picture

right there witcha. as the Great Black Community Organizer once threatened, "don't think we aren't taking notes, brother"

the left is going to find, to its sorrow and shock, that that works both ways

PTR's picture

Like the communist witch hunts of the 50s, the radical left is running out of targets and are starting to turn on their own.  Witness Evergreen State U.

#popcorn

CheapBastard's picture

And yet Bankers are getting record bonuses and the stawk market is at all time highs!

 

 

froze25's picture

So how do you open a bank?

Hitlery_4_Dictator's picture

You have to be jewish is the #1 thing. 

Zip_the_Zap's picture

Not necessarily, you can open a bank if you agree to be the gentile that agrees to front for the jew. That way when they come to take your home the jew is not out front and can enjoy shabbat and gentile boinking without guilt.

Nobody For President's picture

A substantial amount of Cee four?

Or is this a trick question?

charlewar's picture

because they have quick access to trillions of practically free Fed Preserve Bunk money.

Dr. Dooms-a-lot's picture

Me too, let's get on with it already.  All stacked up and ready to go.

But...

I'm thinkiing that we might have to wait until the fall.  All the other bubbles went in the fall. 

Yukon Cornholius's picture

Yup. Nobody wants their summer vacation ruined by an economic collapse.

The Autumn Wind is a Raider, pillaging just for fun. He'll knock you round and upside down and laugh when (((he's))) conquered and won.

Dr. Dooms-a-lot's picture

Squid Viscous is my favorite ZH alias.

ZeroPoint's picture

I have been inside any of these stores, ever, except for Sears.

dobermangang's picture

Same here.  Never heard of most of them.  I still say 50% of malls close within 5 years.  Lots of grocery stores close too, as Aldi and Lidl expand into the USA.

Shitonya Serfs's picture

What are stores? What is this "outside" thingy?

All I know is I watch TV and play with my phone and ding ding, and order all my necessities from the mighty Amazon.

Also, I have all the friends I need on FB and Xbox.

You guys are weird leaving the house.

Mr. Universe's picture

Amazon has been deep sixed from our house unless we can't find it anywhere else as a last resort. Funny thing is if you take another 3-5 minutes and look around you can find it elsewhere, cheaper and almost 2 day shipping minus the $100 prime fee.

Deep In Vocal Euphoria's picture

sitting back watching as what's left of america decays.......not long now.....it's coming....the great disaster

nope-1004's picture

It's easier and cheaper for me to buy my electronics online and have it come to my door than hop in my broken Pinto and drive to a congested mall, where the min wage Radio Shack dude has no clue what he's selling anyway.

VWAndy's picture

 Just raise the taxes more that will solve everything.

hutnela's picture

Sometimes I like to go to the dollar store when they're having a  75% off sale... Time to tighten the money belt.

Peterman333's picture

I've been onoce or twice, when I quickly realize that what they're selling is not even worth a dollar I generally stopped going

hutnela's picture

Yea same except for rip it energy drink... Which it seems dollar tree is the only place you can find it.

TrumpXVI's picture

Sears, K-Mart, Bon-Ton and Neiman Marcus are the only businesses on that list I have ever even HEARD of.