The So-What Of Bankruptcy: JCPenney, Hertz, & More
The So-What Of Bankruptcy: JCPenney, Hertz, & More
The So-What Of Bankruptcy: JCPenney, Hertz, & More
The last few weeks have seen some high-profile bankruptcies, with rental car major Hertz, retailers JCPenny and Neiman Marcus, and Latin America’s largest airline LATAM filing for Chapter 11 protection as sales collapsed on account of the Coronavirus pandemic and the associated lockdowns. There’s a real possibility that we could see more high-profile failures as the economy slips into what looks like a deep recession. In fact, LATAM’s bankruptcy filing has raised questions about the survival chances for American Airlines while also bringing the liquidity position of peers United Airlines and Delta Airlines under the scanner.
But what does filing for bankruptcy mean for a particular company as well as its stakeholders? Below, we try to answer some common questions about the broader bankruptcy process and the potential outcome for shareholders and bondholders.
What happens in bankruptcy?
Companies file for bankruptcy under federal laws, when they are in deep financial distress and don’t have the cash to pay their immediate debt obligations.
There are typically two routes companies can take:
Most public companies opt for Chapter 11 bankruptcy, which allows them to reorganize their business (renegotiate with debt holders, cut costs, etc.) as they look to become profitable again.
