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As a bankruptcy practitioner for over thirty years I thought I had seen everything, but the onset of the Coronavirus, COVID-19, has changed everything. The tremendously adverse impact of COVID-19 has already resulted in a slew of large and small bankruptcies across several industries-not just retail.
Bankruptcies have hit the retail, hotel, restaurant and tourism industries hardest, but other industries such as oil, gas, movie industry, gyms and small businesses of every form and type (and the list goes on and on) have also been devastated. Most of us are aware of the J.C. Penny, J Crew, Neiman Marcus, Pier 1, Storage Stores (Bealls) bankruptcies, but the list is much more extensive and diverse.
We have also all heard the horror stories of our beloved local businesses and chains either simply shutting down or treading water by use of the temporary SBA Assistance (2 month grant).
COVID-19 and the barrage of large and small bankruptcies has already resulted in unimaginable layoffs, furloughs and fears of much more after the SBA funds are used up over the next month or so and the COVID 19 impact continues indefinitely. The trickle down to feeder businesses that manufacture, sell, advertise and require support from the larger now bankrupt or defunct businesses is evident. For example, traffic at malls, strip shopping centers and the surrounding areas. Just think of the amount of feeder businesses and individuals impacted by the cruise ship closures. It is a never-ending cascade of horribles that has no end point.
The quantifiable economic impact in the US is and has been staggering! As of end of April 2020, there were 30 million unemployment claims with a steep decline in mobility and hours worked by those who remain employed. GDP contracted 4.8% mostly from reduced consumer spending which accounts for almost 70 % of GDP. Quarter 1 was the first GDP decline in six years. Suffice to say the statistics are scary bad and Q2 will be bad as well, even considering the massive stimulus obtained from government borrowing.
All of this is a monumental concern, but I am extremely concerned about the business and individuals just hanging on, keeping their businesses going, maintaining their long-held employees. Some of the businesses have little or no business but are hoping for a comeback as economies domestically and internationally “open up”. There is a breaking point and my fear is that breaking point will be pronounced in the next 2- 4 months from large and small businesses and individuals.
To date the Administration and Congress’ response has been to save (bailout) certain industries, pump funds into small business, increase unemployment temporarily, provide stimulus checks to most Americans and other temporary measures. Much more is needed to stave off residential and commercial evictions, foreclosures, bankruptcy of state and municipal governments whose tax bases are shrinking and are not able to borrow with impunity like the Federal Government and the long list of adverse continuing impacts from COVID-19.