American Airlines to fire 19,000 employees

American Airlines plans to cut 19,000 jobs if federal aid lapses, cuts to take effect October 1

In a regulatory filing, American Airlines (AAL) said:

“In short, American’s team will have at least 40,000 fewer people working Oct. 1 than we had when we entered this pandemic. We have worked to mitigate as many involuntary reductions as possible through voluntary programs.

Company says it will have 40,000 less employees on October 1

Across the mainline and regional carriers, more than 12,500 of our colleagues have made the difficult decision to leave the company permanently through early out programs or retirement.

Another 11,000 team members have offered to be on a leave of absence in October.

These are important life decisions and we respect and greatly appreciate the sacrifice these team members have made, and continue to make, for American and their fellow team members.

The pandemic has hurt airline the most

Even with those sacrifices, approximately 19,000 of our team members will be involuntarily furloughed or separated from the company on Oct. 1, unless there is an extension of the PSP…

The one possibility of avoiding these involuntary reductions on Oct. 1 is a clean extension of the PSP. Led by your labor unions, with the support of the industry, we have generated enormous bipartisan support for such an extension.

The overwhelming majority of members of both the U.S. House and Senate appreciate that saving jobs in the airline industry through this crisis will mean a quicker economic recovery in the months and years ahead.

And that preserving these essential service jobs will also mean continued commercial air service to all communities, small and large. But, despite this broad bipartisan support, a PSP extension is tied up in a larger COVID-19 relief package, which our elected officials haven’t yet been able to negotiate.

So we must prepare for the possibility that our nation’s leadership will not be able to find a way to further support aviation professionals and the service we provide, especially to smaller communities.”

AAL is down $0.45 to $13.00.

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Stein Mart files for Chapter 11 bankruptcy

Stein Mart voluntarily files Chapter 11 bankruptcy protection

Stein Mart (SMRT) announced that it and its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida – Jacksonville Division.

Stein Mart files for bankruptcy protection

Stein Mart offers designer and name-brand fashion apparels, home decor merchandise, accessories, and shoes at everyday discount prices in the United States. As of June 3, 2020, it operated 281 stores in 30 states. The company was founded in 1908 and is headquartered in Jacksonville, Florida.

The Company has filed customary motions with the Bankruptcy Court that will authorize, upon Bankruptcy Court approval, the Company’s ability to maintain operations in the ordinary course of business, including, among other things, the payment of employee wages and benefits without interruption, payment of suppliers and vendors in the normal course of business, and the use of cash collateral.

Too much savings caused Stein Mart’s demise

These motions are typical in the Chapter 11 process and the Company anticipates that they will be approved shortly after the commencement of its Chapter 11 case.

Details on the Company’s Chapter 11 process and go-forward strategy are as follows:

The Company expects to close a significant portion, if not all, of its brick-and-mortar stores and, in connection therewith, the Company has launched a store closing and liquidation process.

The Company, however, will continue to operate its business in the ordinary course in the near term; and the Company is evaluating any and all strategic alternatives, including the potential sale of its eCommerce business and related intellectual property. 

SMRT last traded at $0.18.

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New York sues to dissolve NRA

New York Attorney General James files lawsuit to dissolve NRA

New York Attorney General Letitia James has filed a lawsuit seeking to dissolve the National Rifle Association.

According to a statement, “Attorney General James charges the organization with illegal conduct because of their diversion of millions of dollars away from the charitable mission of the organization for personal use by senior leadership, awarding contracts to the financial gain of close associates and family, and appearing to dole out lucrative no-show contracts to former employees in order to buy their silence and continued loyalty.

The suit specifically charges the NRA as a whole, as well as Executive Vice-President Wayne LaPierre, former Treasurer and Chief Financial Officer Wilson “Woody” Phillips, former Chief of Staff and the Executive Director of General Operations Joshua Powell, and Corporate Secretary and General Counsel John Frazer with failing to manage the NRA’s funds and failing to follow numerous state and federal laws, contributing to the loss of more than $64M in just three years for the NRA.

NY Attorney General Letitia James

In the complaint, Attorney General James lays out dozens of examples where the four individual defendants failed to fulfill their fiduciary duty to the NRA and used millions upon millions from NRA reserves for personal use, including trips for them and their families to the Bahamas, private jets, expensive meals, and other private travel.

In addition to shuttering the NRA’s doors, Attorney General James seeks to recoup millions in lost assets and to stop the four individual defendants from serving on the board of any not-for-profit charitable organization in the state of New York again.”

It further states that, “the NRA is alleged to have fostered a culture of noncompliance and disregard for internal controls that led to the waste and loss of millions in assets and contributed to the NRA reaching its current deteriorated financial state.

Vista Outdoor (VSTO), Stockwinners

The NRA’s internal policies were repeatedly not followed and were even blatantly ignored by senior leaders. Furthermore, the NRA board’s audit committee was negligent in its duty to ensure appropriate, competent, and judicious stewardship of assets by NRA leadership.

Specifically, the committee failed to assure standard fiscal controls, failed to respond adequately to whistleblowers, affirmatively took steps to conceal the nature and scope of whistleblower concerns from external auditors, and failed to review potential conflicts of interest for employees.

Smith & Wesson Brands (SWBI), Stockwinners

The lawsuit alleges that the four men instituted a culture of self-dealing, mismanagement, and negligent oversight at the NRA that was illegal, oppressive, and fraudulent.

They overrode and evaded internal controls to allow themselves, their families, favored board members, employees, and vendors to benefit through reimbursed expenses, related party transactions, excess compensation, side deals, and waste of charitable assets without regard to the NRA’s best interests.

Sturm, Ruger (RGR), Stockwinners

The complaint lays out numerous other instances in which LaPierre, Phillips, Powell, Frazer, and other executives and board members at the NRA abused their power and illegally diverted or facilitated the diversion of tens of millions of dollars from the NRA.

These funds were in addition to millions of dollars the four individual defendants were already receiving in grossly excessive salaries and bonuses that were not in line with the best practices and prudent standards for evaluating and determining compensation.”

Stocks to Watch

Companies in the firearm space include Sturm, Ruger (RGR), Smith & Wesson Brands (SWBI), and Vista Outdoor (VSTO).

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AMC Theatres to open in July

AMC to reopen 450 U.S. theaters on July 15

Beginning July 15, AMC will resume operations of 450 U.S. theatres as part of a phased plan that is expected to bring the 600-plus U.S. theatre circuit to nearly full operation leading into the opening of MULAN on July 24 and TENET on July 31.

Adam Aron, CEO & President, AMC Theatres, said, “After a painful almost four-month hiatus due to the coronavirus, we are delighted to announce that movies are coming back to the big screen at AMC.

Our next 100 years of making smiles happen officially begin at approximately 450 theatres across the United States on July 15. I cannot emphasize enough how much care and attention to detail we have taken in developing AMC Safe & Clean, our absolute commitment to optimizing the health and safety of our theatres for our guests and associates.

Remember that there is a rumor that Amazon may buy AMC

Developed along with The Clorox Company, and current and former faculty of Harvard University’s School of Public Health, AMC Safe & Clean represents a comprehensive commitment with a broad array of tools being used in sanitizing our theatres.

Social distancing, reduced seat capacity, greatly intensified cleaning regimens, new employee health protocols, contactless ticketing and mobile food & beverage ordering are all part of AMC Safe & Clean.

So too is a new multimillion-dollar commitment to implementing high tech solutions in making AMC theatres safe, including deploying electrostatic sprayers, HEPA vacuums and upgraded MERV 13 ventilation filters.

All this is being put into motion because at AMC our single highest priority is the health and safety of our guests and associates. Both personally and professionally, I couldn’t be more excited for what this means for movie lovers.”

Disney’s Mulan to open July 24th

In the coming weeks, theatre teams will begin returning to their theatres for training on AMC’s new, enhanced cleaning and safety procedures.

AMC expects that almost all its 600-plus U.S. locations will be open and in operation for the launch of MULAN on July 24 and TENET on July 31.

The resumption of AMC operations may be adjusted if there are changes to the current theatrical release schedule, or as needed in response to local or regional conditions.

To facilitate proper social distancing within theatre auditoriums, AMC will approach seat capacity limitations in four distinct phases. But AMC will always follow all federal, state and local directives, including those that mandate a maximum capacity if lower than those envisioned in AMC’s four phases as now planned.

Tenet is scheduled for July 31 opening

The reopening schedule for specific theatres will be communicated in early July. During the weeks leading up to new major theatrical releases, AMC will be showing popular repertory titles made available from its studio partners. Those titles and ticket price information will be announced prior to reopening.

AMC closed at $5.63.

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California Resources on the verge of bankruptcy!

The oil driller is preparing near-term bankruptcy filing, WSJ reports

California Resources Corporation (CRC) operates as an oil and natural gas exploration and production company in the State of California.

The company sells crude oil, natural gas, and natural gas liquids to marketers, California refineries, and other purchasers that have access to transportation and storage facilities. It holds interests in approximately 2.2 million net acres of mineral acreage. As of December 31, 2019, the company had net proved reserves of 644 million barrels of oil equivalent.

Interest Payment

California Resources skipped an interest payment to lenders and could file for bankruptcy as soon as next week, The Wall Street Journal’s Alexander Gladstone reports, citing people familiar with the matter.

The company said in an 8-K filing that it entered into forbearance agreements most of its lenders, who have agreed not to exercise “remedies” under the credit agreements. 

The oil driller said Monday it has entered into an agreement with a majority of its senior lenders to wait until Sunday before they can declare a default, the author notes.

2-Year price chart for CRC

The company has suffered from a sharp selloff in crude oil futures prices to start this year, as a result of the drop in demand from the COVID-19 pandemic and the price war between Saudia Arabia and Russia.

CRC is up 67 cents to $2.68.

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Iterum Therapeutics drug fails, shares cut in half

Iterum says Phase 3 trial of sulopenem did not meet primary endpoint

Iterum Therapeutics (ITRM) announced that sulopenem did not achieve statistical non-inferiority relative to ertapenem in its SUlopenem for Resistant Enterobacteriaceae 2 clinical trial in complicated urinary tract infection.

Iterum shares collapse following it’s drug failure

The primary U.S. Food and Drug Administration endpoint was overall clinical and microbiologic response on Day 21 in the micro-MITT population as evaluated using a 10% non-inferiority margin.

The randomized, multi-center, double-blind SURE 2 clinical trial enrolled 1,395 patients to measure the efficacy, tolerability, and safety of IV and oral sulopenem for the treatment of cUTI in adults.

Patients were randomized to receive either IV sulopenem once daily for a minimum of five days followed by oral sulopenem twice daily to complete seven to ten days of treatment, or IV ertapenem once daily for a minimum of five days followed by either oral ciprofloxacin or, for quinolone resistant isolates, amoxicillin-clavulanate twice daily.

Responder rates at the test of cure visit for sulopenem were 67.8% and for ertapenem were 73.9% with a difference of -6.1%.

The difference in response rates was driven almost entirely by higher rates of asymptomatic bacteriuria on sulopenem relative to ertapenem, only evident at the test of cure visit; the rates of patients receiving additional antibiotics or with residual cUTI symptoms was similar.

Clinical response at the test of cure in the Modified Intent to Treat patient population and Clinically Evaluable patient population sulopenem vs ertapenem: 0.4% was similar.

The outcome at other secondary endpoints was also similar, including the overall response at the end of therapy visit at Day 10.

Strategic Alternatives

Based on the trial results, Iterum Therapeutics is evaluating its corporate, strategic and financial alternatives with the goal of maximizing value for its stakeholders while prudently managing its remaining resources.

These alternatives could potentially include the licensing, sale or divestiture of the company’s assets or proprietary technologies, a sale of the company, a merger or other business combination, another strategic transaction involving the company, restructuring activities, winding down of operations, dissolving and liquidating assets or seeking protection under bankruptcy laws.

ITRM shares are down 54% to $1.95.

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Several retailers grab their shopping bags and file for bankruptcy

As JC Penney’s files for bankruptcy, others line up to do the same

Retailers have long been suffering from a tough retail environment due to competition from online retailers such as Amazon, Etsy and eBay; it seems like COVID-19 fired the kill shot.

J.C. Penney

J.C. Penney announced that it has received approvals from the U.S. Bankruptcy Court for the Southern District of Texas, in Corpus Christi, TX for the “First Day” motions related to the company’s voluntary Chapter 11 petitions filed on May 15, 2020, including approval for the company to access and use its approximately $500M in cash collateral.

The 118 year old retailer files for Chapter 11 bankruptcy, Stockwinners

J.C. Penney entered into a restructuring support agreement with lenders holding approximately 70% of J.C. Penney’s first lien debt to reduce the company’s outstanding indebtedness and strengthen its financial position. J.C. Penney has approximately $500M in cash on hand as of the Chapter 11 filing date.

James Cash Penney started the company in 1902

JCP Gets Delisted

The New York Stock Exchange announced that the staff of NYSE Regulation has determined to commence proceedings to delist the common stock of J.C. Penney Company – ticker symbol JCP – from the NYSE. NYSE Regulation reached its decision that the company is no longer suitable for listing after the company’s May 15, 2020 disclosure that the company filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Recent Retail Bankruptcies

On May 4th, J.Crew Group announced it has reached an agreement with its lenders holding approximately 71% of its Term Loan and approximately 78% of its IPCo Notes, as well as with its financial sponsors, under which the company will restructure its debt and deleverage its balance sheet, positioning J.Crew and Madewell for long-term success.

Houston-based Stage Stores Inc. filed for chapter 11 bankruptcy in Texas last week.

GNC Holdings (GNC), the nutritional supplement retailer, avoided bankruptcy by reaching a last-minute deal with creditors that allows it to avoid bankruptcy for at least 30 days but no more than 90 days under a deal announced Friday.

GNC avoids bankruptcy for 90 days

True Religion

Even before COVID-19 forced True Religion to close its 87 stores, the denim specialist’s sales were in decline and its profits were negative. After shuttering its footprint in response to the pandemic, 80% of its sales disappeared, according to the company. 

Others on the list

According to Law.com, both Macy’s (M) and Neiman Marcus have hired bankruptcy law firm Kirkland, and Wachtell. Neiman filed for Chapter 11 last week. Macy’s should be forthcoming.

Pier 1 Imports (PIR) filed for bankruptcy protection this month. It would only make sense if it’s competitors follow the same path.

Nashville-based retailer, Kirkland’s, Inc. operates as a specialty retailer of home décor in the United States. The company’s stores provide various merchandise, including holiday décor, furniture, ornamental wall décor, decorative accessories, art, textiles, mirrors, fragrance and accessories, lamps, artificial floral products, housewares, outdoor living items,

Kirkland’s has avoided Chapter 11, Stockwinners

In 2019, seventeen major retailers filed for bankruptcy. For some of them it was their second trip to the alter including Payless, Gymboree, and Charming Charlie.

Some of the retailers that filed for bankruptcy in the past 18 months. Stockwinners

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In the market for a used car? You are in luck

A Hertz bankruptcy will flood the market with used vehicles

If you are in the market for a used car, you are in luck. That is, if you have a place to drive to!

According to the Detroit Press, used car prices fell 34.4 percent in April alone. The paper offers solace to it’s readers by mentioning that  used car prices could go up soon due to a shortage of new cars caused by plant closures. The paper however, failed to mention the nearly half a million cars currently sitting ideal on Hertz car lots. With practically no one traveling these days, the need for rental cars has evaporated. Hertz (HTZ) and Avis-Budget (CAR) have suffered the most. Hertz has bigger problems than COVID-19 and that is it’s balance sheet.

There are several stories suggesting a Hertz bankruptcy is around the corner.

Hertz is near bankruptcy

According to Bloomberg, Hertz’s situation is a three-way standoff between Holders of Hertz’s asset-backed securities. They could delay pressuring Hertz to sell down its fleet for a short period of time, but they will need Hertz’s banks to promise to make them whole. The banks, in turn, may not want to take on such a risk, which requires them to bet that either the rental car business or used car prices return to some normal operating level.

A 2-year price chart of Hertz (HTZ), Stockwinners

Meanwhile, controlling shareholder Carl Icahn (IEP) holds a 39% equity stake in the rental company. Bloomberg says that he could put in more money to keep Hertz afloat, but this once again is dependent on a belief that the rental car business will recover to some extent in the very near future.

Carl Icahn

In a bankruptcy, Bloomberg notes, equity holders’ claims would be behind those of creditors, which is not an incentive for Icahn to put in more money at the moment.

Used car prices have fallen sharply due to Covid-19

A Hertz bankruptcy could flood the used car market with several hundred thousand cars, whose value is likely to take a substantial hit at a time when used car lots are already quite full and demand is low.

Companies now deliver used cars to your home for test drives

Bloomberg notes that used car prices dropped 11.4% from March to April, while sales were merely a quarter of pre-outbreak levels.

Meanwhile Hertz has started discounting its cars on its used car lots and Hertz Car Sales. In fact, you can pick up a car, and they will deliver it to your house for a test drive. We have seen discounts as high as 25% on some models.  The company carries brands like Ford, Chevrolet, Toyota and Nissan, to some luxury brands like Audi, Jaguar and Mercedes-Benz.

Cars are discounted by Hertz

One more footnote to this story: auto dealerships usually set their used car prices as a function of new car prices. With most of the domestic auto plants closed, price of new cars (2021 model year) will not be known anytime soon.

Companies in the space include: Copart (CPRT), CarMax (KMX), Carvana (CVNA), CarGurus (CARG), Penske (PAG). AutoNation (AN). 

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Chesapeake Energy may file for bankruptcy

Chesapeake Energy slides as company considers bankruptcy, strategic alternatives

Shares of Chesapeake Energy (CHK) are tumbling after the company warned that it might not be able to stay in business amid low commodity prices caused by a global price war and depressed demand due to the COVID-19 pandemic.

Chesapeake is near bankruptcy

EVALUATING STRATEGIC ALTERNATIVES:

On Monday, Chesapeake Energy announced that it filed its Form 10-Q for the three-month period ended March 31, 2020 and, in light of the unprecedented market environment, has withdrawn the financial outlook it previously provided on February 26, 2020.

The company also reinstated a “going concern” warning. “Fluctuations in oil and natural gas prices have a material impact on our financial position, results of operations, cash flows and quantities of oil, natural gas and NGL reserves that may be economically produced.

Historically, oil and natural gas prices have been volatile; however, the volatility in the prices for these commodities has substantially increased as a result of COVID-19 and the OPEC+ decisions […]

Historical oil prices represented in 2020 dollar, Stockwinners

If the current depressed prices persist, combined with the scheduled reductions in the leverage ratio covenant and an expected significant reduction in our borrowing base in our scheduled determination, then our liquidity and our ability to comply with our financial covenants during the next 12 months will be adversely affected,” Chesapeake said in the filing.

Boom to bust for CHK

“Based on our current forecast, we do not expect to be in compliance with our financial covenants beginning in the fourth quarter of 2020. Failure to comply with these covenants, if not waived, would result in an event of default under our revolving credit facility, the potential acceleration of outstanding debt thereunder and the potential foreclosure on the collateral securing such debt, and could cause a cross-default under our other outstanding indebtedness.

As a result of the impacts to the company’s financial position resulting from declining industry conditions and in consideration of the substantial amount of long-term debt outstanding, the company has engaged advisors to assist with the evaluation of strategic alternatives, which may include, but not be limited to, seeking a restructuring, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 of the Bankruptcy Code.

However, there can be no assurances that the company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions. As a result of these uncertainties and the likelihood of a restructuring or reorganization, management has concluded that there is substantial doubt about the company’s ability to continue as a going concern.”

REVERSE STOCK SPLITs NEVER WORK:

Chesapeake stock has lost about 50% of it’s value since a 1-for-200 reverse stock split took effect after the close of trading on April 14, 2020.

The company had implemented the reverse split to raise its share price enough to regain compliance with listing standards, but it was viewed as validation of investor concerns as the company struggled with falling commodities prices, high debt levels and the effects of the COVID-19 pandemic, the author added.

The company lost its way after Aubrey McClendon, a founder and former chief executive of Chesapeake Energy, died in a fiery car crash in 2016, a day after he was charged with conspiring to rig bids for oil and natural gas leases. Many believe he committed suicide.

Aubrey McClendon

McClendon — a key player in the U.S. shale boom — co-founded Chesapeake in 1989 and stepped down from the company in 2013. Chesapeake used to be the second-largest natural gas producer in the United States.

PRICE ACTION: In afternoon trading on Tuesday, shares of Chesapeake have dropped almost 22% to $10.13.

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