Four years-plus past the onset of the pandemic, corporations are still reeling from its impact, according to a new report from Fitch Group released Monday. The study examined the effects of the pandemic on issuers of debt.
Particularly hard-hit were gaming, leisure, lodging, and restaurant (GLLR) issuers, said Fitch spokesman Sandro Scegna. He added that liability-management transactions (LMTs) “remain an area of focus in 2024.”
“The GLLR sector is cyclical and cash flow declines during periods of weak consumer spending,” said Fitch Ratings Director Joshua Clark. “Lingering effects from the pandemic continued to be a bankruptcy driver for GLLR issuers, while LMTs have affected recoveries.”
He added, “Additional bankruptcy drivers include shifting dining and entertainment preferences and high cost structures. Hurricanes are a driver in particular for gaming companies, while restaurants have been challenged by increasing labor costs, reduced traffic, and high rent.”
Three companies spot lit in the report were Cineworld, Lucky Bucks, and Hornblower Holdings. They filed for bankruptcy in 2022, 2023, and 2024, respectively.
In the case of Cineworld, it took out $760 million in priming debt in 2020, only to emerge from bankruptcy in August 2023 with first-lien debtors looking to collect as little as 3.4 percent of what they were owed. This was far worse than the average, which was 70 percent of first-position debt. Said Scegna, “Pandemic-era filers exhibited markedly worse recoveries with only two of 13 first-lien issuances achieving a recovery in the ‘RR1’ range.”
Another worry was the ability to emerge from Chapter 11 as a going concern. Still, 49 of 52 GLLR companies did so. Added Scegna, “This included 20 court-supervised sales of all assets to third-party buyers that continued to operate the businesses.”
Casino companies profiled in the report included Black Gaming, Caesars Entertainment, Herbst Gaming, Majestic Star Casino, Revel AC (twice), Station Casinos, Tropicana Entertainment, and Trump Entertainment Resorts (twice).
