Bankruptcies Begin: Three Corporations with Pasadena Locations Facing Chapter 11

Two iconic national businesses with outlets in Pasadena have filed for Chapter 11 bankruptcy protection, adding to the severe economic pain wrought by the Coronavirus pandemic. Clothing retailer J. Crew and the Gold’s Gym chain made the moves on Monday, while car rental giant Hertz is struggling to avoid the same fate via an array of measures amid a May 22 deadline to restructure its debts into a manageable form.

Chapter 11 bankruptcy protection allows a company to continue operations as it restructures its finances.

J. Crew – which operates an Old Pasadena outlet at 3 W. Colorado Blvd. – drew the most attention from Twitter users and Google searches for its filing, as the clothier drew derisive comments about its preppy reputation. It is the first major retail chain to seek bankruptcy protection, but a wave of others is expected to follow as the pandemic has shuttered businesses from coast to coast.

Owner J. Crew Group Inc. currently has $1.65 billion in debt that will be converted into equity and is estimating that the present store closures will result in $900 million in lost sales. The retailer, which had been struggling for several years prior to the current pandemic, reached an agreement with its lenders to restructure its debt by converting that amount into equity and secured $400 million in financing from several of its existing lenders.

Meanwhile, the Gold’s Gym bankruptcy filing will only affect the 10 percent of locations that are company-owned, rather than franchised. The Pasadena location at 39 S. Altadena Drive has been temporarily closed since March and had no one available to comment on its status.

The privately held company had already permanently closed about 30 of its gyms because of the COVID-19 outbreak last month, but has seen new members sign up at reopened franchises in Tennessee and Georgia.

“No one had a playbook for this, the virus affected us very deeply, we had to take immediate action,” Gold’s CEO Adam Zeitsiff told FOX Business on Tuesday. “Choosing to close those clubs and going through this financial restructuring is going to ensure we come out a stronger company.”

Gold’s Gym has attempted to adapt to the stay-at-home orders nationwide by making its digital personal training app, GOLD’S AMP, free to users through May 31. The app provides access to more than 600 indoor and outdoor workouts that enable users to maintain their fitness regimens at home.

Based in Venice, the gym is also planning to launch on-demand streaming of video workouts by the end of summer. Members would pay between $5 to $10 more to access these virtual workouts in addition to paying their regular memberships of nearly $20 per month and the annual and enrollment fees.

However, Zeitsiff also noted that a virtual-only business model would not work for Gold’s in the long-term, since most bodybuilders prefer working out in actual gyms.

Finally, the struggles of Hertz – which has a location at 2070 E. Colorado Blvd. in Pasadena – come amid an unparalleled downturn in travel spending. The chain announced in a public filing that it received approval from lenders to “develop a financing strategy and structure that better reflects the economic impact” of COVID-19.

The Hertz filing also stated that the pandemic has caused “a rapid, sudden and dramatic negative impact” on its business, and noted that the company had already announced a plan on April 14 to cut nearly 10,000 jobs. Yet with “significant ongoing operating expenses,” including agreements to lease more vehicles than it presently needs, the company is losing nearly $200 million per month.

When the company failed to make certain lease payments that were due April 27, additional interest obligations were triggered. To help guide its current maneuverings, CNBC reported Monday that Hertz had enlisted the firm FTI Consulting to guide it through the bankruptcy process.