The Effect of Coronavirus on Different Sectors of the Economy

The Effect Of Coronavirus On Different Sectors Of The Economy

The coronavirus crisis destroyed companies from the airline, tourism, restaurant, fitness, entertainment, retail, oil, real estate sectors, and these companies had to file bankruptcy protection in accordance with Chapter 11 for debt restructuring. Some enterprises were already in decline before the pandemic, and the crisis with coronavirus was the last straw.

Bankruptcy is not the endpoint for business, after filing a bankruptcy petition “Chapter 11”, negotiations are underway with creditors to restructure the terms of the debt. For example, General Motors (GM) went bankrupt during the last financial crisis in 2009 and regained its position and profitability as America’s largest automaker. Over the past two decades, United Airlines Holdings, Inc (UAL) and American Airlines Group Inc (AAG) have been hit by bankruptcies and reorganizations. However, if the company fails at this stage, then the business closes in accordance with Chapter 7.

The American chain of clothing and footwear stores J.Crew filed for bankruptcy, allowing reorganization of activities and freezing of payments on debt. This is the first major American retailer who failed to survive the crisis caused by the spread of the pandemic of a new type of coronavirus. J.Crew was able to agree with creditors to write off the debt of more than $ 1.5 billion, which will eventually be exchanged for a controlling stake in the updated company.

In addition, the company will be able to save a loan of $ 400 million. This money should go to support operating activities during the bankruptcy procedure. It is noted that such access to liquidity is especially important now that, due to quarantine and the closure of all stores in the chain, a company cannot arrange for the liquidation of goods.

Gold’s Gym fitness club chain filed for bankruptcy after the COVID-19 epidemic caused the closure of branches in the US and around the world. Worldwide, Gold’s Gym operates over 700 gyms.

The uncertainty of the pandemic period creates difficulties for bankruptcy proceedings since most of them are filed under “Chapter 11,” but because of the pandemic, it is not known when firms will start earning again.

The real economy crashes as capital markets become more active. Institutional investors are looking for promising companies, most individual investors are looking for assets to preserve capital. For example, a private investment company, General Atlantic, attracts about $ 5 billion to invest in attractive ventures.

Thus, many enterprises claiming bankruptcy under “Chapter 11” will restructure their debt and continue to operate after the pandemic.

While some sectors were affected, these sectors remained that were able to increase their sales during the pandemic, and some even became profitable for the first time. We are talking about sectors that mainly work online, such as e-commerce, telemedicine, remote work services, fintech, streaming services, online games and online training, delivery; biotechnology stockpiles have also grown amid the development of a coronavirus vaccine.

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