U.S. gaming, leisure, lodging and restaurant (GLLR) issuers have cited lingering effects of the pandemic in recent bankruptcy filings, Fitch Ratings reported. Fitch has added four case studies to its existing compilation of 52 GLLR bankruptcies.
Broader sector pressures, including rising labor and food costs, changing consumer spending, high interest rates and increased competition, have also contributed to recent bankruptcies. Many recent filers, such as Maverick Gaming, Blink Fitness and Hornblower Holdings LLC, continue to cite lingering pandemic effects on their financial condition and operating performance, according to Fitch. Restaurant sector filers commonly use Chapter 11 to close unprofitable locations and renegotiate lease terms.
“Restaurant chains like Red Lobster and BurgerFi are shedding burdensome leases, securing economic concessions from landlords, and emerging with a smaller, more sustainable footprint,” said Joshua Clark, Director at Fitch Ratings.
Default rates for gaming, lodging and restaurant issuers have remained relatively low, consistently below 0.5% since 2015. Leisure and entertainment defaults, currently at 2.3%, have been somewhat higher.
“Of 56 GLLR issuers, 53 emerged as a going concern from the bankruptcy cases we analyzed,” said Clark. “This includes 23 court-supervised sales of all assets or equity to third-party buyers that continued to operate the businesses.”
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