L'Occitane and HNA Group File for Bankruptcy Protection: Is This the End for Corporations?

The pandemic has brought economic winter worldwide, impacting not only small businesses but also major corporations.

Industry Giants Filing for Bankruptcy?

On January 27, French skincare group L'Occitane's U.S. subsidiary filed for Chapter 11 bankruptcy protection in New Jersey.

The company plans to restructure while continuing operations, including closing 23 underperforming stores. L'Occitane cited declining brick-and-mortar sales and the ongoing pandemic as reasons for filing.

Two days later on January 29, HNA Group officially announced its bankruptcy restructuring.

HNA stated it received notice from Hainan High People's Court after creditors applied for bankruptcy restructuring due to the company's inability to repay debts. HNA will cooperate with the court to protect creditors' rights while maintaining normal operations.

Both companies explained their reasons for filing.

L'Occitane U.S. CEO Yann Tanini stated "Even before the pandemic, physical store sales were declining while e-commerce revenue grew significantly." The company had attempted rent negotiations with landlords through Hilco Real Estate before resorting to bankruptcy protection.

As one of the hardest-hit industries, aviation suffered tremendously in 2020. Despite this, HNA's core aviation business had recovered to 90% of pre-pandemic flight levels by December 2020, with numbers continuing to rise. The restructuring won't affect normal flight operations.

With such well-known brands filing for bankruptcy, are even major corporations struggling to survive the pandemic?

Bankruptcy Restructuring ≠ Bankruptcy

While bankruptcy often carries negative connotations, "bankruptcy restructuring" differs fundamentally from "bankruptcy liquidation." Different jurisdictions have varying bankruptcy laws, but two main types exist:

Liquidation: The business ceases operations entirely, with assets sold to repay creditors.

Reorganization (Chapter 11): The debtor continues operating under court supervision while proposing a repayment plan. Creditors vote on the plan, which may involve debt forgiveness or modified payment terms. This allows potentially viable businesses to recover while maximizing returns for creditors - often called "bankruptcy protection."

Clearly, both L'Occitane and HNA filed for restructuring, not liquidation. Customers needn't worry - you'll still fly HNA and buy L'Occitane products as usual. Restructuring helps them weather the pandemic storm.

Bankruptcy Protection as Lifeline

In 2019, fast-fashion retailer Forever 21 similarly filed for bankruptcy protection. Two years later, their stores remain ubiquitous. Their Chapter 11 filing allowed business continuity through restructuring.

Forever 21 exited 40 international markets while maintaining U.S. presence, closing 178 domestic stores. They secured $350 million in financing from J.P. Morgan and TPG Sixth Street Partners to revitalize operations - proving restructuring's effectiveness as seen in their 2021 recovery.

With recent economic turbulence - from stock market volatility to corporate bankruptcies - both investments and restructures represent survival strategies.

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