The pandemic coronavirus has started its effects on the economy. J. Crew group which operates the J. Crew and Madewell brand become the first to file for bankruptcy after the pandemic hits. On Monday the cloth retailer filed to begin Chapter 11 of the proceedings in federal bankruptcy court in the Eastern District of Virginia. The company mentioned that they have reached an agreement where the lenders will convert $1.65 billion in debt into equity.

The lockdown has shut down many businesses or let’s say all businesses around the world. Thus hitting the economy is an impact to be seen. It will be more likely for other big companies to go bankrupt. Bankruptcy certainly doesn’t mean that closure of the business or the company will go out of the business but some companies or firms use bankruptcy to shed the debts and other liabilities which they can’t afford anymore thus closing unprofitable operations and locations.

J. Crew Group CEO Jan Singer said, “We will continue all day-to-day operations.”

Although this is a very unique time to go for bankruptcy. As many stores are closed around the world and stay at home orders yet few nervous shoppers are eager to open the market. Reshmi Basu, an expert in retail bankruptcies at Debtwire said, “Retailers also frequently use store closing sales to liquidate the inventory and raise the cash they need to fund operations during a bankruptcy reorganization, which tracks the finances of troubled companies.”

J. Crew filing bankruptcy is the latest sign of hitting the pandemic economically. UBS analysts said last month that “retail store closures are likely to accelerate in a post-COVID-19 world.” The group estimated both assets and liabilities at between $1 billion and $10 billion in its bankruptcy filing.

J. Crew was started in 1983 as a catalog-retailer. In 1989 it build the first store in New York. The company, which is known for its preppy clothes, was purchased by private equity firms TPG Capital and Leonard Green & Partners in a $3 billion deal that closed in 2011. After the deal, it got more famous and grown rapidly within 9 years but the company acquired far more debt. Before the deal, it had a $50 million debt in 2010. By Feb 1st it had $1.7 billion debt.

The J. Crew about a year ago had 14,500 employees of which 10,000 were part-time. There are mainly 500 stores that the company operates including J. Crew, Madewell, and J.Crew factory stores but they are closed due to the concerning coronavirus problem.

The singer said on Monday, “As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come.”

The company posted a $78.8 million loss during the recent fiscal year. Hopefully, as soon the pandemic will over the industry start running again.