Report: Long-Term Care Accounting for 54 Percent of Health Care Industry Bankruptcies This Year​​​

Bankruptcies in the health care industry are trending up by more than 25% this year, and 54% of them have happened in senior-living and other long-term-care settings, particularly in skilled-nursing facilities, according to data released by Gibbins Advisors, McKnight's Senior Living reported. Experts expect the numbers to accelerate through 2023. “Healthcare organizations without adequate cash reserves to fund operating losses and debt service may face more difficulty in accessing capital in the current climate than the last two years, which can lead to more restructuring activity, including bankruptcies,” said Ronald M. Winters, a principal at Gibbins Advisors. Organizations that faced financial challenges before the pandemic are finding that those challenges have not gone away, said Clare Moylan, a principal at Gibbins Advisors. The next 18 months will be especially challenging, she said. Several factors are at work in the economy as the COVID-19 pandemic wanes, according to experts at Gibbins. For example, government funding that was widespread for long-term-care entities two years ago has dried up to a certain extent. In addition, operators that had Medicare payments advanced to them in April 2020 now have to pay them back, placing pressure on cash flow. Additionally, increased costs all around are squeezing profit margins, and staffing challenges are causing some SNFs and senior-living communities to limit new admissions. Additionally, Moylan noted, interest rates are increasing, and some lenders are backing off on financing projects. For the study, Gibbins Advisors researched chapter 11 bankruptcies for large health care organizations with liabilities of more than $10 million during the period from January 2019 to June 2022. Among those 2022 chapter 11 filings by senior-living and skilled-nursing providers were American Eagle Delaware Holding Co., Andover Senior Care, BVM The Bridges, Christian Care Centers, Fairport Baptist Homes, Northwest Senior Housing Corp. and Senior Care Living VII.
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Suburban Rents Are Soaring, Leaving U.S. Renters with Few Cheap Options​​​

For renters encountering soaring housing costs in U.S. city centers, decamping to the suburbs no longer offers much of a reprieve, Bloomberg News reported. The price advantage of renting in the suburbs versus downtowns has shrunk by 53% from three years ago, according to a report Wednesday from brokerage Realtor.com. While suburban renters used to save 12% compared to city dwellers in July 2019, they now pay only 5.8% less. The shift is a blow for apartment-hunters already squeezed by escalating costs and few options for relief. The median U.S. rent jumped 12% in July from a year earlier to $1,879, Realtor.com data show, the 17th straight monthly record. The suburbs grew in popularity during the pandemic as urbanites who could suddenly work from anywhere fled cramped downtown apartments for more space. With the price differential narrowing, people outside downtown areas now pay about $107 a month less on rent, compared with $175 in 2019. The trend is starting to turn as bosses call workers back to downtown offices and other renters simply want a return to vibrant city life, Hale said. The cost of renting in urban areas jumped 13% in July, compared with just under 12% in the suburbs. This is a reversal from January 2021, when urban rent fell 2.5% and suburban rent rose 3.9%.
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Over 2 Million Americans Aren’t Working Due to Long Covid​​​

Between two million and four million Americans aren’t working due to the long-term effects of COVID-19, according to a new Brookings Institution report released yesterday, the Wall Street Journal reported. The inability to work translates to roughly $170 billion a year in lost wages, the report estimates. It follows a January Brookings Institution report that estimated long Covid was potentially causing 15% of the country’s labor shortage. The report estimates that roughly 16 million Americans of working age — between 18 and 65 — have long Covid, which most groups and doctors define as wide-ranging symptoms that persist for months following an infection and can include shortness of breath, extreme fatigue and neurocognitive issues. An estimated 10% to 30% of people with Covid develop the condition, according to studies and estimates from governments, hospitals, universities and doctors. It can occur after even mild cases. Long Covid’s impact is being felt on workplaces, with employees not well enough to work and patients struggling to financially support themselves, and family members having to act as caregivers. “Three million full-time-equivalent workers is 1.8% of the entire U.S. civilian labor force,” said Katie Bach, a nonresident senior fellow at the Washington, D.C.-based think tank and author of both Brookings reports.
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Fewer Americans Claimed Jobless Benefits Last Week​​​

Fewer Americans filed for unemployment benefits last week as the labor market continues to stand out as one of the strongest segments of the U.S. economy, the Associated Press reported. Applications for jobless aid for the week ending Aug. 20 fell by 2,000 to 243,000, the Labor Department reported Thursday. The four-week average for claims, which evens out some of the week-to-week volatility, rose by 1,500 to 247,000. The number of Americans collecting traditional unemployment benefits fell by 19,000 the week that ended Aug. 13, to 1.42 million. First-time applications generally reflect layoffs and are often seen as an early indicator of where the job market is headed. Hiring in the U.S. in 2022 has been remarkably strong, even as the country faces rising interest rates and weak economic growth. U.S. employers added 528,000 jobs in July, according to the Labor Department, more than double what forecasters had expected.
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IRS Will Wipe Away $1.2 Billion in Late Fees from Pandemic​​​

The Internal Revenue Service announced Wednesday that it will wipe out late fees for taxpayers who struggled to file their tax returns on time during the pandemic, Bloomberg News reported. The IRS estimates that nearly 1.6 million taxpayers will receive more than $1.2 billion worth of penalty relief. The tax agency will automatically issue the refunds or credits for most of the fees by the end of September. “Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways,” IRS Commissioner Chuck Rettig said in a statement Wednesday. “The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there’s no need to call.” Tax returns for 2019 and 2020, which were due to the IRS in 2020 and 2021, will be eligible for the relief. Taxpayers must file any late returns by Sept. 30, 2022, to get the late fees forgiven. Penalties for failing to file a tax return can be as much as 25% of the unpaid levies. The IRS will not forgive penalties for failing to pay or in situations where fraudulent returns were filed, the agency said.
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Commentary: Can Grocery Stores Save the American Mall?​​​

From movie theaters to fitness centers and full-on amusement parks, America’s shopping malls have scrambled for years to attract new visitors to counter plummeting foot traffic. Even before the coronavirus struck, the concept of the mall — once so central to suburban life — was increasingly viewed as an anachronism. Now, with pandemic precautions falling by the wayside and brick-and-mortar shopping eyeing a revival, it’s looking as if there could be a strategy that will enable malls to survive amid the hordes of Amazon delivery vans: grocery stores, according to a Bloomberg commentary. Malls were already reeling before the pandemic, with closed stores and bankruptcies legion. They didn’t pivot fast enough in the face of Amazon, resulting in dwindling traffic, lower sales and vacant storefronts. Once the existential threat of ecommerce became clear, owners struggled to find ways to get people out from behind their computers, with new and strange offerings and more diverse tenants. As far back as 2017, Credit Suisse was already predicting that 20% to 25% of U.S. malls would fail in just five years. Then COVID-19 arrived. Dozens of mall-based retailers sought court protection, including JC Penney Co. and J. Crew. Macy’s announced plans to close more than 125 of its stores at the beginning of 2020, citing too many locations in underperforming malls. Nordstrom and Bed Bath & Beyond also announced widespread closures. Although grocery stores have anchored strip malls for decades, traditional supermarkets and groceries haven’t been a dominant presence at indoor U.S. malls. Although roughly one in five enclosed shopping malls has a grocery store, according to data from commercial real estate analytics firm Green Street, half of them are Targets. Grocery stores have been a growing U.S. consumer segment over the last few years. Except for so-called value outlets and dollar stores, grocers have experienced the most store openings, outpacing home improvement, electronics and superstores, according to an analysis of store openings between 2019 and 2021 from Green Street. The firm’s research shows that adding a grocery store can boost traffic by upwards of 20% at shopping centers.
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NFTs Are Increasingly Being Targeted by Criminals, Report Says​​​

Nonfungible tokens (NFTs) are increasingly being sought by criminals looking to either steal them or use them to launder illicit gains, a new report from blockchain analytics firm Elliptic said yesterday, the Wall Street Journal reported. More than $100 million worth of these blockchain-based assets have been reported stolen in scams over the past year, according to the study. Over 4,600 NFTs were stolen in July, the most in any month since Elliptic began tracking the data in 2017, the report said. Since that year, over $8 million in proceeds from illicit activities has been laundered through platforms that facilitate the creation, buying and selling of NFTs, the report said. Another $328 million that went through the platforms came from so-called obfuscation services, such as mixers that enable users to exchange cryptocurrencies with relative anonymity, and may also include illegally made money, the report said. Tornado Cash, for instance, a mixer platform that was sanctioned by the U.S. Treasury Department earlier this month, was the source of about $137 million of cryptocurrencies processed by NFT marketplaces, according to the report. Before it was blacklisted, Tornado Cash was also “the laundering tool of choice” for 52% of NFT scam proceeds, the report said. Platforms that use NFTs face a growing threat of attack from sanctioned entities and state-sponsored groups, the report said. In particular, it pointed to the $540 million heist in March by North Korea’s Lazarus Group from online game Axie Infinity’s Ronin Bridge, a platform that allows players to turn holdings of the digital asset Ethereum into video game tokens, according to the report. (Subscription required.).
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Wednesday’s abiLIVE Webinar to Examine Commercial Real Estate Distress​​​

Commercial real estate continues to be a sector to watch as we navigate the post-COVID recovery period, which has thus far featured high inflation, rising interest rates, work-from-home preferences and other changes in consumer behavior. ABI's Real Estate Committee is sponsoring a special abiLIVE webinar on Wednesday, during which seasoned real estate attorneys and advisors will provide an update on where things stand across all of the key asset classes, including office, retail, industrial, multi-family and hospitality, as the important summer season winds down, in order to arm practitioners with important insights as we head into 2022's fourth quarter.
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International Committee Seeking Nominations for Its First Annual "Matter of the Year" by Sept. 15​​​

ABI's International Committee is proud to announce its First Annual International Committee Matter of the Year Award! The nominated matter needs to involve the U.S. and other jurisdictions and be of some international legal significance and/or impact to international insolvency, as well as international cooperation. Nominations are due September 15, 2022, by 5:00 PM EDT. For more information, visit the International Committee page.

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