EV Firm Proterra Files for Chapter 11 Protection
Electric-vehicle parts supplier Proterra (PTRA.O) filed for chapter 11 bankruptcy protection on Monday, making it the latest company to go belly up in an industry grappling with supply chain constraints, slowing demand and a funding drought, Reuters reported. The move comes weeks after Lordstown Motors filed for bankruptcy protection and put itself up for sale after failing to resolve a dispute over a promised investment from Foxconn. Proterra, whose shares nearly halved in value after the bell, listed its assets and liabilities in the range of $500 million to $1 billion. The company had a market value of $362 million as of last close. In January 2021, Proterra was valued at $1.6 billion, including debt, in a merger deal with a blank-check firm. Proterra, which makes electric buses as well as battery packs, said it intends to continue to operate in the ordinary course of business. It plans to file the customary motions with the bankruptcy court to use existing capital to fund operations. The company earlier this year announced plans for more job cuts and said it will combine electric bus and battery production in South Carolina as it looks to trim costs.
https://www.reuters.com/business/autos-transportation/ev-firm-proterra-…
Student Loans: Bankruptcy Filers Get $198 Million Settlement from Navient
Private student loan borrowers who filed for bankruptcy are finally getting some relief from student loan provider, Navient Corp., to the tune of $198 million, YahooFinance.com reported. Navient settled a lawsuit with borrowers who alleged the company illegally collected on private student loans by falsely telling borrowers that their loans were not discharged in bankruptcy. The settlement includes $182 million in debt relief and $16 million cash compensation for impacted borrowers along with help to improve their credit scores as a result of the illegal collections. The settlement affects borrowers who had private student loans with Navient that were discharged in bankruptcy. Eligible borrowers identified by Navient will receive notices and debt relief will be automatic.
https://finance.yahoo.com/news/student-loans-bankruptcy-filers-get-198-…
Cargo Airline Western Global Files for Bankruptcy to Cut Debt
Western Global Airlines has filed for bankruptcy with a plan to cut its debt after the employee-owned cargo carrier faltered because of headwinds including the weakening global economy and higher costs, WSJ Pro Bankruptcy reported. The Estero, Fla.-based company yesterday filed for chapter 11 in the U.S. Bankruptcy Court in Wilmington, Del., and said it has a proposed restructuring deal in hand with holders of 85% of its 2025 senior unsecured notes that includes cutting its debt by $450 million. The company’s liabilities include $560 million in loans, a credit facility and notes, according to a sworn declaration by co-Chief Restructuring Officer Robert Del Genio. Western, which was founded in 2013, has 19 wide-body aircraft and provides services on six continents to governments and commercial customers that include the U.S. Defense Department, the U.S. Postal Service and UPS, according to court records and its website. The company has said that it was profitable until last year. It cited the lingering effect of the pandemic in China as another reason for its financial troubles. In June, Fitch Ratings, S&P Global and Moody’s Investors Service said they were withdrawing the company’s ratings due to a lack of information. Later that month, founder and Chief Executive Jim Neff bought the company’s $115 million of outstanding senior debt for $45 million.
https://www.wsj.com/articles/cargo-airline-western-global-files-for-ban…
Analysis: How Yellow’s Downfall Is Rippling Through the Economy
The collapse of one of America’s largest trucking companies is reverberating across the economy, from domestic shipping and real-estate markets to Wall Street, WSJ Pro Bankruptcy reported. Yellow was a $5.2 billion business as recently as last year when it moved around 50,000 shipments a day in a trucking network that made it a fundamental part of the supply chains of hundreds of U.S. companies. The rapid wind-down of its business last month, capped by the shutdown of all operations and a bankruptcy filing in recent days, is leaving behind a trail of winners and losers as the 99-year-old trucker disappears from the highways. The most immediate winners are Yellow’s competitors in the less-than-truckload sector, known as LTL, a segment of the trucking industry that acts as a kind of circulatory system for the goods economy by having trucks carry cargo for multiple customers on the same trailer in fast-paced distribution networks. The clearest losers in Yellow’s demise are the company’s workers, who were laid off, dismissed and locked out of closed terminals and offices last month as the trucker wound down its business. The loss of some 30,000 jobs is the largest at a single company since Boeing at the end of 2020 announced it would cut its workforce by around 30,000 jobs, according to Challenger, Gray & Christmas, an outplacement services firm.
https://www.wsj.com/articles/yellow-bankruptcy-us-economy-e2761b0b?st=1…
University of Iowa Plans to Acquire Mercy Hospital for $20M as Facility Files for Bankruptcy
The University of Iowa has revealed plans to acquire Mercy Hospital on the heels of the organization's recent bankruptcy filing, the Iowa City Press-Citizen reported. Mercy "voluntarily" filed a bankruptcy petition, the company announced in a press release Monday morning. The 194-bed facility has served area residents since 1873. “Mercy Iowa City believes this plan is the best path forward to preserve our hospital operations,” said Tom Clancy, Chairman of the Board and CEO of Mercy Iowa City in a press release. “As we implement this plan, our dedicated Mercy Iowa City staff remain steadfast in their commitment to provide compassionate care to our community.” The State of Iowa Board of Regents will consider the university's proposed $20 million acquisition of Mercy's facilities and business operations at Tuesday morning's special session.
https://www.press-citizen.com/story/news/2023/08/07/mercy-hospital-file…
The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.
https://www.abi.org/hybrid/conference/hc23/page
U.S. Consumer Credit Rises, Driven by Surge in Non-Revolving Debt
U.S. consumer borrowing increased in June by more than forecast on the biggest gain in non-revolving credit in eight months, Bloomberg News reported. Total credit rose $17.8 billion on the heels of the smallest monthly increase since 2020 in the prior period, Federal Reserve data showed Monday. The figure, which isn’t adjusted for inflation, exceeded the $13 billion median forecast in a Bloomberg survey of economists. Non-revolving credit, such as loans for school tuition and vehicle purchases, jumped $18.5 billion following a modest advance in the prior month. Auto sales increased in June from a month earlier, according to separate data. The Fed’s survey showed that the value of loans for vehicle purchases increased to a fresh record in the second quarter. Student loans, meanwhile, fell. Revolving credit outstanding, which includes credit cards, decreased $604.5 million, the first decline in more than two years.
https://www.bnnbloomberg.ca/us-consumer-credit-rises-driven-by-surge-in…
A Real-Estate Haven Turns Perilous With Roughly $1 Trillion Coming Due
Apartment buildings, long considered a real-estate haven, are emerging as the next major trouble spot in the beleaguered commercial-property world, the Wall Street Journal reported. Investors bid up the prices of multifamily buildings for years, attracted by steadily rising rents and the prospect of outsize returns. Many took on too much debt, expecting they could raise rents fast enough to pay it down. Unlike office buildings and malls, which have been hit hard by remote work and e-commerce, rental apartments have low vacancy rates. The apartment sector’s main problem isn’t a lack of demand — rents have soared since 2020 — it is interest rates. The sudden surge in debt costs last year now threatens to wipe out many multifamily owners across the country. Apartment-building values fell 14% for the year ended in June after rising 25% the previous year, according to data company CoStar. That drop is roughly the same as the fall in office values. (Subscription required.)
https://www.wsj.com/articles/a-real-estate-haven-turns-perilous-with-ro…
U.S. Banking Industry Starts to Pick Its Battles Against New Capital Rules
Now that regulators in Washington, D.C., have unfurled a hefty reform package of post-financial crisis capital regulations, banking industry advisers are honing in on what they consider most disruptive, including risk management requirements that could affect real estate lending, consumer credit and wealth management, Reuters reported. In a joint proposal on July 27, the top three U.S. bank regulators proposed a thousand-page overhaul that would in aggregate require banks to set aside an additional 16% in capital the regulators believe is needed to strengthen the financial system. By increasing the degree of risk attributed to certain assets, the proposed rules would require banks to hold proportionately more capital, potentially eating into returns on equity and profits. Industry lobby groups such as the Financial Services Forum (FSF), the Bank Policy Institute and the Securities Industry and Financial Markets Association have argued this will make it harder to lend to consumers and warn it will slow the economy. Though the spring of 2023 saw three of the four biggest bank failures in U.S. history, the FSF reacted to the proposal by saying the Federal Reserve's own stress tests show the largest banks were sound and well capitalized, making the proposal "a solution without a problem."
https://finance.yahoo.com/news/us-banking-starts-pick-battles-100000744…
New Lending by Mortgage REITs Has Dried Up
Some of the biggest names in commercial real-estate lending have all but turned off the spigot, the Wall Street Journal reported. Blackstone Mortgage Trust and KKR Real Estate Finance Trust, two of the biggest mortgage real-estate investment trusts, have halted loans to any new borrowers. While these firms continued to provide financing related to existing loans, they didn’t originate any new loans during the first half of this year, according to the companies. Starwood Property Trust, another lender in the sector, has greatly decreased its appetite for new lending in recent quarters, securities filings show. Mortgage REITs, which lend to property owners instead of buying and developing real estate like equity-oriented REITs, typically originate an average of about $10 billion in loans a quarter, according to Jade Rahmani, an analyst at Keefe, Bruyette & Woods. But lately “hardly anyone has made new loans,” he said. Mortgage REITs are pulling back to protect their balance sheets during one of the most troubled commercial real-estate markets in decades. Default rates are rising for all lenders because higher interest rates are making it tougher for many borrowers to refinance and many properties, especially office buildings, are suffering higher vacancy rates. Their shutdown is a clear sign of how much lenders are tightening credit. Total commercial and multifamily mortgage lending is expected to fall to $504 billion this year, a 38% decline from 2022, according to the Mortgage Bankers Association.
https://www.wsj.com/articles/new-lending-by-mortgage-reits-has-dried-up…
SEC Chairman Warns of Risk to Financial Systems from AI
Securities and Exchange Commission (SEC) Chairman Gary Gensler warned in a new interview that artificial intelligence (AI) will eventually lead to financial crises, The Hill reported. “This technology will be the center of future crises, future financial crises,” Gensler told The New York Times. “It has to do with this powerful set of economics around scale and networks.” Gensler predicted the future business systems in the U.S. will be reliant on two or three foundational models, which he says would make a financial crash more likely due to “herding,” which means all companies will rely on the same information. The SEC proposed a new rule last month that would require investment advisers to rid conflicts of interest in their technologies. Gensler said in a press release at the time that AI could place brokers’ or investment advisers’ interests above the investors’ interests, which is what the proposed rule would aim to curtail.
https://thehill.com/policy/technology/4142101-sec-chair-warns-of-risk-t…
PayPal Becomes First Major Fintech to Launch Dollar-Backed Stablecoin
Payments giant PayPal said on Monday it has launched a U.S. dollar stablecoin, becoming the first major financial technology firm to embrace digital currencies for payments and transfers, Reuters reported. While stablecoins — crypto tokens whose monetary value is pegged to a stable asset to protect from wild volatility — have been around for years now, they are yet to successfully make headway into the mainstream consumer payments ecosystem. PayPal's announcement, which lifted its shares 2.5% in afternoon trading, reflects a show of confidence in the troubled industry that has over the last 12 months grappled with regulatory headwinds that were exacerbated by a string of high-profile collapses. Prior attempts by major mainstream companies to launch stablecoins have met fierce opposition from financial regulators and policymakers. The 2019 plans of Meta (then Facebook) to launch a stablecoin, Libra, were foiled after regulators raised fears it could upset global financial stability. A string of major economies, from Britain to the European Union, have since laid out rules to govern stablecoins. The EU's policies will come into force in June 2024.