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A group of Senate Republicans released the outline for a $568 billion infrastructure plan, putting out a GOP alternative to President Biden’s $2.3 trillion plan as lawmakers seek a bipartisan compromise on the issue, the Wall Street Journal reported. The two-page Republican plan — which includes spending on roads, transit systems, and broadband internet over five years — doesn’t provide specifics on how it would cover the cost of the bill, a central issue in the talks. The GOP proposal calls for collecting user fees for electric vehicles and repurposing existing federal spending, while opposing President Biden’s proposed tax increases on companies. Of the $568 billion in the outline, $299 billion would go toward roads and bridges, an increase from the $115 billion the Biden administration’s plan proposes. The GOP plan also dedicates $61 billion to public transit systems, $20 billion to rail and $65 billion for broadband. Overall, though, the GOP offer is a fraction of the size of the Biden administration’s proposal, which will likely limit its support among Democrats. President Biden said at a meeting with a bipartisan group of lawmakers this week that he wanted to see a Republican offer on infrastructure by mid-May. Read more. (Subscription required.) 

The infrastructure package proposed by President Biden and congressional deliberations on it were the focus of the "Politics, the Economy and Insolvency: Updates from D.C." session last week at ABI's Annual Spring Meeting. If registered, you can access replays for 30 days! 

Hertz Global Holdings Inc. agreed to provide some value to equity holders when it leaves chapter 11, vindicating the individual traders who have insisted the company is worth something despite its bankruptcy filing. Hertz yesterday proposed in a chapter 11 exit plan that current stockholders receive warrants to purchase up to 4% of the restructured business, the first time the company has said it is worth enough to distribute some value to its owners, WSJ Pro Bankruptcy reported. The shareholder distribution would amount to a recovery of 60 to 70 cents per share, a “material return to equity,” Hertz lawyer Thomas Lauria said yesterday during a court hearing. If approved by the U.S. Bankruptcy Court in Wilmington, Del., that outcome would make Hertz a relative rarity in corporate bankruptcies, in which equity ranks behind debt and most often is wiped out. Hertz shares closed at $1.74 on Wednesday, down 8.4% on the day but up 36% year to date.

The owners of Old Country Buffet, Hometown Buffet and several other all-you-can eat restaurant chains are planning a quick bankruptcy sale for their assets and some of their leases, with hopes to sell them off by the summer, WSJ Pro Bankruptcy reported. San Antonio-based Fresh Acquisitions LLC and Buffets LLC along with several affiliates filed for chapter 11 protection Tuesday, marking the fourth trip through bankruptcy since 2008 for some of the sister chains. Together, the companies owe about $13.5 million in secured debt and more than $5.3 million in unsecured liabilities, according to court papers. The companies said that they filed for bankruptcy again after the Covid-19 pandemic and government-mandated shutdowns disrupted their restaurant operations and severely limited customer demand. Before the pandemic, the companies operated 90 restaurants in 27 states, including other brands such as Furr’s Fresh Buffet, Country Buffet, Ryan’s, Fire Mountain, and Tahoe Joe’s Famous Steakhouse. But the steep decline in sales at the restaurants from occupancy restrictions and the banning of family-style buffet dining forced the companies to close all of their all-you-can-eat locations. The only locations currently open are six Tahoe Joe’s restaurants in California, which had revenue of about $21 million a year before the pandemic, court papers show. Out of their remaining 71 leases, the companies plan to turn over 57 locations to their landlords to stop the continued payment of about $1 million in rent a month. The remaining 14 leases could potentially be transferred through the sale process so that a buyer could use them for future operations. If not, the leased locations could be handed back to the landlords.

It’s not just urban dwellers who have faced difficulties paying the rent during the past year as the pandemic upended the economy. Renters in rural New England have faced many of the same affordability challenges, according to a report released yesterday by the Federal Reserve Bank of Boston’s New England Public Policy Center, the Associated Press reported. While the pandemic may not be having as large a health impact on New England’s rural areas as it’s had on its cities, it’s having a similar economic impact due to businesses closures and restrictions on economic activity aimed at limiting the spread of the virus. The share of jobs lost in rural New England communities has been large, even though these areas have seen fewer cases of COVID-19 relative to their population size compared with the region’s urban areas, the report found. That’s in contrast with the experience in much of the rest of the country, where rural areas nationally had seen more COVID-19 cases relative to their population size but had lost a smaller share of jobs.

It’s fair to say that $12.3 trillion of stimulus seems to have killed off the U.S. credit default cycle, according to a Bloomberg News commentary. The simplest way to see this is quite basic: The lowest-rated companies are enjoying the cheapest borrowing costs in history. All-in yields on corporate debt rated triple-C and below have fallen to about 8% from as high as 20.2% as recently as March 2020, ICE Bank of America index data show. Investors have raced one another to lend billions of dollars to cruise companies and airlines even as they bleed cash. The amount of U.S. junk-rated debt included in the Bloomberg Barclays U.S. High Yield bond index has surged to a record face value of $1.53 trillion from $1.2 trillion in October 2019. It’s easy to look at these valuations paired with more leveraged balance sheets and say risk is being mispriced, according to the commentary. Some companies will default, perhaps unexpectedly, even if credit seems priced to perfection now. And yet these yields and low perceived risk of default make perfect sense. In fact, there’s a case for some of these bond yields to go lower. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

A bipartisan group of senators yesterday unveiled plans to offer more emergency pandemic relief to the country's tiniest employers, a last-minute revamp of Washington's nearly $1 trillion small business rescue that is close to exhausting its funding, Politico reported. The bill introduced by Senate Small Business Chair Ben Cardin (D-Md.) would allow thousands of self-employed Americans to qualify for more aid under the massive Paycheck Protection Program, which offers government-backed loans that can be forgiven if businesses maintain payroll. Cardin and the bill's co-sponsors — including Sens. James Lankford (R-Okla.) and Susan Collins (R-Maine) — face a narrow window to pass the legislation because PPP funding is expected to run out in the coming weeks. Their bill would not appropriate additional money. As of last week, the program had $44 billion to lend out of the nearly $292 billion made available by Congress since December. It's unclear how many potential borrowers the bill will help without any more money being pumped into the program. And the legislation doesn't extend the May 31 deadline for loan applications either.

Knighthead Capital Management and Certares Management for a second time sweetened their proposal to buy Hertz out of bankruptcy as the rental car company’s board meets to review bids, Bloomberg News reported. The latest plan, which was submitted yesterday, would hand shareholders more value — specifically a 40% stake in the reorganized company through a combination of direct investment and a more than $1 billion equity rights offering. The battle over ownership of Hertz has been heating up. The company earlier this month picked a plan from Centerbridge Partners, Warburg Pincus and Dundon Capital Partners that outbid an earlier Knighthead deal. Last week, Knighthead and Certares responded with a plan that assigned Hertz an enterprise value of around $6.2 billion, paid senior lenders and unsecured bondholders in full, and offered existing equity holders a shot at recovery. The deal was backed by investors including Apollo Global Management Inc. The Centerbridge-led proposal would swap unsecured funded debt claims for 48.2% of the equity in the reorganized company and the right to purchase an additional $1.6 billion of equity. Holders of general unsecured claims would recover around 75 cents on the dollar while existing equity holders would be wiped out. In a court hearing last week, U.S. Bankruptcy Judge Mary Walrath delayed approval of a creditor vote on the Centerbridge-backed reorganization to give Hertz time to consider both proposals.

Availability of cheap credit has masked distress, but it’s still out there, says BlackRock managing director Mark Kronfeld, Bloomberg News reported. “Just because you’re not seeing bankruptcy filings doesn’t mean there isn’t distress,” said Kronfeld, a member of the global credit platform at BlackRock Inc., which manages $9 trillion in assets. There will be fewer traditional bankruptcies — besides pre-packaged filings — as long as there’s enough liquidity to ride out the pandemic, according to Kronfeld, who focuses on special situations and distressed investments. Still, there may be more bankruptcy filings in the sectors most impacted by the pandemic, including retail and energy, Kronfeld said. “Companies, even with increased leverage, are able to get cheap financing,” but risks remain, he said on a virtual panel hosted by SierraConstellation Partners. There was about $90 billion of distressed debt trading as of April 16, down from almost $1 trillion in March 2020, according to data compiled by Bloomberg. That includes nearly $5 billion in retail bonds and loans, and $15 billion from oil and gas companies. Last week saw just one new bankruptcy filing from a firm with at least $50 million of liabilities, according to data compiled by Bloomberg. Weekly filings have been trending lower since the end of February. Bankruptcy filings this year “haven’t been prolific,” with many companies filing with less than $100 million in assets and liabilities, said Richard Bernard, partner at law firm Faegre Drinker Biddle & Reath. Potential pockets of stress in manufacturing and the higher education sector could emerge, depending on the lasting disruption from the pandemic, Bernard said.

The supply-chain disruptions rippling across the business world are taking a heavy toll on small U.S. companies, which have fewer resources to absorb or push back on price increases and less leverage to pass along the higher costs to customers, the Wall Street Journal reported. Forty-four percent of small businesses reported temporary shortages or other supply-chain problems in March, according to a survey of roughly 800 companies by Vistage Worldwide Inc., a business advisory firm. A U.S. Census Bureau survey of small businesses, completed in early April, found supply-chain disruptions in wholesale trade, manufacturing and construction, among others. Multiple forces are driving supply-chain woes, from coronavirus infections among employees and temporary business closures to increased demand as vaccines take hold and restrictions ease. A backlog at California ports, the temporary closure of the Suez Canal and weather-related problems have created additional challenges. Smaller companies typically have less sophisticated purchasing departments than larger corporations. Read more. (Subscription required.) 

Explore the many issues that arise when suppliers are unable to make deliveries of promised parts due to financial problems with ABI's Interrupted! Understanding Bankruptcy's Effects on Manufacturing Supply Chains.