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Thanks to the pandemic, U.S. banks won a long-sought regulatory break that let them expand their balance sheets by as much as $600 billion without adhering to profit-denting safeguards. Now, firms are frantically lobbying to extend that relief before it expires at month’s end, Bloomberg News reported. The reprieve from what’s known as the supplementary leverage ratio — granted a year ago as COVID-19 rocked markets and the economy — gave lenders free rein to load up on Treasuries and deposits, while avoiding a requirement that they hold more capital as a buffer against losses. The Federal Reserve and other agencies eased the rules because they said they wanted excess capital deployed to struggling businesses and households. As watchdogs mull letting the relief continue, Wall Street isn’t shying away from offering arguments and even warnings. Executives point out that the pain from coronavirus is far from over, and JPMorgan Chase & Co. has cautioned that it might have to shun customer deposits if tougher rules are reinstated. Analysts have also said recent bouts of wild trading in the $21 trillion Treasury market could be tied to concerns that banks will be forced to hold less government debt, even selling some of their holdings.

Plastics recycler CarbonLite Holdings LLC yesterday secured approval, on an interim basis, of four separate loans totaling $78.5 million to fund its bankruptcy proceedings, Reuters reported. U.S. Bankruptcy Judge John Dorsey signed off on the financing during CarbonLite’s first hearing since filing for chapter 11 protection on Monday. The company, represented by Pachulski Stang Ziehl & Jones, blamed low output at its facilities, high operating expenses and high interest rates on its debt obligations, as well as pandemic-related construction delays at one facility, for its financial strain.

Eagle Hospitality Trust, which oversees several corporations that operate the Queen Mary and own hotels in Pasadena, Anaheim and Palm Desert, filed a motion in federal court yesterday to auction off several of its properties, including its lease for the legendary ship that makes its home in Long Beach, Calif., the Long Beach Press Telegram reported. The filing came as part of the chapter 11 bankruptcy process, which kicked off in January when several affiliates of Eagle Hospitality Trust — including the corporations that run hotels across the Southland — notified the Delaware district of the U.S. Bankruptcy Court of their intent to restructure. The bankruptcy court is scheduled to weigh in on the motion, and possibly approve it, on Tuesday, March 23. The proposal from Eagle Hospitality Trust noted that the New York capital investment fund Monarch Alternative Capital has bid a total $470 million for the corporations that own or manage the Embassy Suites by Hilton Anaheim North, the Holiday Inn Hotel & Suites Anaheim, the Sheraton Pasadena and the Queen Mary, as well as 11 other hotels across the state and country. If the motion is approved by the court, those companies would tentatively be listed for auction on May 20, with Monarch Alternative Capital’s bid being the minimum offer.

New York City is creating a $65 million fund to help taxi medallion owners, but drivers called the plan “a disgraceful betrayal from a city that already has blood on its hands,” Bloomberg News reported. The proposal, funded with federal stimulus money, will offer $20,000 loans to help restructure debts on taxi medallions, and as much as $9,000 in debt payment support, said Taxi and Limousine Commissioner Aloysee Heredia Jarmoszuk. “I think this new plan will be a difference maker for many drivers,” Mayor Bill de Blasio said yesterday. But Bhairavi Desai, executive director of the 21,000-member Taxi Workers Alliance, said the plan is “horrible” and “does absolutely nothing for us.” “It’s a cash bailout for lenders while we are left to drown in debt, foreclosure & bankruptcy,” Desai said in a Twitter post. In response, the mayor said, “It’s very easy to call for plans that aren’t going to work. Our job is to come up with solutions that will actually work.” The market for taxi operating permits known as medallions has collapsed with the onset of the digital ride-hailing industry, leaving thousands of drivers facing financial ruin. Several have committed suicide. The Alliance has called on the city to help convince and incentivize lenders to restructure their debt.

The American Bankruptcy Institute (ABI) sent a letter to Senate Judiciary Committee leadership on Friday supporting S. 473, the "COVID-19 Bankruptcy Relief Extension Act," to extend, for another year, bankruptcy-relief provisions due to sunset in the 2020 CARES Act and December 2020 omnibus appropriations bill. “There is no doubt that the COVID-19 pandemic and its aftermath will continue to put significant strain on U.S. small businesses in the near future and perhaps for years to come,” ABI Executive Director Amy Quackenboss writes in the letter to bill co-sponsors Senate Judiciary Chairman Richard Durbin (D-Ill.) and Ranking Member Charles Grassley (R-Iowa). “By extending the increased debt limit of the SBRA, the COVID-19 Bankruptcy Relief Extension Act offers much-needed relief to a growing number of U.S. small businesses who find themselves in need of reorganizing in order to stay in business.”

Click here to read ABI’s letter.

The Federal Reserve on Monday announced it would keep its program for buying Paycheck Protection Program (PPP) loans from banks open for additional three months and allow three other facilities to expire at the end of March, The Hill reported. The Fed will keep its PPP liquidity facility open through June 30, allowing lenders to sell PPP loans to the central bank and use the proceeds to make new loans to small businesses. The Senate-passed version of President Biden’s $1.9 trillion economic relief plan includes an additional $284 billion for PPP loans, which can be forgiven entirely if used by a business to cover payroll, rent and other basic expenses. The PPP facility is one of more than a dozen emergency lending programs set up by the Fed during the onset of the coronavirus pandemic as financial markets nearly broke down in panic. All but four of the Fed’s emergency facilities were shut down at the end of 2020, and the bank announced Monday that the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility, and the Primary Dealer Credit Facility will close on March 30 after minimal usage since the summer.

The House looked on track to pass the latest version of the $1.9 trillion coronavirus relief package later this week, as liberal Democrats swallowed their frustration with the Senate’s changes and prepared to approve the bill for a second time, the Wall Street Journal reported. Democrats, who hold a slim majority in the House, will need to stay largely united behind the legislation given the absence of any GOP support, providing an early test for party leaders. The House is expected to narrowly pass the bill today or tomorrow, sending it to the White House for President Biden’s signature. House Majority Leader Steny Hoyer (D., Md.) had initially said the House would take its first procedural vote on the bill Monday, but processing the bill’s Senate paperwork pushed the vote slightly later in the week, aides said. The legislation would provide $300 in weekly unemployment benefits through Sept. 6, send $1,400 direct payments to many Americans, direct $350 billion to state and local governments, fund vaccine distribution and expand the child tax credit, among other aid. Read more. (Subscription required.) 

In related news, the coronavirus relief package that President Biden is expected to sign into law in the near future would cut taxes on average by about $3,000 in 2021 and would have the biggest impact on the after-tax incomes of low- and middle-income households, according to an analysis released yesterday by the Urban-Brookings Tax Policy Center (TPC), The Hill reported. The analysis focuses on four major tax provisions in the bill: the $1,400 direct payments and the expansions of the child tax credit, earned income tax credit, and child and dependent care tax credit. The Senate passed the bill on Saturday, and final passage in the House is expected this week. Those with incomes under $25,500 would on average see a 20.1 percent increase in their after-tax incomes for 2021, the biggest percent change of any income group, according to the analysis. Households in the middle of the income distribution, with income between roughly $51,000 and $91,000, would see a 5.5 percent increase in their after-tax income. Read more.

American Airlines Group Inc. is kicking off a $7.5 billion sale of bonds and leveraged loans backstopped by its frequent-flyer program, capitalizing on low borrowing costs to repay U.S. government loans that have helped it navigate the pandemic, Bloomberg News reported. The carrier is marketing two $2.5 billion series of notes maturing in 2026 and 2029, and a term loan credit facility of the same amount due in 2028. The new debt, which is secured against the company’s loyalty program, will help refinance American’s $7.5 billion Treasury loan, of which $550 million has been drawn to date, according to an investor presentation Monday. Early pricing discussions are in the low-to-mid 6% range for the five-year notes, and the mid-to-high 6% range for the eight-year portion. Initial pricing on the loan is being discussed at a spread of 500 to 525 basis points over the London interbank offered rate, plus an original issue discount of 98 cents on the dollar with a 1% Libor floor. American opted to refinance the Treasury loan with debt in an amortizing structure, which allows the company to pay back it in pieces leading up to maturity rather than all at once. The new financing gives American greater flexibility and also potentially increases the borrowing capacity of the AAdvantage program, a company spokesman said.

Plastics recycler CarbonLite and its subsidiary PinnPack Packaging have filed for chapter 11 protection, Plastics in Packaging reported. Production at all three of U.S.-based CarbonLite’s facilities — in California, Texas and Pennsylvania — and its Californian thermoforming business PinnPack Packaging, will continue as usual without interruption, as will payment of all employees. Layoffs are not under consideration. There will be no stoppage of supply to CarbonLite’s customers during the reorganisation period. Pressures directly related to the coronavirus pandemic contributed to CarbonLite’s decision to reorganize. This included temporary production slow-downs caused by employee illness, the low price of virgin plastics relative to recycled PET, and a nine-month delay in the opening of the company’s new Pennsylvania facility caused by travel restrictions that held up equipment commissioning by European manufacturers. CarbonLite has also incurred heavy capital expenditures for the recent expansion of its Dallas facility and construction of its 270,000 square foot plant in Reading, Pa., which launched limited production in October 2020. This plant is outfitted with advanced robotic systems and is the largest standalone bottle-to-bottle recycling facility in the world. Its opening is planned for this spring.