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U.S. mall values plunged an average 60% after appraisals in 2020, a sign of more pain to come for retail properties even as the economy emerges from pandemic-enforced lockdowns, Bloomberg News reported. About $4 billion in value was erased from 118 retail-anchored properties with commercial mortgage-backed securities debt after reappraisals triggered by payment delinquencies, defaults or foreclosures, according to data compiled by Bloomberg. That average drop — which reflects the change in value since the debt was originated years ago — may underestimate losses when the properties come up for sale because so much retail real estate is in distress. And few buyers are willing to take risks on aging shopping centers as e-commerce continues to grab market share. The biggest owners, such as Simon Property Group Inc., Brookfield Asset Management Inc. and Starwood Capital Group, have started to triage properties, walking away from money-losers while reinvesting in viable locations. Hard-hit centers were already decimated by department store bankruptcies and high vacancy rates, before COVID-19 accelerated Americans’ taste for online shopping. Only about half of the 1,100 U.S. indoor malls have a good chance of survival, according to Floris van Dijkum, a real estate analyst with Compass Point Research & Trading. The strong will get stronger while the weakest face abandonment, he said. “There’s a huge bifurcation between good and bad quality,” van Dijkum said. “By value, 80% is in the top 300 malls.”

Car rental company Hertz Global Holdings Inc. said today that it had filed a proposed plan of reorganization with the U.S. Bankruptcy Court for the District of Delaware, Reuters reported. Under the plan, Knighthead Capital Management LLC and Certares Opportunities LLC will invest about $4.2 billion to buy up to 100% of common stock of reorganized Hertz.

The head of a group representing major U.S. passenger airlines and a senior union official will make the case today to lawmakers for a third round of government assistance, according to testimony seen by Reuters. Since March 2020, Congress has awarded passenger and cargo airlines, airports and contractors nearly $90 billion in government assistance and low-cost loans, including two prior rounds of payroll assistance for U.S. passenger airlines totaling $40 billion. The $1.9 trillion COVID-19 relief package approved by the U.S. House last week includes another $14 billion for passenger airlines to keep workers on payrolls for an additional six months. It awaits action by the U.S. Senate. Nick Calio, who heads Airlines for America, a trade group representing American Airlines, Delta Air Lines, United Airlines and others, will tell the House Transportation and Infrastructure’s aviation subcommittee that tens of thousands of aviation workers will “lose their jobs — or experience reductions to wages and benefits — effective April 1.” Calio’s testimony adds that “funding is an explicit recognition that the industry remains in dire straits, even before factoring in the certainty that it will be inundated with debt for years to come.” In 2020, U.S. airlines saw passenger traffic fall by 60% to 368 million passengers, the lowest number since 1984 and reported pretax losses of $46 billion. They continue to burn “an estimated $150 million of cash every day,” Calio will say.

A group of Democratic senators is urging President Biden to include recurring direct payments for some Americans in his forthcoming coronavirus recovery plan, The Hill reported. A letter spearheaded by Senate Finance Committee Chairman Ron Wyden (D-Ore.) calls for Biden’s forthcoming Build Back Better proposal to fund recurring direct payments and automatic unemployment insurance extensions that are tied to economic conditions. That would be on top of the one-time payments of $1,400 per person that are included in the $1.9 trillion relief package the House passed last week. The letter has attracted at least nine other signatories, including the chairs of the Senate’s three major financial committees, and will be circulated on Capitol Hill today to garner further support. The letter does not specify a dollar amount for the recurring payments.

New data shows that a year after the pandemic wrought economic devastation around the country, forcing states to revise their revenue forecasts and prepare for the worst, for many the worst didn’t come, the New York Times reported. One big reason: $600-a-week federal supplements that allowed people to keep spending — and states to keep collecting sales tax revenue — even when they were jobless, along with the usual state unemployment benefits. By some measures, the states ended up collecting nearly as much revenue in 2020 as they did in 2019. A J.P. Morgan survey called 2020 “virtually flat” with 2019, based on the 47 states that report their tax revenues every month, or all except Alaska, Oregon and Wyoming. A researcher at the Urban-Brookings Tax Policy Center, a nonpartisan think tank, found that total state revenues from April through December were down just 1.8 percent from the same period in 2019. Moody’s Analytics used a different method and found that 31 states now had enough cash to fully absorb the economic stress of the pandemic recession on their own.

Fed Governor Lael Brainard said yesterday that the coronavirus pandemic laid bare a number of weaknesses in the financial system that should be addressed with new rules to prepare for the next shock, Reuters reported. “We should not miss the opportunity to distill lessons from the COVID shock and institute reforms so our system is more resilient and better able to withstand a variety of possible shocks in the future, including those emanating from outside the financial system,” said Brainard, a key voice in recent debates over financial regulation and a critic of recent steps to ease requirements on financial institutions. Brainard focused her most detailed suggestions on the rules governing the large money market funds that saw massive redemptions as the pandemic intensified last spring, causing stress in corporate and other funding markets that rely on them. She said ideas like “swing pricing,” which kicks in after redemptions hit a certain level to penalize those who continue to withdraw, as well minimum deposit and other rules could head off a future crisis by reducing the “incentive to run.” “The COVID stress test highlighted significant financial vulnerabilities” across markets that forced the Fed to roll out its own backstops to ensure corporations, foreign governments, and others could get the dollars they needed to function, Brainard said.

Nearly a year since coronavirus-related shutdowns began affecting large swaths of the American economy, more businesses are filing for bankruptcy as court records show that chapter 11 filings were up nearly 20 percent in 2020 compared with the previous year, the Washington Post reported. Data on a subset of businesses ― those registered as corporations ― shows that some sectors are faring much worse than others, with restaurants, retailers, entertainment companies, real estate firms and oil and gas ventures filing for protection in far greater numbers than in previous years, according to New Generation Research. Bankruptcies filed by entertainment companies in 2020 nearly quadrupled, and filings nearly tripled for oil and gas companies, doubled for computer and software companies and were up 50 percent or more for restaurant owners, real estate companies and retailers, compared with 2019, data from the research firm shows. Among those industries most affected, there were 5,236 chapter 11 filings in 2019 but 6,917 last year, a tally at least 30 percent higher than any of the previous four years. Because bankruptcy filings lag other signals of economic distress, experts say the worst may be yet to come. Bankruptcies stemming from the 2007 financial crisis didn’t peak until 2010. “Bankruptcies don’t cause damage to the economy," said Ed Flynn, a consultant to the American Bankruptcy Institute. "The damage has already occurred when the bankruptcy is filed. Higher bankruptcies are more a symptom of economic harm than the cause.” Read more.

Be sure to read Ed Flynn's exclusive analysis of weekly filing trends on ABI's COVID-19 Resources website.

The House approved President Joe Biden’s $1.9 trillion pandemic rescue plan in a 219 to 212 vote early Saturday morning, sending the measure to the Senate as Democrats race to pass it into law before boosted unemployment payments expire next month, <em>Politico</em> reported. All but two Democrats supported the sprawling coronavirus relief package, with zero Republicans backing it — a major step toward enacting the White House’s first major legislative priority amid dueling public health and economic crises. Days after the U.S. marked 500,000 deaths to the virus, the Democrats’ COVID aid bill would send $1,400 stimulus checks to millions of Americans, boost unemployment payments and increase the child tax credit. It would also provide billions of dollars in aid to small businesses, states and efforts to test for and vaccinate against the coronavirus. But House GOP leaders, who kept their members in line against the bill, have argued the price tag is too high, with programs that are unrelated to fighting the virus. If passed, the package will be one of the largest ever approved by Congress, and the fifth major piece of legislation approved since the pandemic began. The Senate will take up the measure this week, where top Democrats will be forced to grapple with a major setback to Biden’s plan — their push to include a long-sought minimum wage increase has officially run afoul of the Senate’s arcane budget rules. For now though, the House package still includes that federal minimum wage hike to $15 an hour, assuring minimal drama in the lower chamber, and forcing Senate Republicans to formally nix it.

U.S. hospitals face up to $122 billion in lost revenue this year as the pandemic continues its rampage, threatening to push more critical-care centers into bankruptcy or out of business entirely, Bloomberg News reported. Even a best-case scenario would cost hospitals $53 billion of revenue, according to a new Kaufman, Hall & Associates report for the American Hospital Association. That’s on top of more than $323 billion in reduced revenue and higher expenses last year. U.S. hospitals were already hard-pressed before the COVID-19 outbreak, especially in poor and rural regions, with more than 30 going bankrupt in the year preceding the pandemic. “We need additional funding to both participate in the vaccination efforts as well as care for large numbers of critically ill patients, maintain sufficient staffing and continue to acquire enough personal protective equipment and other resources necessary to do this critical work,” according to a Thursday letter from the group to Senate leaders. How quickly hospitals recover depends on the vaccine rollout, the spread of more infectious strains, and how potential patients behave — both in terms of how cautious they remain and how willing they are to return for not only profitable elective procedures but even for emergencies. “Even as restrictions lifted, our data found that many patients continued to hold off on rescheduling elective procedures in certain categories, like plastic surgery and orthopedic procedures,” said Matt Hawkins, chief executive officer of Waystar, a company that works with hospitals on billing. Falling revenue squeezed hospitals as safety and treatment costs soared, with a 14% rise in labor and 17% for drugs last year, the report said. Even before the pandemic, hospitals operated on thin margins, with a median of 2.5% in 2019, according to the report. Read more.

Don’t miss next week’s Bankruptcy Battleground West as an expert panel will tackle issues related to current hospital distress. Register today!