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CBL & Associates Properties Inc. yesterday urged a bankruptcy judge to reject senior lenders' efforts to assert control over the mall operators' assets and operations, saying that its ability to reorganize in chapter 11 is at stake, Reuters reported. The statements from CBL attorney, Ray Schrock of Weil Gotshal & Manges, came during opening arguments in a virtual trial before Chief U.S. Bankruptcy Judge David Jones in Houston over lender claims that a series of alleged defaults on the loan documents gave them the right to take over certain subsidiaries and collect revenues directly from tenants. Wells Fargo & Co., which heads up the lender group and is represented by Jones Day, claims that CBL did not have the authority to file for bankruptcy and is looking to have the case thrown out. The case is now a showdown between the lenders and the company, which said it was forced to seek bankruptcy to protect itself and its assets from Wells Fargo. Chattanooga-based CBL filed for chapter 11 protection in November following months of COVID-19-related economic turmoil for its retail tenants and Wells Fargo's allegations of default on a $1.1 billion loan. The company, which was one of the first major mall operators to seek bankruptcy since the onslaught of the pandemic, reported $4 billion in debt and a restructuring support agreement with holders of its $1.4 billion in unsecured notes. Under the noteholder-backed restructuring agreement, CBL would reduce its debt load and preferred obligations by $1.5 billion.

U.S. shale oil and gas producer Chesapeake Energy Corp plans to cut 15% of its workforce, an email sent to employees revealed, as it closes on new financing that will allow it to emerge from bankruptcy court protection next week, Reuters reported. Once the second-largest U.S. natural gas producer, Chesapeake was felled by a long slide in gas prices. The company is “resetting our business to emerge a stronger and more competitive enterprise,” according to the email to employees by Chief Executive Doug Lawler dated on Tuesday, and reviewed by Reuters. Most of the 220 layoffs will happen at the Oklahoma City headquarters, the email said. Chesapeake on Tuesday said it planned to raise $1 billion in notes to complete its bankruptcy exit. The company’s bankruptcy plan was approved by a U.S. judge last month, giving lenders control of the firm and ending a contentious trial. Chesapeake filed for court protection in June, reeling from overspending on assets and from a sudden decline in demand and prices spurred by the coronavirus pandemic.

For all the talk of workers fleeing pricey coastal cities such as New York and San Francisco, one of the most troubled spots in the U.S. commercial real estate market is deep in the heart of Texas, Bloomberg News reported. Houston ended last year with a 24% office-vacancy rate, the highest of any major U.S. city, according to Jones Lang LaSalle Inc. After years of construction to accommodate an oil boom that’s now gone bust, buildings are sitting empty, values are plunging and mortgage defaults are piling up. The COVID-19 pandemic is only accelerating the real estate distress in America’s energy capital. Office tenants vacated a net 3.2 million square feet (300,000 square meters) last year, and there’s 3.1 million square feet of new top-tier space set to be completed over the next 18 months. 

President Biden urged Senate Democrats in a call yesterday to “go big” and move quickly on a COVID-19 relief bill, signaling that he is rejecting a $618 billion proposal sponsored by 10 GOP senators as “too small” even though he is open to some of their ideas, The Hill reported. “It was clear,” said Sen. Tim Kaine (D-Va.) after the call. “Go big and be prompt because the American public is really hurting and really needs this.” Biden told Democrats that his clear preference is for Congress to pass a $1.9 trillion package, despite concerns voiced by Republicans about the impact on the deficit. Kaine said Biden didn’t close any doors to working with Republicans but he wants Democrats to move a large package immediately, which means it’s almost certain to need to move under a special process known as budget reconciliation to be able to pass with a simple majority vote. Read more.

In related news, Sen. Dick Durbin (D-Ill.) and Rep. Cindy Axne (D-Iowa) on Tuesday introduced a bill aimed at providing tax relief to people who received unemployment benefits last year amid the coronavirus pandemic, The Hill reported. The legislation would exempt from federal income taxes the first $10,200 in unemployment benefits that taxpayers received last year. Both people who received unemployment benefits through federal programs and people who received benefits through state programs would be eligible for the tax relief, according to a news release from the lawmakers. Read more.

Greylock Capital Management says it’s really nothing more than a small business that should be allowed to use special bankruptcy rules to quickly cancel a lease on its expensive, midtown Manhattan office space, Bloomberg News reported. At a court hearing yesterday, attorney Jeffrey Chubak argued that the company qualifies as a subchapter V debtor because only its affiliates owe hundreds of millions of dollars, not Greylock Capital Associates, the entity that filed for bankruptcy Jan. 31. Once Greylock finishes deconsolidating its balance sheet, Associates will be under the maximum debt limit of about $7 million, Chubak told U.S. Bankruptcy Judge Robert Drain. “Obviously I don’t want this case to proceed in subchapter V if you’re over the debt limit,” Judge Drain said. Assuming Greylock can show the debt is low enough, Judge Drain said that he would be open to quickly considering cancellation of the office lease since the company has already moved out. After that contract is gone, Greylock will be able to file a reorganization plan that pays all creditors in full, Chubak said. Greylock, founded in 2004, is one of the best known hedge funds in emerging markets investing; within two months its assets under management will be around $350 million, down from about $1.1 billion at the end of 2017, according to court papers.

Mudrick Capital Management LP, the hedge fund that provided a much-needed lifeline to AMC Entertainment Holdings Inc. in December, is sitting on hundreds of millions of dollars in gains following last week’s rally in the price of AMC’s shares, WSJ Pro Bankruptcy reported. The New York-based firm made $200 million in profit, mostly from its holdings in AMC debt. Mudrick’s gains derive from a combination of paper gains and realized trades. Last week, AMC shares nearly tripled in value as the cinema chain’s stock caught the attention of individual investors swarming popular Reddit forums who were looking to repeat the dizzying rally seen in shares of GameStop Corp. Most of Mudrick Capital’s gains, however, are from its holdings in the company’s bonds, which rallied as the company’s share price increased. The firm also made about $50 million writing call options last week in the midst of the buying frenzy. The call options will enable holders to buy shares from Mudrick at a predetermined price. When Mudrick provided AMC with the new loan, the firm also received AMC shares as part of its commitment fee, as well as part of a swap of some of the firm’s holdings in junior AMC bonds. In that transaction, Mudrick swapped $100 million in AMC debt for shares.

The American economy will return to its pre-pandemic size by the middle of this year, even if Congress does not approve any more federal aid for the recovery, but it will be years before everyone thrown off the job by the pandemic is able to return to work, the Congressional Budget Office projected on Monday, the New York Times reported. The new projections from the office, which is nonpartisan and issues regular budgetary and economic forecasts, are an improvement from the office’s forecasts last summer. Officials told reporters on Monday that the brightening outlook was a result of large sectors of the economy adapting better and more rapidly to the pandemic than originally expected. They also reflect increased growth from a $900 billion economic aid package that Congress passed in December, which included $600 direct checks to individuals and more generous unemployment benefits. The budget office now expects the unemployment rate to fall to 5.3 percent at the end of the year, down from an 8.4 percent projection last July. The economy is expected to grow 3.7 percent for the year, after recording a much smaller contraction in 2020 than the budget office initially expected.