Spending on U.S. construction projects increased 0.9 percent in November as strength in home building offset weakness in other parts of the construction industry, the Associated Press reported. The November gain followed a bigger 1.6 percent rise in October and left construction spending up 4.4 percent through the first 11 months of 2020 compared to the same period in 2019, according to the Commerce Department. For November, spending on residential construction rose 2.7 percent with single-family construction surging 5.1 percent while apartment construction was flat, according to the new data released yesterday. Record low mortgage rates have spurred strong demand for housing even as a global pandemic resulted in widespread lock downs for other parts of the economy.
As 2020 comes to an end, the $600 promised by the federal government — poised to begin appearing in bank accounts soon — is welcome news to millions of needy Americans whose finances have been devastated after nine months of economic crisis wrought by the coronavirus pandemic. But for people whose bank accounts are overdrawn, whether they get their hands on the money depends on what the country’s banks decide to do, the New York Times reported. Banks hold this power because, for a vast majority of people, the stimulus money will be deposited in the same bank accounts in which they also receive tax refunds. In the past week, the largest United States banks have pledged to temporarily zero out their customers’ negative balances so they can get access to their stimulus money and put it toward whatever expense seems the most pressing. Negative balances typically include the various fees that banks tack on to customers’ accounts for letting the customers withdraw more money than they have.
Airlines are betting that coronavirus vaccines will reignite demand for travel this year. The question is when, according to a Wall Street Journal report. Delta Air Lines Inc. Chief Executive Ed Bastian expects improvement starting this spring. Alaska Airlines President Ben Minicucci said he hopes to get back to 80% of pre-pandemic capacity by summer. United CEO Scott Kirby, however, said travel may not start getting back to normal until vaccines are widely distributed — in late 2021. “I recognize a lot of people are saying it’s going to happen faster, and I hope they’re right,” he said in a December interview. “This is one of those strange situations where I think we’re probably better at forecasting what’s going to happen a year from now than we are what’s going to happen next quarter.” Their strategies for coping with the uncertainty are just as diverse. Airlines are shutting down some international markets and running reduced schedules while also buying new planes and adding new cities in an attempt to capture demand where it exists. United is returning to New York’s John F. Kennedy International Airport in February after a five-year absence, while rival Southwest Airlines Co. plans to fly from Chicago’s O’Hare International Airport for the first time ever in 2021. JetBlue Airways Corp. is also adding flights this year at Miami International Airport — the busiest U.S. airport it didn’t yet serve.
Mexican pilots have rejected a cost-saving plan put forward by their own trade union amid talks aimed at agreeing how to restructure airline Grupo Aeromexico, the ASPA union said on Thursday, Reuters reported. Battered by the coronavirus pandemic, Aeromexico filed for chapter 11 protection in a U.S. court in June, and is trying to secure a second tranche of financing. In a statement, the ASPA said the majority of its pilots had in a vote rejected the plan put forward by the union as an alternative to Aeromexico’s own proposal, but that it would keep exploring other options to aid restructuring efforts. The airline earlier this year had up to $1 billion in debtor-in-possession (DIP) financing approved, and received an initial $100 million payment in September.
Senate Majority Leader Mitch McConnell (R-Ky.) dealt a likely death blow yesterday to President Donald Trump’s bid to boost coronavirus aid to Americans, declining to schedule a swift Senate vote on a bill to raise relief checks to $2,000 from $600, Reuters reported. McConnell said on the Senate floor that a bill passed by the Democratic-controlled House of Representatives, which sought to meet fellow Republican Trump’s demands for bigger checks, “has no realistic path to quickly pass the Senate.” McConnell, who controls the Senate’s agenda and opposes the increase in aid, had introduced a competing bill combining the $2,000 checks with provisions unacceptable to Democrats, who could block it. With a new Congress set to be sworn in on Sunday, the action appears all but certain to kill the effort to increase the amount of the $600 checks Congress has already approved.
AMC Entertainment Holdings Inc., the world’s largest cinema operator, plans to offer as many as 50 million more shares as it tries to stave off a bankruptcy filing, Bloomberg News reported. The offering adds onto 200 million shares the Leawood, Kansas-based company registered earlier this month, it said in a filing yesterday. AMC warned again in the new document that it might have to seek an in-court or out-of-court restructuring, which could wipe out its equity investors. The company has said that it needs to raise $750 million. AMC declined again after setting plans for a new stock offering. Movie-theater owners have been hit hard by the coronavirus pandemic. The superhero sequel “Wonder Woman 1984” had the biggest theatrical opening of the crisis last weekend but generated just $16.7 million at the North American box office. Its studio, AT&T Inc.’s Warner Bros., said only 39 percent of U.S. cinemas were open, at limited capacity.
The new owners of JCPenney replaced Chief Executive Officer Jill Soltau less than a month after re-launching the department store chain that went bankrupt during the pandemic, Bloomberg News reported. Soltau will depart Dec. 31 and be succeeded by Stanley Shashoua, the chief investment officer of Simon Property Group Inc., while a search for a new CEO is conducted, according to a statement Wednesday. Mall owners Simon and Brookfield Asset Management Inc. acquired the retail operations of J.C. Penney Co. to help keep one of their biggest tenants in business. The brief, two-paragraph announcement gave no explanation for the CEO change. Soltau, hired in October 2018, was in the middle of overseeing her own turnaround plan and putting a new team in place when the Covid-19 pandemic swept the globe this year and temporarily shuttered many retail stores. By May, J.C. Penney Co. was bankrupt. She remained in the top job throughout the bankruptcy process, and the new owners highlighted her comments as CEO in the Dec. 7 announcement of the relaunch under the JCPenney name. Simon and Brookfield plan to establish a temporary office of the CEO that will include members of JCPenney’s current management team, according to the statement. J.C. Penney Co. was split up during the bankruptcy into the operating company, which is owned by the mall operators, while lenders get the property company. The latter remains in the chapter 11 process and is expected to emerge in the first half of 2021.
A disgruntled creditor of Speedcast International Ltd., which opposed a financial restructuring of the satellite-communications company, has obtained clearance to submit a late takeover offer to buy the company out of bankruptcy, WSJ Pro Bankruptcy reported. “We want to bid as soon as we can,” said Al Hogan, a lawyer for creditor Black Diamond Capital Management LLC, during a hearing Wednesday in the U.S. Bankruptcy Court in Houston. Subject to outstanding due diligence, Hogan said that “Black Diamond would absolutely prefer to own this asset than to see it sold to Centerbridge at the price under the current plan.” Black Diamond’s emergence as Speedcast’s potential acquirer is an unexpected twist that arose during a multiday trial over a plan backed by private-equity firm Centerbridge Partners LP. U.S. Bankruptcy Judge Marvin Isgur is allowing Black Diamond to bid for Speedcast and formulate an alternative transaction to get the company out of chapter 11 protection, after he expressed concerns about approving the Centerbridge-backed plan. Speedcast came to bankruptcy carrying about $689 million in long-term debt, which the company intends to cut through a financial restructuring. The company anticipates emerging from chapter 11 in the first quarter of 2021.
On December 23, 2020, Congress passed the Combined Consolidated Appropriations Act, 2021, which includes the Coronavirus Economic Relief for Transportation Services Act and Coronavirus Response and Relief and Relief Supplemental Appropriations Act (H.R. 133) (the "CARES ACT II") , which provides for another $284.45 billion in "PPP Second Draw Loans" ("PPP III Loans"). While over four months had passed since the lapse of the prior PPP loan program, struggling businesses throughout the U.S. breathed an audible sigh of relief. As CARES Act II contained numerous provisions related to stimulus and aid availability separate from PPP III Loans. Despite threats of veto, President Trump signed the bill on December 27, 2020. Did CARES Act II "fix" the issue and definitively do away with any future litigation in this area? Of course not. Instead, there is a mixed bag in CARES Act II — some good news for some debtors, bad news for other debtors, and a pretty much sure bet for future litigation concerning the latter. Read the full commentary.
As the pandemic intensified, even companies with enough cash to try to reorganize in court lost faith that they’d be able to stay open after cutting their debts, Bloomberg News reported. On March 28, Carol and Henry Huffman of Pike Creek, Delaware, simply closed down their specialty catering shop, the Cheese Chalet, and walked away rather than seek court protection from creditors and chance a reopening. “Waiting was not an option,” Carol Huffman said. “They kept saying there might be another shutdown in the fall.” Hundreds of thousands of small business owners made the same decision in 2020, according to researchers. Collectively, they laid off millions of employees and walked away from small stores, restaurants and other enterprises in a wave of silent closures. Next year may be different if the widespread rollout of a vaccine gives entrepreneurs hope that cutting debt under court oversight is once again worth it. “Bankruptcy requires people to be hopeful that there will be a better future on the other side,” said Prof. Jared Ellias of the University of California's Hastings College of the Law. “I suspect you will see a serious bounce in Q1 and Q2 especially. The driver isn’t going to be the pandemic. The driver is going to be the vaccine.” A spate of shutterings would typically cause bankruptcies to surge, according to a paper by academics at the University of Illinois, Brigham Young University and Harvard Business School. But in 2020 they declined as some business owners walked away while others received enough government support to delay reorganizations. Through November, 20 percent fewer business cases were filed compared to the same period last year, according to statistics from the American Bankruptcy Institute. A new provision of the bankruptcy code, known as Subchapter V, started this year and was designed to make the process cheaper and easier for companies with less than $7.5 million in debt. So far, about 1,300 such cases have been filed, said Ed Flynn, a consultant with ABI who studies bankruptcy statistics. Some small companies want to wait before filing for bankruptcy under Subchapter V rules because the process comes with tight deadlines for proposing a debt-cutting plan, said Matthew C. Zirzow, a bankruptcy lawyer in Las Vegas who led two companies through the process in Nevada and has many more clients waiting to file. “They don’t want to file Subchapter V too soon,” he said in an email. “It may have a great business when things bounce back that is well worth eventually reorganizing, but who is to say when that will happen?” Banks and landlords have been far more willing to work with struggling firms during the pandemic, keeping some out of bankruptcy for longer, Ellias said. “The normal mechanisms of debt collection are not working because banks are holding off on collecting,” he said.
