Ascena Retail Group Inc. has won court approval to sell its Ann Taylor, Lane Bryant, Loft and Lou & Grey retail brands out of bankruptcy to private-equity firm Sycamore Partners in a deal valued at about $1 billion, WSJ Pro Bankruptcy reported. Bankruptcy Judge Kevin Huennekens of the U.S. Bankruptcy Court in Richmond, Va., said yesterday that he would approve the sale of the majority of Ascena’s remaining assets to Sycamore Partners. The private-equity firm, which specializes in retail and consumer investments, had agreed last month to a purchase price of $540 million, subject to certain adjustments, the assumption of some liabilities and other terms. The deal, which could close by next week, will preserve the business as a going concern with at least 900 stores. As of late August, Ascena operated 1,500 retail locations throughout the U.S., down from its previous roughly 2,800 stores.
Francesca’s Holdings Corp. plans to seek court approval in January for a bidding process to sell its specialty retail business out of bankruptcy and close nearly 100 stores, on top of the nearly 140 stores it closed earlier this year, WSJ Pro Bankruptcy reported. Houston-based Francesca’s, which filed for chapter 11 bankruptcy last week, has tapped investment firm TerraMar Capital LLC to serve as the potential lead bidder for substantially all of its assets. The $23.1 million offer is dependent on the completion of an asset purchase agreement and subject to better and higher offers. The boutique chain, which sells apparel, jewelry, accessories and gifts, found that a restructuring wasn’t possible without selling a majority of the business. Francesca’s expects the purchase price to cover the secured debt, some other liabilities, as well as administrative and wind-down expenses. In court papers, Francesca’s valued its assets at $264.7 million and listed total liabilities of $290.5 million. Its largest shareholder is investment firm Cross River Capital Management LLC.
Rating agency Fitch yesterday downgraded New York City debt to ‘AA-’ from ‘AA’, while maintaining its negative outlook, on concerns of a prolonged impact to the city’s economic growth due to the coronavirus crisis and related containment measures, Reuters reported. Fitch’s move comes close on the heels of S&P Global Ratings changing its outlook on the city’s debt to “negative” from “stable” due to uncertainties stemming from a recent uptick in the virus transmission rate. S&P’s revision relates to the city’s general obligation (GO) and associated appropriation-backed bonds, while the Fitch downgrade includes industrial development revenue (IDR) bonds, special revenue bonds and GOs. It reflects a one-in-three chance S&P could lower its rating during the outlook period, which typically spans two years, the rating agency said. The coronavirus transmission rate increase could hurt the city’s financial forecast, and could negatively affect global tourism trends and additional federal stimulus funding for state and local governments as well as service reductions at the Metropolitan Transportation Authority, S&P Global Ratings credit analyst Nora Wittstruck said in a statement.
S&P Global Ratings said yesterday that U.S. corporations are sitting on record amounts of cash to reduce shock caused by the coronavirus pandemic, Reuters reported. Cash and investments owned by non-financial and non-utilities corporate issuers jumped 30 percent to an all-time high of $2.5 trillion in the first half of 2020, the ratings agency said. Those companies have increased their debt levels by 9% to nearly $8 trillion, S&P Global Ratings said, adding that the U.S. Federal Reserve’s plan to maintain interest rates near zero for at least another three years will help companies that may need to take on more debt if the health crisis worsens. “S&P Global Ratings believes near-term economic uncertainty likely will keep balance sheets relatively conservative,” the ratings agency said. “However, if the outlook brightens in 2021 as coronavirus vaccines become widely available, we believe some issuers will revert to more aggressive financial policies.”
Norwegian Air was given additional creditor protection by a court in Norway yesterday on top of that granted by an Irish judge on Monday, allowing the cash-strapped airline’s restructuring efforts to continue, Reuters reported. “A supplementary reconstruction process under Norwegian law will be to the benefit of all parties and will increase the likelihood of a successful result,” Chief Executive Jacob Schram said. The company, which helped transform transatlantic travel, expanding the European budget airline business model to longer-haul destinations, has been forced to ground all but six of its 140 aircraft amid the COVID-19 pandemic. If successful in convincing creditors and owners of its future potential, Norwegian could, with the help of the courts, emerge as a smaller but more efficient carrier with fewer aircraft, less debt and more equity. The airline, which has said it could run out of cash by the end of the first quarter of next year, aims to complete the debt restructuring by Feb. 26.
The U.S. Small Business Administration opposes Astria Health’s bankruptcy plan, saying $2.7 million in Paycheck Protection Program loans it received in June should be considered a high-ranking claim in its reorganization, WSJ Pro Bankruptcy reported. The SBA said that Astria is claiming that the loans needn’t be repaid. “While a PPP loan may be forgivable under certain circumstances, it is nevertheless a loan, not a grant,” the SBA said on Friday in a filing in U.S. Bankruptcy Court in Yakima, Wash. The Sunnyside, Wash.-based nonprofit health system, which filed for chapter 11 last year, will seek approval of its bankruptcy plan in mid-December. Congress passed the Coronavirus Aid, Relief and Economic Security Act, or Cares Act, in response to the economic devastation caused by the coronavirus pandemic. Its programs include PPP loans. The SBA’s PPP application says that bankrupt companies aren’t eligible for the loans, causing banks to deny their requests. But some legal experts, affected companies and at least two federal judges have said nothing in the Cares Act indicates Congress meant to withhold stimulus funds from troubled companies that have turned to bankruptcy. Some businesses have sued the SBA over the matter. Astria sued the SBA in May and sought a temporary restraining order, asking the court to require the federal agency to consider its PPP application despite the business being in bankruptcy. The SBA opposed the motion. The court in June granted Astria’s motion and a preliminary injunction, and shortly thereafter Astria received the PPP loans. The SBA has appealed.
Almost a week after Democratic congressional leaders climbed down from their demand for a multi-trillion dollar stimulus package, Senate Majority Leader Mitch McConnell (R-Ky.) continued to tout his own plan, endangering prospects for a compromise, Bloomberg News reported. McConnell’s top priority — federal limits on COVID-19 related lawsuits against businesses — has emerged as the key potential deal-breaker. Republicans have balked at the six-month moratorium proposed in a bipartisan stimulus package, saying it’s too limited, and talks have stalled. McConnell’s continued use of rhetoric that pre-dates the shift by House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer on the overall dollar amount of aid underscored the risk of no further COVID-19 help by year-end. Senators from both sides of the aisle concluded that the prospects for a $908 billion compromise that Republican and Democratic negotiators are hashing out will come down to McConnell’s decision. Several GOP members have endorsed or been open to the plan, and top White House economic adviser Larry Kudlow said President Donald Trump would likely sign it. The Republican and Democratic negotiators continued to butt heads over aid for states and localities as well as the coronavirus liability protection for businesses. “Those are coupled together,” said GOP Senator John Cornyn of Texas, who couldn’t predict whether the relief package will be enacted. “There’s either going to be none for both of those, or both of those that are going to be provided for. My hope is we’ll do both.” Republicans have blasted state assistance as a bailout for mainly Democratic areas, while Democrats have refused to give employers a shield from lawsuits over poor protection against the spread of COVID-19. Time is running ever shorter on getting a deal, which Senator John Thune, the No. 2 Republican in that chamber, said yesterday would be attached to either a stopgap federal spending bill or omnibus appropriations legislation that funds the government into 2021. Read more.
In related news, Congress will vote this week on a one-week stopgap funding bill to provide time for lawmakers to reach a deal in talks aimed at delivering COVID-19 relief and an overarching spending bill to avoid a government shutdown, Reuters reported. Lawmakers in the Republican-led Senate and Democratic-run House of Representatives need to enact a funding measure by Friday, when current funding for federal agencies is set to expire. House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell hope to attach long-awaited COVID-19 relief to a broad $1.4 trillion spending bill. But with those negotiations yet to produce agreement, McConnell and House Majority Leader Steny Hoyer said separately yesterday that both chambers would vote this week on a measure to allow an additional week of talks. “I am disappointed that we have not yet reached agreement on government funding. The House will vote on Wednesday on a one-week CR to keep government open while negotiations continue,” House Majority Leader Steny Hoyer, the chamber’s No. 2 Democrat, said in a tweet. McConnell did not specify when the Senate would take up the measure. Read more.
Superior Energy Services Inc. filed for bankruptcy yesterday with a plan to eliminate almost all of its debt, WSJ Pro Bankruptcy reported. The Houston-based company, which rents and sells equipment used in oil and gas drilling, filed for chapter 11 reorganization in the U.S. Bankruptcy Court in Houston with a fast-track plan to cut the debt and hand over ownership to its bondholders. Superior expects to emerge from bankruptcy in early 2021, Chief Executive David Dunlap said. The company will ask the bankruptcy court to confirm its reorganization plan by Jan. 25, court filings show. The company has a pre-packaged restructuring plan that has been agreed to by holders of about 85 percent of the company’s $1.3 billion of senior unsecured notes, according to court papers filed by Chief Financial Officer Westervelt Ballard Jr. Superior, which has operations spanning the Asia-Pacific region, Africa, Europe and the Middle East, kept most of its businesses outside the U.S. out of bankruptcy, court filings show. Superior also has lined up a loan commitment of as much as $200 million to finance the company once it exits bankruptcy from parties including some of its note holders, according to the filings.
Millions of Americans who lost their jobs during the pandemic have fallen thousands of dollars behind on rent and utility bills, a warning sign that people are running out of money for basic needs, the Washington Post reported. Nearly 12 million renters will owe an average of $5,850 in back rent and utilities by January, Moody’s Analytics warns. Last month, 9 million renters said they were behind on rent, according to a Census Bureau survey. Economists say that the data underscores the deepening financial disaster for many families as the pandemic continues to shut off work opportunities, lending new urgency to negotiations over a second round of stimulus that could reinstate federal unemployment insurance and rental assistance, among other forms of aid. The stakes are high for some 20 million Americans receiving some kind of unemployment aid, who have seen weekly checks dwindle since August, making it harder to pay bills. About 12 million unemployed are slated to have their benefits cut off entirely at the end of the year unless lawmakers act before then.
After showing signs of momentum, consumer borrowing slowed in October, according to Federal Reserve data released yesterday, MarketWatch.com reported. Total consumer credit increased $7.2 billion. That’s an annual growth rate of 2.1 percent. This was down from a $15 billion gain in September. Economists had been expecting the strength in September to continue and had penciled in a $17 billion increase, according to Econoday. Revolving credit, like credit cards, fell 6.7 percent in October after a 3.2 percent jump in the prior month, which was the first gain in the category since the pandemic struck in March. Nonrevolving credit, typically auto and student loans, rose at a 4.8 percent rate after a 4.7 percent rate in September. Separate data from the New York Fed found that credit-card balances fell by $10 billion in the third quarter after a record $76 billion decline in the second quarter. The data does not include mortgage loans, which is the largest component of household debt. Mortgage originations came in at $ 1 trillion in the third quarter, the second largest quarterly increase on record, the New York Fed said.
