%1

Boutique women’s clothing chain Francesca’s Holdings Corp. filed for bankruptcy after the coronavirus pandemic accelerated its sales drop, Bloomberg News reported. The Houston-based company sought chapter 11 protection in U.S. Bankruptcy Court in Delaware with plans to sell the business, according to a statement. TerraMar Capital LLC or an affiliate has agreed to become the stalking-horse bidder in a bankruptcy auction, and Francesca’s existing lender, Tiger Finance LLC, has committed to provide $25 million of debtor-in-possession financing, the retailer said. “Implementing this process allows Francesca’s to address our lease obligations and seek a new investor that can see Francesca’s into the future,” Andrew Clarke, chief executive officer, said in the statement. Other potential bidders are studying the company, the chain added, with a target of Jan. 20 for completing a sale. The chain temporarily closed all of its stores in March and began reopening them in April, the company said in its first-quarter earnings call. But net sales fell 50% in the first quarter, raising doubt about its ability to survive. The company recently said in a filing that it plans to shutter about 140 of its 700 stores and added yesterday that more closings might be necessary. Some 558 stores remain open, the company said. The first store opened in Houston in 1999, touting its frequently changing inventory. Its stores in malls and on main streets cater to 18- to 35-year-old shoppers, featuring apparel, accessories and gifts.

AMC Entertainment Holdings Inc., the world’s largest movie theater chain, has launched efforts to sell more than $700 million worth of stock while warning that failing to raise enough liquidity might force the company into bankruptcy, WSJ Pro Bankruptcy reported. The equity sale could help AMC avoid a debt default, if the company can generate enough dollars to last it until widespread vaccination against COVID-19 helps bring moviegoers back into theaters, AMC Chief Executive Adam Aron said yesterday. If AMC can’t obtain the liquidity needed to stay afloat until movie attendance gets back to normal, the company would likely need to restructure its balance sheet, potentially causing a “total loss” of stockholders’ investment, according to a securities filing Thursday. Equity ranks below debt in priority and often gets wiped out in a bankruptcy restructuring. AMC is aiming to sell up to 200 million shares, or more than $700 million, based on the $3.58 stock price yesterday. The company previously proposed stock sales in September and November, filing two separate shelf registrations to sell 30 million and 20 million shares, respectively. Despite reopening the bulk of the company’s more than 1,000 cinemas world-wide, AMC is burning cash as capacity restrictions limit movie attendance and major Hollywood theaters delay big-ticket flicks or, increasingly, send them straight to streaming. AT&T Inc.’s Warner Bros. studio pushed back the release of “Wonder Woman 1984” until Christmas, while MGM Holdings Inc. has delayed the release of “No Time to Die,” a James Bond film, to April 2021.

The U.S. passenger and cargo airline industry saw total employment fall by nearly 29,000 workers through the month ending in mid-October as government restrictions on laying off staff expired, Reuters reported. The U.S. Transportation Department said U.S. airlines employed 673,278 workers in mid-October, which was 81,749 fewer than in March when U.S. travel demand started falling dramatically due to the coronavirus pandemic. The department said that since March, United Airlines had reduced its workforce by 32 percent, or 29,243 employees, while Delta Air Lines eliminated 32 percent of its jobs, affecting 28,751 employees. In October, American Airlines and United Airlines said they were furloughing more than 32,000 workers after the prior $25 billion payroll assistance program expired on Sept. 30. The U.S. airline industry is still losing billions of dollars a month as travel demand remains down more than 60 percent and recent coronavirus travel advisories have discouraged holiday travel.

A growing number of junk-rated corporations including Delta Air Lines Inc. and Royal Caribbean Cruises Ltd. are losing money even before they pay interest and other necessary expenses like taxes, Bloomberg News reported. They’re covering those costs with cash they still have and with more borrowing in the bond and loan markets, where investors are willing to bet that companies will recover relatively fast after COVID-19 vaccines arrive. In the latest quarter, the number of junk-rated corporations that borrow in U.S. dollars and lost money before paying interest and other required expenses, known as having negative Ebitda, reached an eye-popping 47, according to a Bloomberg Intelligence analysis. That’s nearly double the level in the second quarter, out of a universe of about 600 borrowers. These companies are doing worse than many other zombies, or corporations that have losses after covering interest expenses. In this case, the businesses are losing money even before servicing their debt. If they don’t turn themselves around, some could be part of another wave of bankruptcies next year. For now, the Federal Reserve is helping these companies float along by keeping interest rates near zero and forcing investors that want decent returns to consider financing struggling businesses. But money managers won’t be willing to lend to weak corporations forever. Companies are trying to just hang on until life returns to normal.

Southwest Airlines Co. dramatically expanded its furlough warnings, telling employees that 6,828 jobs are at risk as the company and its labor unions have failed so far to agree on how to cut $500 million in costs, Bloomberg News reported. Pilots, flight attendants, baggage handlers and other workers got notices yesterday that they may be furloughed, Southwest said. The new warnings boosts the number of people at risk of being cut between January and April 1 to 7,273, or nearly 13 percent of the workforce. Southwest’s inability to secure a 10 percent reduction in 2021 spending for each work group means the company is on the brink of its first involuntary job cuts in its 49-year history. With the coronavirus pandemic keeping travel demand at about 40 percent of last year’s levels, the airline says it has 20 percent more employees than it needs -- at an expected cost next year of $1 billion. “We are willing to continue negotiations quickly to preserve jobs if we can achieve the support that allows Southwest to combat the ongoing economic challenges,” said Russell McCrady, Southwest vice president of labor relations. The latest notices were the third batch in four weeks that Southwest has sent warning of potential layoffs. The earlier letters went to 445 mechanics, employees who manage parts inventory, technicians who clean aircraft and other workers. Talks began in October, with the goal of securing agreements by the end of that month. The carrier earlier reached deals with two small work groups.

House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) on Wednesday threw their support behind using a bipartisan, compromise plan as the basis for COVID-19 relief talks, The Hill reported. “While we made a new offer to Leader McConnell and Leader McCarthy on Monday, in the spirit of compromise we believe the bipartisan framework introduced by Senators yesterday should be used as the basis for immediate bipartisan, bicameral negotiations,” the Democratic leaders said in a joint statement, referring to Senate Majority Leader Mitch McConnell (R-Ky.) and House Minority Leader Kevin McCarthy (R-Calif.). Prior to November’s election, Pelosi turned down a $1.8 trillion offer from Treasury Secretary Steven Mnuchin, who was negotiating on behalf of the Trump administration, citing major differences on policy details. McConnell has insisted on a “targeted,” $500 billion approach. The stakes for passing a relief bill during the lame-duck session are monumental. Two crucial unemployment programs are set to expire on Dec. 31, which would leave an estimated 12 million people with no income during the worst phase of the pandemic so far. The move to put a $908 billion compromise bill at the center of talks is a significant retreat from the $2.2 trillion HEROES Act that Democrats have been pushing in recent months, and will add pressure on McConnell to respond in kind. Other key programs, such as $600 in supplemental unemployment insurance and a forgivable loan program for small businesses called the Paycheck Protection Program (PPP) expired in the summer. While McConnell has repeatedly spoken of the need for relief, he said yesterday that he was sticking to his plan with the backing of the White House. Read more. 

In related news, U.S. Treasury Secretary Steven Mnuchin said on Wednesday he backs another $20 billion in additional government payroll support for U.S. airlines, Reuters reported. “I think that would be very meaningful in terms of employment and saving the industry,” Mnuchin said at a House hearing. A bipartisan proposal released Tuesday called for $17 billion in payroll support for airlines to extend the program for four months. In October, American Airlines and United Airlines furloughed more than 32,000 workers after a prior $25 billion payroll assistance program expired. Airlines spent months seeking a new bailout and have won overwhelming support in the U.S. Congress, but lawmakers have been reluctant to support airlines, while other transportation modes like transit, buses, and rail railroad Amtrak are also seeking emergency aid. The Treasury separately offered $25 billion in loans to airlines; to date it has approved more than $21 billion in loans, including $7.5 billion for both American and United. Mnuchin also said that he backed aid for the struggling private motorcoach industry. The bipartisan proposal released on Tuesday would extend $8 billion to bus companies. Read more.