J.C. Penney is almost at the end of its bankruptcy after getting a verbal confirmation Tuesday of its plan from Bankruptcy Judge David Jones, the Dallas Morning News reported. That plan of reorganization includes the sale of the retail company to landlords Simon and Brookfield and a big chunk of its real estate to lenders to pay down debt. The pending transaction includes a complex document for the transfer of 160 stores and six distribution centers to Penney’s lenders. Penney’s shareholders continued to object to the plan’s treatment of their rights to future claims, their lawyer Mathew Okin said at the hearing. In response, Judge Jones granted shareholders pre-petition claim status, giving them future rights if they pursue a legal case. The judge deemed himself the gatekeeper of that status but noted that any shareholder claims would be dwarfed by creditors who have agreed to the plan of reorganization. Penney’s shareholders are holding stock with no value but haven’t accepted that the bankruptcy plan has canceled their equity. Judge Jones had allowed them to form an ad hoc equity committee and approved funds to pay fees for financial and legal assistance.
California Pizza Kitchen says that it has emerged from chapter 11 protection with $220 million less in debt and no lending obligations coming due in the near term, Restaurant Business reported. Earlier disclosures by the casual-dining chain indicate that the court-approved plan of reorganization leaves the brand with $177 million in borrowed capital for expansion and sharpening the chain’s focus on what it calls a “Cali health” menu. The new bill of fare includes such items as a BBQ Don’t Call Me Chicken Pizza, a meatless riff on its signature barbecue-chicken pie. The new version features a plant-based protein analog in place of chicken. The company retired its debt by swapping equity for what it owed lenders. Those former creditors now own substantially all of the operation, California Pizza Kitchen said. The operation had tried to sell itself via an auction last month, but no bidders came forward. The company filed for bankruptcy protection at the end of July, citing the impact of the pandemic. Sales had been sliding for at least two years beforehand, according to the researcher Technomic. CPK currently operates or holds the franchise rights to 240 restaurants in 10 countries.
There is widespread agreement that the $1.8-trillion economic recovery package that went into effect in March — the CARES Act — averted economic disaster after the coronavirus pandemic began, according to a Bloomberg commentary. With each passing month, the evidence mounts that the CARES Act performed better than even its strongest advocates thought it would. Perversely, its success is undermining the perceived need for Congress to provide additional support, according to the commentary. There are signs that the cushion is losing air. The pace of monthly job gains has slowed considerably since the spring. This fall, consumers pulled back on spending, and their confidence in the economy fell in November to a three-month low. The savings rate has fallen by 20 percentage points as households burn through their reserves. Lines at food banks are growing as nutritional insecurity worsens. If Congress does not pass another stimulus, then the first quarter of 2021 could easily see a shrinking economy and increasing unemployment. Deeper problems could take root. Millions of businesses could be wastefully lost. Labor demand could weaken over the medium term, keeping unemployment higher for longer. Read more.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
Canada’s Cirque du Soleil Entertainment Group said yesterday that it had emerged from bankruptcy, after the COVID-19 pandemic forced the famed circus operator to cancel shows and lay off artists earlier this year, Reuters reported. The once high-flying Cirque, which grew from a troupe of street performers in the 1980s to a company with global reach, has slashed about 95 percent of its workforce and suspended shows due to the pandemic. It had filed for bankruptcy protection in June and reached a new purchase agreement with secured lenders shortly after. A group of creditors, led by Catalyst Capital Group, had bid to take control of the Montreal-based circus group in July, replacing a deal with Cirque shareholders that included debt financing from a Quebec government body. As a part of the deal with its creditors, Cirque said it would add the former chief executive officer of MGM Resorts Jim Murren and Gabriel de Alba, a partner at Catalyst Capital Group, to its board.
Two banks failed in October, the first to collapse since the start of the coronavirus pandemic. Banking experts say they won't be the last, USA Today reported. At least 50 of the country's more than 5,000 banks are considered troubled, according to Bauer Financial, a company in Coral Gables, Fla., that tracks the health of financial institutions. That means they have high levels of nonperforming loans and not enough capital set aside to protect them if more of their loans go bad or if the economy gets any worse. The most troubled banks have high levels of bad loans and other assets compared with their total capital on hand, a measure known as a "Texas Ratio" and one of the most important indicators used by analysts to determine a bank's long-term viability. From vacant storefronts and office buildings to renters' inability to pay rent due to financial hardship, he sees the pandemic taking a much greater toll on the economy — one that will result in far more foreclosures, bankruptcies and bank failures than many think. "We're gearing up for what could be close to a 2008 housing crisis," said Jason Vanslette, a mortgage foreclosure specialist and partner at Kelley Kronenberg law firm. "And commercial loans, my God. There's going to be a massive amount of defaults on commercial properties." Besides being tiny, the two banks that failed in October have little in common. First City Bank of Florida in Fort Walton Beach, with its $135 million in assets, had been struggling with problem loans since the last recession. Having to set aside additional capital for loan loss provisions to deal with COVID-19 related problems simply pushed it over the edge. Almena State Bank, with $70 million in assets, was different. The Kansas bank got hit hard by bad agricultural loans made during the past few years of falling commodity prices brought on by robust harvests and the US-China trade war. Of the 10 banks considered most troubled by Bauer Financial, six have similar stories to that of First City. They have been weighted down by loan problems for more than 10 years. The other four are more like Almena — impacted by the flagging economy in farm states, where agricultural loan delinquencies hit an eight-year high in March and repayment rates have continued declining until this summer, according to the Federal Reserve of Kansas City. Two of the most troubled banks were also upended by fraud on the part of their chief executive officers.
Treasury secretaries who served under both Democratic and Republican administrations are calling on Congress to urgently pass a COVID-19 relief bill, The Hill reported. “Our nation’s leaders should act on another round of fiscal relief now,” the former officials wrote in a letter organized by the Aspen Institute's Economic Strategy Group and signed by a bipartisan group of dozens of economists. “Our country and economy cannot wait until 2021,” they added. Signatories included former Treasury secretaries Henry Paulson, who served during the George W. Bush administration, Timothy Geithner, who served under former President Obama, and Larry Summers, who served during the Clinton administration. Others who signed the letter included Republicans like former Congressional Budget Office Director Douglas Holtz-Eakin, former Indiana Gov. Mitch Daniels, and Democrats like Obama economic advisers Jason Furman and Austan Gooldsbee. Congressional efforts to agree on a new COVID-19 relief bill have been stalled for months. Republican leaders have been pushing for a $500 billion package, while Democrats want a much larger bill, north of $2 trillion. The letter said the bill's first priority should be to fund public health efforts to fight the coronavirus. But the economists also pointed to enhanced unemployment benefits, food security programs and protections for people facing evictions. They also endorsed aid to state and local governments, which are facing significant budget shortfalls, and financial support for small businesses.
Recent coronavirus case spikes, new lockdowns and the expectation of minimal family outings during the holidays has turned a year of bad news for the country’s cinemas into an outlook that’s simply bleak, Bloomberg News reported. In early October, when Regal Cinemas shuttered all 500-plus locations nationwide, that darkened more than 7,000 screens alone. The industry has already seen a cinema cull in the U.S., per the National Association of Theatre Owners, with the number of movie theaters shrinking from around 7,200 in 1996 to roughly 5,500 as of late 2019. But that may just be a preview. John Fithian, head of the National Association of Theatre Owners, told Variety that unless Congress passes the Save Our Stages Act, a bipartisan push to support concert venues and theaters that have seen their businesses decimated by Covid, “probably around 70% of our mid- and small-sized members will either confront bankruptcy reorganization or the likelihood of going out of business entirely by sometime in January.” In past economic downturns, theater owners tried stunts like “dish nights” — giving away different pieces of a table setting, such as a saucer or salad plate, to lure Great Depression patrons. That probably won’t work this time, leaving a lot of moviegoing real estate in need of a reboot. There’s a long tradition of adaptive reuse when it comes to the older generation of neighborhood moviehouses, many of which died off in the second half of the 20th century as new suburban multiplexes appeared. These smaller facilities often see a second life as community theaters, churches, gyms and bookstores. But modern multiplexes can be poor candidates for adaptive reuse, theater owners and real-estate experts told the Wall Street Journal, because of their sloped floors and subdivided spaces. That’s especially true at a time when the malls they are often attached to are struggling reinvent themselves. Closed theaters may fare better on the real estate market as available land in need of a demolition; a shuttered Regal Theater in North Charleston, S.C., for example, was simply demolished, with plans to build an apartment building in its place. Some developers do see sequel potential in modern movie theaters, though. Last year, PMB, a development firm focused on the medical field, turned a 1980’s multiplex in Goodyear, Arizona, into a collection of medical offices. And Walter Crutchfield, co-founder and partner of the Arizona development firm Vintage Partners, turned a Flagstaff movie theater into perhaps the country’s most creative department of motor vehicles.
The Small Business Administration has begun asking some Paycheck Protection Program borrowers to document why they needed the loans, drawing concern from advocacy and trade groups that say such disclosures weren’t required when the businesses applied for aid, the Wall Street Journal reported. The Loan Necessity questionnaire is aimed at borrowers that took loans of $2 million or more under PPP, the federal government’s main coronavirus-aid initiative for small businesses. It directs them to answer questions about business activity and liquidity. The form says the questions will help the SBA evaluate a certification borrowers made when they applied for aid. The certification stated that economic uncertainty made the loan request necessary to support business operations. But the loan application didn’t specify what the SBA meant by “economic uncertainty” or how borrowers would demonstrate their need, according to Mike Kennedy, general counsel at the Associated General Contractors of America, a trade group.
Advisers to President-elect Joseph R. Biden Jr. are planning for the increasing likelihood that the U.S. economy is headed for a “double-dip” recession early next year. They are pushing for Democratic leaders in Congress to reach a quick stimulus deal with Senate Republicans, even if it falls short of the larger package Democrats have been seeking, the New York Times reported. Until now, Biden, Speaker Nancy Pelosi (D-Calif.) and Sen. Chuck Schumer (D-N.Y.) have insisted that Republicans agree to a spending bill of $2 trillion or more, while Senate Majority Leader Mitch McConnell (R-Ky.) wants a much smaller package. The resulting impasse has threatened to delay additional economic aid until after Biden’s inauguration on Jan. 20. Many of the president-elect’s advisers have become convinced that deteriorating economic conditions from the renewed surge in COVID-19 infections and the looming threat of millions of Americans losing jobless benefits in December amid a wave of evictions and foreclosures require more urgent action before year’s end. That could mean moving at least part of the way toward McConnell’s offer of a $500 billion package. But top Democrats remain publicly adamant that Republicans need to move closer to their opening offer of $2.4 trillion. Biden, Pelosi and Schumer have given no public indication of how much they are willing to scale back their ambitions in order to reach a deal with McConnell, arguing that the Republican leader has not been willing to compromise.
A slew of expiring emergency programs are setting up an economic “COVID cliff” come 2021, which could see millions of people lose unemployment insurance and get evictions, while a growing wave of small businesses close shop, The Hill reported. March's CARES Act set up myriad programs to give people economic relief in the earliest days of the COVID-19 pandemic, many of which are set to expire on Dec. 31. Unless a divided Congress can reach a deal to extend the programs, the country's economic suffering could skyrocket. Come New Years, one program that extended traditional unemployment benefits from the standard 26 weeks by another 13 weeks, and another program that made self-employed and gig economy workers eligible, will expire. At the same time, provisions meant to shore up tax benefits for low-income earners, such as the Earned Income Tax Credit and Child Credit, are scheduled to go up in smoke, potentially pulling money out of the paychecks of the poorest people who are still working. On top of it all, an evictions moratorium from the CDC is set to expire, teeing up a wave of evictions and homelessness. “We know that eviction filings have been able to continue during this period even with maraotira in place, so certainly the cases are there and ready to be processed and adjudicated,” said Samantha Batko, an expert on housing insecurity at the Urban Institute. The most recent data from the Census Household Pulse Survey, covering the last days of October and early November, painted a grim picture. Nearly a third of all households (32.9 percent) said they were behind on housing payments and rated the chances of eviction or foreclosure within two months as somewhat or very likely. Some 25.9 percent expected a household earner to lose employer income in the coming month, and 12 percent said they didn’t have enough to eat. An analysis by Stout found that absent a moratorium, as many as 6.4 million evictions filed in recent months could take effect on Jan. 1.
