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A U.S. judge yesterday approved a deal to rescue J.C. Penney Co Inc. from bankruptcy proceedings precipitated by the coronavirus pandemic, averting a liquidation that would have put the beleaguered department store chain out of business and jeopardized tens of thousands of jobs, Reuters reported. The U.S. Bankruptcy Court for the Southern District of Texas approved the deal, which will allow the 118-year-old retailer to emerge from bankruptcy before the upcoming holiday season, the company said in a statement. The rescue deal is expected to save approximately 60,000 jobs. The transaction contains multiple parts. Lenders led by H/2 Capital Partners will forgive $1 billion in debt in exchange for 160 properties and six distribution centers. Mall operators Simon Property Group and Brookfield Property Partners will acquire the company’s slimmed-down retail operations for $1.75 billion in cash and debt. The sale approval comes a week after J.C. Penney’s lawyers announced a settlement with nearly all of its creditor groups that locked in support for the sale and marked a turning point in a bankruptcy case that has been marked by inter-lender fighting. However, a group of equity holders — whose investments will be wiped out — remained opposed to the deal.

A political fight is brewing over whether to extend critical programs that the Federal Reserve rolled out to help keep credit flowing to companies and municipalities amid the pandemic-induced recession, the New York Times reported. The dispute has the potential to roil financial markets, which have calmed significantly since the Fed announced in March and April that it would set up backstops in response to market turmoil spurred by the coronavirus pandemic. Those programs expire on Dec. 31, and it is unclear whether the Trump administration will agree to extend them. The Federal Reserve chair, Jerome H. Powell, and Treasury secretary, Steven Mnuchin, must together decide whether they will continue the programs — including one that buys state and local bonds, another purchasing corporate debt and another that makes loans to small and medium-size businesses. The officials will probably make that decision by early to mid-December, according to a senior Treasury Department official. The Fed might be inclined to keep the efforts going, but Mnuchin, whose Treasury Department provides the funding backing up the programs, has signaled that he would favor ending the one that buys municipal bonds. And he is under growing pressure from Republicans to allow all five of the Treasury-backed programs to sunset. Sen. Patrick J. Toomey (R-Pa.), who could soon lead the Senate Banking Committee, is arguing that the Fed and Treasury do not have the legal authority to extend new loans or buy new securities beyond this year without congressional approval. While that view is disputed by legal experts, Toomey also believes it was Congress’s intent for the relief programs to end on Dec. 31. The programs’s expiration could come at exactly the wrong moment, as the U.S. faces an expected surge in coronavirus cases this winter and as fiscal stimulus measures that Congress passed in the spring fade. While lawmakers have toyed with passing a new relief bill before next year during the lame-duck session of Congress, President Trump’s election loss makes the outcome highly uncertain. “Cliffing the programs at year-end would be ill advised, opening markets up to a year-end disruption,” said Scott Minerd, the global chief investment officer at Guggenheim Partners, who expects the programs to be extended. Mnuchin has made clear in responses to congressional questioning that he does not favor extending the municipal bond program. While Mnuchin’s comment was specific to that effort, a senior Treasury official laid out reasons for allowing the others to end, mainly centered on a belief that the worst of the economic crisis has passed and the programs should not be a replacement for support from Congress.

The U.S. may still face a wave of debt defaults and “significant declines” in asset prices because of the coronavirus pandemic and recession, the Federal Reserve warned yesterday, in a stark reminder that the economy is far from out of the woods, Reuters reported. “As many households continue to struggle, loan defaults may rise, leading to material losses” for lenders, the Fed said in its latest biannual Financial Stability Report. Business debt “has risen sharply as businesses increased borrowing to weather the period of weak earnings. The general decline in revenues associated with the severe reduction in economic activity has weakened the ability of businesses to services these obligations.” Asset prices “remain vulnerable to significant declines should investor risk sentiment fall or the economic recovery weaken.”

Creditors who lost money on Loot Crate Inc. say venture-capital investors used hardball tactics, such as acting out scripted confrontations, to tighten their grip on the company, making moves that eventually pushed it into bankruptcy, according to court documents, WSJ Pro Bankruptcy reported. Loot Crate, which markets itself as a subscription service for “gamers and nerds,” filed for chapter 11 last year. A lawsuit filed by the Loot Crate creditors in bankruptcy court last week contains excerpts of emails involving executives at investors Upfront Ventures and Breakwater Management LP. The suit alleges the venture-capital firms used a playbook they created, as well as acting advice from a law firm, to use during boardroom negotiations with Loot Crate management. The investment firms also threatened to pressure Loot Crate co-founder Christopher Davis through his father, a Fortune 500 executive, according to an email cited in the lawsuit. Loot Crate raised $18.5 million in 2016 from investors including Upfront, Breakwater and Robert Downey Jr.’s venture-capital firm, Downey Ventures, which isn’t named in the complaint. Loot Crate owed more than $50 million to creditors when it filed for bankruptcy. A committee of unsecured creditors, including Major League Baseball, is seeking compensation of at least $10 million for the loss of value surrounding Loot Crate.

Gym chain YouFit Health Clubs LLC filed for bankruptcy yesterday, joining a growing list of fitness peers forced to seek court protection from creditors amid the pandemic, Bloomberg News reported. The chapter 11 filing in Delaware allows YouFit to continue operating while it works out a plan to repay creditors. YouFit’s petition listed assets of no more than $100 million and separate court papers show debt of about $110 million. YouFit has a tentative deal to sell itself to lenders for $75 million, court papers show. Payment would come in the form of debt forgiveness. Consumers were forced to stay away from communal gyms as the COVID-19 pandemic spread across the globe this year, leaving chains like 24 Hour Fitness Worldwide Inc. and Gold’s Gym International Inc. without customers. Many U.S. states have now allowed gyms to reopen, but with restrictions on capacity. “As it did for many industries, including other health clubs, the pandemic hit Youfit hard, and we have made the decision to restructure the company through a bankruptcy filing as a way to continue operating and providing an uplifting fitness experience to our loyal members,” YouFit spokesperson Evan Nierman said. The chain’s gyms have reopened in recent months with “stringent safety protocols,” he said. YouFit has some 85 locations in the U.S., many of which are located in Florida, according to its website. YouFit was founded in St. Petersburg, Fla. in 2008 and remains headquartered in the state. Bank of America Corp. is listed as the biggest unsecured creditor at $10 million. YouFit hired Greenberg Traurig as bankruptcy counsel, FocalPoint Securities LLC as investment banker and Hilco Real Estate LLC as real estate adviser, according to its petition.

The U.S. subsidiary of Italian luxury-goods company Furla SpA has filed for bankruptcy due to the impact of the COVID-19 pandemic on its brick-and-mortar and wholesale businesses, the Wall Street Journal reported. Furla (USA) Inc. filed for chapter 11 protection on Friday in the U.S. Bankruptcy Court in New York, planning to use the process to get rid of leases and debt, while focusing on a reorganization strategy of investing in e-commerce and wholesale. The Furla brand was created by the Furlanetto family in 1927. The Bologna, Italy-based parent company manufactures and sells products including bags, wallets, belts, scarves, jewelry, glasses, shoes and other accessories. With its financial troubles, New York-based Furla USA joins other well known brands and retailers — including some of its own wholesale customers, such as department-store operator Neiman Marcus Group Ltd. and off-price retailer Century 21 Department Stores LLC — that have gone out of business or filed for bankruptcy as a result of the coronavirus. Furla USA’s filing comes after revenue fell 67 percent in the first three quarters of this year compared with the same period in 2019. The wholesale business throughout the U.S., Central America and South America has also seen a significant reduction in revenue as customers were subject to government-mandated shutdowns.

Nurses, lab workers and radiology staffers at Calais Regional Hospital plan to go on strike for two days next week, ratcheting up an ongoing labor dispute that included a recent call for the hospital’s CEO to be fired and raising new concerns about what they said has been a poor response to a coronavirus outbreak that recently infected six of their colleagues, the Bangor Daily News reported. The strike will take place next week on Wednesday and Thursday, according to a written notice that Maine State Nurses’ Association, the union representing the workers, provided to the hospital on Friday. The staff members would return to their jobs on Friday morning, Nov. 20, for shifts starting at 7 a.m. The union has about 50 members at the Calais hospital, including registered nurses, medical laboratory scientists, laboratory technologists and radiology technologists. The hospital said that it has a plan to keep operating if the union proceeds with the strike, relying on non-union staff who could be temporarily reassigned to different roles and one temporary worker. But the facility may have to delay some non-essential services, including testing for COVID-19 and elective procedures, according to the statement. In addition to providing testing and treatment in response to the COVID-19 cases now spreading through the community, the hospital also contended with serious cash shortfalls during the early days of the pandemic, when it had to postpone a number of nonessential services. At one point, it said it would lay off 10 percent of its staff and, without additional financial assistance, might have to close in the early summer.

Mexican carrier Grupo Aeromexico will continue to reactivate travel destinations throughout next year, an executive told Reuters yesterday, adding that there is still much uncertainty stemming from the coronavirus pandemic. The country’s largest carrier filed for chapter 11 bankruptcy protection in a U.S. court earlier this year and has since tried to shore up its finances. “We’ll continue to reactivate but a lot will depend on possible resurgences of the virus as well as on the vaccine,” Giancarlo Mulinelli, the carrier’s vice president of global sales, said in an interview. Mulinelli forecast that the industry, one of the worst-hit by the coronavirus pandemic, would probably not make a full recovery before 2022. Read more.

With the COVID-19 pandemic grinding international travel to a halt, experts on an online panel at ABI’s International Insolvency Forum set for Nov. 18-20 will provide their insights into distressed non-U.S. airlines filing for chapter 11 protection, and how their cases may differ from domestic carriers. Click here to register.