Hertz Global Holdings Inc. soon plans to line up a $4 billion financing package to refresh its vehicle fleet, on top of a $1.65 billion loan to carry itself through bankruptcy, WSJ Pro Bankruptcy reported. The rental-car company, which filed for chapter 11 in May, received permission from the U.S. Bankruptcy Court in Wilmington, Del., on Thursday to begin tapping a $1.65 billion loan to help it operate through 2021. Some of that money could be used to buy cars, with the rest earmarked for other corporate purposes. Hertz has been liquidating parts of its fleet, cutting the number of vehicles it leases from banks and bondholders to adapt to slumping demand during the coronavirus pandemic. But the company is also in the market for new models as aging vehicles are sold off. During a court hearing Thursday, Hertz lawyer Tom Lauria said, “We need to start ordering new vehicles.” The $1.65 billion bankruptcy loan will help, but Hertz needs more financing from asset-backed securities, Lauria said. Hertz hopes to get commitments for the additional $4 billion in ABS financing in coming days, he said.
A senior-care facility outside Detroit filed for bankruptcy protection, blaming its default on $52 million in municipal-bond debt on coronavirus pandemic restrictions that curbed occupancy, WSJ Pro Bankruptcy reported. Henry Ford Village, which has more than 1,000 units and offers three levels of care, sought chapter 11 protection Wednesday hoping to find a financial sponsor or a strategic partner to put the facility on sound footing, according to court papers filed in the U.S. Bankruptcy Court in Detroit. Occupancy has fallen as the coronavirus spread, stressing Henry Ford Village to the breaking point. Some seniors who were living there have left to move in with family, fearful of the contagion that devastated some nursing homes in the early days of the pandemic, Chad Shandler, the facility’s chief restructuring officer, said in a declaration filed in court. The Dearborn, Mich., facility has been on strict lockdown since the start of the pandemic, preventing vacant units from being shown to prospective residents. In addition to debts to bondholders, Henry Ford Village has more than $110 million in liabilities to current and former residents, court papers said. As occupancy declines, Henry Ford Village has to set aside more money for refunding the entrance fees that seniors pay when they move in. Such refunds are the facility’s largest financial obligation, according to court papers. Nursing homes and other senior-care facilities nationwide have been subject to some of the most stringent social-distancing mandates to account for the particular danger posed to seniors living in close quarters. Only recently have some states eased rules against visitors. Read more.
In related news, just weeks after the first known coronavirus outbreak on U.S. soil at the outset of a looming pandemic, the woman responsible for helping to protect 1.3 million residents in America’s nursing homes laid out an urgent strategy to slow the spread of infection, the Washington Post reported. In the suburbs of Seattle, federal inspectors had found the Life Care Center of Kirkland failed to properly care for ailing patients or alert authorities to a growing number of respiratory infections. At least 146 other nursing homes across the country had confirmed coronavirus cases in late March when Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, vowed to help “keep what happened in Kirkland from happening again.” The federal agency and its state partners, Verma said, would conduct a series of newly strengthened inspections to ensure 15,400 Medicare-certified nursing homes were heeding long-standing regulations meant to prevent the spread of communicable diseases. It was another key component of a national effort, launched in early March, to shore up safety protocols for the country’s most fragile residents during an unprecedented health emergency. But the government inspectors deployed by CMS during the first six months of the crisis cleared nearly 8 in 10 nursing homes of any infection-control violations even as the deadliest pandemic to strike the United States in a century sickened and killed thousands, a Washington Post investigation found. Those cleared included homes with mounting coronavirus outbreaks before or during the inspections, as well as those that saw cases and deaths spiral upward after inspectors reported no violations had been found, in some cases multiple times. All told, homes that received a clean bill of health earlier this year had about 290,000 coronavirus cases and 43,000 deaths among residents and staff, state and federal data shows. Read more.
Schulte Roth & Zabel has filed suit against its New York landlord, seeking at least $10 million, becoming the latest firm to dispute its office rent obligations during the pandemic, the American Lawyer reported. Schulte is seeking rent abatement from its landlord at 919 Third Ave., an SL Green property in Midtown. The case is similar to Simpson Thacher & Bartlett and Jenner & Block’s litigation this year against their landlords. The law firm disputes have continued to percolate in the legal industry, as the pandemic and shutdown orders have forced firms to operate remotely. But the landlord’s attorney at Fried, Frank, Harris, Shriver & Jacobson strongly disputes Schulte’s argument — along with the broader argument made by other firms. “While this lawsuit is legally without merit, the attempt by Schulte Roth & Zabel and other well-heeled, white-shoe firms to take advantage of the pandemic and not live up to their financial commitments at a time when the vast majority of New Yorkers continue to meet their obligations poses a very serious threat to New York City and its economy,” said Janice Mac Avoy, a Fried Frank partner. Schulte, represented by Foley & Lardner, is suing Metropolitan 919 3rd Avenue LLC, as the successor to 919 Third Ave. Associates in Manhattan Supreme Court. Schulte said it has had an office at 919 Third Ave. since 2000. Schulte’s suit cites sections of the lease that point to “unavoidable delays” in occupying the space. Schulte argues the “lease is clear” that where the firm has been forced to vacate its offices “by laws or government mandates” in response to a national emergency for more than 15 business days, the firm is entitled to rent abatement while Schulte cannot occupy its offices “for the ordinary conduct of its business.”
Exxon Mobil Corp. said yesterday that it could cut its global workforce by about 15 percent, including deep white-collar staff reductions in the U.S., as the COVID-19 pandemic batters energy demand and prices, Reuters reported. Exxon and other oil producers have been slashing costs due to a collapse in oil demand and ill-timed bets on new projects. The top U.S. oil company earlier outlined more than $10 billion in budget cuts this year. “The impact of COVID-19 on the demand for Exxon Mobil’s products has increased the urgency of the ongoing efficiency work,” the company said. An estimated 14,000 employees globally, or 15 percent, could lose jobs, including contractors, spokesman Casey Norton said. The figure will include losses from restructurings, retirements and performance-based exits. Exxon had about 88,300 workers, including 13,300 contractors, at the end of last year.
The recovery in demand coupled with the retrenchment in the U.S. shale sector could lead to higher oil prices as soon as in the second half of 2021, according to one of the top bosses of the country’s largest pipeline company, Bloomberg News reported. “Given the combination of the record retrenchment in drilling and completion activities by U.S. producers, refocused capital allocation and the effects of steep decline curves resulting in a decrease in shale production, we believe this price signal for higher crude oil prices could occur as early as the second half of next year,” Jim Teague, co-chief executive officer of Enterprise Products Partners LP, said Wednesday in the company’s third-quarter earnings statement. “In the interim, we believe the midstream industry will be challenged in its producer-facing businesses,” he added. An historic crash in oil prices along with a glut of fracking after years of debt-fueled growth has triggered a crisis that’s driven some U.S. producers into bankruptcy and many others to slash capital spending as a way to preserve their balance sheets. That’s also prompted consolidation in the industry, with a series of takeovers involving shale producers announced over the past few months. As a result, American oil production is showing no immediate prospect of revisiting pre-pandemic highs. Houston-based Enterprise, whose web of pipelines stretches from Texas to Wyoming to New York, has cut planned growth spending by $1.5 billion for 2020 and 2021 in response to adverse conditions. Last month, it shelved plans to add 450,000 barrels a day of capacity to a system that carries oil from Texas’s Permian basin to the U.S. Gulf Coast.
Delta Air Lines Inc. and the union that represents its pilots have reached a preliminary cost-cutting deal that will prevent furloughs until Jan. 1, 2022, the union said yesterday, Reuters reported. Delta MEC, a unit of the Air Line Pilots Association, said that the agreement — which still needs approval from Delta’s nearly 13,000 pilots — will cut monthly minimum guaranteed hours by 5 percent. In September, Delta reached a tentative agreement with the negotiating committee of its pilots’ union to reduce the number of furloughs by 220, bringing the new total number of job reductions to 1,721. The airline industry has been hit hard by the coronavirus outbreak as travel has been restricted amid the pandemic, with Delta and other airlines focusing on cutting costs, boosting liquidity and restoring customer confidence.
Households likely boosted spending last month as incomes rose, forecasters say, another sign the U.S. economy continued recovering into the fall from the damage inflicted by the coronavirus pandemic, the Wall Street Journal reported. Economists expect the Commerce Department to report Friday that personal-consumption expenditures — a measure of household spending on goods and services — rose 1 percent in September, the same increase as in the previous month. Household spending has been rising after a steep drop off earlier in the pandemic, although the pace of gains slowed over the summer and into the fall. Personal income — a measure of what households receive from wages and salaries, government aid and investments — is expected to rise 0.5 percent in September, after a sharp decline in August. A moderate rebound in personal income would likely reflect the impact of a federal supplement to state unemployment benefits that provides recipients with an extra $300 a week, said Richard Moody, chief economist at Regions Financial Corp. The Commerce Department said August’s drop in personal income was due mostly to the end of a separate program that provided a $600 weekly bonus to recipients of unemployment benefits.
As stimulus checks and other forms of temporary relief run out, experts are projecting an increase in personal bankruptcy filings, which have so far been muted during the coronavirus pandemic, the Wall Street Journal reported. Only a new stimulus program targeting individuals or government actions forgiving or deferring student loans can keep individual filings from rising, panelists said Tuesday at an American Bankruptcy Institute conference that took place online. The $2.2 trillion Cares Act that Congress passed in March broadened jobless benefits, extended their duration and boosted the amount by $600 a week — but those extra payments have expired. Congressional Democrats and the White House continue to negotiate another economic-relief package, which could restore some of the jobless benefits that have lapsed, though prospects have dimmed for a deal before the election. “It’s clear that when it comes to bankruptcy filings by individuals, it’s all about access to liquidity,” said ABI's Ed Flynn. “With the end of the Cares Act, there will be an uptick in filings. The only question is whether it will be a sharp uptick or a gradual one.” Personal bankruptcies are projected to fall this year to 560,000, the lowest number since 1985, said Mr. Flynn, citing data collected by the Administrative Office of the U.S. Courts. But next year that total could climb to over one million, he said. President Trump has extended temporary relief for federal student loan borrowers, allowing them to defer payments until the end of the year from the end of September. “I do worry about a flood of filings by working families,” said Deirdre O’Connor, head of sales and corporate restructuring at legal-services firm Epiq Systems Inc., speaking on the conference panel. Moratoriums on evictions have also been a factor in keeping personal bankruptcies in check, said Christopher Kruse, senior vice president at Epiq, as part of the same panel.
J.C. Penney Co. Inc. said yesterday that it has entered an asset purchase agreement with Brookfield Asset Management Inc., Simon Property Group and a majority of the company's first lien lenders, Reuters reported. The iconic 118-year-old retailer had filed for bankruptcy in a Texas court in May after the COVID-19 pandemic forced it to temporarily close its then nearly 850 stores. The company said it expects to operate outside chapter 11 before the holiday season. Under the agreement, Brookfield and Simon, which are the retailer’s two biggest landlords, will buy substantially all of J.C. Penney’s retail and operating assets through a combination of cash and new term loan debt.
