Hertz Corp. should be blocked from paying as much as $5.4 million to 14 top executives because the proposed bonus program would “potentially squander limited resources,” a group of retired company managers said in court papers, Bloomberg News reported. Paying top managers a bonus while in bankruptcy may make it impossible for Hertz to honor the $5.6 million in deferred compensation owed to the seven retired executives, including the car renter’s former general counsel, Paul M. Tschirhart, according to the objection filed in U.S. Bankruptcy Court in Wilmington, Delaware. The bonus program is “a fairly transparent attempt to continue doling out cash in a manner similar to the $16.2 million that already has been bestowed upon favored employees,” the employees said, referring to payments Hertz made to top executives just before it filed bankruptcy in May.
Sur La Table is will close 73 stores as it restructures following bankruptcy proceedings, FoxBusiness.com reported. Asset disposition firm B. Riley’s Great American Group announced 17 additional store closings on Friday on top of the 56 Sur La Table had previously planned. The Seattle-based high-end kitchenware store will hold liquidation sales at the closing store locations, offering discounts of as much as 30 percent off original prices, according to the announcement. The sales are expected to last about five weeks, or until all the merchandise is sold. Retail furniture, fixtures and other equipment will also be sold at some locations. Sur La Table struggled as the coronavirus pandemic kept shoppers home. The company laid off about 20 percent of its staff in June and filed for bankruptcy protection in July.
Authentic Brands Group LLC is in discussions to join a planned rescue of J.C. Penney Co., Business Insider reported, citing two people familiar with the matter. Mall landlords Simon Property Group Inc. and Brookfield Property Partners LP agreed to buy the bankrupt department store in a deal valued at $1.75 billion. The people didn’t disclose whether Authentic Brands would invest in the department store alongside Simon and Brookfield or buy into the partnership after the restructuring was done in the coming weeks, Business Insider said. New York City-based Authentic Brands, which owns a collection of consumer brands including Nautica and Aeropostale, teamed up with Simon and Brookfield to buy teen clothing chain Forever 21 out of bankruptcy earlier this year.
Fed Chairman Jerome Powell has delicately but resolutely said in recent months he expects Congress will need to do more to compensate for income losses sustained by unemployed workers and revenue holes facing hard-hit businesses and city and state governments because of the coronavirus pandemic, the Wall Street Journal reported. Some colleagues have been more outspoken. “Trouble is brewing with the expiration of these relief policies,” Chicago Fed President Charles Evans told reporters in early August after temporary federal unemployment benefits lapsed. A month later, after little congressional progress on a new financial assistance package, Evans cited partisan politics as a threat to the economy. “A lack of action or an inadequate one presents a very significant downside risk to the economy today,” he said. Fed officials are eager for a fiscal booster shot for two reasons. The first reflects the limits of their tools that became apparent well before the pandemic-induced downturn. The second stems from the unique nature of the current shock. Officials will wrestle at their two-day meeting that concludes Wednesday with how to put meat on the bones of their new average inflation framework. The changes were a response to a deficiency in their old framework, which failed to account for more frequent and extended episodes at the so-called lower bound, where interest rates can’t be lowered once falling to near zero. If the central bank targets 2 percent inflation and consistently falls short once rates are pinned that low, expectations of future inflation can slide, causing inflation and rates to stay low. The new policy tries to break this vicious cycle by seeking somewhat higher periods of inflation after periods of below-target inflation.
Century 21, where generations of New Yorkers shopped for deep discounts on everything from Prada handbags to Jerry Garcia ties, filed for bankruptcy, the latest retailer to fall victim to disruptions caused by the coronavirus pandemic, WSJ Pro Bankruptcy reported. Century 21 Department Stores LLC said yesterday that it is closing all 13 of its department stores and that it plans to liquidate its assets under chapter 11 protection in U.S. Bankruptcy Court in New York. In recent years, Century 21 expanded beyond its roots in New York City to open stores in New Jersey, Pennsylvania and Florida. Going-out-of-business sales are set to start soon. The company blamed the bankruptcy filing on its insurance providers’ decision to not pay about $175 million that the retailer says it is owned amid the coronavirus pandemic and under policies to protect against business disruptions. Insurers that have received coronavirus-related claims have argued that most policies have exceptions for viruses, and courts have generally agreed.
More than 225,000 PPP loans worth nearly $23 billion were approved in Illinois alone. Without additional federal relief, some experts project a flood of small-business bankruptcies this fall as the PPP money runs dry, the Chicago Tribune reported. “The PPP money kept people out of bankruptcy this summer,” said Brian Shaw, a bankruptcy attorney at Cozen O’Connor in Chicago. “You’re going to see a wave of closures after Labor Day. Businesses just are not going to be able to continue.” The Small Business Administration wrapped up the PPP Aug. 8 after approving more than 5.2 million loans totaling $525 billion. The program, which was tweaked several times after its April launch, offered businesses with fewer than 500 employees forgivable loans of up to $10 million, if 60 percent of the money went toward payroll. Part of a broader coronavirus relief package, the $659 billion paycheck program has been beset by problems. It initially came under fire after banks allegedly prioritized larger clients ahead of smaller businesses. Extended for a second round, demand for the loans fell off, leaving about $130 billion of funds on the table. A Sept. 1 House subcommittee report found that billions of dollars in PPP loans may have been diverted to “fraud, waste and abuse” through lack of oversight from the SBA and the Treasury. The loans covered 24 weeks of payroll, but with no end in sight to the pandemic, the money is looking increasingly like a bridge loan to nowhere. “I think you’re going to see the wave of bankruptcies in September for reasons totally separate from the PPP loan,” said Tom Salerno of Stinson.. “You’re going to see it because they’ve got to right-size their balance sheet anyway. They’ve got to renegotiate their leases. They’re going to want to take whatever long-term debt they have and dig themselves out of this hole.” For some small businesses, getting a PPP loan and then filing for bankruptcy may have been the plan all along. The SBA barred bankrupt companies from applying for PPP loans, causing banks to deny applications and precipitating dozens of lawsuits by small businesses. The policy was ultimately upheld by the U.S. Court of Appeals in New Orleans.
A U.S. bankruptcy judge yesterday rejected a $2.4 billion financing plan for struggling LATAM Airlines LTM.SN on the grounds that a convertible loan included as part of the package would amount to "improper" treatment of other shareholders, Reuters reported. The move is a setback for LATAM, which needs short-term liquidity. But in a lengthy court decision, the judge left the door open for the Chilean carrier to introduce a similar financing plan in the future, this time without the possibility of converting part of the loan into equity. The proposal supported by LATAM was composed of a $1.3 billion loan from asset-management firm Oaktree Capital Management and a $900 million convertible loan from several key LATAM shareholders, including the Cueto family, which controls the airline, and Qatar Airways. LATAM presented the bankruptcy financing proposal in July, which prompted a challenge from other creditors, who even assembled a separate funding plan with investment bank Jefferies Group. The key dispute was over the propriety of the convertible loan. LATAM filed for bankruptcy protection in May, hammered by the world travel crisis generated by the coronavirus pandemic. At the time, it was the world’s largest airline to file for bankruptcy due to COVID-19.
J.C. Penney Co. sales plunged 45 percent in the second quarter as the department-store chain entered bankruptcy and struggled with an accelerated shift away from physical stores and the COVID-19 outbreak, Bloomberg News reported. Net sales fell to $1.39 billion in the period ended Aug. 1 from $2.51 billion a year earlier, the company reported yesterday in a regulatory filing. The retailer’s lenders have agreed to team up with landlords Simon Property Group Inc. and Brookfield Property Partners to buy the troubled company, which has struggled for years with changing consumer tastes and falling traffic at malls. The outbreak of the pandemic accelerated this trend and prompted its chapter 11 filing in May. The company reported $64 million in advisory fees and $50 million in debtor-in-possession financing fees. Including gains related to the termination of leases, reorganization costs totaled $108 million in the second quarter.
The owner of New York Sports Clubs is planning to file for bankruptcy as soon as today after talks for financing that would have helped the chain weather the COVID-19 pandemic fell through, Bloomberg News reported. Town Sports International Inc. had been negotiating a potential $80 million capital injection from Kennedy Lewis Investment Management. The investment firm backed away after Town Sports realized it would need more money and asked for $200 million. The gym owner has been in talks with lenders as it seeks to refinance a loan coming due in November. Negotiations are ongoing, but lenders have been reluctant to put in new money or extend the debt. Kennedy Lewis bought a large chunk of the company’s borrowings when they were trading at a steep discount. Town Sports is in discussions with other third parties who could support the company through its restructuring process.
