Senate Majority Leader Mitch McConnell (R-Ky.) expressed doubts about whether Congress can get a deal on another pandemic relief package after lawmakers return to Washington, D.C., after a month-long recess, despite the Trump administration push for a quick, targeted stimulus, Bloomberg News reported. “I don’t know if there will be another package in the next few weeks or not,” McConnell said. He said that talks between top administration officials and House Speaker Nancy Pelosi haven’t been fruitful, and that any embrace of bipartisanship in the Capitol has “descended” as the fall elections near. His comments come a day after Treasury Secretary Steven Mnuchin testified to Congress that parts of the U.S. economy urgently need additional fiscal stimulus to fully rebound from the COVID-19 crisis. Mnuchin told a House panel the most important thing is “that we deliver some relief quickly to the American workers impacted by this.” Mnuchin later initiated a call with Pelosi, amid the stalemate in talks. In a statement Tuesday night, the speaker said she told the Treasury chief that Democrats have “serious questions” remaining in any negotiations. That includes, she said, the view of the administration that a smaller package can be pursued now and a larger one later. There have been no negotiations since the last round broke up almost a month ago. Democrats have offered to lower their demand for a $3.5 trillion package to about $2.2 trillion. Senate Republicans originally put forth a $1 trillion plan, but are now discussing with the administration a smaller $500 billion package they say will be more focused on areas of the economy most affected by the pandemic. Mnuchin singled out the travel industry and small businesses as needing more aid.
As an eviction crisis has seemed increasingly likely this summer, everyone in the housing market has made the same plea to Congress: Send money — lots of it — that would keep renters in their homes and landlords afloat, according to a New York Times commentary. City officials have called for such rent relief. So have landlord associations, tenant advocates, legal aid lawyers, housing researchers, public health experts and economists. Now millions of renters have been covered by a national eviction moratorium, an unprecedented order by the Centers for Disease Control and Prevention to help control the coronavirus pandemic. But there is still no money, according to the commentary. Congress has yet to adopt a new aid package that includes broad rent relief. It hasn’t passed any other cash assistance lately either. Expanded unemployment benefits, worth $600 a week, expired at the end of July, along with a more limited eviction moratorium. There have been no new stimulus checks. And additional unemployment benefits created by executive action by President Trump have not yet reached many workers. That means that while the new order has halted most evictions through the end of the year, there remains no mechanism to cover what those tenants cannot pay — or to control the cascading consequences when rent dries up, according to the commentary. Tenants will still be on the hook for all this unpaid rent when the moratorium expires Dec. 31. And landlords in the meantime may find it increasingly hard to make repairs and cover the mortgage. For this reason, even advocates cheering the moratorium call it a half measure. And landlord groups warn it could destabilize the housing market even more.
The lenders steering J.C. Penney Co.’s bankruptcy are considering joining forces with an outside bidder to buy the retailer after efforts to line up an independent owner stalled, Bloomberg News reported. The plan envisions the hedge funds that hold J.C. Penney’s loans would become co-owners of a business they never planned to run, in partnership with a third party that could include one of the potential buyers they’ve been wooing, according to people with knowledge of the developments. The lender group was already set to take over most of J.C. Penney’s real estate at the outset of the bankruptcy case. This would have involved spinning the properties into a real estate investment trust and selling the rest of the retailer to the highest bidder. Potential bidders Simon Property Group Inc. and Brookfield Property Partners had clashed with the lender group over terms including redevelopment rights and the restrictions imposed by the master lease agreement. The mall owners’ buyout bid was considered the best hope for keeping more of the retailer’s stores open. The private equity firm Sycamore Partners has also held bid talks with lenders, as has Authentic Brands Group LLC. Sycamore owns the department store chain Belk Inc., among other retailers, and Authentic recently bought Brooks Brothers out of bankruptcy.
United Airlines said yesterday that it is preparing to furlough 16,370 workers when federal aid expires on Oct. 1 as the coronavirus pandemic continues to devastate the airline industry, though one union said many more people will be without pay, Reuters reported. United’s cuts include 6,920 flight attendants, but the union representing them said 14,000 will not have a paycheck in October unless Congress acts to extend $25 billion in aid. This is because many have opted for leaves that will provide healthcare but no money, Association of Flight Attendants-CWA International President Sara Nelson said. Airlines have been lobbying Washington for a second stimulus package to protect jobs through March while the industry awaits a recovery. The first $25 billion, which covered airline payrolls, expires this month, but talks have stalled as Congress has struggled to reach agreement on a broader coronavirus assistance package. Chicago-based United had over 90,000 employees before the pandemic brought the industry to a near standstill in March. It warned in July that 36,000 jobs were at risk of involuntary furloughs as demand remained weak.
Delta Air Lines helped its former Brazilian partner Gol Linhas Aereas Inteligentes to refinance a $300 million loan that was due on Monday and which the U.S. carrier had guaranteed, according to an internal memo, Reuters reported. Delta confirmed the memo was sent to employees on Wednesday but declined to provide additional details. Gol said on Tuesday that it had paid the $300 million debt, according to a securities filing, without providing details. The 2015 loan had included a guarantee from Delta which helped Gol get a better interest rate. “As part of the refinancing, Delta worked with Gol to replace the existing loan guarantee with a smaller loan secured with incremental collateral,” Delta said in the memo. It said the deal reduces its own financial exposure and provides additional security, while providing Gol more time to address its obligations during the coronavirus pandemic, which has decimated air travel across the globe.
Amtrak, the passenger railroad agency, said that it will furlough over 2,000 workers in the coming weeks because of a steep decline in ridership and revenue caused by the coronavirus pandemic, the New York Times reported. The job cuts represent nearly 10 percent of Amtrak’s roughly 20,000-member work force and will take effect as the agency begins its new fiscal year, which starts in October. The rail agency will cut 1,950 workers from its unionized work force and 100 employees from its management ranks. Cuts among union jobs could increase or decrease by 2 percent, officials noted in an internal email. The reductions come as Amtrak’s response to historic fiscal challenges receives scrutiny from rail advocates and federal lawmakers. Critics say that the agency should focus less on cuts to its work force and declines in service and instead ensure the rail network operates close to normal at a time when it is seen as an attractive alternative to air travel. In some areas of the U.S., Amtrak provides the lone mode of public transportation, rail advocates say. Since March, ridership on Amtrak has fallen by 95 percent, and projected revenue for 2021 has declined by 50 percent. In response, Congress has bailed out the rail network with nearly $1 billion in emergency funds. But William J. Flynn, Amtrak’s chief executive, has asked lawmakers for an additional $1.4 billion in emergency funds, predicting revenue and ridership will continue to remain low into 2021.
Relying on a public health law intended to prevent the spread of an illness, the Trump administration said yesterday that it is implementing a national four-month moratorium on residential evictions, USA Today reported. The moratorium, announced by the Centers for Disease Control and Prevention, was the latest measure by the administration to get a handle on the economic fallout from the coronavirus pandemic absent an agreement with Congress on a more far reaching package that would have the force of law. To stop evictions, health officials are relying on the 1944 Public Health Service Act, which gives the administration broad quarantine powers. The moratorium, which will run through Dec. 31, applies to individuals earning less than $99,000 a year and who are unable to make rent or housing payments. The move drew a mixed reaction from housing experts: praise that it would potentially keep tens of millions of Americans in their homes but concern that it only moves back a deadline, potentially setting people up for evictions next year because they would continue to accrue back payments during the pause in evictions. It’s also not clear how the move affects landlords, who must continue to make their own payments. Read more.
In related news, California’s legislature passed a bill late on Monday granting renters who are financially affected by the COVID-19 pandemic a reprieve from evictions, which were set to resume today when prior relief expires, the Wall Street Journal reported. The bill passed with supermajorities in both houses of the Democratic-controlled legislature in the final hours of its two-year legislative session and addresses what advocates had said was a looming wave of evictions. Democratic Gov. Gavin Newsom, who crafted the compromise with legislative leaders, tenant advocates and landlord groups last week, immediately signed the bill into law. It takes effect immediately. Backers say it will help keep California’s 17 million renters housed as the state’s economy remains largely closed during the pandemic. The measure would forestall until Feb. 1 evictions for tenants who declare that they have lost income due to the impact of COVID-19 on the economy. All back rent owed by the tenant from March 1 through Aug. 31 of this year would be converted to consumer debt and couldn’t be used as grounds for eviction. To receive continued protection, a tenant would have to pay at least 25 percent of their cumulative rent between Sep. 1 and Jan. 31. The remaining balance would also become consumer debt, which landlords could pursue in small-claims court starting March 1 of next year. Even the bill’s strongest supporters said it was only a stopgap that leaves tenants treading water financially unless and until the federal government provides additional stimulus funds to keep families and landlords afloat. Read more. (Subscription required.)
Treasury Secretary Steven Mnuchin urged Congress to appropriate more money to combat the effects of the coronavirus pandemic, saying at a hearing yesterday that he was ready to sit down with Democratic leaders to resume negotiations at any time, the Wall Street Journal reported. For more than a month since key provisions of the landmark CARES Act expired, Democrats and Republicans have been at loggerheads over the size and content of another relief package. House Democrats in May proposed an additional $3.5 trillion of relief, while Senate Republicans rolled out a $1 trillion bill in July. Without a new agreement, jobless workers have gone without a $600 federal supplement to weekly unemployment insurance since July 31, and a federal eviction moratorium expired on July 25, leaving millions of tenants at risk of losing their homes. In yesterday’s hearing, Mnuchin suggested that the gap between the two sides may be narrowing and mentioned a new, higher number for the administration’s proposed ceiling for a follow-on bill: $1.5 trillion. The secretary also indicated that the Trump administration has softened its opposition to a Democratic proposal to apportion more money for state and local governments. Read more. (Subscription required.)
In related news, Fed Governor Lael Brainard said yesterday that the Federal Reserve “in coming months” will need to roll out new efforts to help the economy overcome the impact of the coronavirus pandemic and live up to the U.S. central bank’s new promise of stronger job growth and higher inflation, Reuters reported. “With the recovery likely to face COVID-19-related headwinds for some time, in coming months, it will be important for monetary policy to pivot from stabilization to accommodation,” Brainard said, and do what’s appropriate to hit the new goals of “maximum employment and average inflation of 2% over time.” That decision “will be guided” by the new strategy which trades risks of higher inflation with efforts to promote further job growth, she said. Brainard, among the architects of the new long-term strategy the central bank adopted last week, is the first Fed official to tie that new approach directly to the need for further monetary stimulus, likely in the form of more aggressive bond-buying or more ambitious promises about returning the country to low unemployment. Read more.
J.Jill Inc. has again bought more time for talks with lenders as the women’s clothing retailer faces the possibility of filing for bankruptcy after its liquidity and turnaround efforts were disrupted by the coronavirus pandemic, WSJ Pro Bankruptcy reported. The Quincy, Mass., company said yesterday that a majority of its term loan lenders and shareholders support an out-of-court financial restructuring transaction that would push back debt maturities by two years, until May 2024. A potential out-of-court deal is contingent on participation by lenders holding at least 95 percent of the company’s term loans by Sept. 11. The retailer said it is working to obtain the necessary consent. If the out-of-court transaction doesn’t garner enough support, J.Jill said that lenders holding more than 70 percent of its term loans and shareholders holding a majority of the equity of the company have agreed to a prepackaged chapter 11 reorganization. “While the company hopes to receive the required consents to execute the out-of-court transaction, the company anticipates that the in-court transaction would be a swift process,” J.Jill said. Under the out-of-court agreement, J.Jill would get as much as $15 million in additional liquidity through a junior term loan. If the retailer files for bankruptcy, it would get additional financing of up to $75 million to support the chapter 11 process.
