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Back-to-School Delays, Virtual Classes Could Deepen Pain for Some Retailers, and Be Windfall for Others

Submitted by ckanon@abi.org on
This school year, retailers may have only one certainty to count on: Kids are growing and that’ll drive some demand for new clothes, CNBC reported. Otherwise, retailers and industry watchers are unsure of what to expect as the pandemic delays the first day of school, leads to staggered schedules or prompts plans for virtual learning across the U.S. Some analysts predict that families will spend less as they watch their budgets or as home-schooling limits the need for a fresh wardrobe. Others say it will simply shake up the shopping list, adding more big-ticket items like laptops and tablets and shifting spending toward lower-priced casual wear like T-shirts and leggings instead of outfits intended to impress. Even retailers themselves have signaled they don’t know what’s ahead. The back-to-school season — the second largest driver for many retailers after the holidays — could deepen the pain, especially for shopping mall staples with a heavy emphasis on kids’ and teens’ clothing. If demand for apparel is weak heading into the fall, American Eagle, Abercrombie & Fitch and The Children’s Place will especially take a hit. The third quarter makes up about 30% of their annual earnings because back-to-school is such a powerful sales driver. Analysts for Bank of America already predicted negative sales trends in the third quarter for those three retailers. On average, they expected same-store sales for the quarter to fall by about 10%. Now, with headwinds during the back-to-school season, they predict same-store sales will drop by an additional 3% to 4%.
Article Tags
Covid19
Retail
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Would Second PPP Save Commercial Tenants?

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Coronavirus-related economic shutdowns throughout the U.S. caused businesses to close, revenues to plummet and owners to question whether they could afford their rents leaving the fate of the commercial real estate industry uncertain, Fox Business reported. “We’ve not seen the full ramifications of the pandemic,” Pierre Debbas, co-managing partner and founding member of Romer Debbas, told FOX Business. “[Paycheck Protection Program (PPP) loans] served as a Band-Aid for many small businesses over the last couple months.” Business owners have until Aug. 8 to apply for an initial round of funding through the PPP and for many small business owners that loan likely would not be enough to keep them afloat — and in their rented spaces — permanently. The ability to apply for a second PPP loan may not solve the problem, either. “It will definitely help but there’s such uncertainty and unknowns for how long this will go on for,” Debbas said, adding there is the possibility of a second wave — and a second round of shutdowns. Fitch Ratings reported the largest-ever, one-month increase in delinquencies in commercial-mortgage backed mortgage securities between May and June, with the highest rates seen in the accommodation and retail industries. How the overall situation plays out, however, may be dependent in large part on how flexible banks are willing to be with property owners. Landlords can only help their tenants as much as banks will allow.
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Covid19
Real Estate
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Law Firms Are Staffing Up on Bankruptcy Lawyers in Anticipation of a Post-COVID-19 Boom

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A lot remains unknown about our post-coronavirus future, but an onslaught of commercial bankruptcies seems inescapable — and law firms are taking a hard look at their bankruptcy and restructuring practice groups in anticipation of increased demand, the ABA Journal reported. With nearly four decades of experience, John D. Penn, firmwide chair of Perkins Coie’s bankruptcy and restructuring practice, has seen it before, and he knows there’s trouble ahead. “I’m sitting on the beach watching the water recede to the horizon,” he says. “I don’t know how fast it will come or how far inland it will go, but the tsunami is on its way.” Lawyers interviewed for this story report that legal headhunters are busy looking to place or to poach bankruptcy lawyers. In April, Baker McKenzie added three lawyers from Greenberg Traurig to its global restructuring and insolvency practice, including Mark Bloom, who had been Greenberg’s bankruptcy practice group co-chair. Gibson, Dunn & Crutcher got an early start last October by bringing on three business restructuring lawyers from Jones Day. Meanwhile, a spokesperson for Latham & Watkins says the firm has been expanding its global restructuring and special situations practice over the last several years. “The legal recruiters are out there hot and heavy in a very competitive environment,” says Christopher Ward, chair of the bankruptcy and financial restructuring practice at Polsinelli and managing shareholder of the firm’s Delaware office. “We’re fairly busy today, and we are staffing up.” At Stinson, bankruptcy and creditors’ rights partner Thomas J. Salerno says he’s planning to hire at least two additional associates. “Bankruptcy is a generalist practice, and we are beefing up. You need litigation folks, corporate M&A people for restructuring, and tax, labor and environmental skill sets,” Salerno says. “The restructuring partner is the quarterback of the team.”
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Covid19
Labor/Employment
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Tailored Brands Likely to Go Bankrupt in Third Quarter

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Tailored Brands said in 10-Q “it is likely that we will pursue a reorganization under applicable bankruptcy laws, possibly as soon as during the third quarter of fiscal 2020, which begins on Aug. 2, 2020,” Bloomberg reported. In this scenario, shareholders probably will be wiped out, the company said. The owner of Men’s Wearhouse has “considered the projected impact of COVID-19 on our cash flows and analyzed our future compliance with the financial covenants under our ABL Facility, including an additional discretionary reserve imposed against our borrowing base, as described in Note 19, and based on such projections and analysis, we will not remain in compliance with the fixed charge coverage ratio covenant under the ABL Facility beginning in the fourth quarter of fiscal 2020.”
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Covid19
Retail
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CARES Act Lets You Withdraw $100,000 from a Retirement Plan — but Most People Haven't Come Close

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In late March, the CARES Act was signed into law, and it included one key provision that, when exercised, could really bail Americans out of their financial jam: the option to take penalty-free withdrawals from a retirement savings plan, The Motley Fool Reported. Normally, IRA and 401(k) withdrawals taken before age 59 1/2 are subject to a 10% early withdrawal penalty. Savers get a tax break on their contributions and investment gains, so in return, they're asked to leave their money alone until retirement. Those who don't abide by that rule get penalized. Under the CARES Act, savers can take a withdrawal of up to $100,000 if they've been affected negatively by the COVID-19 outbreak, and that withdrawal won't be subject to penalties at all. But interestingly enough, most people have not exercised the option to remove $100,000 from retirement savings. In fact, the majority of savers didn't take a coronavirus-related distribution at all. Although the option to remove funds from an IRA or 401(k) without penalty is a good one to have in theory, the fear is that many workers will deplete their retirement savings prematurely, then wind up with inadequate funds later on. But so far, coronavirus-related withdrawals have been minimal. Vanguard reports that only 1.9% of savers took a retirement plan withdrawal through the CARES Act through May 31. Of those, the median distribution amount was $10,413. Furthermore, nearly 30% of distributions taken because of coronavirus were under $5,000, and only 4% took the maximum $100,000 withdrawal. All of this is very good news. The less money workers remove from their savings today, the more they stand to retire with. And also, lower withdrawals equate to less missed investment growth.
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Legislation
Consumer Debt
Covid19
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Rival Companies Tussle to Buy Los Angeles Hospital Out of Bankruptcy

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Prospect Medical Holdings Inc., a hospital manager backed by private-equity firm Leonard Green & Partners LP, is trying to block Prime Healthcare Services Inc.’s $350 million purchase of a bankrupt Los Angeles-area hospital, The Wall Street Journal reported. Los Angeles-based Prospect is making a last-minute attempt to scoop up St. Francis Medical Center in Lynwood, Calif., by offering to top Prime Healthcare’s bid by as much as $50 million. A bankruptcy judge this spring approved the bid by Prime to buy St. Francis from owner Verity Health System of California Inc., which filed for chapter 11 protection in 2018. This month, California Attorney General Xavier Becerra approved the sale to Prime with conditions. Now, Prospect is lobbying Verity and the attorney general to stop the sale from closing and to reopen bidding, or at least to select it as the backup bidder. Because of the COVID-19 outbreak, the company believes it didn’t have a meaningful opportunity to participate in the sale process. St. Francis, which was founded in 1945, has one of the busiest trauma centers in the Los Angeles area. The 384-bed hospital hit the bankruptcy auction block again in February after a previous buyer failed to close on a sale.
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Covid19
Health Care
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U.S. Homeownership Rate Hits Highest Level in 12 Years — But It Could Be a Fluke

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The U.S. homeownership rate hit the highest level in almost 12 years in the second quarter during the height of the coronavirus pandemic, but the gain could be a data collection fluke, Yahoo Finance reported. The rate grew to 67.9% in the second quarter, the highest since the third quarter of 2008 and up from 65.3% in the first quarter, according to the Census Bureau. The 2.7-percentage-point jump was also the largest on record. But the bureau said the rate could have been affected by the data-collection methods in the second quarter, which relied on only telephone surveys and no in-person interviews, which were suspended on March 20 due to the COVID-19 outbreak. As a result, the response rate was 12 percentage points lower than in the first quarter. Still, experts said an increase in the rate would not have been out of line of the recent trend in increasing homeownership, largely because of millennials taking advantage of low mortgage rates. Last week, the rate on the 30-year mortgage was 3.01%, just barely higher than the all-time low of 2.98% it hit in the prior week, according to Freddie Mac.
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Mortgage
Covid19
Real Estate
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From Simple Confusion to Confiscation: Some Nursing Homes Aren’t Giving Residents Their Stimulus Checks

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Pennsylvania’s state’s top attorney has launched an investigation into senior living facilities accused of seizing their residents’ stimulus checks, KDKA (Pittsburgh) reported. Investigator Meghan Schiller found a local man who claims this happened to his loved one. Justin Ciesielski says he will do anything to keep his dad comfortable. “My dad is clean and healthy and seems to be happy every time I go to see him,” he said. At 62 years old, his father now lives at Mt. Lebanon Rehabilitation and Wellness Center, and his dad’s life savings and Medicare funds funnel directly to this facility, in exchange for his care. But in April, Ciesielski received this letter about his dad’s stimulus check. “I got a letter from the IRS basically saying it went into his account so I went and checked his account and it did not.” He called the facility and learned it planned to use his father’s stimulus check to pay down his balance and other expenses. Ciesielski said it didn’t seem right. “We have advised those nursing homes that they can’t do that. That money belongs to the individual,” said Attorney General Josh Shapiro. “They can’t effectively garnish that stimulus check from the resident.” The state’s longterm care ombudsman Margaret Barajas said she’s tracking 200 complaints statewide, in addition to the cases Attorney General Shapiro’s office will handle. “I think in some cases the providers saw this as an opportunity to shore up some past debt,” Barajas said. “The federal government has made it clear that the stimulus check is not considered income. It is not taxable income and for that reason, it would be excluded from any contracts that a resident has signed and agreed to for provision of their care.” In Ciesielski’s case, he said the facility told him his father signed one of the forms Barajas is referencing.
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Covid19
Health Care
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Universal, AMC Theatres Forge Historic Deal Allowing Theatrical Releases to Debut on Premium VOD Early

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Universal Pictures and AMC Theatres have put aside a bitter feud and signed a multi-year agreement that will allow the studio’s films to premiere on premium video on-demand within three weeks of their theatrical debuts, Variety reported. The pact has the potential to reshape the ways that movies are marketed and distributed. Rival studios are likely to begin pushing for exhibitors to grant them more flexibility when it comes to determining when and how their theatrical releases can make their way onto home-entertainment platforms. AMC CEO Adam Aron said that the company will “share in these new revenue streams,” which means that it will get a cut of any money made on these digital rentals. Universal only has the ability to put its movies on premium on-demand. It cannot sell films or rent them for lower on-demand fees until three months after they debut in cinemas. Both sides made nice, with Universal praising the viability of the big screen and AMC hailing the decision as a sign of its willingness to innovate. The bulk of cinemas in the U.S. remain closed due to the coronavirus, and plans for a large-scale national reopening have been delayed again and again as cases surge in the South and and on the West Coast. Theaters don’t have the leverage they once did and are looking for ways to make money at a time when it’s not clear if customers feel safe going to cinemas. As cinemas nationwide have struggled to reopen, AMC has been saddled with concerns of its liquidity. Even before the pandemic, the company was heavily indebted due to expensive refurbishments of its venues and deals to acquire rivals. At one point, AMC looked on the verge of filing for bankruptcy, but it recently renegotiated terms of its debt that helped clean up its balance sheet.
Article Tags
Covid19
Hospitality, Entertainment Venues and Gaming
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Rural Mississippi Hospital Beat Bankruptcy. Can It Survive the Pandemic?

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As Gregg Gibbes walked through the doors of his new hospital in April 2019, he faced a frightening yet all-too-possible future: The facility he had been tasked with leading was at risk of shutting down and taking hundreds of jobs with it, and leaving Simpson County, Miss., without an essential source of medical care, the Clarion Ledger reported. Magee General Hospital, a nonprofit, 44-bed acute-care facility, had filed for bankruptcy eight months earlier in a bid by former owners to save the community facility from financial death. The hospital is an economic hub in the area, and an essential source of care. Entering as the hospital’s new CEO, Gibbes was part of a restructured board of directors and a shrewd plan to beat the bankruptcy through sharing staff with a critical-access hospital in Covington County 20 miles to the south. This May, Magee General exited its bankruptcy, achieving a feat the likes of which “you’d be hard pressed to find another rural hospital” completing successfully, said Gibbes. But now a second storm is ravaging the land. After the pandemic forced Magee General to cut elective care, which six months ago accounted for two-thirds of its revenue, the hospital must confront a pandemic that has been the latest battle for survival for rural hospitals around the country. To date, Magee General has received the lowest amount of coronavirus-related stimulus money of any acute-care facility in the state. To navigate chapter 11 over the past two years, Magee General had to be guided out of a storm of uncompensated care costs, increasingly expensive equipment and shrinking elective care visits — common challenges for rural hospitals in the South.
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Covid19
Health Care
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