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Hertz to Pay Lenders $650 Million to Stay Afloat in 2020

Submitted by ckanon@abi.org on
The Hertz bankruptcy has lurched through court since the car rental company declared chapter 11 in May, but it hopes to buy some time to get its house in order by filing a proposed settlement with its lenders late Monday involving a one-time $650 million payment under a new vehicle lease contract, Jalopnik reported. Hertz currently has just under 500,000 vehicle leases on its books. The company was originally eager to cancel the leases and cull its fleet, but lenders were not quite as anxious to lose money. When it first filed for bankruptcy, it owed $400 million in bills from April that it could not pay, with $135 million just in vehicle depreciation alone. Earlier this month, Hertz tried to shed 144,000 vehicles, which would have saved more than $80 million a month, but lenders balked, wanting Hertz to sell the excess fleet gradually to ensure the best price. Now that used car prices have rebounded, lenders might be more willing to play ball. Hertz’s business model was effectively wiped out when the COVID-19 epidemic grounded planes across the country. Fewer travelers meant fewer car rentals. The $650 million solution is also just a temporary one. Should there be no permanent agreement with lenders by January 2021, then Hertz will go back to the drawing board. The company will go before a bankruptcy judge on July 24 to ask for the plan to be approved.
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Business Reorganization
Covid19
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U.S. Bond Markets Are Driving Force Behind the New Gold Rush

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Deepening negative real yields in the U.S. Treasury market are fueling a frenetic rally in gold that’s boosting the precious metal toward a record, Bloomberg reported. Bullion has gained 24% this year and is about $45 from an all-time high. With five-year Treasuries now yielding -1.16% once the effects of inflation are stripped out, the lowest close in seven years, there’s little reason to expect a slowdown in precious-metal buying as investors fret about the economic outlook, prospects for further outbreaks of COVID-19 and the impact of central-bank bond buying. With investors looking for safe-haven assets that won’t lose value, they’re pouring record amounts into precious-metal exchange-traded funds. Real yields are also driving investors away from the U.S. dollar, which is currently trading near the lowest since March against a basket of currencies.
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Covid19
Investment Banking
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Inflight Entertainment Provider Global Eagle Files for Bankruptcy Protection

Submitted by ckanon@abi.org on
Inflight TV provider Global Eagle Entertainment has filed for bankruptcy protection as airline and cruise line travel collapses amid the coronavirus pandemic, Hollywood Reporter reported. The chapter 11 filing by Golden Eagle — which has assets worth around $630.5 million and carries $1.08 billion in debt across first-lien and second-lien creditors — was made in a U.S. bankruptcy court in Delaware. The application includes a "stalking horse" purchase agreement with secured lenders to kick-start a bidding process for company assets with an eye to Golden Eagle eventually emerging from bankruptcy protection. Golden Eagle acquires nontheatrical releases and music from Hollywood and indie content producers internationally, while also providing satellite-based WiFi Internet to travelers. The company's unsecured creditors include Lionsgate Entertainment, Paramount Pictures, Sony, Warner Music Group, Fox International Channels and CBS. In the July 22 filing, CFO Christian Mezger said that the company "had been adversely impacted by the COVID-19 pandemic" as its airline and cruise line partners had ceased or severely reduced their operations. The filing added that demand for Golden Eagle services had "drastically" shrunk, impacting the company's operations and cash flows.
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Airlines
Business Reorganization
Covid19
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Regal Cinemas Puts Reopening Plans on Hold, New Date Expected Soon

Submitted by ckanon@abi.org on
Regal Cinemas, the second-largest theater chain in the U.S., has postponed its planned reopening indefinitely, Movie Web reported. The company had previously set its reopening date for July 31, but have decided to delay those plans indefinitely. Originally, Regal had hoped to open on July 10. However, with studios continuously shifting their release calendar, theater chains have had to shuffle their plans as well. It is expected that AMC will do the same. The nation's largest chain has been on the verge of bankruptcy for months. Theaters originally closed in the U.S. back in mid-March. Even before the closure, AMC was saddled with tremendous debt, said to be in the $5 billion range. The company recently managed to rework some of its debt to stay afloat for a little while longer. But without being able to safely reopen, it is unclear how long AMC, Regal or Cinemark will be able to hold on without succumbing to bankruptcy. A report in June suggested that theaters were going to lose $30 billion in revenue this year, which represents a 60 percent decline in business. The problem right now is there is an odd game of chicken going on. Studios like Warner Bros. and Disney can't risk releasing blockbusters without a certain level of return at the box office. They both have budgets said to be in the $200 million range. At the same time, chains like Regal need new movies to get people in seats. While the plan is to show older classics and recent hits to drum up some business in the beginning, that likely isn't a sustainable model for these big chains. Drive-ins have had a lot of success during the shutdown, but that is still on a relatively smaller scale.
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Business Reorganization
Covid19
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Commentary: Congress Should Allow the Fed to Make Loans to Bankrupt Companies

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Congress is gearing up to pass another round of fiscal support. This creates an opportunity to draw on the lessons learned since the CARES Act was passed in March and correct shortcomings in that legislation, according to commentary from Forbes. One key reform: Congress should allow the Federal Reserve to loan money to bankrupt companies. Although it may seem counterintuitive, such a move would help protect businesses and their employees — just what Congress wanted when it passed the CARES Act. Congress’s decision to give the Fed and the Treasury the authority to determine which businesses to aid and on what terms made the passage of the CARES Act possible. The COVID-19 crisis was moving at an unprecedented pace, and Congress rightfully wanted to move quickly to provide support to those in need. Delegating difficult decisions to the Fed and the Treasury allowed Congress to reach rapid agreement. And by requiring that any loans meet the substantive and procedural limitations embodied in Section 13(3), Congress was also able to readily impose some checks on the breadth of the discretion it was granting. Not surprisingly, however, Congress’s decision to use an off-the-shelf tool to deal with the crisis had some drawbacks. The tool was not a perfect fit for addressing the needs of companies or the broader economy. Although some of these shortcomings are not easily corrected, and may be reason for a different approach when the next crisis strikes, others can be remedied. Most importantly, Congress should authorize the Fed to make loans to bankrupt companies.
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Business Reorganization
Covid19
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Ann Taylor Parent Ascena Files for Bankruptcy as Pandemic Crushes Already Troubled Retailer

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Ascena Retail Group Inc., parent of the Ann Taylor and Loft retail chains, filed for voluntary chapter 11, with a restructuring agreement supported by more than 68% of its secured term lenders, crushed by the effects of the coronavirus pandemic on its already troubled business, MarketWatch reported. The Mahwah, N.J.-based company said that it expects to reduce debt by about $1 billion in its pre-arranged restructuring, providing increased financial flexibility to become profitable. Ann Taylor, Loft, Lane Bryant and other chains will continue to operate through the restructuring with about 95% of stores open. But the company will reduce its footprint by closing a significant number of Justice stores and certain Ann Taylor, LOFT, Lane Bryant and Lou & Grey stores. Ascena has $150 million in funding from existing lenders and expects that sum combined with cash flow generated by ongoing operations and cash on hand to be sufficient to meet its needs.
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Covid19
Retail
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McConnell Previews GOP Coronavirus Relief Bill

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Senate Majority Leader Mitch McConnell (R-Ky.) provided a broad outline for what to expect in the forthcoming Republican coronavirus relief proposal, including help for schools, small businesses and testing, The Hill reported. He indicated that he would soon be unveiling the Republican proposal after swapping ideas with the administration in recent weeks. Sen. McConnell outlined the major pillars of the forthcoming bill as jobs, health care, kids in school and liability protections. But he also provided new details including that Republicans would include $105 billion in help for schools and provide more help for businesses, who have been hit hard as the spread of the coronavirus forced many to close or scale back. "The American job market needs another shot of adrenaline. Senate Republicans are laser-focused on getting American workers their jobs back," Sen. McConnell said. In addition to another round of Paycheck Protection Program loans, he said that the Republican proposal will reimburse businesses for expenses tied to protective equipment, testing and structural changes that need to be made to protect workers and customers. Sen. McConnell also indicated that the bill would include another round of stimulus checks. He did not provide details on who would qualify but has previously talked about Americans who make up to $40,000 per year, in particular, needing additional assistance.
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Legislation
Covid19
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The Bitter Taste of Restaurant Closure

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As restaurants in New Orleans continue to struggle through the coronavirus blues, a great number of them will not survive, WGNO (La.) reported. In March, the governor ordered a number of businesses to temporarily close as the state prepared to shutdown facing a rise in coronavirus cases and coronavirus deaths. Restaurants were limited to delivery and takeout. The Louisiana Restaurant Association predicts that a quarter of Louisiana’s restaurants overall will close and that 40% of New Orleans’s eateries will also close for good. There are close to 600 full-service restaurants and more than 14,000 estimated restaurant jobs in the Crescent City. New Orleans is home of a cornucopia of restaurant choices, and many of them have a story and a pedigree, which is the uniquely tragic dilemma at the front. In a city treasured for its spice, there’s a real danger of losing an irreplaceable piece of the world famous metropolis and its culinary legacy. The story of the New Orleans restaurants vs. the coronavirus is not a story of dinosaurs vs. a cosmically caused extinction — it’s more like a prizefight of the coronavirus vs. the cayenne pepper spirit of New Orleans. The seasoning has taken 300 years to set in, and there’s no time for defeat now.
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Covid19
Hospitality, Entertainment Venues and Gaming
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As Debt Climbs to Record $27 Trillion, Congress Says It's Not Time to Turn Off Stimulus Spending

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As the national debt approaches $27 trillion, Congress says federal stimulus spending must continue due to the pandemic, Just the News reported. The government spent $864 billion more than it took in during June, bringing the deficit to a record $2.7 trillion so far this year. According to Treasury Department data, the debt held by the public is $20.6 trillion and the total outstanding national debt is more than $26.5 trillion. In 2019, the U.S. gross domestic product  was about $21.4 trillion. Rep. Thomas Massie (R-Ky.) said in June that he thinks the national debt will hit $40 trillion by the end of the coronavirus pandemic. Some experts have predicted that the debt held by the public will soon exceed the nation's entire GDP. Despite the rising deficit, a fourth coronavirus stimulus package is being crafted in the GOP-led Senate after the Democratic-led House passed the $3 trillion HEROES Act in May. Senate Majority Leader Mitch McConnell (R-Ky.) has said that any additional coronavirus stimulus package that passes in the Senate would be the last one. A formal proposal has not been released yet. 
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Legislation
Covid19
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Briggs & Stratton Scraps Retiree Medical Benefits in Bankruptcy

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Briggs & Stratton Corp.’s bankruptcy might be bad news for bondholders owed $195 million and even worse news for hundreds of retirees who are losing health benefits as the COVID-19 pandemic takes a deadly toll on the nation’s elderly, The Wall Street Journal reported. On Sunday, the day before it filed for chapter 11 protection, Briggs & Stratton’s board voted to terminate health benefits for 450 former workers and end life-insurance protection for  4,000 former workers, effective as of the end of August. “We understand this is unfortunate news for our retirees, but we are grateful for their years of service and dedication to the company,” Briggs & Stratton spokesman Rick Carpenter said. At a hearing Tuesday before the U.S. Bankruptcy Court in St. Louis, <b>Ronit Berkovich</b> of Weil, Gotshal & Manges LLP said that if the company completes a planned bankruptcy sale to private-equity firm KPS Capital Partners LP, the business will be saved but little or nothing will be left for bondholders and other unsecured creditors. An auction planned for September could drive up the price, and KPS has agreed to pay some vendors as part of its buyout offer. But Briggs & Stratton’s financial plight — short of cash and with debt coming due this year — means the company can make no promises to low-ranking creditors. Bondholders are joining forces to try to steer Briggs & Stratton’s bankruptcy in a different direction, possibly toward a business reorganization that would improve their prospects of recovery. As for the retirees, they weren’t heard from at Briggs & Stratton’s courtroom debut. The company is seeking a court order saying that it was justified in terminating the benefits, despite Bankruptcy Code provisions that limit the rights of troubled companies to strip retirees of benefits.
Article Tags
Business Reorganization
Covid19
Labor/Employment
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