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The Federal Reserve’s $3 trillion bid to stave off an economic crisis in the wake of the coronavirus outbreak is fuelling excesses across U.S. capital markets, Reuters reported. The U.S. central bank has pledged unlimited financial asset purchases to sustain market liquidity, increasing its balance sheet from $4.2 trillion in February to $7 trillion today. While the vast majority of these purchases have been limited to U.S. Treasuries and mortgage-backed securities, the Fed’s pledge to bolster the corporate bond market has been enough to spur a frenzy among investors for bonds and stocks. “COVID-19 is now inversely related to the markets. The worse that COVID-19 gets, the better the markets do because the Fed will bring in stimulus. That is what has been driving markets,” said Andrew Brenner, head of international fixed income at NatAlliance. The Federal Reserve has not bought stocks as part of its financial stimulus programs. But its near-zero interest rates and credit support for large swathes of Corporate America have driven yield-hungry investors back to the equity market. Since their bottom on March 23, the S&P 500 and the Dow Jones Industrial Average have both risen more than 40 percent and the Nasdaq composite has gained nearly 60 percent. The S&P 500’s forward price-to-earnings ratio is currently 21.5, a level last seen during the dot-com boom 20 years ago. The stock market euphoria has also spilled over into initial public offerings (IPOs) and other stock sales to investors. A record $184 billion was raised in U.S. equity capital markets in the second quarter, according to Refinitiv IFR data. Over $8.9 billion worth of IPOs in the second quarter priced above the target range, the highest amount since the third quarter of 2014, according to Dealogic. The Fed’s bond-buying programs have also encouraged companies to tap credit markets and made the second quarter the busiest ever for debt issuance. Some $1.2 trillion of investment-grade paper was sold in the first half of the year, the highest issuance volume recorded by the Securities Industry and Financial Markets Association. Even though the Fed refrained from buying most junk-rated bonds, issuance was at $200 billion through June, more than double last year’s rate.

AMC Entertainment Holdings Inc. and bondholders agreed to a debt overhaul that provides cash and time to repay its borrowings while it tries to withstand the shuttering of its movie theaters amid the pandemic, Bloomberg News reported. The company is asking holders of existing subordinated notes to swap for new second-lien secured notes due 2026 that would pay interest as 10 percent cash or 12 percent in the form of more notes. The offer covers four sets of existing notes that mature in 2024 through 2027, AMC said. Participants can also subscribe for a pro rata portion of new 10.5 percent first lien secured notes due 2026 that total $200 million. Silver Lake, the private equity firm that holds a board seat, also agreed to buy an additional $100 million of the new first lien notes at 90 percent of face value, less a 2 percent arranger premium, AMC said. The plan has support from investors who hold 73 percent of the principal of existing notes, which also represent a majority of the holders of each series of notes, AMC said. It extended the deal’s deadline until July 24.

Four months into the worst recession since the Great Depression, tens of thousands of workers across the country have filed for jobless claims but have yet to receive payments, the Washington Post reported. The issue has spilled back into public view in recent weeks, as thousands of frustrated workers awaiting payments have camped out, sometimes overnight, in front of unemployment offices in states like Oklahoma, Alabama and Kentucky. The ongoing delays are the result of a confluence of crises, experts say. A flood of new jobless applications — about 50 million — has overwhelmed state unemployment offices over the past four months. The agencies themselves are hampered by years of neglect. They rely on reduced staffs and badly outdated technology after years of budget cuts, often at the behest of business groups and Republican legislatures. Issues with fraud and user confusion over the new rules and filing process have further bogged down the process.

Law firm Haynes and Boone said in a report released this week that a wave of oil and gas bankruptcies in North America is likely to continue this year as oil prices remain depressed and a new surge of COVID-19 cases threaten to stall any recovery in fuel demand, Reuters reported. Bankruptcies surged in the second quarter, including from major shale independents Chesapeake Energy and Whiting Petroleum, as oil prices collapsed due to the pandemic and a brief, unexpected price war between Saudi Arabia and Russia. There were 18 producer bankruptcies in the second quarter, according to a report compiled by law firm Haynes & Boone, the highest quarterly figure since the second quarter of 2016, when there were 34 bankruptcies. In total, 23 oil producers and 18 oilfield service firms have sought protection from creditors this year. U.S. crude oil futures are currently about $40 a barrel, a level that “is not a sufficient clearing price for many heavily leveraged shale producers,” the report said. In the second quarter alone, producers filing for bankruptcy held over $29 billion in debt, with shale pioneer Chesapeake Energy accounting for $9 billion of that. In total, exploration and production firms filing for bankruptcy this year have $30.6 billion in debt. Oilfield service firms that filed in 2020 had $23.8 billion in debt, led by Diamond Offshore Drilling at $11.8 billion. Read more. 

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Treasury Secretary Steven Mnuchin said yesterday that the Trump administration is unwilling to extend a boost to unemployment benefits amid the coronavirus pandemic if it allows jobless workers to make more money than they did before losing their jobs, The Hill reported. Mnuchin said that any extension of enhanced unemployment insurance would cap benefits at “no more than 100 percent” of what the recipient made before becoming unemployed. The $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act signed by President Trump in March added $600 to unemployment insurance in every state. The boost, which expires on July 31, was intended to help workers in industries derailed by the pandemic support themselves and continue spending money amid the lockdowns imposed to slow the pandemic. The future of the increased benefit is one of the most contentious issues facing lawmakers as they craft another stimulus package. Economists credit the enhanced unemployment benefits, among other stimulus efforts, with preventing a deeper plunge in economic activity. But many Republicans have expressed regrets about the boost because it pushed unemployment benefits above the average wage in many states.

A battle is brewing for control of Brooks Brothers Group Inc., with at least two apparel ventures looking to take over the bankrupt clothing retailer, the Wall Street Journal reported. Sparc Group LLC, an apparel company backed by Authentic Brands Group LLC and mall owner Simon Property Group Inc., is considering bidding to buy Brooks Brothers out of bankruptcy. WHP Global Inc., which has agreed to finance Brooks Brothers during its bankruptcy, is also crafting a buyout offer. Brooks Brothers filed for bankruptcy on Wednesday after two centuries in business, unable to withstand the coronavirus pandemic and the forced shutdown of retail shopping. The company, which struggled in recent years with a shift toward more casual dress styles at work, will soon start a formal process to field offers. Both potential bidders are planning to keep most Brooks Brothers stores intact, betting that the retailer’s survival is tied to a strong brick-and-mortar presence.

AMC Entertainment Holdings Inc. is set to announce a deal with bondholders that would allow private equity firm Silver Lake to jump up the repayment-priority line, setting the stage for another credit-market brawl as companies dealing with the fallout of COVID-19 seek to restructure their debts, Bloomberg News reported. The transaction, which is expected to launch in the coming days, would provide $200 million of new money and see subordinated bondholders exchange their securities at a discount for new second-lien notes, according to people with knowledge of the situation. It will also extend the maturity on $600 million of convertible bonds held by Silver Lake for two years in exchange for first-lien priority on certain collateral. A group of existing first-lien lenders including Apollo Global Management Inc., Ares Management Corp. and Eaton Vance Corp. are opposing the deal, arguing it benefits certain creditors over others at the expense of the company, said the people, who asked not to be identified discussing a private matter. The cinema chain has been trying to hash out an accord for weeks as it looks to raise cash, manage its more than $5 billion debt burden and avoid a potential bankruptcy.

The U.S. entity of Japanese retailer Muji, known for its minimalist home goods, filed for bankruptcy, adding to a growing list of industry companies reeling from the COVID-19 pandemic, Bloomberg News reported. Muji U.S.A Ltd., which is operated by Ryohin Keikaku Co., filed for chapter 11 in Delaware, according to a filing. It listed assets and liabilities in the range of $50 million to $100 million, and estimated the number of creditors at 200 to 999. Ryohin Keikaku said in a separate statement that Muji U.S.A. filed for bankruptcy due to shutdowns from the coronavirus. The company had been grappling with losses due to high rent and other costs, and was taking steps to improve sales and renegotiate rents before the pandemic hit, it said. In the last fiscal year, sales from U.S. operations, where there are 19 stores, made up about 2.5 percent of Ryohin Keikaku’s revenue. The U.S. business has been operating at a loss for the past three fiscal years. Last year, it had a loss of around $10 million, according to its bankruptcy statement.

Bed Bath & Beyond said on Wednesday that its sales tumbled nearly 50 percent during its latest quarter, even as online sales surged more than 100 percent during April and May, with consumers stocking up on cleaning supplies and home decor, CNBC.com.  The company said that it plans to permanently close roughly 200 of its namesake stores over the next two years, starting later in 2020, as it works toward getting back to profitability against the backdrop of the coronavirus pandemic. As of May 30, it operated a total of 1,478 stores, including 955 Bed Bath & Beyond shops. Bed Bath — which also owns the chains Buybuy Baby, Christmas Tree Shops and Harmon Face Values — said these actions should generate annual cost savings of between $250 million and $350 million, excluding related one-time costs. Sales fell 49% to $1.31 billion from $2.57 billion a year ago, as the retailer’s stores were temporarily forced shut for much of the quarter like many other companies, to try to help curb the spread of COVID-19.