%1

The U.S. House of Representatives yesterday approved an extension of a $660 billion lending program in an effort to help small businesses hit hard by the coronavirus pandemic, renewing a lifeline that had just expired, Reuters reported. The Senate approved the extension on Tuesday. It would keep the Paycheck Protection Program (PPP), which expired at midnight Tuesday, operating through Aug. 8. The bill, which both chambers passed on a voice vote, now goes to President Donald Trump for signing into law. The Treasury Department and the Small Business Administration have handed out $515 billion since April under the small business lending program to help cash-strapped companies make rent and keep workers employed. The House and Senate action is aimed at keeping the funds flowing at least a few more weeks as lawmakers discuss restructuring the program for the longer term. Congress has signed off on roughly $3 trillion in coronavirus aid so far, but Federal Reserve Chair Jerome Powell and other Fed policymakers have said more will be needed.

More than $6 million of federal loans wasn’t enough to keep HopCat’s beer pubs or TooJay’s sandwich delis out of bankruptcy, Bloomberg News reported. They’re the two biggest recipients of Paycheck Protection Program aid, designed to prevent U.S. small businesses from collapsing during the pandemic, that filed for chapter 11 protection, according to research by bankrutpcydata.com. Almost one out of every 12 companies that have gone bankrupt since early April got PPP loans just weeks earlier, and more are likely on the way. “The bankruptcy trend is just up,” said Jim Hammond, chief executive officer of New Generation Research Inc., which owns bankruptcydata.com. “The money is going to run out.” The recipients that went bankrupt didn’t do anything improper. Federal regulations bar companies from receiving PPP money while they are in bankruptcy — but not the other way around. TooJay’s Management LLC and HopCat parent company Barfly Ventures LLC, which both filed within five weeks of getting federal assistance, are seeking to use the cash to keep operating while they reduce debt and prepare for a fresh start once their court cases end. For them, the low-interest PPP loan is a cheaper way to finance a turnaround than in traditional bankruptcy cases, where lenders routinely charge double-digit interest rates and impose hefty fees. There appears to be no guideline preventing a borrower from heading to the courthouse shortly after getting PPP funds, said Edward Barry, chief executive officer of Capital Bank NA, a Rockville, Maryland-based lender that has made $234 million of PPP loans. “It’s free money if you work within the program,” Barry said.

The Treasury Department announced yesterday that it will loan $700 million to a trucking firm that ships military equipment, in exchange for having U.S. taxpayers acquire an almost 30 percent stake in the company, the Washington Post reported. Under the unusual arrangement, the Treasury Department will provide the emergency loan to YRC Worldwide, while taking a 29.6 percent equity stake in the company. The U.S. government does not typically take ownership stakes in companies but was given permission to do so by Congress as a way to ensure taxpayer funds are not misspent. The deal is the first under a $17 billion loan program approved as part of the broader stimulus by Congress in March. That pot of money was earmarked for firms deemed “critical” to U.S. national security. Congress gave Treasury the authority to approve more than $500 billion in emergency loans to companies and cities, although most of that money has not been disbursed. “We are pleased for Treasury to make this loan pursuant to the CARES Act,” Secretary Steven Mnuchin said. “This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers.” YRC Worldwide is a publicly traded company headquartered in Kansas. With a fleet of about 7,600 tractors and 30,000 trailers, YRC is one of the largest “less-than-truckload” transportation companies in North America. The 96-year-old company covers 68 percent of the military’s services in that area, according to the Treasury Department’s announcement.

The U.S. Treasury Department has paid out more than $100 billion in unemployment benefits in June, the most for a single month since the pandemic started and underscoring the importance of federal relief efforts to shore up a battered job market, Bloomberg News reported. The U.S. Treasury paid out $108.5 billion in unemployment benefits in June — the most on record dating back to 2005 — according to the department’s latest daily statement on Tuesday. That exceeded the $93.6 billion in May and $48.4 billion in April as the government continues to play catch up with the backlog in processing claims due to an overwhelming number of people applying for benefits. States have said that claims from as early as the start of February are finally making their way through the system. And with the average weekly claim amounting to a little less than $1,000 — which includes a temporary $600 pandemic benefit — backdated checks could amount to thousands of dollars. Despite the surge in payments in June, the numbers still fall short of the estimated $141.2 billion that should have been paid during the month, according to Bloomberg calculations based on weekly unemployment filings and the average size of those claims. The total estimated shortfall since March, when pandemic-related job losses began, now comes to about $105.3 billion, according to Bloomberg calculations.

U.S. President Donald Trump said yesterday that he supports another coronavirus stimulus bill but wants it to include incentives for Americans to go back to work, setting up a clash with Democrats in Congress over jobless benefits, Reuters reported. Trump said he supports direct payments to individuals as part of the so-called Phase 4 stimulus package. “We want to create a very great incentive to work. So, we’re working on that and I’m sure we’ll all come together.”  The remarks indicate the Trump administration will oppose an effort by Democrats in Congress to renew a $600 supplement to weekly jobless benefits set to expire at the end of July that was contained in earlier coronavirus relief legislation. Many Republicans have argued that the supplemental benefit encourages workers to remain unemployed and they would prefer to provide a benefit for workers returning to the job. Trump said that the structure of the last round of financial aid to struggling Americans created a disincentive for people to return to work. Administration officials have said they will calibrate their response in terms of further stimulus based on economic data set to roll in over the next couple of weeks. Negotiations over another relief bill are not expected to pick up until Congress returns from a break for the July 4 Independence Day holiday.

More than 40 million workers have filed for unemployment benefits since the early days of the coronavirus pandemic — over seven times the number of requests in all of 2019. And all of those claims have been convenient cover for identity thieves filing bogus applications that could cost billions of dollars, the New York Times reported. “Fraudsters have been able to hide in the flood of data,” said Pam Dixon, executive director of the World Privacy Forum, a public interest research group. “It is a perfect storm of identity fraud. Anyone who has experienced a major breach in the past three or four years could fall victim to this.” The coronavirus has made the unemployment system, which is administered by the states, an attractive target in other ways, too: The CARES Act relief package added an extra $600 a week to successful claims and expanded eligibility to self-employed and similar workers, who are not subject to the same employment verifications that typically apply. Having your application flagged for review doesn’t necessarily mean someone else tried to pose as you — it just means your state thought it warranted further inspection. Fraudulent claims have forced states to dial up their scrutiny and deploy systems that mark potentially suspicious claims.

Payroll services firm ADP reported that private payrolls expanded in June as pandemic stay-at-home orders lifted and employees returned to work, rebounding from a troubling drop in May, the Washington Post reported. The nation’s private employers expanded by more than 2.37 million positions in June, according to ADP. It also revised its May figures to show a net gain of 3.1 million jobs instead of the loss of 2.76 million reported last month. Still, the gains are tenuous — stores, restaurants and other businesses that were allowed to reopen weeks ago are shutting down as coronavirus infections spike, leading to new layoffs. California, Florida and Texas have implemented new policies that partly restrict restaurant or bar service, and at least nine other states have postponed or slowed reopening plans. The monthly ADP report, produced in collaboration with Moody’s Analytics, noted that small businesses (those with fewer than 50 employees) added 937,000 jobs. Franchises saw a 4,500-job increase, with growth at restaurants, auto dealers and parts sellers and declines in food retailers, business services, accommodations and real estate.

Bankrupt Hertz Global Holdings Inc. and its bondholders are squaring off over how to shrink its nearly half-a-million vehicle fleet, Bloomberg News reported. Market watchers say that the outcome could upend the $25 billion rental-car lease ABS industry. The cars are housed in an entity linked to Hertz’s asset-backed securities and leased to the rental giant. Hertz wants a judge to allow it to convert the master lease into 494,000 separate agreements so it can reject the terms on 144,000 vehicles. That would allow Hertz to save roughly $80 million a month while it hangs onto the remainder of the cars as it seeks to emerge from bankruptcy a viable company. If the motion fails, Hertz may press for a reduction in payments to creditors. Hertz is seeking to avoid liquidation and strengthen its balance sheet via the restructuring, while bondholders with billions of dollars at risk who’d grown confident of their chances of being paid back are now threatened with losses. Moreover, industry insiders worry that if Hertz is successful in court, it would redefine the rules that have long governed the ABS market.

NPC International Inc., the nation’s largest Pizza Hut and Wendy’s franchisee, filed for bankruptcy Wednesday and will put its burger restaurants up for sale as it continues to hold discussions over the fate of its pizza outlets, WSJ Pro Bankruptcy reported. The company, which operates more than 1,200 Pizza Hut locations and about 400 Wendy’s Co. restaurants, had been struggling even before the coronavirus pandemic forced many of its eateries to close. The company nearly filed for chapter 11 earlier this year before a group of lenders threw it a financial lifeline. The company said that the Pizza Hut chain has been a particular drag on NPC for years, amid steep competition from rivals and Pizza Hut parent Yum Brands Inc.’s reluctance to invest in the chain, according to a filing in the U.S. Bankruptcy Court in Houston. Nevertheless, if all goes well in bankruptcy, NPC intends to reorganize around its Pizza Hut eateries and emerge from chapter 11 under new ownership. NPC was in default on payments owed to the Pizza Hut parent when it filed for bankruptcy, court filings show. The franchisee has nearly $900 million in debt.

Macy’s Inc. reported a staggering $3.58 billion quarterly loss yesterday as coronavirus-related store shutdowns resulted in a $3 billion impairment charge, Reuters reported. “While our stores are reopened, we expect that the COVID-19 pandemic will continue to impact the country for the remainder of the year,” Macy’s chief executive, Jeff Gennette, said in a statement, adding that the department store operator does not expect another total shutdown of stores. Macy’s, which also owns Bloomingdale’s, said net sales for the fiscal first quarter ended May 2 nearly halved to $3.02 billion. Macy’s, which on June 25 said that it would lay off about 3,900 employees in corporate and management positions in a bid to save cash, did not provide an updated outlook. In response to the market changes, Macy’s has invested heavily in improving its digital business and personalized marketing, clearing out unsold inventory and offering services like curbside pickup.