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After a stumbling start, the government’s centerpiece relief program for small businesses was closing down yesterday — although it may turn out to be a temporary hiatus, the New York Times reported. In just three months, the Paycheck Protection Program handed out $520 billion in loans meant to preserve workers’ jobs during the coronavirus pandemic. But as new outbreaks spike across the country and force many states to rethink their plans to reopen businesses, the program had more than $130 billion still in its coffers. It might not be closed down for long, though. Just a few hours before the program was scheduled to shut down late yesterday, the Senate approved a five-week extension for the program to August 8. It wasn’t clear when the House might take up the bill. Read more. 

In related news, U.S. Treasury Secretary Steven Mnuchin testified at a House Financial Services Committee hearing that up to $140 billion in loans for small business could be refocused to support restaurants, hotels and other industries hit hardest by the coronavirus pandemic, Reuters reported. Mnuchin said it appeared there was support among Democrats and Republicans to “repurpose” the money, perhaps by tailoring it to hotels, restaurants and other businesses most impacted by the social-distancing measures adopted to fight the spread of the novel coronavirus. Mnuchin was testifying along with Federal Reserve Chair Jerome Powell before the U.S. House of Representatives Financial Services Committee about the U.S. fiscal and monetary response to the coronavirus crisis, including the nearly $3 trillion allocated by Congress to help businesses and individuals. Read more. 

More U.S. retail companies sought bankruptcy protection in the first half of 2020 than in any other comparable period. Energy filings piled up at the fastest pace since oil prices plunged in 2016, data compiled by Bloomberg show. There have been 75 filings among all companies with liabilities of at least $50 million in the last three months, matching the same period of 2009, the second-worst quarter ever. Signaling more trouble ahead, the universe of issuers with bonds trading at distressed levels expanded for the first time since April. Three retailers filed last week, including Grupo Famsa SAB de CV, CEC Entertainment Inc. and GNC Holdings Inc. That made 16 bankruptcies for the year-to-date, the most ever for the first six months of a year, according to Bloomberg data going back to 2003. The sector remains under pressure from lockdowns that are crushing demand. The energy sector is the second-biggest contributor to this year’s bankruptcy surge, with June’s seven oil and gas filings matching the April 2016 peak. Chesapeake Energy Corp.’s insolvency highlights risk lurking in the shale sector, which remains under pressure from weak global demand.

Lilis Energy, an oil and gas producer, announced on Monday that it filed for chapter 11 protection in Houston, TheStreet.com reported. Lilis operates in the Permian Basin of West Texas and Southeastern New Mexico. It has a restructuring agreement with many of its creditors and equity holders, including Varde Partners, the company said in a statement. Under the agreement, common shareholders would be wiped out. The plan, which must be approved by the bankruptcy court, would likely reduce Lilis’ funded debt obligations by more than $34.9 million. It has received a commitment from its bank lenders to provide up to $15.0 million in debtor-in-possession financing. The company anticipates up to $5.0 million will be available on an interim basis. The plan is contingent on Varde providing an equity commitment and additional debtor-in-possession financing. If Varde decides not to do so, or the restructuring plan isn’t pursued, Lilis will sell off its assets, the company said.

Five U.S. restaurant companies have recently found suitors to acquire them out of bankruptcy, in contrast to the host of troubled retailers failing to attract buyers amid the COVID-19 pandemic, the Wall Street Journal reported. Chains that own casual-dining brands including Krystal, Logan’s Roadhouse, Gordon Biersch, Bar Louie, Brio, Bravo and the U.S. division of Le Pain Quotidien have all found takers for their bricks-and mortar locations after filing for bankruptcy protection this year. The buyers are betting that restaurants will rebound after the pandemic. That view doesn’t extend to retailers that have struggled to adapt to changing consumer preferences; the growth of e-commerce, particularly Amazon.com Inc.; and the obsolescence of malls. None of the major bricks-and-mortar retailers that filed for bankruptcy in 2020 looking for a buyer has been able to sell its stores, according to BankruptcyData.com. The recent wave of retail bankruptcies has come as government-mandated coronavirus closures tipped struggling companies over the edge. Restaurants were ordered to close their dining rooms, though many have continued to serve customers through drive-throughs, carryout, curbside pickup and delivery. “A path to success for restaurants is clearer to an investor than one for retailers,” said Stephanie Lieb, a bankruptcy lawyer at Florida-based Trenam Law. One reason restaurants are often viewed as more attractive is their franchising models, which require less of a capital investment from the chain’s owner, said Aaron Cheris, a partner at Bain & Co. and head of its Americas retail practice.

U.S. District Judge Brian S. Miller testified before the Senate Judiciary Committee yesterday that the creation of new judgeships has not kept pace with the growth in case filings over three decades, producing “profound” negative effects for many courts across the country, according to a U.S. Courts press release. Miller on behalf of the Judicial Conference of the United States, the national policy-making body of the federal Judiciary. Miller chairs a subcommittee on judicial statistics for the conference’s Committee on Judicial Resources. The Judicial Conference has recommended that Congress establish five new judgeships in the Ninth Circuit Court of Appeals and 65 new judgeships in 24 district courts across the country. The Judicial Conference also recommended the conversion of 14 temporary bankruptcy judgeships to permanent status.

The top Republican in the U.S. House of Representatives said yesterday that it would not be productive to extend extra unemployment benefits that were included in coronavirus relief legislation earlier this year but that expire on July 31, Reuters reported. “I don’t think it’s productive to extend the added money from the federal government. We’re finding numerous people... that it’s becoming a hardship for individuals to go back to work,” said House Minority Leader Kevin McCarthy (R-Calif.). Republicans and Democrats have been debating over what else needs to be done to help the country recover from the economic effects of the novel coronavirus, which led to business closures that left millions of Americans out of work. McCarthy was referring to statistics showing many Americans are paid more thanks to the extended unemployment benefits than they earned when they were at work. Instead, he said, the focus should be on getting people back to work. The loss of the safety net of $600 per week looms well before a sustained recovery is likely to take hold from the sudden and deep recession brought by the pandemic.