Macy’s is eliminating about a quarter of its corporate workforce, slashing 3,900 white-collar jobs in a sweeping effort to cut costs during the coronavirus pandemic, the Washington Post reported. The layoffs announced yesterday come just months after the beleaguered retailer announced it would close 125 stores — about a fifth of its total — and shed 2,000 positions after a disappointing holiday season. The company also is scaling back staffing at its Macy’s and Bloomingdale’s stores, distribution facilities and customer service centers, but says that it will “adjust as sales recover.” The department store chain projected the moves would save it $630 million a year. The pandemic “has significantly impacted our business,” chief executive Jeff Gennette said in a statement. “While the reopening of our stores is going well, we do anticipate a gradual recovery of business. … We know that we will be a smaller company for the foreseeable future.”
Cash-starved cities and states across the country are starting to weigh whether to raise taxes on homes, cigarettes, local businesses and global tech giants, hoping to rake in new revenue that might help them close the massive budget shortfalls created by the coronavirus pandemic, the Washington Post reported. The increases that have been proposed — and in some cases adopted — reflect growing desperation on the part of government leaders nationwide. Many have found that recent spending cuts, furloughs and layoffs have not been enough to shore up their sagging finances, forcing them to consider more politically noxious and economically risky moves in the middle of an economic crisis. Philadelphia increased fees on parking and raised wage taxes on workers who reside outside the city. Chicago Mayor Lori Lightfoot (D) said this month she could not rule out a property tax increase to cover her city’s $700 million budget shortfall. From New York to Seattle, other states and municipalities have considered a wide array of prospective rate hikes in response to major drops in once-reliable sources of income — and months of failed attempts to get Congress to authorize more federal aid. Nashville leaders even took the eye-popping step in June to increase property taxes by about 34 percent, a move meant to help pay down rising public education costs — and one that quickly sparked a public outcry. The city’s rates had long been historically low, according to Bob Mendes, an at-large member of the Nashville Metro Council who helped craft the budget blueprint. An increase helped pave the way for the city to close an anticipated $216 million financial hole in the 2021 fiscal year without severely hamstringing much-needed public services, he said.
Restaurant chain Chuck E. Cheese parent CEC Entertainment filed for chapter 11 protection today, making it the latest corporate casualty of the COVID-19 pandemic, Reuters reported. The company described the current crisis as the “most challenging” in its history and said it would use the bankruptcy proceedings to continue talks with stakeholders and landlords, as well as restructure its balance sheet. CEC listed both assets and liabilities in the range of $1 billion to $10 billion, according to the bankruptcy filing in the U.S. Bankruptcy Court for the Southern District of Texas. U.S. and international franchise partners as well as corporate entities outside the United States are not part of the process, it said. Chuck E. Cheese and Peter Piper Pizza locations will continue to re-open as per government guidelines, CEC added. As of yesterday, 266 Chuck E. Cheese and Peter Piper Pizza restaurant and arcade venues were re-opened, with the company expecting to maintain ongoing operations in the locations throughout the chapter 11 process. Irving, Texas-based CEC was taken private by Apollo Global Management in 2014 in a $1.3 billion deal, including debt.
Jason Industries Inc., the maker of brushes, polishing buffs and seating for heavy industry, filed for bankruptcy after turnaround efforts that began last year foundered amid the coronavirus pandemic, Bloomberg News reported. Creditors of the Milwaukee-based manufacturer are expected to become the new owners as part of the chapter 11 filing with the U.S. Bankruptcy Court in the Southern District of New York. Shareholders will be wiped out, according to a June 5 outline of the plan. Jason has been working with advisers since August 2019 including Moelis & Co., Kirkland & Ellis and AlixPartners on strategic alternatives. These included looking for a buyer and cutting debt, which totaled more than $400 million earlier this year. But the weak economy weighed on demand from customers and curtailed Jason’s ability to keep up with payments. The company’s preliminary outline envisioned cutting leverage by about $250 million.
Back in April, when the U.S. Small Business Administration was approving about $25 billion in coronavirus loans a day, lawmakers and companies were concerned that $669 billion in relief would run dry, leaving countless mom-and-pop firms hanging. Yet the Paycheck Protection Program had more than $100 billion in funding left as of last Saturday, with only days remaining until the SBA stops taking new applications on June 30, Bloomberg News reported. The PPP loans were a lifeline for the more than 4.7 million companies that got assistance — with an unprecedented $516.5 billion approved over two rounds in less than three months. Still, demand waned after an initial barrage. Millions of the smallest and most vulnerable firms didn’t know they were eligible or didn’t apply because the complicated program didn’t meet their needs. Now, there’s debate in Congress about what to do with the leftover PPP money, and how to reach those businesses as the economy reopens in the midst of new virus outbreaks across the country. “There’s strong bipartisan interest in protecting the funds that have been appropriated to develop a second round, but to have it targeted more to those small businesses that really need the help,” said Sen. Ben Cardin (D-Md.), the top Democrat on the Small Business & Entrepreneurship Committee. Sen. Marco Rubio (R-Fla.), the panel’s chairman, has also suggested another phase of targeted relief. Having leftover funds is a surprising outcome for the PPP program, the centerpiece of the $2.2 trillion relief package Congress enacted in March in response to the pandemic. The criteria to turn the debt into a grant, chiefly by spending a large chunk of the money on payroll, suited larger firms better than mom-and-pop stores and the self-employed. The PPP loans, disbursed via approved lenders, also were harder to get for businesses in low-income communities that often are shut out of the traditional banking system. The initial $349 billion in PPP funding for forgivable loans was depleted in just 13 days, and almost $189 billion of a second round of $320 billion was tapped in the first two weeks after the program relaunched April 27. The program, designed for the 30 million U.S. businesses that have fewer than 500 employees, has stalled since mid-May, leaving about $128 billion available as of June 20, according to the SBA. Read more.
In related news, Treasury Secretary Steven Mnuchin said that the Trump administration is discussing another stimulus package with lawmakers that could be passed in July, the latest effort to revive the U.S. economy amid the coronavirus pandemic, Bloomberg News reported. “It’s something we’re very seriously considering,” Mnuchin said on Tuesday. He said that he expects the U.S. economy to exit recession by year’s end. President Donald Trump has said he’s considering sending another round of economic stimulus payments in a rescue package that he expects will be released “over the next couple of weeks.” The Trump administration has privately discussed a $1 trillion measure as a way to stimulate jobs growth after the COVID-19 pandemic. Mnuchin reiterated that he and the president are not inclined to shut down the economy a second time if there is a resurgence in coronavirus cases. He noted that in March when businesses were ordered to close, hospitals had been overwhelmed with patients and ventilators were running low. Earlier this week, Mnuchin met with Republican senators, who are considering whether the next stimulus measure should include another round of direct payments to individual households. “We want to take our time and make sure we are thoughtful,” Mnuchin said after meeting with the lawmakers. “Whatever we do will be much more targeted and much more focused on jobs and bringing back jobs.” Read more.
Hertz Global Holdings Inc.’s bonds were valued at 26.375 cents on the dollar in a credit derivatives auction yesterday, casting doubt on the possibility that shares will have any value when the company emerges from bankruptcy, Bloomberg News reported. The price, determined in an auction that’s used to settle hundreds of millions of credit default swaps tied to the bankrupt company, means traders who bought protection against the car rental company’s failure will be paid 73.625 cents for every dollar insured. The relatively low bond recovery level suggests Hertz shareholders are likely to see their holdings go to zero as the company reorganizes in bankruptcy court. Hertz is among several bankrupt and near-bankrupt companies whose shares have surged amid a burst of interest from retail investors, even though equity is typically wiped out in chapter 11 proceedings. Hertz shares at one point doubled early yesterday after analysts at Jefferies wrote that firms like CarMax Inc. and AutoNation Inc. could be interested in purchasing Hertz’s roughly 150,000-car inventory. The stock closed at $1.61, up 30 percent from a day earlier. In a highly unusual move, Hertz attempted to sell new shares last week to raise cash and help pay off creditors before calling off the effort amid scrutiny from the Securities and Exchange Commission.
The House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets will hold a hearing today at noon ET titled, “Capital Markets and Emergency Lending in the COVID-19 Era." Securities and Exchange Commission Chairman Jay Clayton will testify before the subcommittee. Click here to view the prepared materials, access the live webcast of the hearing and review the legislative proposals to be discussed at the hearing.
New York City Mayor Bill de Blasio (D) said that the city could lay off or furlough up to 22,000 employees in the fall as it faces a $9 billion budget shortfall from the coronavirus, the Wall Street Journal reported. Looking to cut another $1 billion from the budget, de Blasio said that the staffing reductions would happen in the fall and be across every city agency, including his own office. There are currently more than 326,000 city employees, according to the Citizens’ Budget Commission. Mr. de Blasio has warned about the “bleak reality” of the city’s financial crisis since the coronavirus hit, but Wednesday was the first time he put a number to possible staff cuts in the fiscal year beginning July 1. To avoid layoffs, the mayor said that he would first try to find the savings in discussions with the labor unions that represent city employees. The city could negotiate some concessions within the contracts, he said. “We are running out of options here,” he added, calling layoffs and furloughs a “last resort.”
A major U.S. pilots union said yesterday that it has begun discussing with key lawmakers a plan for the government to purchase seats on each flight to prevent passengers from having to sit next to strangers, Reuters reported. The idea, launched by the Allied Pilots Association (APA) representing American Airlines’ 15,000 pilots, is aimed at easing a return to pre-pandemic passenger levels while creating a level playing field across the airline industry. As of now, some but not all U.S. airlines are blocking middle seats or capping the number of seats they are selling on each flight in order to allow for more space between passengers. Air travel has dropped dramatically in the midst of the coronavirus pandemic. Under the plan, the price of empty seats would be based on industry average costs for 2019, and as immunity to COVID-19 rose, the number of empty seats bought by the government would fall.
