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Creditors to CEC Entertainment Inc., which runs Chuck E. Cheese and Peter Piper Pizza, are weighing restructuring options including bankruptcy as the company seeks to get through the pandemic that has shuttered its locations, Bloomberg News reported. Lenders and bondholders are considering putting new money into the business to keep it afloat, according to people familiar with the matter who asked not to be identified discussing a private matter. Both in and out-of-court options to tame the company’s debt load are being discussed, said the people, noting that the situation is evolving as states across the country mull whether to lift stay-at-home orders. A chapter 11 filing would allow CEC, acquired by private equity firm Apollo Global Management Inc. in a 2014 leveraged buyout, to keep some locations operating and permanently close weaker ones to minimize costs. Chuck E. Cheese alone has over 600 outlets, which would be evaluated for closures as part of the potential court-supervised process, the people said. A group of bondholders has suggested putting $100 million of new money into the firm, extending maturities and adding a payment-in-kind option to give the firm more flexibility. While a proposal was sent to the company, holders haven’t been asked to sign non-disclosure agreements, the people added. PIK notes allow companies to borrow more in lieu of making interest payments, which can help firms facing liquidity pressure. Lenders also organized with advisers and are contemplating putting in new money to support their investment in the company. The group hasn’t sent any formal proposals to CEC, but some parties have discussed new financing of around $200 million as an option to rework the balance sheet.

Barry Sternlicht’s Starwood Capital Group missed two monthly payments on securitized debt tied to five shopping malls anchored by bankrupt department stores including Sears and J.C. Penney, Bloomberg News reported. The delinquent May and June payments are further signs of the damage wrought by the COVID-19 pandemic and economic shutdown, especially to retail. The missed payments total $2.7 million on the $549 million commercial mortgage-backed security, according to data compiled by Bloomberg. Debt delinquencies have soared for mall owners, which lost market share to e-commerce and were hit with tenant bankruptcies even before the pandemic forced shoppers and diners to stay home. By last month, more than 9 percent of retail commercial mortgage-backed securities were managed by special servicers, the workout firms that handle delinquent debt, up from about 5 percent before the pandemic, according to property data firm Trepp. Landlords collected an average 61 percent of rent from retail tenants in June, down from 88 percent in March before the crisis, according to Datex Property Solutions. Starwood Capital, which Sternlicht founded in 1991 as a distressed real estate investing firm, now manages about $60 billion in assets. Read more. 

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

Americans have skipped payments on more than 100 million student loans, auto loans and other forms of debt since the coronavirus hit the U.S., the latest sign of the toll the pandemic is taking on people’s finances, the Wall Street Journal reported. The number of accounts that enrolled in deferment, forbearance or some other type of relief since March 1 and remain in such a state rose to 106 million at the end of May, triple the number at the end of April, according to credit-reporting firm TransUnion. The largest increase occurred for student loans, with 79 million accounts in deferment or other relief status, up from 18 million a month earlier. Auto loans in some type of deferment doubled to 7.3 million accounts. Personal loans in deferment doubled to 1.3 million accounts. The surge in missed payments suggests that the flood of layoffs related to the coronavirus has left many Americans without the means to keep up with their debts. Many people have used up their stimulus checks, and unemployment benefits in high-cost areas aren’t enough to replace paychecks or to help debt-laden borrowers pay down their bills. In some cases, the government is instructing companies to let borrowers defer their loans. The stimulus package signed into law in March, for example, allowed most borrowers to stop making monthly payments through Sept. 30 on federal student loans. The stimulus package also allowed homeowners hurt by the coronavirus or its economic fallout to ask their mortgage servicers for permission to pause their payments for up to 12 months.

Federal workers face serious risks during the coronavirus pandemic performing jobs such as guarding prisoners, delivering mail or providing nursing care. But teleworking has also led to problems, such as delays processing millions of paper tax forms or potentially exposing national secrets to hackers, USA Today reported. Just spending $2.2 trillion as quickly as Congress directed in response to the pandemic opened doors for waste, fraud and abuse. These are among the potential problems that a group of inspectors general warned federal agencies to avoid in a 92-page report yesterday called “Top Challenges Facing Federal Agencies: Covid-19 Emergency Relief and Response Efforts." “Part of our mandate is to not only detect waste, fraud, abuse and mismanagement, but hopefully prevent it from happening on the front end,” Robert Westbrooks, executive director of the inspectors general group called the Pandemic Response Accountability Committee, told USA TODAY. “This is a road map for agency managers and for policy makers to help them address some common issues.” Congress created the committee of 20 inspectors general to track the pandemic response because of the unprecedented size and speed of the response to the pandemic. “Inspectors general continue to conduct aggressive, independent oversight of the more than $2.4 trillion in emergency coronavirus response spending,” said Michael Horowitz, the inspector general for the Justice Department and acting chairman of the committee.

Bankrupt Hertz Global Holdings Inc. yesterday suspended its plan to sell up to $500 million in new shares after the U.S. Securities and Exchange Commission (SEC) raised objections to the sale, Reuters reported. The move comes after SEC Chairman Jay Clayton told CNBC television that the agency has some issues with Hertz's share sale plan, without elaborating on what the problems were. "After discussions with the (SEC) staff, sales under the...program were promptly suspended pending further understanding of the nature and timing of the staff’s review," Hertz said in a filing. Last week, Hertz won bankruptcy court approval to sell up to $1 billion in stock. It announced on Monday plans to sell up to $500 million in new shares, as it takes advantage of a strong rally in its stock since filing for bankruptcy last month. Hertz has warned that its shares would be eventually “worthless”, but the stock sale could benefit creditors seeking to recover more of their claims during the bankruptcy process.

Small-business owners won’t have to pay back their federal pandemic relief loans even if they don’t rehire all of the workers they laid off, the Trump administration affirmed, effectively eliminating a rule that many borrowers had feared would leave them stuck with a large debt, the New York Times reported. Congress appeared to relax that requirement this month with a new law that loosened many terms of the Paycheck Protection Program, a $660 billion relief effort intended to help struggling small companies retain or rehire their workers. But the final say on how the law would be interpreted rested with the Treasury Department, which has called the shots on most aspects of the relief effort. The Treasury Department and the Small Business Administration, the program’s manager, released new loan forgiveness forms that slashed documentation requirements and will give many borrowers an easy pathway to having their debt eliminated. The forms added a “safe harbor” option that allows borrowers to simply affirm they were unable to operate “at the same level of business activity” they had before the crisis because of government requirements or safety guidance, including social distancing rules. Those borrowers can have their loans fully forgiven if they meet the program’s other rules, including a requirement that they spend at least 60 percent of their aid money on payroll.

Two former Federal Reserve economists said the Fed and Treasury Department should ease terms and increase bank fees to boost participation in the central bank’s new effort to lend directly to small and midsize U.S. businesses, the Wall Street Journal reported. After last week revamping the Main Street Lending Program to offer more favorable loan terms, the Fed this week formally opened the initiative. Elected officials, bankers and industry lawyers have warned the program may see tepid demand because of its design. The Main Street program is open to companies with up to 15,000 employees or less than $5 billion in revenue last year. The Fed will purchase up to 95 percent of loans made by banks that meet certain standards, freeing banks up to make more loans. n a paper published by the Brookings Institution on Thursday, Nellie Liang and William English, who previously led the Fed’s divisions of financial stability and monetary affairs, respectively, suggest further changes to the program:

• Longer terms: Under the latest terms, principal payments can be delayed for two years, and loans must be repaid within five.

• Different rates: They say that the program should be changed so that loans to less risky borrowers carry lower rates and have more streamlined documentation. Currently, all loans must pay a spread of 3 percentage points above a widely used short-term borrowing rate.

• Smaller loans: The Fed has twice reduced the minimum loan amount, to $250,000 most recently from earlier thresholds of $500,000 and $1 million. Ms. Liang and Mr. English suggest allowing even smaller loans, which could encourage smaller banks to participate and reach businesses that can’t qualify for the Paycheck Protection Program or need additional support.

• Riskier borrowers: The first set of changes to the program allowed businesses with more debt to participate if banks held on to a larger piece of the loan, but the latest terms changed this so that banks retain a 5 percent stake in all loans. The economists suggest allowing banks to extend loans to riskier firms if they hold a larger portion of the loan.

• Higher bank fees: To encourage banks to participate in the program, Liang and English say that the Fed may need to offer a higher level of fees as well as additional compensation to handle loan workouts should borrowers default.

The Main Street initiative, announced in March, is designed to fill a hole left by the government’s economic-crisis relief efforts by assisting companies too large to qualify for loans under the PPP and too small to borrow in corporate-debt markets, which are being supported with another Fed backstop.

Going-out-of-business sales at 136 closing J.C. Penney stores began yesterday, USA Today reported. The discounts range from 25 to 40 percent off original prices storewide. All sales will be final starting on June 25, according to the company. The retailer, which filed for chapter 11 protection May 15, also updated its list of stores that will permanently close in its first wave of closures. J.C. Penney announced June 4 that 154 stores would close in its first wave of closings but now 136 stores are on the list. However, the removed locations may still close."A handful of previously announced store closing locations remain on hold pending further review," J.C. Penney said in a blog post. The retailer is expected to close 242 stores for good, or about 29 percent of its 846 locations with 192 stores expected to close in the current fiscal year, which ends in February, and then 50 in the next fiscal year. After the closings, the company will have around 604 remaining locations.