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Black Knight reported that of all of the types of mortgages available, government-insured mortgages have the greatest share of loans in forbearance that have little to no equity, National Mortgage News reported. This could negatively affect how those loans are treated when the forbearance period ends, the company said. The great majority of borrowers with forborne government-insured loans have 20 percent or more equity in their homes. But "just 9 percent [of borrowers with forborne loans] have 10% or less equity — typically enough to cover the cost of a sale of a property — with another 1 percent underwater on their mortgages," Ben Graboske, president of Black Knight's data and analytics division, said in a press release. "Of course, this leaves a population of nearly half a million homeowners who may lack the necessary equity to sell their homes to avoid foreclosure in a worst-case scenario," he added. About 19 percent of Federal Housing Administration and Veterans Affairs mortgages in forbearance were at loan-to-value ratios at 90 percent or higher, the firm found.

Neiman Marcus Group Ltd. LLC filed its chapter 11 plan and company disclosures with a bankruptcy court in Houston, keeping the company on track to emerge from bankruptcy by the fall, Bloomberg Law reported. The plan and disclosures that Neiman Marcus and several affiliates filed on June 6 lays out the details of the restructuring agreement it announced when it filed for bankruptcy in May. The Dallas-based luxury retailer had about $5.5 billion in debt when it filed for chapter 11 protection with the U.S. Bankruptcy Court for the Southern District of Texas. The company is restructuring with the help of a $675 million bankruptcy loan from a group of the company’s pre-petition lenders. The court scheduled a hearing to consider the disclosure statement July 8. The company needs court approval of its disclosures before creditors can vote on the plan.

Bankrupt fitness club Gold’s Gym International Inc. is looking to sell itself via auction, with a stalking-horse bid of more than $80 million, Bloomberg Law reported. Judge Harlin D. Hale of the U.S. Bankruptcy Court for the Northern District of Texas yesterday approved bidding procedures for a July 13 auction that will lead to a sale as part of the GGI’s reorganization plan. TRT Gym Asset Holdings LLC, GGI’s majority shareholder as well as an affiliate of the debtor’s post-bankruptcy debtor-in-possession lender, is the lead bidder for the company. Its offer, subject to overbid at auction, will provide $51.3 million to pay off pre-bankruptcy lenders, $20 million for estimated outstanding DIP loans, and between $7 million and $10 million for curing defaults of any contracts or leases that the purchaser may assume as part of the sale. TRT will also pay $225,000 for distribution to unsecured creditors. If another buyer prevails at the auction, TRT will be entitled to receive a break-up fee equal to 3 percent of the purchase price.

As many as 25,000 U.S. stores could close permanently this year after the coronavirus pandemic devastated an industry where many mall-based retailers were already struggling, Bloomberg News reported. The number would shatter the record set in 2019, when more than 9,800 stores closed their doors for good, according to a report from retail and tech data firm Coresight Research. Most of the closures are expected to occur in malls, with department stores and clothing shops predicted to be among the hardest hit. “If the anchor tenants close stores in the mall, other tenants are likely to follow suit,” Coresight Chief Executive Officer Deborah Weinswig said in the report, which put the expected range at 20,000 to 25,000. The U.S. has the most retail selling space per capita of any country and the lowest sales per square feet, according to commercial real estate company Cushman & Wakefield. American retailers went dark in mid-March in response to the Covid-19 outbreak, and — even though states are now beginning to ease restrictions — many shops are still shuttered or only providing limited service. As of June 5, retailers have planned about 4,000 permanent store closures, including hundreds by J.C. Penney, Victoria’s Secret and Pier 1 Imports. In March, before the extent and duration of the virus lockdown was clear, Coresight estimated that about 15,000 stores would shutter in 2020. 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. 

Oil company California Resources Corp. skipped an interest payment to lenders and could file for bankruptcy as soon as next week, the Wall Street Journal reported. The Los Angeles-based oil driller said yesterday that it has entered into an agreement with a majority of its senior lenders to wait until Sunday before they can declare a default. California Resources failed to make a $30 million payment to lenders last month. Without another extension from the lenders and other creditors, California Resources will file for bankruptcy by this weekend. Like many other U.S. oil producers, California Resources, created in 2014 as a spinoff of Occidental Petroleum Corp., has been struggling with a drop in commodity prices due to the coronavirus pandemic. California Resources is primarily a conventional driller of oil and gas, although it also operates some acreage in the Monterey shale. It generated roughly $2.6 billion of revenue in 2019 and finished the year with approximately 1,250 employees. Read more. (Subscription required.) 

Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. Order your copy of ABI's revised and expanded When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy, Second Edition. 

Chesapeake Energy Corp. is preparing a potential bankruptcy filing that could hand control of one of the leading lights of the U.S. shale revolution to senior lenders, Bloomberg News reported. The dwindling options for a powerhouse that once rivaled Exxon Mobil Corp. for title of king of American natural gas comes after Chief Executive Officer Doug Lawler’s 7-year effort to untangle the financial and legal legacies of Chesapeake’s late founder, Aubrey McClendon. Lawler’s denouement, in turn, would signal the deep peril facing a shale industry largely built according to McClendon’s blueprint for Chesapeake: amassing incredible debts to pursue aggressive drilling programs that ultimately unearthed too little treasure to reward investors. Chesapeake is negotiating a restructuring support agreement that could see holders of its so-called FILO term loan take a majority of the equity in bankruptcy. Chesapeake, which owes about $9 billion, is debating whether to skip interest payments due on June 15 and invoke a grace period while it talks with creditors. No final decision has been made, according to sources. The company has also begun soliciting lenders to provide debtor-in-possession financing to fund its operations during bankruptcy.

A group of Whiting Petroleum Corp. bondholders is balking at the company’s restructuring plan, saying the shale driller had the money to pay them in full but chose to file for bankruptcy instead, WSJ Pro Bankruptcy reported. Denver-based Whiting, which drills in North Dakota, the Rocky Mountains and Texas, filed for bankruptcy in April, one of the biggest energy companies to fall victim to the crash in oil prices since the coronavirus pandemic took hold in the U.S. The company had planned to pay down $190 million in convertible bonds that matured April 1, but changed course after consulting with another group of bondholders whose debt was due to mature between 2021 and 2026, according to an objection to Whiting’s plan-disclosure statement filed by the convertible bondholders. Preserving liquidity was the priority in the oil patch when oil futures briefly dipped below $20 a barrel in March amid fears of the pandemic’s impact on the economy and a Saudi-Russian price war that flooded global crude markets. Now, Whiting’s convertible bondholders say that the company’s restructuring plan benefits the rival bondholder group at their expense. They want the company to reveal more information about how it reached a decision to file for bankruptcy and formulated the proposed restructuring plan as well as details on alternatives it may have considered.

Tailored Brands Inc., the owner of Men’s Wearhouse and Jos. A. Bank, is considering a potential bankruptcy after the coronavirus lockdown kept America’s office workers at home, putting a damper on demand for new suits, Bloomberg News reported. The retailer and its advisers have started reaching out to interested parties about reworking its debts of more than $1 billion. Plans are in the early stages and could change, with Tailored Brands still seeking alternative forms of financing, according to sources. The restructuring plans could depend on market conditions and the outlook for stores to re-open. Sales have suffered because government officials were telling shoppers to stay home and nonessential businesses to stay shut to combat the Covid-19 pandemic. Tailored Brands was struggling even before the outbreak. Sales have fallen every year since 2016 as Men’s Wearhouse and Jos. A. Bank contended with changing consumer tastes and ecommerce rivals.

Senate Democrats are calling on the Trump administration to release more details about an alleged criminal operation designed to defraud state unemployment programs across the country, fearing these systems remain vulnerable to attack amid the worst economic crisis since the Great Depression, the Washington Post reported. The lawmakers’ concerns stem from a memo the U.S. government circulated in May indicating scammers may have harnessed stolen Social Security numbers and other personal information to obtain weekly jobless benefits. The attack appeared to target states including Washington, Massachusetts, Rhode Island and Florida at a time when roughly 40 million Americans were seeking benefits as a result of the coronavirus and in need of financial support. Little else is known about the incident, leading lawmakers including Sen. Patty Murray (Wash.), the top Democrat on the Senate’s leading health committee, and Sen. Ron Wyden (Ore.), who leads the party on the Senate Finance Committee, to demand answers. They also called on the government to dedicate new resources toward helping states defend themselves against similar criminal operations, particularly as they race to get critical jobless aid to Americans who need it most.

As the Federal Reserve prepares to start up its Main Street lending program, it has changed the terms to allow for greater participation, CNBC.com reported yesterday. The central bank said yesterday that it is lowering the initially stated minimum loan and raising the maximum that can be borrowed, plus is expanding the loan terms to five years. The program is part of the Fed’s efforts to get money to small- and medium-sized businesses hurt during the coronavirus-induced recession. Under the new guidelines, the minimum loan now will be $250,000, half the amount under previous versions of the plan. The maximum will now vary by facility but could be up to $300 million from the previous $200 million. Fed Chairman Jerome Powell recently said the program was “days away” from making its first loan and said the central bank was revamping provisions based on feedback received from thousands of sources.