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President Donald Trump on Friday signed into law legislation designed to make it easier for millions of small businesses to avoid being stuck with debt after taking government-backed loans during the pandemic, Politico reported. The bill would give businesses more leeway on how they spend funds through the so-called Paycheck Protection Program, which Congress created in March to fight mass layoffs during the Covid-19 outbreak. The program offers low-interest loans that can be forgiven if businesses agree to maintain their payrolls — an incentive that led to the issuance of 4.5 million loans totaling more than $510 billion. Restaurants and other businesses hit hard by nationwide social distancing measures warned that the rules for using the funds were proving to be too burdensome as much of the economy remains locked down for longer than lawmakers anticipated. The new law, which the House and Senate passed with overwhelming support, would give businesses more time to spend the money — 24 weeks instead of eight — and the ability to use more of it on non-payroll expenses while still qualifying for loan forgiveness.

Private equity firm Sycamore Partners is in preliminary talks to acquire J.C. Penney Co Inc. out of bankruptcy should the U.S. department store chain’s negotiations with its creditors fail, Reuters reported. J.C. Penney, which employs roughly 85,000 people, filed for bankruptcy protection in May after the coronavirus pandemic forced it to temporarily close its more than 800 stores across the United States, compounding financial woes that stemmed from years of dwindling sales. Sycamore is weighing acquiring J.C. Penney outright or making an investment in the troubled retailer. There is no certainty that the talks between Sycamore and J.C. Penney will result in a deal, which would require a bankruptcy judge’s approval. J.C. Penney is also in touch with some of its landlords, including Brookfield Asset Management Inc. and Simon Property Group, about possible transactions. Under one scenario being explored, Sycamore, Brookfield and Simon would join forces on a bid for J.C. Penney, two of the sources said. Wells Fargo & Co. is also involved in the discussions.

For 20 years, Christopher Raynal ran the Montmartre bistro in Washington, D.C., but the restaurant closed its doors in March as the coronavirus shuttered popular eateries across the U.S., Bloomberg News reported. As stay-at-home orders end, Raynal has decided that Montmartre and its sister spot, Seventh Hill Pizza, won’t be coming back — in part because federal aid programs designed for small business won’t help enough. Raynal had explored pandemic relief loans created by Congress, yet found that bringing back staff to operate under new occupancy caps would boost labor costs and bring only a small gain in revenue, an unsustainable scenario that restaurateurs are wrestling with across the country. Raynal is one of thousands of restaurant owners nationwide stuck in the same trap: They’re desperate for assistance, but are reluctant to tap the Small Business Administration’s Paycheck Protection Program because of the strings attached to the relief loans. The economic pressure from the pandemic is hitting some of the country’s top-tier establishments, forcing some to close for good. The casualties include David Chang’s Momofuku in Washington, D.C., New York’s pioneering Pegu Club cocktail bar and John Fraser’s 701 West in the Times Square Edition hotel, which itself is scheduled to close in August. Many more establishments are teetering financially and may have to scale back their culinary ambitions just to survive.

Though many wealthy health care companies that have received billions of dollars in taxpayer funds but are laying off or cutting the pay of tens of thousands of doctors, nurses and lower-paid workers, many have continued to pay their top executives millions with some taking modest pay cuts, the New York Times reported. The Times analyzed tax and securities filings by 60 of the country’s largest hospital chains, which have received a total of more than $15 billion in emergency funds through the economic stimulus package in the federal CARES Act. The hospitals — including publicly traded companies like HCA and Tenet Healthcare, nonprofits like the Mayo Clinic, and regional chains with thousands of beds and billions in cash — are collectively sitting on tens of billions of dollars of cash reserves that are supposed to help them weather an unanticipated storm. They awarded their five highest-paid officials about $874 million in the most recent year for which they have disclosed their finances. At least 36 of those hospital chains have laid off, furloughed or reduced the pay of employees as they try to save money during the pandemic. Industry officials argue that furloughs and pay reductions allow hospitals to keep providing essential services at a time when the pandemic has gutted their revenue. But more than a dozen workers at the wealthy hospitals said in interviews that their employers had put the heaviest financial burdens on front-line staff, including low-paid cafeteria workers, janitors and nursing assistants. They said pay cuts and furloughs made it even harder for members of the medical staff to do their jobs, forcing them to treat more patients in less time.

The U.S. unemployment rate likely shot up to almost 20 percent in May, a new post World War II record, with millions more losing their jobs amid the Covid-19 crisis, Reuters reported. The Labor Department’s closely watched monthly employment report on Friday could bolster economists’ dire predictions that it would take several years to recover from the economic meltdown. Still, May was probably the nadir for the labor market. While layoffs remained very high, they eased considerably in the second half of May as businesses reopened after shuttering in mid-March to slow the spread of Covid-19. Consumer confidence, manufacturing and services industries are also stabilizing, though at low levels, hopeful signs that the worst was over. “The good news is that we probably have hit the bottom,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “But the recovery will be painfully slow. It will take years, probably a decade to get back to where we were at the end of last year.”

After passing legislation to amend a forgivable loan program for coronavirus-stricken small businesses on Wednesday, the Senate was working on a related bill yesterday that would give borrowers another tax break on their loans, Roll Call reported. Sen. John Cornyn (R-Texas) who introduced the bill in early May, told reporters that leadership was trying to pass the bipartisan measure, but said that it still faced obstacles. The bill would give borrowers a second tax benefit, a practice sometimes described as double-dipping. The borrowers already don't have to treat forgiven loans as income and the bill would allow them to get a business expense deduction. “If I’m not mistaken, we did hotline it — got a couple of holds and we’re working through those one at a time,” he said yesterday. (Senate hotlining involves leadership quickly polling members to see if any have issues with passing it by unanimous consent. It’s a way to pass uncontroversial measures without hours of floor debate.) But Senate Majority Leader Mitch McConnell (R-Ky.) wrapped up later in the afternoon, deferring any action until at least next week. Senate backers of the bill may also be facing resistance from the administration. Treasury Secretary Steven Mnuchin has resisted calls to allow the deduction by changing the rules of the PPP program, calling it a "double dip."

Competing factions of J.C. Penney Co. lenders that were vying to finance the retailer’s restructuring efforts reached a deal yesterday, averting potential litigation between them, WSJ Pro Bankruptcy reported. Kris Hansen, a lawyer for creditors including Aurelius Capital Management LP, said at a court hearing his group had come to terms with rival lenders on a financing package that supplies Penney with up to $900 million to stay afloat through bankruptcy. The settlement avoided a possible fight between Hansen’s clients and rival lenders led by H/2 Capital Partners LLC that hold roughly three-quarters of Penney’s top real-estate loans. Penney filed for bankruptcy last month with a commitment from H/2, along with Silver Point Capital LP, Sculptor Capital Management and others, to cover its expenses while it attempts a complex financial restructuring. Other investors including Aurelius cried foul, saying the proposed terms were stacked against Penney and offering a competing loan proposal. Under the settlement announced Thursday, Aurelius and its allies can participate in the financing package. They will get to convert $53 million of their debt claims into top-ranking bankruptcy loans. The judge presiding over Penney’s bankruptcy approved the loan package, even as he acknowledged it was “expensive money” for the company. “If we were in a perfect world, this financing package would be highly objectionable,” Judge David Jones said from the bench. But he added he wouldn’t let the bankruptcy languish any longer without a financing source. “It is the only path forward that I see,” the judge said. Read more. 

In related news, J.C. Penney said yesterday that it will start closing 154 of its stores next week in what it is calling the first phase of its efforts to shrink its footprint, the Associated Press reported. The Plano, Texas-based retailer said that it could take about 10 to 16 weeks to complete the closures. A list of the stores closing was published on Penney’s website. Penney filed for bankruptcy protection last month, making it the biggest retailer to do so since the coronavirus pandemic forced non-essential stores to be shut down temporarily. J.Crew and Neiman Marcus sought bankruptcy protection days before J.C. Penney. All three were laden with debt and had trouble connecting with shoppers, who are increasingly skipping the mall and shopping online. As part of its bankruptcy reorganization, Penney said it planned to permanently close nearly a third of its 846 stores in the next two years. That would leave it with just over 600 locations. Read more. 

Brooks Brothers, which has dressed all but four U.S. presidents, could end up closing its three American factories as it navigates the pandemic, the New York Times reported. Brooks Brothers plans to lay off nearly 700 employees this summer at factories in Massachusetts, New York and North Carolina. The company is also trying to find buyers for the factories by mid-July, and expects to close them if it can’t. The plans emerged through filings under the federal WARN Act, which requires companies to give workers at least 60 days’ notice before mass layoffs or plant closings. Shortly after, Gordon Brothers, the expert in retail liquidations, announced it would provide a $20 million secured loan to Brooks Brothers. Together the decisions left two towns with factories worried about their futures, and raised questions around the core financial health of the company, especially when retail sales have dropped sharply and brands like J. Crew, Neiman Marcus and J.C. Penney have filed for bankruptcy protection.

Simon Property Group, the country’s largest mall owner, filed a lawsuit against Gap Inc. on Tuesday over unpaid rent and other charges it says amount to $66 million, the Wall Street Journal reported. In the filing, Simon Property said that the retailer has withheld rent for April, May and June. The landlord is seeking to be paid rent for those months, as well as attorney fees and other charges, according to the lawsuit. “The requirement that The Gap Entities timely pay rent due under the leases has not been excused,” said the complaint, which was filed in the Superior Court of the state of Delaware. Gap didn’t comment on the lawsuit directly, but said it is committed to working with landlords on “mutually agreeable solutions and fair rent terms.” “It’s important to note the profound effect that Covid has had on shopping centers as well, leaving them closed to us and our customers for months,” said Mark Daniel Snyder, communications manager at Gap. Gap said in April that its stores are closed because of the coronavirus pandemic and it had stopped paying rent because of insufficient cash flow. The San Francisco-based retailer, which owns brands such as Old Navy, Banana Republic and Athleta, added at that time that it was looking to renegotiate leases with its landlords.