The U.S. arm of the Belgian bakery chain Le Pain Quotidien won a bankruptcy judge’s approval to get out of leases for 59 restaurants shut down in the fallout from the coronavirus pandemic, Bloomberg News reported. Bankruptcy Judge John Dorsey acknowledged it was uncommon for a company in chapter 11 proceedings to seek immediate freedom from the leases at issue in the case. “The relief requested is unusual, but these are unusual times,” Dorsey said. The decision to seek protection from creditors under chapter 11 of the bankruptcy code allowed Le Pain Quotidien to shed debt and carry out a $3 million sale, pending court approval, to Aurify Brands LLC. That $3 million will serve as the chain’s bankruptcy financing.
New Jersey Governor Phil Murphy (D) said that the state may have to cut half of its 400,000 public employees if the federal government doesn’t help make up a $10.1 billion revenue shortage through June 2021, Bloomberg News reported. “I don’t think there’s any amount of cuts or any amount of taxes that begins to fill the hole,” said Murphy, a retired Goldman Sachs Group Inc. senior director and Democrat who came to office in January 2018. Without federal help, he said, state and local governments will have to dismiss firefighters, police, emergency-medical personnel and others. “The alternative to not getting that funding is a whole lot of layoffs — we think as much as 200,000 or more,” he said. Last week his administration listed more than $5 billion in cuts and deferrals to address the expected $10.1 billion revenue shortage — the fallout from a shutdown he ordered on March 21 to slow the spread of the new coronavirus. Murphy is seeking to issue billions of dollars in short- and long-term debt, including via the U.S. Federal Reserve’s Municipal Liquidity Facility.
The Justice Department is preventing struggling cannabis businesses and their workers from accessing bankruptcy to weather the coronavirus-related downturn, even in states that determine medical marijuana is an essential industry during the pandemic, WSJ Pro Bankruptcy reported. The department’s policy means the financial safety net that bankruptcy provides consumers who fall behind on their mortgages or car payments is likely out of reach for those who work in the marijuana industry or businesses supporting state-regulated dispensaries or growers. Cannabis remains illegal under federal law, which includes the U.S. Bankruptcy Code, though Congress is considering legislation to decriminalize it nationwide. In 2017, Justice Department officials who oversee the nation’s bankruptcy courts ramped up enforcement of the federal marijuana ban on individuals with income from the cannabis industry. Lawyers have attempted to get around the prohibition by segregating marijuana wages or rent collected from cannabis growers from bankruptcy repayment plans, leaving it up to judges to decide what is allowed. Courts have mostly sided with the Justice Department, though some individuals have voluntarily given up on their pending bankruptcy cases after the government argued against them in court.
U.S. airlines have yet to tap $29 billion in federal pandemic relief loans as they wait to see whether the re-opening of the economy revives demand and diminishes the need for money that comes with government strings attached, Bloomberg News reported. Although the four largest U.S. passenger airlines have applied for the Treasury Department program, only American Airlines Group Inc. has said it intends to tap the pool of funds. Southwest Airlines Co., United Airlines Holdings and Delta Air Lines Inc. say they plan to wait until fall before deciding whether to take the money — after a summer travel season that could see more people return to the skies. The wait-and-see approach illustrates how airlines are preparing for an uncertain future amid early signs of a recovery after Americans all but stopped flying in April due to the coronavirus and travel restrictions. A second wave of infections could make the situation worse. It also highlights how only a small portion of hundreds of billions of dollars available to the Treasury Department has actually been doled out to help companies. “That pool of money is designed as backstop financing and for those who can’t raise money elsewhere,” said Helane Becker, an analyst at Cowen & Co. in New York. U.S. airlines have separately raised billions in capital through methods including secured loans, bond offerings and equity sales, and Becker said that the federal loans are a last resort. The government loans would impose restrictions such as a cap on executive compensation and require carriers to offer equity or other financial stakes to the government in exchange for the aid.
Specialty’s Café and Bakery announced last week it was closing its 55 location for good after 33 years in business. On Wednesday the Pleasanton, Calif.-based bakery, known for hot, fresh cookies, officially filed for chapter 7 bankruptcy liquidation, the San Francisco Business Times reported. That means the company will sell off all its assets to pay off its creditors. According to bankruptcy filings, the company’s total assets are between zero and $50,000. That falls far short of what it owes — between $1 million and $10 million to nearly 1,000 creditors. Specialty’s Café and Bakery has decided to sell off what it can and close down for good.
Upon arriving at work, employees should get a temperature and symptom check. Inside the office, desks should be six feet apart. If that isn’t possible, employers should consider erecting plastic shields around desks. Seating should be barred in common areas. And face coverings should be worn at all times. These are among sweeping new recommendations from the Centers for Disease Control and Prevention on the safest way for American employers reopening their offices to prevent the spread of the coronavirus, the New York Times reported. If followed, the guidelines would lead to a far-reaching remaking of the corporate work experience. They even upend years of advice on commuting, urging people to drive to work by themselves, instead of taking mass transportation or car-pooling, to avoid potential exposure to the virus. The recommendations run from technical advice on ventilation systems (more open windows are most desirable) to suggested abolition of communal perks like latte makers and snack bins.
American Airlines Group Inc. is not considering a chapter 11 bankruptcy filing, Chief Executive Doug Parker said yesterday and dismissed speculation that a major U.S. carrier could disappear due to the coronavirus pandemic, Reuters reported. The U.S. airline industry is expected to be 10 to 20 percent smaller in the summer of 2021, Parker said, and its recovery would depend on how passenger demand and revenues evolve. Earlier this month, Boeing Co. Chief Executive Dave Calhoun said he thought that a major U.S. carrier could go out of business in the fall, when government payroll aid for airlines will expire. U.S. airlines, suffering an unprecedented downturn in air travel because of the pandemic, have warned they may need to eliminate jobs after Oct. 1 but Parker said the company aimed to avoid furloughs. Nearly 40,000 of its more than 100,000 employees have opted for an early retirement, reduced work schedule or temporary leaves, he said. American’s revenues are down by about 90% due to the outbreak, but demand is improving and net receipts have been in positive territory for the past 2-1/2 weeks after a period when airlines were receiving more cancellations than new bookings. Read more.
In related news, American Airlines Group Inc. said in a letter to employees that it must reduce its management and support staff by about 30 percent and may have to cut frontline employees as it downsizes due to the coronavirus outbreak, Reuters reported. All major U.S. airlines have said that they will need to shrink in the fall, once U.S. government payroll aid that bans involuntary job cuts expires on Sept. 30. Competitor United Airlines Holdings Inc. has also said it will need to reduce its management and administrative staff by about 30 percent. Read more.
The U.S. division of bakery chain Le Pain Quotidien filed for bankruptcy protection as pandemic restrictions continue to wreak havoc on fast-casual dining chains, WSJ Pro Bankruptcy reported. The Belgian company’s U.S. arm said in court papers that it hoped to avert a complete liquidation of its 98 Le Pain Quotidien locations with a proposed $3 million sale of the business to fast-casual restaurant operator Aurify Brands LLC. The sale to Aurify, which requires court approval, would allow for 35 Le Pain Quotidien restaurants to reopen and would allow some employees who had been terminated to regain their jobs, said Steven J. Fleming, the U.S. division’s chief restructuring officer, in a sworn declaration in the U.S. Bankruptcy Court in Wilmington, Del. Even before the Covid-19 pandemic kept customers from dining out, PQ New York Inc., which licenses the Le Pain Quotidien brand name from a Belgian division, was in financial trouble. More than half the company’s sales come from the New York City metro area, which is saturated with restaurants, Fleming said. He said that most of the dining industry’s recent growth has come from delivery and to-go sales, rather than Le Pain Quotidien’s casual dine-in concept. Fleming also blamed flagging investments in stores, a lagging digital platform and turnover within corporate management.
The parent company of Advantage Rent a Car filed for bankruptcy protection, the second big car-rental company to seek protection from creditors in less than a week as travel restrictions from the coronavirus pandemic continue to ripple through the economy, WSJ Pro Bankruptcy reported. Private-equity-owned Advantage Holdco Inc. filed for chapter 11 in U.S. Bankruptcy Court in Wilmington, Del., along with a half dozen affiliates, including E-Z Rent a Car LLC, a sister company in the low-price rental sector. Debts top $500 million, according to papers filed late in the evening Tuesday. Advantage follows Hertz Global Holdings Inc., one of the nation’s biggest rental-car companies, into chapter 11 as the fallout from the coronavirus pandemic has devastated air travel, a key component of the rental car business. The pandemic has also caused big drops in the value of rental-car company fleets and virtually frozen the used-car market. Advantage, the fourth-largest rental car company in North America, is owned by funds managed by Catalyst Capital Group Inc., a Canadian investment firm based in Toronto. Hertz at one point owned Advantage, having purchased the assets of its smaller rival out of bankruptcy in a 2009 deal. Advantage was later divested so Hertz could get regulatory approval to acquire another bargain operator.
