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As unemployment rises and the first wave of federal economic relief nears expiration, lawmakers are increasingly looking to expand an existing wage subsidy to keep workers on payrolls and help businesses stay afloat, the Wall Street Journal reported. The $3 trillion package passed by the House this month features an expanded wage subsidy, known as the employee retention tax credit. That proposal, which would add about $194 billion to a $55 billion tax credit created in March, is gaining bipartisan support even as lawmakers clash over other legislation to aid the economy during the pandemic. For Democrats, the subsidy offers an alternative to the payroll-tax cut President Trump is seeking, which they oppose because it does little for the unemployed. Republican supporters prefer the subsidy to spending programs favored by Democrats and see it as a way to link aid to work. The House plan would give employers enough money to cover up to 80 percent of their wages and benefits, up to $45,000 per worker, plus a credit for fixed expenses like rent. Eligible companies would simply keep taxes withheld from employees’ paychecks. If that isn’t enough to equal the credit, they could get additional money from the Internal Revenue Service. Smaller businesses would get the subsidy for all workers, while larger ones would get it only for furloughed workers still receiving wages or benefits. The break would be scaled to each employer’s revenue loss during the coronavirus pandemic. Read more. (Subscription required.)
https://www.wsj.com/articles/tax-credit-for-keeping-workers-on-payrolls…

In related news, the first shoots of an economic recovery from shutdowns caused by the coronavirus pandemic are starting to emerge, but the U.S. is likely to face a sustained period of record-high unemployment, the Wall Street Journal reported. Policy makers confronting that possibility are preparing plans to offer additional stimulus to the economy in the coming weeks and months. White House economic adviser Kevin Hassett said on Sunday that he already sees signs a rebound is occurring, pointing to businesses reopening and credit-card data showing consumers are starting to increase spending. Still, he said that May’s unemployment rate, which measures joblessness in the middle of the month, could “end up with a number north of 20%.” April’s rate, 14.7 percent, was the highest on record back to 1948. The Trump administration is in talks with Congress on a fourth pandemic-relief bill, Hassett said. He demurred when asked if President Trump supports extending a $600 weekly boost to unemployment benefits past July. House Democrats have proposed extending those enhanced benefits into early next year. Read more. (Subscription required.)
https://www.wsj.com/articles/unemployment-could-top-20-but-economy-reco…

The more than a century old car rental firm Hertz Global Holdings Inc. filed for bankruptcy protection on Friday after its business was decimated during the coronavirus pandemic and talks with creditors failed to result in much needed relief, Reuters reported. Hertz’s board earlier in the day approved the company seeking chapter 11 protection in a U.S. bankruptcy court in Delaware, according to court records. Its international operating regions including Europe, Australia and New Zealand were not included in the U.S. proceedings, the company said. The firm, whose largest shareholder is billionaire investor Carl Icahn with a nearly 39 percent ownership stake, is reeling from government orders restricting travel and requiring citizens to remain home. A large portion of Hertz’s revenue comes from car rentals at airports, which have all but evaporated as potential customers eschew plane travel. With nearly $19 billion of debt and roughly 38,000 employees worldwide as of the end of 2019, Hertz is among the largest companies to be undone by the pandemic. The Estero, Florida-based company, which operates Hertz, Dollar and Thrifty car-rentals, had been in talks with creditors after skipping significant car-lease payments due in April. Forbearance and waiver agreements on the missed payments were set to expire on May 22. Hertz has about $1 billion of cash.

The future of a $700 billion market for risky corporate debt rests on companies like Portillo’s Hot Dogs, Chicago’s famous fast-food chain, the Wall Street Journal reported. Portillo’s owed about $550 million in loans when it stopped serving inside its 62 restaurants in March. It was suddenly at risk of going bust and credit-ratings firms quickly slashed grades on its borrowings. The company’s loans sit on the books of dozens of collateralized loan obligations (CLOs), which buy up risky corporate debt and package it into securities. With sales way down, many of those companies have gone from just being risky to teetering on the brink of bankruptcy. Retailers like Neiman Marcus and J.Crew Group Inc. have already tipped over the edge. The stress is testing the CLO market, which has allowed companies to rack up debt, often to fund private-equity buyouts. So far, only modest cracks have appeared in CLOs, but they threaten to cut off a cheap source of corporate credit and cause losses for investors who stretched for a bit of extra return. CLOs have become the dominant force in high-risk lending, buying about 60 percent of new leveraged loans in the past few years. In total, CLOs own about half the U.S. market, according to LCD, S&P Global’s loan research arm.

The list is growing: JCPenney, Neiman Marcus, Diamond Offshore Drilling, Alta Mesa Resources, Echo Energy, Alta Petroleum, TriPoint Oilfield Services, Sheridan Holding and Stage Stores. More Texas businesses are filing for bankruptcy this year than did during the Great Recession or anytime in the past two decades, and legal experts said the wave of insolvencies and restructurings is still far from breaking or hitting their peak, the Houston Chronicle reported. Between Jan. 1 and May 5, more than 545 Texas companies have filed for protection from creditors under chapter 11 of the U.S. Bankruptcy Code — up from 234 such filings during the same period in 2019, or a 133 percent jump, according to new data provided exclusively to The Texas Lawbook by Androvett Legal Media research. And bankruptcy courts in the Southern District of Texas — specifically Houston — are the epicenter for the historic number of corporate restructurings expected to be filed this year. So far in 2020, five times more business bankruptcies have been filed in Houston than in any of the other three federal district courts in the state. “There is a tsunami coming,” said Foley bankruptcy partner Holly O’Neil. “For tens of thousands of retailers and restaurants and other businesses, their incoming revenue completely stopped, but their expenses kept coming. The options for many of these businesses are running out.”

Mortgage availability has tightened sharply as lenders impose tougher income, credit-score and down-payment conditions and drop some loan types altogether, such as home-equity lines of credit, the Wall Street Journal reported. The economic shock from the coronavirus pandemic explains some of this credit crunch. But the economic factors have been exacerbated by policy decisions in Washington, D.C., industry officials say. As part of its March relief bill, Congress let homeowners suspend mortgage payments for up to a year but provided no way to pay for this, potentially saddling lenders with the burden. Meanwhile, federal regulators make it hard for loans where borrowers might seek forbearance to get the backing of Fannie Mae and Freddie Mac, which guarantee nearly half of residential mortgages. One indicator of the credit crunch is that the volume of mortgages being refinanced, which normally rises sharply when rates drop, is up only modestly since before the pandemic, according to Black Knight, a mortgage-data and technology firm. Another indicator is mortgage rates themselves: They are roughly a percentage point higher than they ordinarily would be given current Treasury-bond yields.

To help financial service providers assist struggling borrowers during the coronavirus pandemic, the Consumer Financial Protection Bureau on Friday issued two no-action letter (NAL) templates that are intended to help institutions make their own NAL applications for certain consumer financial products and services, as allowed under the CFPB’s innovation policy, the ABA Banking Journal reported. The first NAL template — which is intended for mortgage servicers seeking to offer foreclosure prevention and other loss mitigation efforts — was requested by Brace Software, Inc. It would enable servicers to use Brace’s online loss-mitigation platform, an online version of the Fannie Mae Form 710. The bureau noted that “digitizing the loss mitigation application process has the potential to improve a process that is experiencing an increase in loss mitigation requests from consumers due to the COVID-19 pandemic.” The CFPB issued a second NAL template on small-dollar lending — requested by the Bank Policy Institute — that insured depository institutions may use to apply for a NAL covering their small-dollar credit products. The NAL template comes as financial regulators, including the CFPB, have encouraged banks to offer responsible small-dollar lending products to help meet consumers’ financial needs during the pandemic.

Tyson Foods, the largest meat processor in the U.S., has transformed its facilities across the country since legions of its workers started getting sick from the novel coronavirus. It has set up on-site medical clinics, screened employees for fevers at the beginning of their shifts, required the use of face coverings, installed plastic dividers between stations and taken a host of other steps to slow the spread. Despite those efforts, the number of Tyson employees with the coronavirus has exploded from less than 1,600 a month ago to more than 7,000 today, according to a Washington Post analysis. Meat companies have spent hundreds of millions of dollars on measures such as protective gear, paid leave and ventilation systems since they were forced to shut dozens of plants that were among the top coronavirus hot spots outside urban areas. But the industry has still experienced a surge in cases, and some companies say they are limited in just how much they can keep workers separated from one another. Only a portion of the labor force has gone back to work — some workers kept away on purpose — and the nation’s meat supply remains deeply strained as barbecue season gets underway. A May report from CoBank, which specializes in serving rural America, warns that meat supplies in grocery stores could shrink as much as 35 percent, prices could spike 20 percent and the impact could become even “more acute later this year” as the knock-on effects on the U.S. agriculture supply chain are felt.