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Three Senate Committees will hold hearings tomorrow looking at key issues related to the COVID-19 pandemic and the financial fall-out from it:

The Senate Health, Education Labor and Pensions Committee will hold a hearing tomorrow at 10 a.m. EST titled, "COVID-19: Safely Getting Back to Work and Back to School.” For the witness list and to access a live web stream of the hearing, please click here. 

The Senate Banking Committee will hold a hearing tomorrow at 10 a.m. EST titled "Oversight of Financial Regulators." For the witness list and a link to the live webcast, please click here. 

The Senate Judiciary Committee will hold a hearing tomorrow titled "Examining Liability During the COVID-19 Pandemic" at 2:30 p.m. EST. For the witness list and to access a live web stream of the hearing, please click here. 

Year-to-year farm bankruptcies increased 23 percent, according to recently released data from U.S. Courts, according to an American Farm Bureau Federation Market Intel report. The data shows a total of 627 filings during the 12-month period ending March 2020, marking five consecutive years of chapter 12 bankruptcy increases, including an accelerated rate since January. Wisconsin was the hardest hit with 78 filings in the 12-month period, followed by Nebraska with 41 chapter 12 filings and Iowa at 37. More than 50 percent of the chapter 12 filings were in the 13-state Midwest region, followed by 19 percent in the Southeast.

Auto-parts maker Techniplas LLC filed for bankruptcy with plans to hand ownership to bondholders that include HIG Capital LLC, saying Covid-19 has further hurt its struggling business, WSJ Pro Bankruptcy reported. Techniplas, which has roots in U.S. plastics manufacturing dating back to 1941, filed for chapter 11 on Wednesday, the same day that a forbearance agreement with one of its lenders expired, according to papers filed in U.S. Bankruptcy Court in Wilmington, Del. The bankruptcy was prompted by several factors that have contributed to a drop in the company’s earnings and liquidity, the latest of which is a pandemic that has punished the global economy, Peter Smidt, co-chief restructuring officer, said in a court filing. Techniplas has 445 active employees and 271 furloughed employees. Before filing for bankruptcy, the Nashotah, Wis.-based company cut 190 jobs at facilities in Iowa and Alabama. The company’s automotive products include fluid and air-control parts. It also makes such nonautomotive items as power utility and electrical components and water filtration goods. Last year, it recorded sales of $475 million and a net loss of $21 million. Nearly all of the private company’s equity is owned by founder George Votis.

With tax revenue crashing and expenditures soaring, states face severe financial problems. Illinois has already requested a federal bailout of its pension system, and last month Senate Majority Leader Mitch McConnell suggested that Congress should enact legislation allowing states to go bankrupt, according to a Wall Street Journal commentary. Allowing states to declare bankruptcy would fundamentally contradict the federal structure of our constitution, according to the commentary. Federal bankruptcy protection would greatly constrain a state’s sovereignty, or power to govern itself, which the Constitution guarantees. Fortunately, there is a better path for cash-strapped states: more borrowing. States can put investors at ease by waiving their claim to sovereign immunity in the contract under which the bonds are issued, according to the commentary. States routinely give such waivers, and courts enforce them. They can agree that the contract under which the bonds are issued will be subject to the law of another jurisdiction and that they themselves may be sued in courts of that jurisdiction. This helps attract investors, because just as creditors generally don’t trust a court in a country with poor credit to enforce the terms of a bond contract against that country, according to the commentary. States could also reduce the interest rates they would otherwise pay by providing bondholders with credit enhancements. Read more. (Subscription required.) 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Hertz Global Holdings Inc.’s creditors were offered two tough choices when hammering out a deal to keep it out of bankruptcy: cut the 102-year-old company some slack and hope it recovers, or let it slip into insolvency and try to recoup their investment in sales of its devalued rental fleet, Bloomberg News reported. The holders of Hertz’s asset-backed securities blinked and gave the company until May 22 to pay them about $400 million. Hertz knew its creditors would want to avoid bankruptcy, which could trigger a fire sale of devalued used cars if the ABS trusts that hold the vehicles have to liquidate. That sets up a parallel quandary for Hertz’s bank lenders, which kept fighting after the ABS holders had agreed to a forbearance. In the next two weeks, Hertz’s banks — led by Deutsche Bank AG and Barclays Plc — must decide whether to allow Hertz to raise more money to pay the ABS holders, or let it slide into bankruptcy. The possibility of a future bankruptcy filing is still on the table, according to sources. Rental-car companies in bankruptcy typically look to unwind their ABS by selling down the fleet that backs the bonds. The coronavirus pandemic that has squeezed Hertz’s finances, though, has also sent resale values for those vehicles plunging.

When the federal government relaunched its small business aid program on April 27 with an additional $310 billion, lenders and business advocates warned the money would dry up within a few days, the Wall Street Journal reported. Nearly two weeks later, more than 40 percent of the money remains available, according to figures released yesterday by the Small Business Administration, even as small businesses continue to suffer from the fallout of the coronavirus pandemic. Several factors appear to be behind cooling demand, including the Treasury Department’s decision following an uproar to exclude public companies and others that could obtain funding elsewhere. Another reason: Some borrowers sought duplicate loans from several lenders as a backstop against loan denials or delays, according to bankers and small business advisers. Bigger banks found that more than 10 percent of their applications were duplicates, according to loan brokers and industry officials. Some smaller lenders reported that half their applications were rejected because the applicant had gotten a loan elsewhere. But the likely biggest reason for the slowdown is that many business owners have concluded that the SBA’s Paycheck Protection Program simply doesn’t meet their needs, lenders and others say, or they are waiting for the government to clarify the terms under which loans can be forgiven. The program is generally aimed at companies with 500 or fewer employees, and it requires them to spend 75 percent of their loans on payroll to have the loan forgiven. Many small retail businesses, such as restaurants and hair salons, say that is a problem because they remain largely shut down and are operating with skeletal staffs. Read more. (Subscription required.) 

In related news, when American companies recently applied for U.S. government loans meant to help small businesses survive the coronavirus crisis, they had to certify they needed the cash to cover basic needs like salaries and rent, Reuters reported. The money, up to $10 million, was meant to tide them over for eight weeks. Some recipients, though, had considerable cash on hand. Forty-one publicly traded companies that got the emergency aid already had enough to cover basic expenses for two months or more when they applied for the funds, a Reuters analysis found — even if their revenue dropped to zero. Thirty had three months or more of cash. Six had enough to last at least until December, according to the review, which was based on average monthly operating expenses from 2019. All told, these relatively flush 41 companies were able to secure $104 million in government aid, at a time when legions of smaller companies with little in their coffers were being turned down. Seventeen of the 41 recipients had market capitalizations of at least $100 million. Read more.