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Congress is cooking up another relief bill for small business, but it could quickly expand beyond just small business to balloon in size, according to a Wall Street Journal editorial. The $1.9 trillion bill passed last March included $50 billion for small businesses, including $28.6 billion in grants for restaurants, but this money has been depleted. Maryland Sen. Ben Cardin and Mississippi’s Roger Wicker are cobbling together another relief bill for restaurants. “The restaurant money is a fairness issue. Some restaurants got it and others did not,” Mr. Cardin said. Twenty-eight mayors recently sent a letter imploring Congress to replenish the Restaurant Revitalization Fund from the March spending bill. They say 86% of independent restaurants and bars that didn’t receive grants “risk permanently closing,” and 177,000 applicants have been denied relief. The editorial sympathizes with restaurants, which are also having to deal with rising prices and worker shortages. Some have faced a drop-off in business during Covid surges as customers stay home. Yet the commentary asserts that restaurants in certain states seem to be struggling much more in part because of population flight during the pandemic. Data from the website OpenTable shows restaurant reservations were up 19% in Florida, 14% in South Carolina and 9% in Arizona on Jan. 3 compared to the same date in 2019. Reservations were down 78% in Maryland, 52% in New York and 45% in Illinois. Treasury has allowed states and localities to use the $350 billion in budget aid from the March bill to help struggling households, small businesses and industries. States and localities are swimming in revenue, so they can assist their own restaurants, though some like New York have preferred to pay off public unions and grow government programs instead. Congress could also repurpose money that states and localities haven’t spent to replenish the restaurant fund or hospitals, but there’s no need to appropriate new funds, the editorial argues. It has already spent nearly $6 trillion on Covid relief. 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.

U.S. inflationary pressures should ease in 2022 due to weaker demand for goods, easing supply bottlenecks and a receding coronavirus pandemic, the U.S. Treasury's top economist said yesterday, Reuters reported. In a statement released alongside the Treasury's quarterly borrowing estimates, Assistant Secretary for Economic Policy Ben Harris said he expects energy prices to stabilize in 2022, but geopolitical instability could push prices higher. Harris said that the course of the pandemic remains a primary downside risk to the U.S. economic outlook, along with supply chain disruptions, high energy prices and housing costs. Future coronavirus variants "may have worse symptoms or fatality rates or may be fully resistant to current vaccines and present a significant risk to the economic outlook. On the other hand, given the level of vaccinations and prior infection, the U.S. population may be nearing herd immunity." He also said that the pandemic continues to endanger the recovery of supply chains due to continued lockdowns in China and southeast Asia, which could keep goods prices elevated. Potential future growth also depends on the recovery of the U.S. labor supply, which has been diminished by the pandemic, Harris said. "If these losses in labor supply are permanently lost due to the pandemic, then potential economic growth has been shifted lower," he said.

With the pandemic wrecking the growth plans of some private equity-owned companies, lenders are helping buyout shops hold on to such assets until they develop further, Bloomberg News reported. Fund-to-fund transfers — which allow a private equity firm to sell an asset from one of its funds to another — are set to increase in 2022, bankers say. Strong investor demand for the debt package behind BC Partners’ transfer of CeramTec suggests more buyout firms may follow this model. The deal will let one arm of the buyout shop sell the commercial ceramics maker to satisfy the return requirements for one customer base, while allowing the other to sponsor an asset BC Partners believes has longer term potential. This kind of move isn’t entirely new, but it’s far from widespread. Bankers are entering into talks with a number of private equity firms about such transactions in a bid to deal with the adverse impacts of COVID-19. The moves are popular with institutional investors, as it’s quicker and easier to reinvest in an asset they already know and believe has bright prospects. “The expectation is that the leveraged market will see more financings supporting fund-to-fund transfers in 2022 as private equity hold onto assets for longer if they see the potential for growth in them,” said Jeremy Selway, head of European leveraged finance capital markets at Deutsche Bank AG. Many PE firms have struggled to see desired returns on some portfolio companies, especially those in sectors adversely affected by Covid, when two years of poor trading has eaten into investment strategies typically lasting 3-5 years.

Aeromexico on Friday won court approval of its restructuring plan after the airline struck a deal with the remaining holdouts among its creditors, clearing the way for it to emerge from bankruptcy with new controlling shareholders, Reuters reported. "I could not be more pleased to tell you the plan of reorganization is confirmed," U.S. Bankruptcy Judge Shelley Chapman said soon after the agreement to pay a settlement to the creditors was announced during a court hearing. Her approval of the plan allows Aeromexico, one of three major Latin American airlines to seek court protection from creditors during the pandemic, to complete the bankruptcy process, which has been ongoing since June 2020. Aeromexico shares were up 17% on Friday, although those gains did not appear to reflect the creditor deal and final approval, which came as the market was about to close. The plan provides for new infusions of capital into Aeromexico. Apollo Global Management, a frequent investor in distressed companies, will be the largest shareholder. Delta Air Lines Inc., an existing equity holder, is expected to have a 20% stake in the company once the plan is implemented. The deals struck on Friday brought in support from a group of junior creditors who had opposed what they argued was overly beneficial treatment for Delta and four Mexican individual investors.

Consumers pulled back their spending in December, as spiraling coronavirus caseloads kept many Americans at home late in the holiday season. Spending fell 0.6 percent last month, the first decline since February, the Commerce Department said Friday. Rapidly rising prices meant that spending, adjusted for inflation, fell 1 percent, the New York Times reported. The decline offered some of the clearest evidence yet of how the spread of the Omicron variant is affecting the economy. Forecasters expect the toll to worsen in January, when a record-breaking jump in cases kept millions of people home from work. Still, Omicron may not have been the only factor in the December slump. Spending on services — the part of the economy hit hardest by the pandemic — actually rose last month, though more slowly than in the fall. Spending on goods, however, fell. That may reflect supply chain issues, either directly — as consumers struggled to find the products they wanted — or indirectly, as holiday shoppers shifted their spending to earlier in the fall to make sure their gifts arrived on time. So far, at least, there is little evidence that Omicron has done more lasting damage to the economy. Personal income rose 0.3 percent in December, led by an 0.7 percent increase in wage and salary income, suggesting that employers continued to hire workers and offer raises despite the latest Covid wave. Households, in the aggregate, should have plenty of money to spend once Omicron fades. The combination of rising income and falling spending pushed up the personal saving rate to 7.9 percent. Americans collectively have accumulated roughly $2.5 trillion in extra savings during the pandemic, the result of reduced spending and increased government aid. Not all families are so fortunate, however. Savings for lower-income households have dwindled in recent months, according to data from the JPMorgan Chase Institute. And December was the last month in which families received monthly payments through the expanded Child Tax Credit, which expired at the end of the year.

Grupo Aeromexico SAB cut a last-minute deal with the main group of its unsecured creditors, easing the way for the airline to seek final approval to exit bankruptcy from a judge in New York, Bloomberg News reported. The official committee of unsecured creditors in the company’s chapter 11 case agreed to join more senior debt-holders who back the plan, including Apollo Global Management Inc. and Delta Air Lines Inc. In return, unsecured creditors will get a note for $40 million, contingent on future performance. The agreement means the only opposition the company faces to its proposal to slash $1.1 billion of debt is a smaller group of unsecured creditors led by Invictus Global Management and Corvid Peak Capital Management. That group objects to the reorganization proposal, which would hand ownership stakes to senior debt-holders Apollo and Delta. The deal was announced at the start of a court hearing in Manhattan being overseen by U.S. Bankruptcy Judge Shelley Chapman, who will hear final arguments about the proposal and then decide whether to approve the reorganization plan and allow Aeromexico to exit bankruptcy.

Gyms, movie theaters and other businesses hurt by the coronavirus pandemic would receive state grants under a $185 million spending bill that won initial legislative approval yesterday, the Associated Press reported. The 96-6 vote in the House came more than a month after the Legislature and Gov. Gretchen Whitmer enacted $409 million in aid for businesses that lost money — funded with federal discretionary COVID-19 aid. Applications for those grants are due by April 1 and must be disbursed by July 1. The next round of proposed grants, which also would be paid for with federal funds, would go to fitness centers, convention bureaus, community development banks, cinemas, and live music and entertainment venues. The bill would also offset lost revenue if separate legislation is passed to waive 2022 liquor license renewal fees and refund licensing fees for workers and restaurants hampered by past pandemic orders. The Senate will consider the legislation next.