%1

LATAM Airlines Group, the region's largest carrier, said yesterday that it had secured additional financing of up to $750 million, a key step in a bankruptcy protection process the airline initiated in 2020, Reuters reported. LATAM filed for bankruptcy protection in the U.S. in May 2020 as world travel came to a halt amid the coronavirus pandemic. At the time, it was the world's largest airline to take such action due to COVID-19. The fresh funds announced on Wednesday were obtained for Tranche B of the debtor-in-possession (DIP) financing, the airline said in a statement, "at rates and more competitive conditions than those obtained for Sections A and C, which will allow the group to improve its cost of financing under Chapter 11." LATAM's board of directors unanimously approved the offer, which came from a group composed of Oaktree Capital Management, Apollo Management Holdings "and certain funds, accounts and entities advised by them," the statement said. The proposal must now be approved by the U.S. bankruptcy court overseeing the process. The company said earlier this month it had received several offers to fund its exit from chapter 11 bankruptcy, each of which are worth more than $5 billion.

The Delta variant of COVID-19 appeared to temper economic growth this summer, but economists expect the recovery from the pandemic to reaccelerate as the virus’s toll eases, the Wall Street Journal reported. In recent weeks, many economists lowered their forecasts for third-quarter economic growth in large part because consumers slowed spending on meals out, hotels and airline tickets amid the spread of the highly contagious Delta variant. The COVID-19 surge also complicated office and school reopenings, turning what had been expected to be a September boom into a downturn. One wild card is continued supply constraints—including product and worker shortages—that have been more severe than many analysts anticipated, contributing to inflation and downgrades in growth expectations. While constraints such as backups at U.S. ports and overseas manufacturing disruptions have persisted, the Federal Reserve and economists expect them to eventually ease. Fed Chairman Jerome Powell yesterday said that a recent spell of higher inflation might last longer than central bank officials had anticipated, but he repeated his expectation that the price surge should eventually fade.

Jennifer Condron’s BulletProof Productions LLC got a $350,000 loan backed by the U.S. Small Business Administration in 2019, before the COVID-19 pandemic shut down entertainment venues and dried up their revenue. Under these extraordinary circumstances, the agency issued guidance in early March 2020 that encouraged lenders participating in its 7(a) program to allow deferred payments for six months and beyond, Bloomberg Law reported. But the latest extension of that policy, one of the last remaining forms of pandemic relief for businesses, expires at the end of September. Borrowers without the means to pay back the loans because of the pandemic, such as those that relied on foot traffic from people working in offices, will have few options to stop lenders from demanding payments, small-business attorneys say. Condron’s bank has already tried taking her to court, which in turn caused her to be rejected by a federal pandemic-relief fund for shuttered entertainment venues. She has already exhausted both a Paycheck Protection Program (PPP) loan and a Economic Injury Disaster Loan (EIDL). Now, her hopes hinge on winning an appeal for the entertainment venue grant before she has to declare bankruptcy. More defaults and bankruptcies are likely unless the agency — or Congress — steps in. The SBA’s 7(a) program provides government-guaranteed loans for small businesses that otherwise can’t get loans from banks because of thin credit files or other risk factors. Before the pandemic, it was the agency’s most popular program. Since fiscal year 2008, it has approved about 730,000 loans worth more than $270 billion. Typically, an owner will put up valuable personal assets as collateral in the form of vehicles or real estate. All programs but EIDL have expired, and without an updated policy in place, “we are going to see some lenders moving to enforce these loans that are delinquent,” said Davis Senseman, attorney and founder of Minnesota-based small-business advocacy law firm Davis Law Office. Jason Milleisen, owner and operator of Distressed Loan Advisors, who consults for small businesses with defaulted SBA loans, said delinquencies and defaults will likely come in November or December. 

Banks are on pace this year to merge at a level not seen since the 2008 financial crisis, the Wall Street Journal reported. It is a sharp turnaround from last year, when the economy spiraled and many regional and community banks put merger plans on the shelf. Bank executives are now feeling more certain about what the future holds, but some are finding it hard to make it on their own. Though the economy has in many ways recovered from 2020, loan demand is still low and profits from lending are slim. Banks have announced more than $54 billion in deals through late September, according to Dealogic. That puts industry mergers and acquisitions on pace for their biggest year since 2008, when some big banks had to sell themselves to stave off collapse. At this time last year, banks had announced just $17 billion in mergers. Banks typically spend weeks or months turning a potential target’s loan book upside down, searching for risky loans or other red flags, before agreeing to acquire it. But the COVID-19 pandemic muddied that process. For months, lenders struggled to assess the creditworthiness of their own customers, much less those of their competitors.