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The abundance of cheap corporate debt is pushing investors who typically buy the debt of U.S. companies in financial distress to invest instead in providing financing to companies that are shunned by banks and don’t have any other way to borrow money, Reuters reported. Distressed-debt investors snap up the debt of a company with the expectation that a potential bankruptcy would give them ownership of that company. The financial downturn brought about by the COVID-19 pandemic could have resulted in a tidal wave of such opportunities. Instead, the U.S. government and Federal Reserve flooded the market with liquidity, from government-assistance programs to buying financial assets. This added to cheap money that was already available thanks to the Fed’s near-zero interest rates. Rajay Bagaria, president at Wasserstein Debt Opportunities, said distressed debt accounts for only 0.9% of the U.S. high-yield bond universe currently, adding that there were very few opportunities in the sector. According to Fitch data, the trailing 12-month default rate of U.S.-leveraged loans dropped to 1.4% at the end of July, the lowest in 25 months. Fitch expects the default rate to be at 1.5% at the end of this year.

Colombia’s flag carrier, Avianca, has submitted a reorganization plan to a U.S. bankruptcy court, Flight Global reported. The Bogota-based airline’s plan, submitted to the bankruptcy court for the Southern District of New York on Aug. 10, outlines its obligations to creditors and the settlement of claims. It says a new strategy will help it simplify operations and position Avianca to thrive in the Latin American market. Avianca and its Latin American peers Aeromexico and LATAM Airlines declared bankruptcy last year after the coronavirus decimated global air travel demand. Airlines shrunk networks, retired and stored aircraft, and laid off staff in an effort to preserve cash. In documents submitted to the court this week, Avianca outlines a new fleet plan and says it expects to emerge from the proceedings with 109 aircraft, down from the 158 it operated prior to 2020. It has also been working with airframers and lessors to restructure future aircraft deliveries. The airline has 66 aircraft in service and 29 in storage, according to Cirium fleets data.

Prices for U.S. consumers rose last month but at the slowest pace since February, a sign that Americans may gain some relief after four months of sharp increases that have imposed a financial burden on the nation’s households, the Associated Press reported. Wednesday’s report from the Labor Department showed that consumer prices jumped 0.5% from June to July, down from the previous monthly increase of 0.9%. They have increased a substantial 5.4%, though, compared with a year earlier. Excluding volatile energy and food prices, so-called core inflation rose 4.3% in the past year, down slightly from 4.5% in June — the fastest pace since 1991. Americans continue to face higher costs, with the year-over-year inflation rate matching June’s increase as the largest annual jump since 2008. At the same time, some recent drivers of the inflation surge slowed last month. The price of used cars, which had soared over the past three months, ticked up just 0.2% in July. Airline fares, which had been spiking, actually declined 0.1% in July.

Fewer oil and gas companies filed for bankruptcy in the second quarter as crude demand increased and prices climbed to past $70 a barrel last month, the Houston Chronicle reported. Four exploration and production companies and eight oil-field service companies in North America filed for chapter 11 protection from April to June, according to Haynes and Boone, a Dallas-based law firm tracking bankruptcies in the industry. That’s down from 13 companies in the first quarter and 23 in the fourth quarter of 2020. Of the 12 bankruptcies in the second quarter, seven were filed in Texas courts. Companies that filed for bankruptcy protection last quarter include OFS International, Dorchester Resources and Anglo-Dutch Energy. Oil and gas companies have been hit hard by the coronavirus pandemic, which slashed global demand for crude products such as gasoline and jet fuel. Unlike past downturns, oil and gas companies have been under increased financial pressure after many investors pulled out of the sector in 2018 following years of low-to-middling performance. Several energy companies said they were forced to file for bankruptcy after lenders pulled credit lines as revenue dried up. Forty-six exploration and production companies and 61 oil-field service companies declared bankruptcy in 2020, according to Haynes and Boone. The 107 oil and gas bankruptcies last year were the most since 142 during the previous oil bust in 2014-16.

Business bankruptcies in Texas this year are down significantly from last year’s record number of court-supervised restructurings, but they remain much higher than the prepandemic filings and far exceed the number seen any in other state in the U.S., the Houston Chronicle reported. They are also more complicated. Companies now filing for bankruptcy, according to the top federal bankruptcy judge in Houston, are facing much more complex issues and finding it considerably more challenging to restructure. The Southern District of Texas saw fewer than half the number of bankruptcy filings during the first six months of 2021 compared to the second half of 2020. Filings were down 40 percent from the the first six months of last year, according to new federal court data provided to the Texas Lawbook by Androvett Legal Media Research. Nearly 550 businesses filed for chapter 11 protection in Texas through June 30 — down from 815 during the same period last year and down from an all-time high of 967 filings in the second half of 2020. But the biggest bankruptcies were filed as a result of the February freeze, including those of Brazos Electric Cooperative and power retailer Griddy Energy. Both filed in the Southern District of Texas. “The volume of new cases coming in is certainly down and we are not as busy as last year,” U.S. Bankruptcy Chief Judge David Jones said. “But the cases now are much more difficult and more problematic than in 2020.”

Operational expenses continue to outstrip revenues for the Springfield (Vt.) Hospital, which exited chapter 11 bankruptcy in December, according to the hospital’s filings with the Green Mountain Care Board, the Valley News reported. Some of the ongoing revenue issues can be chalked up to the COVID-19 pandemic and a related reduction in visits, as well as recovery from the bankruptcy, but it’s not clear how much. “We’re hopeful that it … ends up being a sustainable venture obviously,” said Andrea DeLaBruere, the executive director of the Vermont Agency of Human Services. Springfield Hospital projects to finish the fiscal year on Sept. 30 with a negative operating margin of $3.35 million, more than 6% of its total budget of $52.6 million, according to filings with the GMCB. That loss is smaller than the $5.3 million negative operating margin the hospital booked last year and the $9 million negative margin it booked in 2019. As of July 15, when it filed its budget proposal with the GMCB, the hospital reported 18 days of cash on hand. This is in spite of being the only hospital in the state to receive financial assistance in the past six months for “necessary expenditures incurred due to the public health emergency with respect to COVID-19,” said DeLaBruere.

The president of the Federal Reserve Bank of Boston added his voice yesterday to a growing number of people, inside and outside the Fed, who say the central bank should soon begin to dial back its extraordinary aid for an economy that is strongly recovering from the pandemic recession, the Associated Press reported. Eric Rosengren said that the central bank should announce in September that it will begin reducing its $120 billion in purchases of Treasury and mortgage bonds “this fall.” The bond buying, which the Fed initiated after the coronavirus erupted in March of last year, has been intended to lower longer-term interest rates and encourage borrowing and spending. Rosengren also echoed some of the Fed’s recent critics by arguing that the bond purchases are no longer helping to create jobs but are instead mostly helping drive up the prices of interest-rate sensitive goods such as homes and cars. Home prices are rising at the fastest pace in nearly 20 years. 

U.S. job openings jumped to a fresh record high in June and hiring also increased, an indication that the supply constraints that have held back the labor market remain elevated even as the pace of the economic recovery gathers momentum, Reuters reported. Job openings, a measure of labor demand, shot up by 590,000 to 10.1 million on the last day of June, the Labor Department said yesterday in its monthly Job Openings and Labor Turnover Survey, or JOLTS report. The ratio of openings to hires, despite easing in June, remained at historically elevated levels," JPMorgan analyst Peter McCrory said. Acute labor shortages have been reported, particularly in leisure and hospitality. Generous unemployment benefits, childcare issues and lingering worries about the virus have also been cited as factors holding back people returning to the workforce. The largest increases in vacancies in June were in professional and business services, retail trade and accommodation and food services.