%1

Hertz Global Holdings Inc. won bankruptcy-court approval to hand control of the rental-car company to Knighthead Capital Management LLC, Certares Management LLC and other investors that won a bidding war over the company, WSJ Pro Bankruptcy reported. While shareholders typically receive nothing in corporate bankruptcies, the winning bid for Hertz will provide a distribution of more than $7 and as much as $8 a share to the company’s current owners, according to Hertz’s estimates. The winning bid reflected a dramatic rise in Hertz’s prospects in recent weeks as investor groups competed to buy the company out of bankruptcy. Earlier offers from potential bidders offered nothing for Hertz’s equity, and, as recently as mid-April, the company said its shareholders would come away empty-handed in the chapter 11 proceedings. Hertz filed for bankruptcy last May, fighting for survival as its revenue plummeted during the pandemic. “Today we’re on the verge of a remarkable recovery,” company lawyer Tom Lauria said at a virtual hearing Friday in the U.S. Bankruptcy Court in Wilmington, Del. COVID-19 vaccinations and a rebound in consumers’ eagerness to vacation are expected to reinvigorate the travel business and ease Hertz’s path out of chapter 11. Hertz’s creditors will be paid in full, and shareholders will see a substantial return, Lauria said. Rachel Strickland, a lawyer for bondholders that were outbid for control of the company, said they would fight to ensure that they would have everything paid to them that was due, including accrued interest.
https://www.wsj.com/articles/hertz-gets-court-approval-for-bankruptcy-d…

The Fairmont San Jose hotel bankruptcy case has arrived at some crucial stages while uncertainties swirl around a precise date to reopen the iconic downtown lodging and the viability of a plan to revamp its finances, the San Jose (Calif.) Mercury News reported. On March 5, the Fairmont San Jose closed its doors and filed for bankruptcy to reorganize its finances, with the hotel’s owner saying at the time that the hotel would reopen in two to three months. The original time frame of 60 to 90 days pointed to a reopening by as soon as early May or as late as early to mid-June, based on the assertions of the hotel’s owners at the time of the chapter 11 bankruptcy filing. Now, however, court papers have emerged that hint at a later time to reopen the doors of the double-tower hotel in downtown San Jose. The indication of a later time frame — which now points to mid-to-late summer — arose with the filing by the Fairmont’s owners of an amended disclosure statement regarding its business operations, assets, and liabilities. The new disclosures were filed with the U.S. Bankruptcy Court on May 11. The approval of the reorganization plan is seen as a necessary prerequisite to the hotel resuming operations. That’s because the plan must be in effect so it can provide the foundation needed to put the hotel back on a stable financial footing.

U.S. President Joe Biden’s pension bailout might do more than just support troubled retirement plans. It could also spur tens of billions of dollars in demand for corporate bonds with the lowest investment-grade ratings, according to Citigroup Inc., Bloomberg News reported. Struggling multi-employer pensions, which are often tied to unions, will be able to apply for special financial assistance, thanks to the $1.9 trillion pandemic-relief bill signed into law in March. Pension Benefit Guaranty Corp., which insurers the plans, will make a single lump-sum payment to eligible funds. Citigroup estimates that roughly 230 pensions will be eligible to receive $86 billion as early as 2022, though the amount may change when the pension insurer releases application guidance in July, strategists Daniel Sorid and Jason Williams said in an interview. The plans will have to invest the money in high-grade bonds or other securities approved by the agency. The strategists said that pension managers may try to extract as much yield as possible by loading up on bonds in the lowest investment-grade rung, which yield 2.46% on average, versus 2.23% for the broader market. Existing funds could get reallocated into riskier investments like stocks, they added. But in credit, the new demand may entice companies rated BBB to issue longer-dated paper than they usually do and flatten the curve for bonds maturing in 10 years and 30 years even further.

Retails sales in April remained virtually unchanged from March, according to census data released Friday, a significant drop off following the major 10.7 percent surge the previous month, The Hill reported. The figures fell short of the 1 percent rise economists had expected. Retail sales came in at $619.9 billion, slightly higher than March. The March growth in retail sales was fueled by $1,400 stimulus checks, though additional payments have continued to trickle out in April and May. Despite the unexpected stall in growth, the overall figures remained positive, according to Matthew Shay, CEO of the National Retail Federation. The latest figures are significantly higher than pre-pandemic levels, which reached $525.8 billion in February of last year, before the pandemic shuttered the economy.

Philippine Airlines Inc. is in talks with plane lessors about reducing its fleet size and has told them it’s considering a chapter 11 filing in the U.S. to carry out a restructuring, Bloomberg News reported. The airline could return at least two Airbus SE A350s to lessors and four of the 10 Boeing Co. 777s in its fleet. Two A350s are in the process of being taken back by aircraft lessors and will be redeployed to other carriers. Prior to the negotiations, Philippine Airlines had six A350s. One lessor reached an agreement with the airline for it to keep a 777 and an A330. Philippine Airlines is working on documentation for a pre-packaged bankruptcy, with Seabury Capital advising on the restructuring. Founded in 1941, the airline said in a statement it is working with stakeholders “on a comprehensive restructuring plan” that will enable it to emerge from the global crisis financially stronger. Flights and operations won’t be affected in any restructuring, it said.

A sprawling shopping mall in Syracuse, New York, may be driven into one of the biggest municipal-bond defaults since the onset of the pandemic, Bloomberg News reported. Already struggling before the lockdowns hammered retailers, Destiny USA, the state’s largest mall, said it doesn’t know if it will generate enough cash to keep running and pay its debts this year, raising doubts about whether it can continue as a business. Its owner, Pyramid Management Group, hired restructuring advisers and has sought a meeting with investors who hold about $285 million of municipal bonds that financed the project, according to a filing last month. Nuveen LLC and MFS Investment Management were the biggest holders of the debt as of March 31, according to data compiled by Bloomberg. If Destiny can’t pay what it owes, it would be the second-largest default in the state and local government bond market since Covid-19 began racing through the nation in early 2020. It would also mark the first ever on debt backed by payments developers agreed to make instead of property taxes, making it a potential precedent for a $7.5 billion corner of the market that financed New York’s Hudson Yards development, the Mets’ baseball stadium and the new American Dream mall in New Jersey, whose grand opening was delayed by the pandemic.

Elliott Investment Management, the owner of Barnes & Noble, said on Tuesday that it will acquire gift and stationery retailer Paper Source, CNBC.com reported. The acquisition will provide Paper Source with the funding it needs to emerge from chapter 11 bankruptcy. Barnes & Noble CEO James Daunt will oversee both companies. While the two businesses plan to operate independently, it hinted at possible partnerships in the future. Paper Source plans to operate 130 stores in the U.S. as well as its website and wholesale division, Waste Not Paper by Paper Source. The stationery chain filed for bankruptcy on March 2 and was forced to close stores, cut jobs and reduce the pay of senior managers. Like many retailers, Paper Source’s sales fell last year after Covid pandemic shutdowns, capacity restrictions, and a wave of canceled weddings and events hurt sales of invitations. Paper Source had purchased 30 new stores from its competitor Papyrus just weeks before the pandemic hit in March 2020. At the time of its bankruptcy filing, Paper Source had 1,700 employees, 158 stores, and $100 million in debt and leases that cost $36 million annually.

Lawmakers have unleashed more than $5 trillion in relief aid over the past year to help businesses and individuals through the pandemic downturn. But the scale of that effort is placing serious strain on a patchwork oversight network created to ferret out waste and fraud, the New York Times reported. The Biden administration has taken steps to improve accountability and oversight safeguards spurned by the Trump administration, including more detailed and frequent reporting requirements for those receiving funds. But policing the money has been complicated by long-running turf battles; the lack of a centralized, fully functional system to track how funds are being spent; and the speed with which the government has tried to disburse aid. The scope of oversight is vast, with the Biden administration policing the tail end of the relief money disbursed by the Trump administration last year in addition to the $1.9 trillion rescue package that Democrats approved in March. Much of that money is beginning to flow out the door, including $21.6 billion in rental assistance funds, $350 billion to state and local governments, $29 billion for restaurants and a $16 billion grant fund for live-event businesses like theaters and music clubs. The funds are supposed to be tracked by a hodgepodge of overseers, including congressional panels, inspectors general and the White House budget office. But the system has been plagued by disagreements and, until recently, disarray.