%1

A scion of one of the last American department-store dynasties has a recipe for other ailing chains: stop being a department store, the Wall Street Journal reported. That realization came too late for Tim Grumbacher to save his own company, Bon-Ton Stores Inc., which is liquidating all of its 262 locations after filing for bankruptcy protection in February. “If I had had the foresight to realize I had to blow up the model, I would have,” the former CEO said. Grumbacher, the largest shareholder, who stepped down as CEO in 2004 but remained chairman until last year, says that he would have subleased space to other companies, added more services like blow-dry bars and narrowed the product assortment. He says consumers don’t want to shop in cavernous department stores anymore. “You almost have to be a series of specialty stores that people can get into and out of much faster,” Grumbacher said. One obstacle that prevented the company from making any big changes was a roughly $1 billion debt load, accrued through multiple acquisitions that created a rift between Grumbacher and his father, who ran Bon-Ton for more than four decades. Read more. (Subscription required.) 

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

The U.S. has opened a criminal investigation into whether traders manipulated prices in the $550 billion market for corporate bonds issued by Fannie Mae and Freddie Mac, Bloomberg News reported. The probe shows that investigations by the Obama Justice Department into market manipulation by bank traders are continuing under President Donald Trump. The Obama administration secured billions of dollars in settlements and criminal charges tied to the rigging of currency markets and benchmark interest rates. The latest inquiry is in its early stages and focuses on whether traders at banks coordinated with one another in order to benefit the institutions they work for. Investigators are looking at potential fraud and antitrust violations. The investigators are looking not into the mortgage securities issued by the two companies to finance home purchases but rather at the secondary market for Fannie’s and Freddie’s corporate bonds. Together, the mortgage-finance companies have outstanding corporate debt of about $548 billion, according to the Securities Industry and Financial Markets Association.

The chapter 11 bankruptcy of Aspen Constructors, a builder of luxury homes, has come to an end, the Aspen (Colo.) Times reported. Bankruptcy Judge Elizabeth Brown signed an order dismissing the case on Friday in response to the company's motion to toss it out because of the settlement of litigation in Pitkin County District Court. Aspen Constructors declared chapter 11 on Dec. 29 and continued to operate through the bankruptcy. The bankruptcy was ignited by a $1.3 million arbiter's award to the owner of a home on which Aspen Constructors was the general contractor. The owner, Fort Lauderdale, Fla.-based West Hallam LLC, sued Aspen Constructors and subcontractor Argento Marble in 2014 for construction defects on the home. The case went to arbitration, leading to the award that prompted Aspen Constructors in August to sue its insurance provider, Cincinnati Insurance Co., which initially had defended Aspen Constructors in the arbitration proceedings but denied coverage for the award.

Rates for home loans throttled higher, nipping at the heels of a housing market that’s so far managed to absorb pricier financing on top of surging home prices, MarketWatch.com reported. The 30-year fixed-rate mortgage averaged 4.66 percent in the week ending May 24, mortgage finance provider Freddie Mac said yesterday, a jump of five basis points during the week. While housing demand remains robust, the continued rise in rates has housing industry participants watching closely. So far in 2018, rates have increased in 15 out of the first 21 weeks of the year, Freddie Mac Chief Economist Sam Khater noted. 

Executives at David’s Bridal Inc. have hired restructuring advisers at Evercore Inc. and legal counsel at Debevoise & Plimpton to help turn around the budget-priced business, Bloomberg News reported. The chain also appointed a new chief executive officer, Scott Key, according to a statement on Friday. Some holders of first lien term loans have been working with advisers from law firm Jones Day and investment bank Greenhill & Co., according to two more people, and some bondholders are working with Houlihan Lokey as a financial adviser. The chain owes creditors about $762 million, with the bulk due in October 2019. Bonds issued by David’s trade for half their face value, with Moody’s Investors Service and S&P Global Ratings cutting the company’s credit rating deeper into junk earlier this year on concern that it’s headed for a distressed-debt exchange.

Fair-housing advocates planned to file a lawsuit today against the U.S. Department of Housing and Urban Development and HUD Secretary Ben Carson for suspending an Obama-era rule requiring communities to examine and address barriers to racial integration, the Washington Post reported. The 2015 rule required more than 1,200 communities receiving billions of federal housing dollars to draft plans to desegregate their communities — or risk losing federal funds. After nearly 50 years of inaction, the rule was seen as a belated effort by HUD to enforce the landmark civil rights legislation of the 1968 Fair Housing Act, which compelled communities to use federal dollars to end segregation in residential neighborhoods. The 2015 rule, developed over a six-year period, required every community receiving HUD funding to assess local segregation patterns, diagnose the barriers to fair housing and develop a plan to correct them. Most communities were supposed to submit their plans to HUD every five years, beginning in 2016. Communities without HUD-approved plans would no longer receive federal housing dollars.