Trump Says Stimulus Talks, $1,200 Checks Are Back in Play

Trump Says Stimulus Talks, $1,200 Checks Are Back in Play

ABI Bankruptcy Brief

October 8, 2020

ABI Bankruptcy Brief

Trump Says Stimulus Talks, $1,200 Checks Are Back in Play

President Trump and House Speaker Nancy Pelosi (D-Calif.) both said today that they’re still negotiating on broad economic relief legislation, the latest twist after five head-spinning days during which the White House has whipsawed between demanding a stimulus bill, then shutting down talks — only to renew them again, the Washington Post reported. Pelosi made her demands for a new package clear, nixing the idea of passing a stand-alone bill to solely help the airline industry. She said that such aid would only be considered if it's part of — or accompanied by — a larger relief bill to meet other economic needs. She said that she and Mnuchin were still talking. There appears to be a new sense of urgency from the White House and some congressional Republicans to reach some sort of agreement amid signs the economic recovery is weakening. Trump said in a Fox Business interview that economic relief talks are back on and could include a new round of $1,200 stimulus checks. This announcement came two days after he abruptly declared them over and ordered his deputies to stop negotiating with Pelosi. Pelosi and Mnuchin had been negotiating for about a week on a comprehensive relief bill with a price tag of between $1.6 trillion and $2.2 trillion. The deal under discussion would include new $1,200 stimulus checks, renew enhanced unemployment benefits, and provide $75 billion for coronavirus testing and tracing, among other provisions. When talks broke off Tuesday, Democrats were pushing for language ensuring a wide-scale testing strategy. Pelosi said today that they were still waiting to hear back on that issue.

U.S. Jobless Claims Remained Elevated Last Week

Applications for jobless benefits remained high last week, even as they have fallen swiftly from their peak of more than 6 million last spring, the New York Times reported. But that progress has recently stalled at a level far higher than the worst weeks of past recessions. That pattern continued last week, the Labor Department said today: More than 800,000 Americans filed new applications for state benefits before adjusting for seasonal variations, roughly in line with where the total has been since early August. “The level of claims is still staggeringly high,” said Daniel Zhao, senior economist at the career site Glassdoor. “We’re seeing evidence that the recovery is slowing down, whether it’s in slowing payroll gains or in the sluggish improvement in jobless claims.” That slowdown comes as trillions of dollars in government aid to households and businesses has dried up. The continued high level of jobless claims, combined with large monthly job gains, highlight the remarkable level of churn still roiling the U.S. labor market. Companies are continuing to rehire workers as they reopen, even as other companies cut jobs in response to still-depressed demand for goods and services.

Retailers Brace for a Black Friday Without Crowds

While shoppers may be wary about in-store shopping on Black Friday, American malls and stores are desperate to make the key shopping day happen, Bloomberg News reported. Traditional brick-and-mortar holiday shopping has been declining for a decade as consumers flock to e-commerce, and the COVID-19 outbreak and recession will only hasten its fall. The U.S. retail sector has been devastated after months-long shutdowns and dozens of bankruptcies, battering the survivors’ hopes that shopping patterns would get back to normal by retail’s busiest day. With barely seven weeks left, merchants are scrambling to prepare stores and websites to make up for lost time. The holiday playbook of opening stores right after family Thanksgiving feasts, lining the weekend with doorbuster sales, and cramming shops with inventory and workers has been thrown out the window. Stores will be reconfigured, with fewer racks on the floor and service stations spread farther apart. Online sales will take center stage. Supply chains will be strained like never before as businesses try to keep up with record e-commerce purchases, with distribution centers hiring tens of thousands more workers to package and ship orders. What’s more, the pandemic has made shoppers wary of going to crowded stores and left many tight on cash after mass layoffs in most industries. COVID-19 has already cost the U.S. retail industry billions of dollars. In a normal year, department stores and apparel sellers get about a quarter of their annual sales in November and December, according to Fitch Ratings. This year’s fourth-quarter shopping spree will be even more crucial; many sales were missed when stores were closed, and consumers refrained from buying gold necklaces, designer handbags, and other discretionary items. Almost $122 billion in U.S. retail sales has evaporated since the pandemic caused store shutdowns in March. Sales at clothing and accessories stores plunged 34.9 percent in the first eight months of 2020 from the same period in 2019, according to the U.S. Census Bureau.

Census Bureau: Nearly One-Fourth of American Households Facing Layoffs or Pay Cuts

Survey results released yesterday by the Census Bureau found that nearly a quarter of Americans expect someone in their household to lose their job or take a pay cut before Election Day, and nearly one-third expect to potentially lose their homes within the next two months, The Hill reported. The Census Bureau’s latest edition of the Household Pulse Survey found that 24 percent of Americans expect either themselves or someone they live with to suffer a loss of employment income within four weeks. The survey was conducted Sept. 16-28 through an online questionnaire. Roughly 32 percent of respondents said it is likely they will be evicted or foreclosed on within the next 60 days despite federal protections meant to prevent a widespread homelessness crisis, and another 6.8 percent said they do not expect to pay their next monthly rent or mortgage payment on time.

Lenders Get Stuck with Busted Eateries After Bidders Get Scarce

Lenders are having a hard time unloading distressed and bankrupt restaurants amid the financial storm caused by the COVID-19 pandemic, Bloomberg News reported. California Pizza Kitchen Inc. on Tuesday canceled an auction to sell itself after no buyers bid for the company, making its bankers the likely new owners. Ruby Tuesday Inc. went bankrupt Wednesday and plans to hand itself over to its lenders. With federal stimulus talks shelved and colder weather putting an end to outdoor dining, the industry’s pain may start to get even worse in the coming months. “It is a difficult time to sell a casual dining brand,” said John Gordon, a longtime restaurant analyst with Pacific Management Consulting Group. Casual dining chains have been slammed this year both by government shutdowns and by consumer worries about catching COVID-19. Restaurant dining rooms across the U.S. were temporarily shuttered by the pandemic earlier this year. While most have reopened, capacity limits have put a cap on how much revenue they can actually generate. “This fear factor is material; it has an impact on the casual dining sales potential,” Gordon said in an interview. He added that locations that can’t reach annual sales of $4 million to $5 million won’t have the margins that entice investors. Casual dining has suffered for the past decade as consumer tastes diverged away from the sit-down experience of chains like Applebee’s and TGI Friday’s. Sales have instead flowed into local restaurants, fast-food chains like McDonald’s Corp., delivery-focused companies like Domino’s Pizza Inc., and fast-casual concepts like Chipotle Mexican Grill Inc. and Shake Shack Inc. With many diners opting against eating in restaurants since March, casual restaurants have been forced to improvise to hold on to sales. TGI Friday’s, for example, has tried to lure customers with outdoor dining tents, while others are selling meal kits and bulk food.

Companies Give Up Cash Cushions to Buy Back Debt

Companies in the U.S. and Europe are buying back bonds to reduce the cash piles they built up earlier this year, signaling expectations for more stable economic times ahead, the Wall Street Journal reported. This year has seen a 40 percent rise in the value of bonds bought back early by investment-grade firms in the U.S. and a 50 percent increase in the region that includes Europe, the Middle East and Africa, compared with last year, according to research from Deutsche Bank. Corporate debt issuance hit a record high in 2020, data from Dealogic showed. In the U.S., firms tapped the bond market for close to $1.5 trillion through September. Companies in Europe raised €486 billion, equivalent to $573 billion. Many firms rushed to set aside the money as a cushion in anticipation of a prolonged disruption to their operations during the pandemic. (Subscription required.)

ABI Sessions Next Week at the Insolvency 2020 Virtual Summit: Bankruptcy Issues Related to PPP Loans, Ethics, Keynote on the Pandemic’s Impact on Mental Health Now and in the Future, and More!

ABI sessions continue next week at the Insolvency 2020 Restructuring, Insolvency and Distressed Debt Virtual Summit to examine the key issues facing the commercial bankruptcy landscape. Panels include:

Oct. 12
• Premier Sponsor Showcase: Development Specialists, Inc. 

Oct. 13
• Bankruptcy Issues Related to PPP Loans and Other Pandemic Governmental Lending Programs
• Views from the Bench: Ethics

Oct. 14
• Networking Hour: A Martial Artist's Guide to Conflict Management 
• Keynote with Dr. Patrice Harris: The COVID-19 Pandemic: The Impact on Mental Health Now and in the Future 
• Networking Event: Spooktacular Mastering Mixology 

Oct. 15

• Trivia Night 

Oct. 16
• Premier Sponsor Showcase: Getzler Henrich
• Premier Sponsor Showcase: Squire Patton Boggs
• Premier Sponsor Showcase: Moelis & Company

Also, don’t miss great programing from Summit partners ABA, AIRA, IWIRC, NABT, NAFER and NCBJ and M&A Advisors throughout the week!

Sixteen leading insolvency organizations are participating in the Virtual Summit through Oct. 27 to bring thought leaders from the worlds of restructuring, insolvency and distressed debt for insightful online programming and engaging networking via a state-of-the-art virtual platform. Click below to learn more about how the Insolvency 2020 platform provides attendees with an enhanced online conference experience:

For more information and to register, please click here.

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New on ABI’s Bankruptcy Blog Exchange: Banks Urge Fed to Revise Liquidity Rule After Pandemic Shock 

The banking industry is warning regulators putting the finishing touches on the Net Stable Funding Ratio that the measure could exacerbate volatile market events like the spring selloff of Treasury securities, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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