Monthly Archives: September 2020

The next big wave of U.S. bankruptcy filings wont happen until mid-2021, when companies that borrowed heavily to survive Covid-19 hit a wall, says bankruptcy attorney James Sprayregen of Kirkland & Ellis.

You could think of it as a rat of debt working its way through the snake, and it takes a while for that to happen, said Sprayregen, whose firm represented some of largest U.S. companies that went bankrupt during the pandemic. A big wave has already happened and we have a semi-hiatus for maybe the rest of the year, he said in a telephone interview Monday.

A distressed debt surge in the second or third quarter of 2021 will include bankruptcies and restructurings, said Sprayregen, a Kirkland partner who built its international restructuring group. Debt-for-equity swaps will also leave some companies with new owners, he said.

Besides energy, a large number of companies in the travel and leisure sector will need to address capital structures, according to Sprayregen, who splits his time between Chicago and New York.

After a boom in corporate distress when economies shut down to deal with the pandemic, 2020 had been expected to be the biggest bankruptcy year ever. The pace of bankruptcies was widely expected to pick up after last month, which was slower than May-July, but still the worst August on record.

The Covid Bankruptcies: Vegas Monorail to a New York Retail Icon

In the past week there were just four filings by companies with more than $50 million in liabilities, including iconic New York department store chainCentury 21 Stores. Thats down from six filings a week, on average, from April to July, but in line with Augusts weekly average.

Default RiskThere have been 187 bankruptcy filings year-to-date by companies with more than $50 million in liabilities, according to data compiled by Bloomberg. Thats the most for any comparable period since 2009, when there were 271 in the full year, the data show.

Global corporate defaults picked up after slowing in August, with five issuers added to the default tally last week, according to a Sept. 11 report from S&P Global Ratings, which highlights risk in CCC rated debt.

So far in 2020, 152 out of 171 defaults, or nearly 90%, were from entities rated CCC and below before default, said Sudeep Kesh, head of S&P Global Credit Markets Research.

Moodys Investors Service predicted more pain to come for global oilfield services and drilling companies. In a report published Monday, it cites elevated refinancing as a potential cause of bankruptcies.

Distress EasesThe total amount of distressed bonds and loans traded fell by 1.7% to $278 billion as of Sept. 11, the third straight week of declines. Thats down from $935 billion in March, data compiled by Bloomberg show. Volume of distressed bonds declined 0.9% while loans fell 3%.

There were 518 distressed bonds from 263 issuers trading as of Monday, down from 548 and 287, respectively, one week earlier. Thats significantly less than the 1,896 issues from 892 companies at the March 23 peak, Bloomberg data show.

American Airlines Inc. and Bombardier Inc. topped the ranks of issuers with the most debt trading at distressed levels that hadnt filed for bankruptcy as of Sept. 11, data compiled by Bloomberg show.

More:

Pandemic borrowing seen driving the next bankruptcy surge in 2021 - Asset Securitization Report

Regus CEO Mark Dixon with 175 Pearl Street in Brooklyn, 1325 Sixth Avenue and 1501 Broadway (Regus, Google Maps)

Short-term office company Regus put half a dozen of its New York City workcenters into bankruptcy as the company seeks Chapter 11 protection for upwards of 100 locations across the country.

Regus, which went through a bankruptcy restructuring in 2003 after the dot-com bubble burst, has put roughly 90 locations into Chapter 11 over the past six weeks, filings show.

The company has filed for six workcenters in Manhattan, Brooklyn and Long Island City in the past week.

Four of the locations are in Midtown: Paramount Groups 1325 Sixth Avenue at 53rd Street, Levin Properties 1501 Broadway in Times Square, Brookfield Properties 424-434 West 33rd Street in Manhattan West and EQ Offices 1740 Broadway at 56th Street.

The other centers are at Normandy Real Estate Partners 175 Pearl Street in Dumbo and Jamestown Properties Falchi Building at 31-00 47th Avenue in Long Island City.

A representative for Regus declined to comment. But in the half-year update from its parent company, Switzerland-based IWG, CEO Mark Dixon said the firm will be accelerating its plan to trim 4 percent of its global portfolio in response to Covid-19.

Whilst the Covid-19 pandemic continues, we expect our third quarter to be particularly challenging. We therefore remain sharply focused on maximising further cost savings in the coming months, he wrote in the August report, noting the company is working to build a large cash buffer.

Regus is the largest flex-office provider in the world, with about 10 times as many locations as WeWork. The company, founded in 1989, is largely seen as a barometer for the short-term office market, which has grown significantly in the past few years with WeWorks expansion driven largely by SoftBank.

As recently as last fall, Dixon was crowing that Regus was thriving as its younger, upstart rival was experiencing growing pains.

But the coronavirus has had a severe impact on the short-term office market, with a number of smaller players fizzling out. Regus bankruptcy filings are the most significant indicator yet that the pandemic pain may start to reach the industrys highest levels.

The majority of the sites Regus put into bankruptcy are in urban cores including New York, Chicago and San Francisco areas hard hit by the virus. The number of centers in Chapter 11 represent about 2 percent of the 1,000 locations the company has in the United States and Canada.

The company believes its clients will want to work in suburban offices closer to home, rather than in dense business centers.

Nearly $13 billion worth of commercial-mortgage backed securities loans have exposure to Regus locations, according to a recent report from Kroll Bonds Ratings Agency.

Contact Rich Bockmann

Original post:

Regus throws 6 NYC locations into bankruptcy - The Real Deal

Century 21, which blamed its decision to shut down on its property insurers, wants to bring the legal fight over Covid-19 coverage to bankruptcy court.

The New York-based department store chain this week said it could have been saved if insurers agreed to pay about $175 million it says it is owed under policies to protect against business disruptions.

The designer discounter, which sought bankruptcy protection Thursday, is asking a New York bankruptcy judge to hear its case against its insurers quickly, so if victorious, it can collect on its policies. The family-owned department store sued its insurers in July in New York state court, after government restrictions in response to the pandemic forced it to close down.

The bankruptcy court, however, is unlikely to issue a decision or speed up a settlement that would result in a payout to Century 21, said bankruptcy lawyers not involved in the case who were interviewed by The Wall Street Journal. And even if it does, that decision wouldnt save the storied retailer, they said.

The bankruptcy court may decide not to take over the lawsuit against insurers.

Original post:

Century 21 Wants to Move Covid-19 Insurance Fight to Bankruptcy Court - The Wall Street Journal

DWayne Prieto and 115 Cedar Street in New Rochelle (Linkedin, Google Maps)

A hotel project pegged as a catalyst for the revitalization of downtown New Rochelle just filed for Chapter 11 bankruptcy.

A company tied to a luxury Wyndham hotel planned for 115 Cedar Street made the bankruptcy filing Sept. 11 in federal court. The hotels developer is Ward Capital Management, a real estate investment firm based in nearby Dobbs Ferry.

The hotel project the largest in Westchester County in 20 years owes creditors $4.67 million, including $715,000 to prolific hotel architect Gene Kaufman. It has assets of $4.1 million, according to the filing.

Ward Capital Management secured New Rochelles approval to build a 24-story, 225-key hotel last summer. The project was part of the citys larger goal to revitalize its downtown area to attract younger residents.

DWayne Prieto, the managing partner and CEO of Ward Capital, is the husband of Jewelle Prieto, founder and co-owner of the now-shuttered restaurant and nightlife spot Don Coqui, which operated at the site for years.

Amenities at the 245,000-square-foot hotel tower planned to include a restaurant and bar, a spa, a rooftop pool and grill, valet parking and conference space. The hotels expected completion date was June 2021.

An attorney representing the hotel, Kevin Nash of Goldberg Weprin Finkel Goldstein, did not immediately return a request for comment. Ward Capital Management declined to comment. Court records show the partners in the project are in litigation; the bankruptcy filing could be a means to resolve their dispute.

Hotels have been slammed by the pandemic, as tourism and business travel have been virtually nonexistent since March.

The Courtyard by Marriott in Herald Square just revealed it will not reopen, and a few weeks ago, the Hilton in Times Square also announced it is closing permanently. The 478-room hotel at 234 West 42nd Street disclosed its plans to permanently shutter in a filing with the New York State Department of Labor.

View post:

Largest Westchester hotel project in 20 years files for bankruptcy - The Real Deal

The coronavirus pandemic has been brutal to small businesses. Nearly 79% of small businesses have felt a moderate-to-large negative effect from the pandemic, according to an August 2020 U.S. Census Bureau Small Business Pulse Survey.

I never would have imagined myself in this position, says Nicole Rosen, founder of Mizfit Inc., a company that provides after-school and summer dance classes to schools across South Florida. Rosens company successfully applied for a Paycheck Protection Program (PPP) loan to help maintain payroll and operations, but without the same level of demand or ability to hold in-person classes, she still had to let several employees go and dip into savings to stay open.

Im pivoting and doing whatever I can to survive, Rosen says.

Although the PPP was touted by U.S. Treasury Secretary Steven Mnuchin as a huge success, with government data indicating the forgivable loan program supported more than 51 million jobs, the sustained economic downturn and its resulting effect on small businesses has stretched far beyond anyones expectations, leaving many businesses wondering what else they can do to survive.

While Republicans have touted reopening the economy as a way to save small businesses, it may not be the panacea that business owners hope for.

In New York, for example, restaurants will be able to host indoor dining at 25% capacity starting on Sept. 30. But many restaurateurs fear that the revenue generated by this reduced capacity wont be enough to save their businesses, nor hire back all of their employees.

In an interview with the New York Times, Eric Ripert, chef at Le Bernardin, said, I know I can make it work at 50 percent, but the expenses of getting it up and running, versus the revenue, my gut tells me it will not work at 25 percent.

Some business owners have pinned their survival hopes on another round of PPP. But the Senate failed to pass its latest stimulus bill, and with lawmakers stuck in a months long stalemate, there may be no relief before the end of 2020.

As the funds from CARES Act programs like the PPP and the Small Business Associations (SBA) Economic Injury Disaster Loan (EIDL) Advance grant are depleted, small business owners are left wondering if they can survive untilor even ifadditional government aid arrives.

The [CARES Act] kind of cushioned the immediate impact but didnt fix anything long term. says Ike Shulman, co-founder of the National Association of Consumer Bankruptcy Attorneys (NACBA). There are going to be people filing for bankruptcy that never had a clue theyd need a bankruptcy lawyer.

When a business has already exhausted its PPP loan but sales havent rebounded, whats the next move?

Small business owners waiting on negotiations about future aid may consider turning to other avenues, although each comes with its own potential pitfalls.

Fast cash options, which are lines of credit issued to a small business and often backed by a personal guarantee, have proliferated over the past few months. And although it may seem appealing to get money quickly to tide you over, these types of loans often come with sky-high interest, says Leslie Tanye, a lawyer and founder of debt solutions law firm Tayne Law Group, P.C. in Melville, New York.

In todays environment alternative funding is limited, loans are more restricted, Tayne says. It becomes a Catch-22 for a business owner: What do you do to get money and how do you keep your business up?

Although there are low-cost small business loan programs available, including the SBAs EIDL program, the Federal Reserves Main Street Lending Program (MSLP) and Community Development Financial Institutions (CDFI loans), the thought of owing money can be unappealing without a clear path on how to repay it.

I dont owe anybody any money, I dont want to owe anybody any money, says Joey Ball, who owns several franchises in the greater Los Angeles metropolitan area. Its going to be a hard decision to think that youre either going to have to borrow money to stay afloat or to just file bankruptcy and wait for this to blow over and start again.

Ball says he received PPP funding, but the money he received for all seven of his businessesincluding five massage and skin care salons, one waxing salon and one tanning salonhas now been spent. His businesses are closed, and he anticipates at least two of them will never reopen.

Ball also says many of his employees have moved on to other jobs now that the federal $600 unemployment benefit has ended, making it near-impossible to reopen even if he could.

The only thing at this point thats going to save me is a second round of PPP, Ball says. Basically the government is controlling my destiny.

Closing your doors permanently may not be your only option.

The natural inclination is people dont want to file [for bankruptcy], theyll do whatever they can to stay afloat; but if the mountain of debt that they are facing is so large that they know its a real possibility, then the earlier they the get organized the better, Shulman says.

Another option may be debt negotiation.

Renegotiating your debts with an experienced financial attorney, especially if you have assets, allows more flexibility than in bankruptcy, Tayne says. Obviously bankruptcy is an option but its complicated and expensive. Often small business owners have mixed personal funds with business funds. And, when someones personal monies are enmeshed with their business funds, it can make it exceedingly difficult to tell which is which, a requirement for a bankruptcy proceeding.

Tayne recommends taking stock of any business assets you can potentially either sell off or use as a negotiating chip with creditors, along with taking a hard look at your cash flow to see if your business is sustainable in the current economic environment.

Renegotiating debt can also have less of an impact on your business and personal credit. It depends on the type of business you have, but a business bankruptcy can stay on your personal credit report for seven to 10 years, and on your business credit reports for up to 25 years.

There are generally two types of business bankruptcy options:

Theres a provision of Chapter 11 that may make it more palatable to smaller business owners trying to buy time until the economy bounces back. Within the Small Business Reorganization Act of 2019 (SBRA), theres an option that allows business to spread administrative fees out over three to five years versus the traditional upfront payment of administrative costs.

Before taking action, consult with an attorney to help determine your next steps. Many bankruptcy or financial attorneys offer free consultations before you have to commit to working with them or taking legal action. Most states have legal aid societies or lawyers who will take cases pro bono or at a drastically reduced cost for those who qualify financially.

Read the original here:

Small Businesses Continue To Suffer Pandemic Pain. Is Bankruptcy The Answer? - Forbes

CENTER VALLEY, Pa. - It's a record summer for bankruptcies.

The number of bankruptcies is up over 200 percent from July and August of last year and expected to get worse as the economy continues to stall.

"We're going to see a lot more bankruptcies because many, many businesses are trying to hold on as much as they could," saidKamran Afshar, an economist with DeSales University.

"Still, we are not going to see many of these jobs come back because like every recession businesses learn how to do the same job more efficiently."

Currently, most of these bankruptcies are from larger companies like Stein Mart, Chuck E. Cheese, and Brooks Brothers to name a few.

But small business might not be that far behind them.

Charles Laputka is a bankruptcy lawyer in Allentown. Although locally, he says filings have been down he expects them to go up as government aid stops.

"And I expect bankruptcies to pick up again probably January, February, March," Laputka said.

And for many small businesses they might be too broke to file for bankruptcy.

"And they have to put down-in the Lehigh Valley-anywhere between $10-$25,000 upfront just to begin the case. And then it's billed hourly after that,"Laputka said.

"Generally, always, the rate of business failure is higher than bankruptcy. Now significantly more so,"Afshar said.

However for those who, unfortunately, will have to file it might not be the black stain it once was.

"In this type of situation I believe there's going to be a lot of wiggle room in bankruptcy, will not be as negative as it has been in the past. You know COVID will excuse a lot of sins,"Laputka said.

Originally posted here:

Record number of businesses filed for bankruptcy this summer. That could be just the beginning - 69News WFMZ-TV