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Mall Owners Go on Defensive to Rescue Aéropostale

A move by a pair of mall owners to rescue distressed retailer Aéropostale Inc. shows how some landlords are getting more aggressive as they seek to stem a rising tide of vacancies and store closings, the Wall Street Journal reported today. Simon Property Group and General Growth Properties Inc. were part of a consortium that last week won an auction to purchase teen-apparel retailer Aéropostale, an unusual move in which shopping-center landlords stepped in to rescue a tenant to preserve the tenant’s business. The push to take over the struggling retailer comes at a time when changing shopping habits and the growth of e-commerce are eating into traditional retailers’ revenue and in some cases forcing store closures. That, in turn, is weighing on mall operators, forcing some to reconfigure their properties and add other attractions to bring in shoppers. Simon and General Growth saw value in keeping afloat Aéropostale, which had filed for chapter 11 protection in May and later faced the threat of liquidation. Aéropostale stores potentially generate more than $1 billion in global retail sales, of which more than $800 million is from the U.S., said General Growth Chief Executive Sandeep Mathrani in a news release. Simon counts 160 Aéropostale stores and General Growth has 77 in their respective tenant portfolios. Read more. (Subscription required.) 

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Puerto Rico Federal Oversight Board to Hold First Meeting on Friday

Puerto Rico's newly created federal oversight board, charged with helping the U.S. commonwealth navigate through a crushing $70 billion debt burden, announced it will hold its first meeting in New York City on Friday, Reuters reported. The seven-member board, created by the U.S. Congress in part to stave off a massive default and help the Puerto Rican government renegotiate its debt obligations, is scheduled to meet at 8:30 a.m. EDT, when it will elect a chairperson, the board said in a statement on Friday. The board also said that it will formally request from Puerto Rico's governor the submission of a fiscal turnaround plan, which is a key requirement of the federal Puerto Rico rescue law that created the board, known as PROMESA. The turnaround plan must ultimately be approved by the board, which has broad powers to approve the island's budgets and facilitate debt restructuring talks. The board is comprised of four Republicans, including former Puerto Rico Government Development Bank Chairman Carlos Garcia and bankruptcy expert David Skeel, a professor at the University of Pennsylvania Law School; and three Democrats, including former New York bankruptcy judge Arthur Gonzalez. Read more

Click here to view the agenda for the meeting. 

Latest ABI Podcast examines Puerto Rico’s financial future under PROMESA Oversight Board. Click here to listen. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage

Caesars Inches Closer to Deal with Bankrupt Unit's Creditors

Caesars Entertainment Corp. said today that its major creditors supported the proposed terms of a plan to push its main operating unit out of bankruptcy, making it "optimistic" of winning approval from other creditors, Reuters reported. Caesars offered a sweetened $5 billion settlement last week to hold-out creditors of its main operating unit, Caesars Entertainment Operating Co Inc (CEOC). In exchange, creditors would have to drop their allegations of fraud prior to the unit's bankruptcy in January 2015 with $18 billion of debt. Caesars said today that the parties were working on the support agreements and amending CEOC's current reorganization plan to adopt the proposed terms they had agreed on. Caesars and its private equity owners Apollo Global Management and TPG Capital Management offered junior creditors an increased recovery of 66 cents on the dollar, the casino operator said.

Oklahoma Hospital Files for Bankruptcy

The public trust operating Pushmataha Hospital in Antlers, Okla., filed for bankruptcy on Friday, noting the hospital will remain open as its leaders work to find a long-term solution, the Oklahoman reported yesterday. The Pushmataha County-City of Antlers Hospital Authority, a public trust operating the Pushmataha Hospital, filed the voluntary petition on Friday for chapter 9 bankruptcy in U.S. Bankruptcy Court for the Eastern District of Oklahoma. Pushmataha Hospital is one of multiple rural Oklahoma hospitals that have filed for bankruptcy over the past few years. In total, seven state rural hospitals have been involved in bankruptcy reorganizations since 2011.

Battle Over Munis Moves to Senate

A bipartisan group of senators is pushing to include municipal bonds in bank-safety rules, the latest wrinkle in a continuing fight over how safe — and salable — the debt of states and localities would be in another financial crisis, the Wall Street Journal reported today. Sens. Mark Warner (D-Va.), Charles Schumer (D-N.Y.) and Mike Rounds (R-S.D.) are set to introduce legislation on municipal bonds this week, according to Senate aides. The bill aims to open the door for big U.S. banks to count municipal bonds as liquid assets under rules completed in 2014 that were designed to ensure Wall Street firms have enough cash during a crisis to fund their operations for 30 days. The Senate legislation would place municipal bonds on the lowest rung of the “high quality liquid assets” category. That means they would be treated on par with corporate bonds, but not as favorably as under related legislation approved by the House early this year.

Fed Plans to Ease Stress-Test Requirements for Regional Banks

A revamp of the Federal Reserve’s stress-testing activities for banks will include an effort to tailor how the tests assess smaller lenders while increasing the capital needs of systemically important firms, according to Fed Gov. Daniel Tarullo, reported yesterday. Tarullo said yesterday the central bank wants to rethink the qualitative assessments of smaller lenders as part of its Comprehensive Capital Analysis and Review (CCAR) tests. The Fed is issuing its notice of proposed rulemaking for that relief, Tarullo said. Globally systemic financial institutions “will see their capital requirements rise,” Tarullo said in his speech. “Other CCAR firms will see some reduction in their capital requirements. And firms that have less than $250 billion in assets and do not have extensive international or nontraditional banking activities will also transition to a more tailored set of capital planning expectations outside the CCAR process.”