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Reorganization of Bankrupt Applebee’s Franchisee Could Include Existing Owner

Acon Investments LLC, the buyout firm that owns a bankrupt Applebee’s franchisee, wants to recapitalize the restaurant operator while also leaving the door open for a new bidder to emerge in the chapter 11 proceedings, a lawyer for the franchisee said, the Wall Street Journal. The disclosure came during a hearing yesterday in U.S. Bankruptcy Court in Wilmington, Del., during which RMH Franchise Holdings Inc. faced off against Bank of America NA, which leads a group of secured lenders. The bank said last week that the restaurant operator, which sought protection from creditors in May, should put itself up for sale immediately before it gets to use any more cash to run its business. Bank of America previously consented to three earlier requests for RMH to use cash. By the end of the hearing, Bank of America and Atlanta-based RMH ultimately came to an agreement allowing the company to continue to use “cash collateral” through the end of August, at which point the company expects to have filed both a proposed plan of reorganization and bid procedures for outside parties interested in buying its assets.

Dell-Backed Buyer Outbids Larian for Two Toys ‘R’ Us Warehouses

A buyer financed by the private investment firm of Michael S. Dell boosted its bid at the last minute to win the most valuable properties of bankrupt retailer Toys “R” Us Inc. in a court-managed sale, Bloomberg News reported. A joint venture between Saadia Group and Square Mile Capital used a $120 million loan from MSD Partners to convince a bankruptcy judge to accept its bid for two of Toys “R” Us’s distribution centers over a competing offer from Isaac Larian, the chief executive of toymaker MGA Entertainment. The Saadia venture will pay $177 million for the properties in California and New Jersey, which a Toys “R” Us lawyer called the most valuable real estate owned by the retailer’s U.S. business.

NYU Makes Tuition Free for All Medical Students

New York University said yesterday that it will cover tuition for all its medical students regardless of their financial situation, a first among the nation’s major medical schools and an attempt to expand career options for graduates who won’t be saddled with six-figure debt, the Wall Street Journal reported. School officials worry that rising tuition and soaring loan balances are pushing new doctors into high-paying fields and contributing to a shortage of researchers and primary care physicians. Medical schools nationwide have been conducting aggressive fundraising campaigns to compete for top prospects, alleviate the debt burden and give graduates more career choices. NYU raised more than $450 million of the roughly $600 million it estimates it will need to fund the tuition package in perpetuity, including $100 million from Home Depot founder Kenneth Langone and his wife, Elaine. The school will provide full-tuition scholarships for 93 first-year students — another nine are already covered through M.D./PhD programs — as well as 350 students already partway through the M.D.-only degree program.

Senate Republicans Seek to Clarify Tax Policy for Harassment Victims

U.S. Senate Republicans yesterday sought to correct a section of President Donald Trump’s tax overhaul that threatened to prevent sexual harassment victims from claiming a tax deduction for the legal costs they incur while pursuing their cases, Reuters reported. In a letter to Treasury Secretary Steven Mnuchin dated yesterday, all 14 Republican members of the Senate Finance Committee said that they wanted to clarify Congress’ intent on three separate tax provisions as the administration implements the Republican tax bill that Trump signed into law last December. Republicans say they intend to introduce a technical corrections bill. But the prospects for a legislative fix are clouded by ongoing partisan gridlock in Congress, raising the possibility of wide-ranging unintended consequences. The Trump administration is implementing the new law at a time when allegations of sexual harassment against dozens of high-profile men in media, entertainment, business and politics, including in Congress, have led to a wave of lawsuits and settlements.

Trump Directs SEC to Study Six-Month Reporting for Public Companies

President Trump said today that he had asked the Securities and Exchange Commission to study moving financial reporting for publicly traded companies to a six-month schedule rather than the current quarterly system, the Wall Street Journal reported. On Twitter, Trump said he had consulted “some of the world’s top business leaders” on steps to create jobs and make business “even better.” He said one had told him, “Stop quarterly reporting & go to a six month system.” The comments by Mr. Trump could reignite a long-running debate over whether there is too much emphasis on quarterly results at the expense of a business’s performance down the road. In an opinion article in June in the Wall Street Journal earlier this year JP Morgan Chase CEO and Business Roundtable Chairman James Dimon and Berkshire Hathaway Chairman Warren Buffett said that companies should stop giving quarterly earnings guidance, saying it puts too much weight on hitting short-term targets and discourages longer-term investment. At the same time, the executives said they still supported quarterly reporting, saying transparency about results is an “essential aspect of U.S. public markets” and that quarterly and annual results let the public “reliably assess real progress.”

Citi Draws SEC Fine for Unauthorized Trading, Other Violations

Citigroup Inc. was fined $10.5 million for multiple infractions, including allegations that employees engaged in unauthorized proprietary trading, a practice that regulators famously restricted after the 2008 financial crisis, Bloomberg News reported. Three Citigroup traders mismarked illiquid positions in proprietary accounts from 2013 to 2016, in two instances to cover losses from unauthorized transactions, according to a statement yesterday from the Securities and Exchange Commission. Once uncovered, the bank fired the traders and had to book $81 million in losses. The SEC sanctioned Citigroup in part for failing to detect the misconduct sooner and for inadequate supervision of the traders.
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