After passing legislation to amend a forgivable loan program for coronavirus-stricken small businesses on Wednesday, the Senate was working on a related bill yesterday that would give borrowers another tax break on their loans, Roll Call reported. Sen. John Cornyn (R-Texas) who introduced the bill in early May, told reporters that leadership was trying to pass the bipartisan measure, but said that it still faced obstacles. The bill would give borrowers a second tax benefit, a practice sometimes described as double-dipping. The borrowers already don't have to treat forgiven loans as income and the bill would allow them to get a business expense deduction. “If I’m not mistaken, we did hotline it — got a couple of holds and we’re working through those one at a time,” he said yesterday. (Senate hotlining involves leadership quickly polling members to see if any have issues with passing it by unanimous consent. It’s a way to pass uncontroversial measures without hours of floor debate.) But Senate Majority Leader Mitch McConnell (R-Ky.) wrapped up later in the afternoon, deferring any action until at least next week. Senate backers of the bill may also be facing resistance from the administration. Treasury Secretary Steven Mnuchin has resisted calls to allow the deduction by changing the rules of the PPP program, calling it a "double dip."

Competing factions of J.C. Penney Co. lenders that were vying to finance the retailer’s restructuring efforts reached a deal yesterday, averting potential litigation between them, WSJ Pro Bankruptcy reported. Kris Hansen, a lawyer for creditors including Aurelius Capital Management LP, said at a court hearing his group had come to terms with rival lenders on a financing package that supplies Penney with up to $900 million to stay afloat through bankruptcy. The settlement avoided a possible fight between Hansen’s clients and rival lenders led by H/2 Capital Partners LLC that hold roughly three-quarters of Penney’s top real-estate loans. Penney filed for bankruptcy last month with a commitment from H/2, along with Silver Point Capital LP, Sculptor Capital Management and others, to cover its expenses while it attempts a complex financial restructuring. Other investors including Aurelius cried foul, saying the proposed terms were stacked against Penney and offering a competing loan proposal. Under the settlement announced Thursday, Aurelius and its allies can participate in the financing package. They will get to convert $53 million of their debt claims into top-ranking bankruptcy loans. The judge presiding over Penney’s bankruptcy approved the loan package, even as he acknowledged it was “expensive money” for the company. “If we were in a perfect world, this financing package would be highly objectionable,” Judge David Jones said from the bench. But he added he wouldn’t let the bankruptcy languish any longer without a financing source. “It is the only path forward that I see,” the judge said. Read more. 

In related news, J.C. Penney said yesterday that it will start closing 154 of its stores next week in what it is calling the first phase of its efforts to shrink its footprint, the Associated Press reported. The Plano, Texas-based retailer said that it could take about 10 to 16 weeks to complete the closures. A list of the stores closing was published on Penney’s website. Penney filed for bankruptcy protection last month, making it the biggest retailer to do so since the coronavirus pandemic forced non-essential stores to be shut down temporarily. J.Crew and Neiman Marcus sought bankruptcy protection days before J.C. Penney. All three were laden with debt and had trouble connecting with shoppers, who are increasingly skipping the mall and shopping online. As part of its bankruptcy reorganization, Penney said it planned to permanently close nearly a third of its 846 stores in the next two years. That would leave it with just over 600 locations. Read more.