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Bankruptcy Headlines

Retailer Payless ShoeSource Set to Shutter its U.S. Stores

U.S. discount retailer Payless ShoeSource Inc. plans to close all of its approximately 2,300 stores when it files for bankruptcy later this month for the second time in as many years, Reuters reported. The move would make Payless one of the most high-profile victims of the string of bankruptcies that have hit the brick-and-mortar retail sector as more shopping is done online. Toys “R” Us and The Bon-Ton Stores are among the retailers that shut their stores in liquidations in the last 12 months. Payless had been trying unsuccessfully to find a buyer. After no such deal could be clinched, the Topeka, Kansas-based company has decided to initiate preparations to liquidate. There is still a small chance a buyer could emerge after Payless files for bankruptcy. In the meantime, the company is preparing to run going-out-of-business sales at its shops in the next week.

ShopKo Seeks Court Approval to Investigate McKesson Pricing

Retail chain ShopKo is asking a bankruptcy judge for help investigating McKesson Corp., alleging that the drug distributor might have overcharged its stores for years and could be the main reason the retailer’s pharmacy operations failed, WSJ Pro Bankruptcy reported. Lawyers for ShopKo are asking Judge Thomas Saladino of the U.S. Bankruptcy Court in Omaha, Neb., for access to a range of information about McKesson, including all documents showing the cost of supplies sold to the retailer, and any records about the profitability of the relationship, according to court papers filed on Wednesday. ShopKo and affiliated businesses that sought protection from creditors in mid-January are seeking the judge’s blessing for an investigation under rule 2004 of the bankruptcy code, which allows for examination of issues that affect the administration of a case, including a company’s financial condition and past operation.

Retail Sales Drop the Most Since September 2009

U.S. retail sales recorded their biggest drop in more than nine years in December as receipts fell across the board, suggesting a sharp slowdown in economic activity at the end of 2018, Reuters reported. The Commerce Department said yesterday that retail sales tumbled 1.2 percent, the largest decline since September 2009 when the economy was emerging from recession. Data for November was revised slightly down to show retail sales edging up 0.1 percent instead of gaining 0.2 percent as previously reported. The December retail sales report was delayed by a 35-day partial shutdown of the federal government that ended on Jan. 25. No date has been set for the release of the January retail sales report, which was scheduled for publication on Friday. Excluding automobiles, gasoline, building materials and food services, retail sales dropped 1.7 percent last month after a slightly upwardly revised 1.0 percent surge in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have jumped 0.9 percent in November.

Student Loan Servicers’ Frequent Mistakes Went Unpunished, Audit Finds

An audit released by the Education Department yesterday described its slipshod oversight of federal student loan servicers that were regularly let off the hook for mistakes, driving up costs for taxpayers and for borrowers already owing more than $1 trillion in debt, the New York Times reported. The department failed to track many mistakes by servicers, the contractors hired to send out monthly bills, keep track of what borrowers owe and help them navigate repayment options. And when serious problems were discovered, the department rarely invoked its contractual right to dock servicers’ pay, the department’s inspector general said in its report. Student loan servicers and Education Department officials pushed back against the audit’s findings. In a written response included in the report, James F. Manning, the acting chief operating officer of the agency’s Federal Student Aid office, said his department was dedicated to giving borrowers “world-class service” and strongly disagreed with the report’s conclusion. The audit said that more than 60 percent of the agency’s oversight reports from 2015 to late 2017 contained examples of servicers acting improperly.

PG&E’s Bankruptcy Shows Blindspots in Green Investing

The bankruptcy filing by PG&E Corp. is the latest stumble by a company rated highly by environmentally focused investors, further exposing a weakness in a scoring system meant to measure risk for shareholders, the Wall Street Journal reported. The California utility’s moves over the past 10 years to rely more on renewable sources such as wind and solar resulted in high scores on environmental, social and governance metrics, which are considered by many investors to be a positive factor in choosing a stock and used by others as a way of managing risk. What the ratings couldn’t predict is that the stock would lose nearly 70 percent of its market value since early November, as investors worried about potential liabilities for the role PG&E’s equipment may have played in multiple wildfires. PG&E Corp. filed for bankruptcy protection on Jan. 29. Even as the world’s biggest asset managers pile into ESG investing strategies — an estimated $22.89 trillion invested with ESG in mind, according to industry group the Global Sustainable Investment Alliance — the ratings and analysis that underpin sustainable investment scores remain more art than a science. The data is often self-reported, and there can be blind spots, like those revealed when companies such as PG&E, Volkswagen AG and Facebook Inc. ran into trouble. “These data providers almost have an impossible task in front of them” because it isn’t standardized, said George Serafeim, a professor at the Harvard Business School. “The whole field is very messy.”

U.S. Group Says Trump Trade Tariffs Cost Businesses $2.7 Billion in November

U.S. businesses paid an additional $2.7 billion in tariffs in November 2018, according to data from a coalition of U.S. business groups fighting President Donald Trump’s trade tariffs, Reuters reported. The group, which brands itself “Tariffs Hurt the Heartland” and includes the Americans for Free Trade coalition and Farmers for Free Trade, crunches tariff payment data nationally and by state. The data is part of a monthly series called the Tariff Tracker, which the group releases in a tie-up with The Trade Partnership, a Washington-based international trade and economic consulting firm. The monthly import data, it said, is calculated using numbers from the U.S. Census Bureau, and the monthly export data is compiled using numbers from the Census Bureau and the U.S. Department of Agriculture. The November numbers are the latest government ones available due to the recent U.S. government shutdown.