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U.S. Household Debt Jumps to $13.3 Trillion While Student Loan Delinquencies Dip

U.S. household debt continued to increase in the second quarter, propelled by an advance in mortgage borrowing, according to a Federal Reserve Bank of New York report that also noted a decline in seriously delinquent student loans, Bloomberg News reported. Total household debt rose 3.5 percent from a year earlier in the April-to-June period to a record $13.3 trillion, while mortgage debt rose 3.5 percent to $9 trillion. The majority of newly originated mortgages continued to go to borrowers with the highest credit scores, extending the pattern of most of the current economic expansion — 58 percent of new mortgage loans were taken by those with scores of 760 or higher. As borrowing advanced, borrower stress continued to decline. Loans slipping into delinquency fell to 4.52 percent in the second quarter, the lowest in data from 2003. The drop was primarily due to student loans, for which the transition rate has fallen 1.3 percentage points over the last year. Read more. 

Be sure to check out yesterday's ABI Chart of the Day. 

LightSquared Founder Falcone Sued Over $21 Million Aircraft Debt

Philip Falcone was sued over a $21 million aircraft-leasing debt that a bank says was guaranteed by the former hedge fund manager and his wife, WSJ Pro Bankruptcy reported. Wilmington Trust Co. filed papers in the Supreme Court of New York County on Friday seeking to enforce guaranties signed by Falcone and Lisa Falcone for the lease of a Gulfstream Aerospace G-V aircraft through a limited liability company he controls. Wilmington Trust said that it was launching a “straightforward action for defendants’ failure to pay instruments of money only.” Falcone V LLC, the aircraft lessee, defaulted on its rent obligations and reached a forbearance deal with the bank in May, according to the complaint. The bank said that the lessee subsequently defaulted on the forbearance deal by paying only $700,000 out of a required $1.5 million installment.

Plus-Size Retailer FullBeauty Hires PJT to Fix Debt Load

FullBeauty Brands Inc., the New York-based online and catalog retailer of plus-size apparel, recently hired financial adviser PJT Partners Inc. to address its debt load, WSJ Pro Bankruptcy reported. The retailer, owned by Apax Partners LLP since 2015, saw revenue slide by 6 percent last year and 3.5 percent in the first quarter of 2018, according to Moody’s Investors Service. FullBeauty has faced increasing competition from online retailers such as Amazon.com Inc. as well as traditional retailers such as J.C. Penney Co., which have expanded their plus-size offerings. FullBeauty is struggling with $1.13 billion in debt, which could be unsustainable, given the recent erosion in revenue. The company’s interest expenses are high at close to $100 million a year, according to Moody’s.

Sears CEO's Hedge Fund Offers to Buy Kenmore Brand for $400 Million

Sears said in a regulatory filing yesterday that a hedge fund owned by the chief executive of Sears Holdings Corp., Edward Lampert, has offered to buy the company’s Kenmore appliances brand for $400 million in cash, Reuters reported. ESL Investments also made an offer to buy the Home Improvement business of the company’s home services division for as much as $80 million in cash, according to the filing with the U.S. Securities and Exchange Commission. The offer for Kenmore is conditional on ESL receiving equity financing from a potential partner, according to the filing. No partner was named. Lampert said in April that Sears should sell its Kenmore brand, home improvement businesses and real estate, and that ESL Investments would bid in any sale.

Overhaul Boosts Credit Scores of Millions of U.S. Consumers

The credit scores of millions of U.S. consumers have risen following a broad overhaul of how credit-reporting firms handle negative credit information, the Wall Street Journal reported. Consumers who had at least one collections account removed from their files experienced an 11-point increase, on average, in their credit scores, according to a report released yesterday by the New York Federal Reserve. The report was based on a sample of millions of anonymous credit reports from credit-reporting firm Equifax Inc. Collections were completely removed from 8 million consumers’ credit reports in the 12 months through June, resulting in an average 14-point increase. The improvements come after the three largest U.S. credit-reporting firms changed how they deal with certain kinds of negative credit events that some have said are prone to error and unfairly drag down credit scores. The firms — Equifax, Experian PLC and TransUnion — agreed to revamp the reports following settlements with state attorneys general dating back to 2015.

Farmers’ Anxiety Grows as Details on Federal Aid Remain Unclear

Farmers fretting over a trade conflict sparked by President Trump’s tariffs may soon get more details on the $12 billion worth of aid that the administration has pledged, as their concerns mount over potentially plunging incomes and market losses, the Wall Street Journal reported. “We certainly are appreciative of it but…we don’t know how it’s going to be determined,” Ryan Pederson, a North Dakota farmer who grows soybeans and canola, said of the proposed farm aid. “You can’t do any planning off of that because you don’t know what it’s going to be.” An Agriculture Department representative this week said that the agency expects to announce official guidelines for the programs by Aug. 24 and be ready to implement them by Sept. 4. Farmers would receive payments between September and the end of their harvest, and would be required to provide documentation of what they grew, the agency said. But details on how much farmers will receive, and how it will be distributed, remain unclear. In July, the White House said it planned to direct the emergency funds to farmers to compensate for losses they face, as other countries retaliate and impose tariffs on U.S. goods. Read more. (Subscription required.) 

In related news, prices for U.S. farm exports dropped in July by the most in more than six years as a trade war with China heated up, Labor Department figures showed yesterday, Bloomberg News reported. Agricultural export prices fell 5.3 percent from the prior month, the biggest drop since October 2011, as soybean prices plummeted 14.1 percent. Export prices for corn, wheat, fruits and nuts also slumped in July. The overall export price index dropped 0.5 percent, the most since May 2017, the department said. The figures exclude the price effect from any tariffs. China in July slapped 25 percent tariffs on American soybeans and also targeted other farm goods in retaliation for U.S. duties on a range of merchandise. The world’s biggest buyer of soybeans has shunned U.S. supplies amid the escalating trade conflict, threatening to curb exports after the harvest. The report also showed that import prices were unchanged from the previous month, matching the median estimate of economists. Prices were up 4.8 percent from a year earlier, the biggest advance since 2012, driven by a 40.7 percent rise in fuel import prices. Read more. 
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