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McConnell: U.S. Senate to Begin Debate on New Coronavirus Bill Next Week

The U.S. Senate will begin debate next week on a fifth coronavirus-response bill, Senate Majority Leader Mitch McConnell (R-Ky.) said yesterday, as he forecast tough negotiations with Democrats who are seeking broader aid than Republicans, Reuters reported. McConnell added the legislation, which has not yet been unveiled, will likely be more contentious than the previous four coronavirus aid bills. Those pumped more than $3 trillion into the hobbled economy with a combination of business loans, expanded unemployment benefits for workers and direct payments to families. “I do think we’ll get there and do something that needs to be done” before Congress begins an August recess, the Republican senator predicted. But there are also divisions among Republicans — in the White House and in Congress — over the precise direction of the upcoming bill, including whether there should be another round of direct payments to individuals and families. McConnell has talked about a bill costing no more than $1 trillion, while Democrats in the House of Representatives passed a $3 trillion measure in mid-May that McConnell has so far ignored. McConnell wants to focus on liability protections for business, schools and other entities as they reopen their operations even as coronavirus cases surge in many parts of the U.S., including Kentucky.

Analysis: Executives at Bankrupt Companies Scored $131 Million in Bonuses

Before the bankruptcies came the bonuses: $10 million at J.C. Penney Co., $25 million at Chesapeake Energy Corp., $1.5 million at Hertz Global Holdings Inc. That’s how much was promised to executives only weeks or in some cases days before their companies filed for bankruptcy. Of the 100 or so major companies that have filed since the coronavirus shutdown began, 19 of them have committed to paying a total of $131 million in retention and performance bonuses, both before and after filing, a number that’s poised to climb as a record number of Americans are jobless and the pandemic spreads, Bloomberg News reported. The companies say that they need to keep their management teams to help turnaround consultants repair the damage, even when it means rewarding people who were in charge when the business began sinking. The timing of some of the bonuses, before the filing, legally heads off opposition from creditors, who can’t block such payouts unless they’re made after a case reaches court. The practice isn’t new, but the context is unprecedented. The economy is in a tailspin, and while thousands more Americans stand to lose their jobs in J.C. Penney’s bankruptcy, the $4.5 million going to Chief Executive Officer Jill Soltau, who in fairness took over in 2018, when the company was already decades in decline, is pretty much a done deal, as are other payouts. According to the law, company creditors and the U.S. Trustee, which oversees bankruptcies for the Justice Department, can dispute bonuses paid to executives while in bankruptcy, but not payments made before filing. To challenge pre-bankruptcy bonuses, creditors need to file an adversary claim, such as a fraudulent-transfer claim, which can be costly and time-consuming. In recent weeks, the U.S. Trustee has objected to about a dozen bonuses it says were excessive, said Peter Carr, a spokesperson for the agency. The Trustee has generally been unsuccessful in blocking payouts, he said. “The only remedy is a claw-back,” Carr said. “The U.S. Trustee program can’t seek that remedy, so we object to any debtor motions that would prevent the unsecured creditors’ committee from pursuing this remedy.”

Women’s Retailer New York & Co. Files for Bankruptcy, Will Close All Stores

The parent company of century-old women’s apparel brand New York & Co. has filed for bankruptcy protection and plans to liquidate all its stores after being hurt by forced closures and supply-chain issues during the coronavirus pandemic, WSJ Pro Bankruptcy reported. New York-based specialty retailer RTW Retailwinds Inc., which also owns the Fashion to Figure and Happy x Nature brands, filed for chapter 11 protection on Monday in the U.S. Bankruptcy Court in Newark, N.J., listing assets of about $405 million against nearly $450 million in debt. RTW said that it has started store-closing sales and inventory liquidations at its 387 retail stores in 32 states while it considers a sale of its e-commerce business and intellectual property. The retailer has hired liquidators Great American Group LLC, a subsidiary of B. Riley Financial Inc., and Tiger Capital Group LLC to conduct the closing sales, which are expected to conclude by Aug. 31, court papers show. The company said 92 percent of its brick-and-mortar stores have reopened after temporary closures due to the pandemic. Founded in 1918 as Lerner Shops and formerly known as New York & Co., the business changed its name to RTW in November 2018. RTW had employed about 5,000 people in February, with roughly 3,600 of those employees working part time.

Iconix Brand Weighs Strategic Options Including Potential Sale

Iconix Brand Group Inc. is considering selling itself or combining with another company as the firm broadens its search for a financial lifeline, Bloomberg News reported. The brand-licensing company said yesterday that its board authorized management and its advisers to study options including a sale, merger, debt and equity financings, or other alternatives to keep the firm afloat. New York-based Iconix owns, licenses and markets consumer brands across fashion and sports, including Candie’s and Ed Hardy. It’s been shedding certain assets to raise cash, including Starter China Ltd., which it agreed to sell for $16 million in June. The company retained Ducera Partners as a financial adviser, together with law firm Dechert, its existing legal counsel, to assist in the review efforts. The plans are in addition to the company’s previously announced agreements to sell the rights to the Umbro and Starter brands in China, it said.

Analysis: Pandemic Leading to Many Small-Business Owners Closing Permanently

More owners are permanently shutting their doors after new lockdown orders, realizing that there may be no end in sight to the crisis, the New York Times reported. It was harrowing enough for small businesses — the bars, dental care practices, small law firms, day care centers and other storefronts that dot the streets and corners of every American town and city — to have to shut down after state officials imposed lockdowns in March to contain the pandemic. But the resurgence of the virus, especially in states such as Texas, Florida and California that had begun to reopen, has introduced a far darker reality for many small businesses: Their temporary closures might become permanent. Nearly 66,000 businesses have folded since March 1, according to data from Yelp, which provides a platform for local businesses to advertise their services and has been tracking announcements of closings posted on its site. From June 15 to June 29, the most recent period for which data is available, businesses were closing permanently at a higher rate than in the previous three months, Yelp found. During the same period, permanent closures increased by 3 percent overall, accounting for roughly 14 percent of total closures since March. Researchers at Harvard believe the rates of business closures are likely to be even higher. They estimated that nearly 110,000 small businesses across the country had decided to shut down permanently between early March and early May, based on data collected in weekly surveys by Alignable, a social media network for small-business owners. Christopher Stanton, an associate professor at Harvard Business School who was one of the researchers, said it was difficult to accurately gauge how many small businesses were closing because, once they shut their doors for good, the owners were hard to reach. He added that it could take up to a year before government officials knew the true toll the pandemic was taking on small businesses. Read more

In related news, the House Small Business Committee will hold a hearing tomorrow at 1 p.m. ET titled "Long-Lasting Solutions for a Small Business Recovery." According to the committee, the hearing will explore efforts to stimulate small business growth following the Great Recession, applying those programs to the COVID-19 crisis, and new ideas to help industries that have been disproportionately impacted by COVID-19. Click here for a list of witnesses and a link to access the live webstream tomorrow of the hearing. 

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