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Toys ‘R’ Us Wins Confirmation of Chapter 11 Payment Plan

A judge signed off yesterday on a bankruptcy plan for Toys “R” Us that gives control of the brand to a group of hedge funds, and a fractional payment to suppliers, after a failed turnaround effort left 33,000 workers without jobs and all of its U.S. stores closed, WSJ Pro Bankruptcy reported. The once-giant toy seller filed for bankruptcy protection in September 2017, hoping to trim its chain of stores and survive. Hopes of a turnaround for the toy store chain were dashed when hedge funds owed about $1 billion pushed Toys into liquidation after a disastrous holiday season. The funds that controlled Toys “R” Us’s secured debt — Angelo, Gordon & Co., Franklin Mutual Advisers, Highland Capital Management, Oaktree Capital Management and Solus Alternative Asset Management — deny they are responsible for the failure of the turnaround effort. Market forces such as the boom in online sales have turned against bricks-and-mortar retailers, they contend.

Study Cites the Benefits of Taking Student Loans

A new study found that student loans, despite their toxic reputation, helped recipients earn better grades, take more classes and graduate sooner, the Wall Street Journal reported. The study counters a drumbeat of bad news about student debt, which has nearly tripled in the last decade and been blamed for everything from hindering homeownership to damping the willingness to switch jobs or go to graduate school. The five-year research project, which followed 20,000 students at an urban community college, found that taking out loans averaging $4,000 enabled the students to work less and study more while also providing a cushion against emergencies. Student loans don’t need to be paid back while students are still in school. “I think having these resources provides a buffer against unexpected issues,” said Benjamin Marx, an economist of University of Illinois and co-author of the study, to be published today in Education Next, a journal of opinion and research put out by the Harvard University Kennedy School of Government. Marx and his colleague tracked 10,000 students who had been offered student loans via a letter from the school and 10,000 who hadn’t. Students who got offers in their letters were 40 percent more likely to take a loan. Those additional students who got loans earned 3.7 more credits per academic year than they would have if they didn’t take a loan.

Borrowers Flee Empty Malls and Bond Investors Brace for Fallout

Mall operators, eyeing defaults caused or made more likely by shuttered stores such as Sears Holdings Corp., are handing over their keys to lenders even before leases end, Bloomberg reported. That’s forcing loan-servicing companies to either take a shot at running the properties or sell them cheap. And if they’re unable to salvage the debt payments, investors in commercial mortgage-backed securities will take a hit. Last month, Washington Prime Group, a REIT, said that it gave up on two malls in Kansas whose loans had either defaulted or were headed for default, according to Deutsche Bank AG. And this month, Pennsylvania REIT announced it fled a mall in Wilkes Barre that had a loan headed for default, and it may abandon another in La Crosse, Wisconsin for the same reason. Read more

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

Bondurant Racing School Closes Its Doors After 57 Years in Business

The Bob Bondurant School of High Performance Driving closed its doors on Monday amid proceedings for chapter 11 bankruptcy, which it filed in early October, The Drive reported. The popular racing institution filed voluntarily as it planned to reorganize its debts, restructure, and continue operating. Unfortunately, it appears it simply ran out of time. According to the chapter 11 filing, Bondurant owes between $1 million and $10 million to its creditors, against an estimated $1 million to $10 million in assets. Those assets include their massive Chandler, Ariz. facility, which features a three-mile track, a kart track, and plenty of other areas for driving instruction.

Most Banks Left Standards for Business Lending Unchanged in Third Quarter

Most banks in the U.S. left their standards for lending to businesses little changed in the third quarter, according to the Federal Reserve’s latest survey of senior loan officers, the Wall Street Journal reported. Of those that changed their business-lending standards, more eased than tightened, the Fed said yesterday. More banks eased standards on commercial and industrial loans than tightened them in the third quarter, particularly in the case of large firms with more than $50 million in annual revenue, according to the survey, which was conducted in early October. The Fed’s senior-loan-officer opinion survey has, in the past, served as an early indicator when banks tended toward making riskier loans. Before the 2007-’09 recession, for instance, banks eased lending standards to businesses and narrowed the premium they charged for loans, even as demand for commercial and industrial loans was growing. The situation today is different. More loan officers surveyed reported business demand for loans weakening than strengthening in the third quarter. The most-cited reason for softer demand was that customer firms’ cash flow had improved, reducing their need to borrow.

Average Utah Payday Loan Interest Rate Rises to Nearly 528 Percent Annually

The already astronomical interest rates for payday loans in Utah are rising, to an average of 528 percent, with the highest rate topping a stunning 1,500 percent. Still, 1 of every 5 payday loan stores in the state closed in the past two years, the Salt Lake Tribune reported. That’s according to new annual data compiled by the state about the industry — portrayed by critics as a “debt trap” that can easily hook and financially drain the poor, but defended by lenders as a needed service for people with poor credit and few other loan options. The annual report by the Utah Department of Financial Institutions also has encouraging news about payday loan customers: They are borrowing less, and 1 in 8 now take advantage of state-mandated programs that allow them to enter into interest-free, extended-payment programs to avoid default.

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