Weekly Jobless Claims Rise to 6.6 Million as Coronavirus Lockdowns Spread

The number of Americans filing claims for unemployment benefits shot to a record high of more than 6.6 million last week as more jurisdictions enforced stay-at-home measures to curb the coronavirus pandemic, which economists say has pushed the economy into recession, Reuters reported. Initial claims for state unemployment benefits surged 3.341 million to a seasonally adjusted 6.648 million for the week ended March 28, the government said. That was double the previous all-time high of 3.307 million set in the prior week. Today’s weekly jobless claims report from the Labor Department, the most timely data on the economy’s health, reinforced economists’ views that the longest employment boom in U.S. history probably ended in March. With a majority of Americans now under some form of lockdown, claims are expected to rise further. Economists said worsening job losses underscored the need for additional fiscal and monetary stimulus. President Donald Trump last week signed a historic $2.3 trillion package, with provisions for companies and unemployed workers. The Federal Reserve has also undertaken extraordinary measures to help companies weather the highly contagious virus, which has brought the country to a halt. The Labor Department said states continued to identify layoffs related to COVID-19 across a broad array of industries, including accommodation and food services, health care and social assistance, manufacturing industries, retail, wholesale trade and construction industries.

Today's ABI’s Chart of the Day has more.

The Rush for $350 Billion in Small-Business Loans Starts Tomorrow, but Banks Have Questions

A day before small businesses can apply for forgivable loans from the $2 trillion financial-relief package, banks say they are still struggling to understand how to make these loans eligible for a government guarantee, the Wall Street Journal reported. Under the Small Business Administration’s Paycheck Protection Program, part of the stimulus package signed into law last week in response to the COVID-19 pandemic, lenders would make available as much as $350 billion in government-guaranteed loans to cover eight weeks of payroll and other expenses. Business owners can begin applying tomorrow for the loans, which are forgivable if businesses keep their workforce largely intact and use the loans for eligible expenses such as rent and utilities. Many details of the program remain unclear, which is complicating efforts by lenders to gear up for what is expected to be an onslaught of prospective borrowers at the end of this week. Among what lenders say are the unanswered questions are how much due diligence of borrowers is required, and whether they will be able to sell these loans to create liquidity. “As a community bank, we want to support all of the small businesses in our communities,” said Jeanne Hulit, chief executive of Maine Community Bank in Biddeford, Maine, which has about $950 million in assets and has received inquiries about the loan program from more than 300 small businesses. “But we need to wait for the lender application forms so we know what we have to provide in terms of documentation and procedures,” she added. “Until we get that guidance from the SBA, we are on hold.” (Subscription required.)

Commentary: This DIP Loan Brought to You by Someone Who CARES! (or, “I’m from the Government, and I’m Here to Help You”)

In an attempt to soften the inevitable economic blow that accompanies this global pandemic and its epic adverse impact on the U.S. economy, on March 27, 2020, Congress passed (and the President quickly signed) the "Coronavirus Aid, Relief, and Economic Security (CARES) Act" into law, according to a special ABI commentary by Thomas J. Salerno, Gerald Weidner, Christopher Simpson and Susan Ebner of Stinson, LLP. The CARES Act is reported to be “twice as large as any relief ever signed” and will provide $2.2 trillion in relief to U.S. families, workers and businesses. This is the third piece of legislation passed to address this problem. While bankruptcy lawyers are aware that CARES expanded the debt limitations for eligibility for the “Small Business Reorganization Act of 2019” (which became effective on Feb. 19, 2020) from a little over $2.7 million to $7.5 million (thereby opening up the streamlined restructuring capabilities for materially more financially distressed business), the authors believe that there could be another substantial implication for the brave new bankruptcy world: a new potential source of DIP financing.



Additionally, Salerno, along with a team of writers from Stinson LLP, has updated Pre-Bankruptcy Planning for the Commercial Reorganization. Pre-bankruptcy planning for the commercial chapter 11 reorganization can be broken down conceptually into four distinct (although interrelated) categories, which are set forth in no particular order of priority: (1) preparation of management, key employees and exit strategy; (2) business preparation; (3) legal preparation; and (4) tax preparation. This update is an invaluable guide for CEOs, CFOs/COOs, general counsel and tax advisors, as well as for practitioners who represent them in going through a reorganization. Pre-Bankruptcy Planning is available at store.abi.org (remember to log in with your ABI credentials to secure member pricing).

Commentary: Coronavirus Is Making the Public Pension Crisis Even Worse

Already chronically underfunded, pension programs have taken huge hits to their investment portfolios over the past month due to the financial fallout from the COVID-19 pandemic, according to a New York Times commentary. The outbreak has also triggered widespread job losses and business closures that threaten to wipe out state and local tax revenues. That one-two punch has staggered these funds, most of which are required by law to keep sending checks every month to about 11 million Americans. Last week, Moody’s investors service estimated that state and local pension funds had lost $1 trillion in the market sell-off that began in February. The exact damage is hard to determine, though, because pension funds do not issue quarterly reports. “You’re not going to see real data on the market crash until Christmas,” said Girard Miller, a former chief investment officer of the Orange County, Calif., pension fund and a former member of the Governmental Accounting Standards Board. And that data will not count the knock-on effects of the economic downturn, which would short-circuit pension funds’ ability to hit up taxpayers for bigger contributions.

Coronavirus Pandemic Widens Divide Between Online and Traditional Businesses

The coronavirus pandemic is deepening a national digital divide, amplifying gains for businesses that cater to customers online while businesses reliant on more traditional models fight for survival, the Wall Street Journal reported. The process is accelerating shifts already underway in parts of the U.S. economy in ways that could last long after the health crisis has passed, some analysts say. “What we’re in right now is a sudden and extreme version of what had been a much longer, slower-moving trend,” said Jed Kolko, chief economist at online job site Indeed. Many brick-and-mortar retailers, which had seen falling foot traffic for years due to online competition, have now shuttered their stores, while online merchants watch sales boom. And sectors that had long resisted moving online are now joining in: Doctors and therapists offer telemedicine appointments while their offices sit nearly empty; yoga studios and other fitness providers are offering remote sessions; schools and universities have moved classes online. The news media is also seeing a longtime trend gain momentum: While the coronavirus pandemic is driving reader traffic to news sites, the crisis is delivering a punishing blow to already-struggling local publishers hit by declining advertising revenue. (Subscription required.)

Trump Says He Has Brokered Oil-Cut Deal with Saudi Arabia, Russia to Halt Price Rout

U.S. President Donald Trump said today that he had brokered a deal with top crude producers Russia and Saudi Arabia to cut output and arrest an oil price rout amid the global coronavirus pandemic, though details of how the cut would work were unclear, Reuters reported. Trump said that the two nations could cut output by 10 to 15 million barrels per day (bpd) — an unprecedented amount representing 10 to 15 percent of global supply, and one that could necessitate the participation of nations outside of OPEC and its allies. A senior U.S. administration official familiar with the matter said Trump would not formally ask U.S. oil companies to contribute to the production cuts, a move that is forbidden by U.S. antitrust legislation. Russia and Saudi Arabia have been at odds since early March, when the two nations failed to agree on a deal curbing output as the coronavirus spread around the globe. The pandemic has worsened since, freezing economic activity and sending oil prices into a tailspin as producers confronted the prospect of a dramatic fall in demand with a flood of unwanted oil supply. The immense decline in demand sent oil prices to their lowest levels since 2002, close to $20 per barrel, hitting the budgets of oil-producing nations and dealing a huge blow to the U.S. shale oil industry, which cannot compete at low prices.

abiLIVE Webinars Tomorrow and Next Week Tackle the CARES Act, SBRA, Consumer Relief and Preferences

ABI will be hosting a series of webinars over the next few days looking at the "Coronavirus Aid, Relief, and Economic Security Act" (CARES Act) and the Small Business Reorganization Act of 2019 that went into effect on Feb. 19. The programs feature expert speakers looking at how the laws will create greater access to financial relief for consumers and small businesses seeking bankruptcy. Former House Speaker John A. Boehner will be joining a panel on Monday to examine tools to navigate the financial crisis related to COVID-19. The abiLIVE webinars are available for free, and CLE is available for a processing fee. Webinars scheduled include:
 
Tomorrow: "The Small Business Reorganization Act: How It Helps in Today’s Health & Economic Crisis"
Panelists: Bankruptcy Judge Madeleine C. Wanslee (D. Ariz., Phoenix), Robert J. Keach of Bernstein Shur (Portland, Maine) and Attorney Allan D. NewDelman (Phoenix), moderated by ABI Editor-at-Large Bill Rochelle.
Date and time: Tomorrow, April 3, at 1:00 p.m. EDT
Register here.
 
Monday: "Tools to Navigate the Financial Crisis Related to COVID-19"
Panelists: Former U.S. House Speaker John A. Boehner of  Squire Patton Boggs (Washington, D.C.), Karol Denniston of Squire Patton Boggs (San Francisco), Michael C. Eisenband of FTI Consulting (New York), Brian Kennedy of FTI Consulting (Washington, D.C.) and Ed J. Newberry of Squire Patton Boggs (Washington, D.C.), moderated by Stephen Lerner of Squire Patton Boggs (Cincinnati, Ohio).
Date and time: Monday, April 6, at 12:00 noon EDT
Register here.
 
Tuesday: "The Consumer Provisions of the CARES ACT, and Local Court Responses to the Pandemic"
Speakers: Bankruptcy Judge Tracey N. Wise (E.D. Ky.; Lexington), Attorney Eric Goering (Cincinnati), Prof. Robert M. Lawless of the University of Illinois (Champaign, Ill.) and Reporter for the ABI Commission on Consumer Bankruptcy, and Michael J. McCormick of McCalla Raymer (Atlanta), moderated by David P. Leibowitz of Lakelaw (Chicago).
Date and time: Tuesday, April 7, at 1:00 p.m. EDT
Register here.
 
Wednesday: "Preference Update: SBRA’s Due Diligence Requirement" 
Speakers: Timothy J. McKeon of Mintz Levin (Boston), Bankruptcy Judge Jerrold N. Poslusny (D. N.J.; Camden), Shane G. Ramsey of Nelson Mullins (Nashville, Tenn.) and Bethany J. Rubis of ASK LLP (Saint Paul, Minn.).
Date and time: Wednesday, April 8, at 1:00 p.m. EDT
Register here.
 

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