'Scary Times for U.S. Companies Spell Boom for Restructuring Advisers' diff viewer (3/4)

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Scary Times for U.S. Companies Spell Boom for Restructuring Advisers	Scary Times for U.S. Companies Spell Boom for Restructuring Advisers
2020-06-12 15:50:29 UTC	2020-06-15 21:36:40 UTC (3 days later)
Freedom Mortgage, one of the nation’s largest mortgage lenders, is looking for additional financing as millions of homeowners are expected to stop making mortgage payments. The Cheesecake Factory said this past week it wouldn’t be able to make rent payments on its leases because of lost business. And giant companies from Kraft Heinz to Ford have tapped billions of dollars in credit from banks in preparation for an uncertain future.	Freedom Mortgage, one of the nation’s largest mortgage lenders, is looking for additional financing as millions of homeowners are expected to stop making mortgage payments. The Cheesecake Factory said this past week it wouldn’t be able to make rent payments on its leases because of lost business. And giant companies from Kraft Heinz to Ford have tapped billions of dollars in credit from banks in preparation for an uncertain future.
These are scary times for American companies as they grapple with the hit to their businesses from the shutdown of major parts of the economy from the coronavirus. But for one group in the financial services industry — restructuring and bankruptcy advisers and lawyers — the emerging signs of pain for companies, both big and small, spell booming business.	These are scary times for American companies as they grapple with the hit to their businesses from the shutdown of major parts of the economy from the coronavirus. But for one group in the financial services industry — restructuring and bankruptcy advisers and lawyers — the emerging signs of pain for companies, both big and small, spell booming business.
Corporations across a wide swath of industries and in vastly different financial straits are being forced to stretch their cash, cut costs, avoid loan defaults and prepare to potentially reorganize their businesses.	Corporations across a wide swath of industries and in vastly different financial straits are being forced to stretch their cash, cut costs, avoid loan defaults and prepare to potentially reorganize their businesses.
Restructuring experts are finding themselves in demand, anticipating that companies will not be able to make good on their commitments on time and may seek to negotiate new terms with lenders, vendors, employees and other parties.	Restructuring experts are finding themselves in demand, anticipating that companies will not be able to make good on their commitments on time and may seek to negotiate new terms with lenders, vendors, employees and other parties.
Dion Hayes, a restructuring attorney at McGuireWoods based in Virginia, said he was getting lots of calls from “businesses that rely on foot traffic.” Sharon Weiss, a bankruptcy lawyer with Bryan Cave in Los Angeles, said she was working with a client in the entertainment business that was looking for another investor to shore up its finances.	Dion Hayes, a restructuring attorney at McGuireWoods based in Virginia, said he was getting lots of calls from “businesses that rely on foot traffic.” Sharon Weiss, a bankruptcy lawyer with Bryan Cave in Los Angeles, said she was working with a client in the entertainment business that was looking for another investor to shore up its finances.
And Simon Freakley, the chief executive of AlixPartners, a restructuring consulting firm, said he has had conversations with directors of big companies that are normally flush with cash, but now must do cash-flow projections to simply see how they can get by for the next few months.	And Simon Freakley, the chief executive of AlixPartners, a restructuring consulting firm, said he has had conversations with directors of big companies that are normally flush with cash, but now must do cash-flow projections to simply see how they can get by for the next few months.
Companies that depend heavily on consumer spending are especially troubled. Restructuring advisers expect retailers — whose financial position was already stretched because of the rise of e-commerce — to run into further trouble as people cut back on shopping. Energy companies, which loaded up on debt in the past decade, are convulsing because of low oil prices as demand falls because of the pandemic. Hoteliers, cruise lines, restaurants, event sponsors and mortgage lenders are among those suddenly short on cash, with travel and outdoor activity at a standstill and unemployment soaring.	Companies that depend heavily on consumer spending are especially troubled. Restructuring advisers expect retailers — whose financial position was already stretched because of the rise of e-commerce — to run into further trouble as people cut back on shopping. Energy companies, which loaded up on debt in the past decade, are convulsing because of low oil prices as demand falls because of the pandemic. Hoteliers, cruise lines, restaurants, event sponsors and mortgage lenders are among those suddenly short on cash, with travel and outdoor activity at a standstill and unemployment soaring.
Carnival, the hard-hit cruise company, has already tapped a $3 billion credit line and said in regulatory filings that it was looking for new financing. The cruise company is working with Wall Street banks to line up investors for a high-interest debt offering, said one person briefed on the matter but not authorized to speak publicly.	Carnival, the hard-hit cruise company, has already tapped a $3 billion credit line and said in regulatory filings that it was looking for new financing. The cruise company is working with Wall Street banks to line up investors for a high-interest debt offering, said one person briefed on the matter but not authorized to speak publicly.
“There’s going to be a massive amount of bankruptcies, but there has to be an even greater amount of out-of-court restructurings,” said David M. Hillman, co-head of the private credit restructuring group at the law firm Proskauer Rose.	“There’s going to be a massive amount of bankruptcies, but there has to be an even greater amount of out-of-court restructurings,” said David M. Hillman, co-head of the private credit restructuring group at the law firm Proskauer Rose.
A restructuring can happen in out-of-court talks. But when a company’s debts are complex or the parties start vying over who will be paid first, the company may seek protection in bankruptcy court, where all the debts are renegotiated under the watch of a judge. In bankruptcy, the company would also seek new financing and a fresh start.	A restructuring can happen in out-of-court talks. But when a company’s debts are complex or the parties start vying over who will be paid first, the company may seek protection in bankruptcy court, where all the debts are renegotiated under the watch of a judge. In bankruptcy, the company would also seek new financing and a fresh start.
In anticipation of demand, many law firms are redirecting their lawyers into restructuring and bankruptcy-related assignments from other areas. Frank Aquila, a corporate attorney at Sullivan & Cromwell who typically focuses on merger and acquisition work, said he’s been spending a lot of time with clients seeking to strengthen their cash position, either by reducing debt, selling assets or considering federal aid.	In anticipation of demand, many law firms are redirecting their lawyers into restructuring and bankruptcy-related assignments from other areas. Frank Aquila, a corporate attorney at Sullivan & Cromwell who typically focuses on merger and acquisition work, said he’s been spending a lot of time with clients seeking to strengthen their cash position, either by reducing debt, selling assets or considering federal aid.
But Mr. Aquila and other advisers said that businesses generally prefer to work with banks rather than seek a government loan — especially if it means giving up the ability to buy back stock or dealing with restrictions on how the money can be used.	But Mr. Aquila and other advisers said that businesses generally prefer to work with banks rather than seek a government loan — especially if it means giving up the ability to buy back stock or dealing with restrictions on how the money can be used.
Michael C. Eisenband, a co-leader of corporate finance and restructuring at FTI Consulting, echoed the sentiment. “If you get $100 million, what happens when the company starts to turn around?” he said. “Do the first profits have to pay the government back first?”	Michael C. Eisenband, a co-leader of corporate finance and restructuring at FTI Consulting, echoed the sentiment. “If you get $100 million, what happens when the company starts to turn around?” he said. “Do the first profits have to pay the government back first?”
Still, some companies — in particular, airlines — will get targeted relief from the $2.2 trillion economic lifeline bill that President Trump signed on Friday, and another $2 trillion that the Federal Reserve is using to keep the bond markets functioning properly.	Still, some companies — in particular, airlines — will get targeted relief from the $2.2 trillion economic lifeline bill that President Trump signed on Friday, and another $2 trillion that the Federal Reserve is using to keep the bond markets functioning properly.
Corporate failures are inevitable in the current crisis, especially given that there is $6 trillion in U.S. corporate debt that remains outstanding — near record levels. Particularly vulnerable is the $760 billion in junk bonds issued by U.S. companies, with $178 billion of that coming due over the next 12 months, according to Dealogic. Junk bonds pay investors higher interest rates.	Corporate failures are inevitable in the current crisis, especially given that there is $6 trillion in U.S. corporate debt that remains outstanding — near record levels. Particularly vulnerable is the $760 billion in junk bonds issued by U.S. companies, with $178 billion of that coming due over the next 12 months, according to Dealogic. Junk bonds pay investors higher interest rates.
Moody’s, a credit-rating agency, predicts that the default rate on corporate junk bonds will reach 10 percent by early next year, and the worst case could be as high as 21 percent. In 2009, one year after the last financial crisis, the default rate on junk bonds peaked at 13 percent, and there were 13,439 so-called Chapter 11 bankruptcy filings, which deal with corporate reorganizations.	Moody’s, a credit-rating agency, predicts that the default rate on corporate junk bonds will reach 10 percent by early next year, and the worst case could be as high as 21 percent. In 2009, one year after the last financial crisis, the default rate on junk bonds peaked at 13 percent, and there were 13,439 so-called Chapter 11 bankruptcy filings, which deal with corporate reorganizations.
Defaults will put pressure on mutual funds, pensions, hedge funds, insurers and other firms that invest in corporate bonds — including collateralized loan obligations, a complex security that includes pieces of various corporate bonds. Missed rent payments will not only pressure commercial landlords but bonds backed by income from those leases. And while no one expects a tidal wave of defaults on corporate bonds rated investment grade — meaning minimal risk to investors — a lot of work is going on behind the scenes to prepare for an epic recession.	Defaults will put pressure on mutual funds, pensions, hedge funds, insurers and other firms that invest in corporate bonds — including collateralized loan obligations, a complex security that includes pieces of various corporate bonds. Missed rent payments will not only pressure commercial landlords but bonds backed by income from those leases. And while no one expects a tidal wave of defaults on corporate bonds rated investment grade — meaning minimal risk to investors — a lot of work is going on behind the scenes to prepare for an epic recession.
So far, banks have remained willing to make new loans to big-name corporations that are usually rated investment grade. McDonald’s said recently it would tap a new $1 billion line of credit from JPMorgan, and Wells Fargo and Bank of America are lending $425 million to Alaska Air, secured by two dozen aircraft.	So far, banks have remained willing to make new loans to big-name corporations that are usually rated investment grade. McDonald’s said recently it would tap a new $1 billion line of credit from JPMorgan, and Wells Fargo and Bank of America are lending $425 million to Alaska Air, secured by two dozen aircraft.
Meanwhile, several private equity and hedge fund firms including Fortress, Apollo and Avenue Capital are seeking opportunities to finance companies with riskier debt profiles that need cash, can’t get it anywhere else and are willing to pay higher interest rates for it, said people briefed on the matter but not authorized to speak for the firms.	Meanwhile, several private equity and hedge fund firms including Fortress, Apollo and Avenue Capital are seeking opportunities to finance companies with riskier debt profiles that need cash, can’t get it anywhere else and are willing to pay higher interest rates for it, said people briefed on the matter but not authorized to speak for the firms.
Updated June 12, 2020	Updated June 12, 2020
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.	So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
	Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.	A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.	The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.	Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.	Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.	States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.	Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)	If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.	Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.	The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.	If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.	If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Restructuring advisers expect the real estate sector to be especially hard hit as homeowners and businesses are unable to make mortgage payments. Several mortgage real estate investment trusts, which buy loans backed by mortgages and other real estate assets on behalf of investors, are already asking their lenders to give them more time to come up with money to pay those investors.	Restructuring advisers expect the real estate sector to be especially hard hit as homeowners and businesses are unable to make mortgage payments. Several mortgage real estate investment trusts, which buy loans backed by mortgages and other real estate assets on behalf of investors, are already asking their lenders to give them more time to come up with money to pay those investors.
And nonbank mortgage servicing firms — which collect mortgage payments from borrowers and then pass on principal and interest payments to investors in bonds backed by those home loans — will see their income slashed because they have to comply with the federal government’s mandate to give forbearance to struggling homeowners.	And nonbank mortgage servicing firms — which collect mortgage payments from borrowers and then pass on principal and interest payments to investors in bonds backed by those home loans — will see their income slashed because they have to comply with the federal government’s mandate to give forbearance to struggling homeowners.
FitchRatings, a credit-rating agency, said that those firms could see “meaningful strains on their liquidity” as income dries up and they still have to pay billions of dollars to investors. In the near term, some of the financial stress may be alleviated by an announcement on Friday from Ginnie Mae, a government agency that guarantees mortgages, that it will provide financial relief to some firms.	FitchRatings, a credit-rating agency, said that those firms could see “meaningful strains on their liquidity” as income dries up and they still have to pay billions of dollars to investors. In the near term, some of the financial stress may be alleviated by an announcement on Friday from Ginnie Mae, a government agency that guarantees mortgages, that it will provide financial relief to some firms.
Fitch put Freedom Mortgage, a large nonbank mortgage firm, on a negative ratings watch, and said it had privately done the same with several other nonbank mortgage firms it monitors.	Fitch put Freedom Mortgage, a large nonbank mortgage firm, on a negative ratings watch, and said it had privately done the same with several other nonbank mortgage firms it monitors.