The COVID-19 pandemic and the economic hardships it is causing will likely result in a wave of personal, farm and small-business bankruptcies in South Dakota and beyond in the coming months that will be both a result and a cause of a wider economic crisis spurred by the coronavirus.

So far, federal aid and unemployment programs, and several months of restricted access to the court system, have delayed a rise in bankruptcies from showing up in court filings.

But increased rates of unemployment, reduced incomes of people at all levels of the economy and a coming debt crisis will all play a role in the anticipated bankruptcy storm that could affect a wide range of individuals and businesses, including people who long saw themselves as financially stable, said Breck Miller, community relations director for Lutheran Social Services Center for Financial Resources in Sioux Falls.

It would not surprise me at all if we do see an increase in the number of bankruptcy filings, Miller said. The pandemic really put a lot of people in a financial bind, and I think its going to strike across the demographics. Its not just a low-income thing.

Federally backed financial assistance programs have helped keep food on many familys tables during the pandemic and have so far helped many of the hardest-hit South Dakotans stave off bankruptcy.

Mortgage forbearance, which allows for a delay or reduction in house payments, was granted as part of the federal CARES Act, and helped some homeowners manage debt. Temporary aid was also provided through new payment options from credit-card companies, and some borrowers were granted a pause in student loan payments.

But as federal assistance programs expire, and private lenders start seeking back payments on home and car loans, experts say many people in financially vulnerable positions will soon find that the debt they took on during the worst of the pandemic has become too much to handle.

Mortgage payments delayed through forbearance still must be paid, sometimes as soon as the forbearance period ends. A homeowner could be on the hook for hundreds or even thousands of dollars in back payments that must be made and carry the risk of defaulting on loans.

Back payments alone will drive more people to seek bankruptcy protections in the coming months, said Clair Gerry, a bankruptcy attorney from Sioux Falls.

For that reason alone I would expect to see a big uptick in Chapter 13s, Gerry said of the personal bankruptcy filings.

As of late July, 16,000 South Dakota residents were unemployed, and many were forced to turn to credit cards or drawing down savings to survive, Miller said. As of August, those unemployed workers lost the $600 weekly enhanced unemployment benefit created by Congress as part of its pandemic relief efforts.

A rising wave of bankruptcies could lengthen the pandemics economic recession as small businesses and consumers struggle to restructure their debts or sell off what they own or write off debts they cant pay. The burden has already been immense for many families at all income levels in South Dakota, many of whom have said they couldnt withstand an unexpected $400 expense without taking on more debt even before COVID-19 hit.

Consumer spending, meanwhile, is sure to fall and the economy overall will suffer, said Joe Mahon, an economist and outreach director at the Minneapolis Federal Reserve Bank.

Think of all those people who lost their jobs and lost their incomes, Mahon said. Even with the unemployment benefits that they might have been receiving, theyre probably thinking more about hanging on to their discretionary money rather than going out and spending on appliances and clothing and things like that.

If consumers are stuck paying off debts, they cant spend their money at local businesses, many of which also took on additional debt to survive the pandemic. That will result in fewer job openings for people trying to return to work as their unemployment runs out and the economy continues to open up.

Exactly when the bankruptcy bomb will go off is anybodys guess at this point, economists and bankruptcy experts say, but they worry it is only a matter of time before filings rise rapidly.

I just know theres a storm looming, Gerry said. Everybody is predicting that theres going to be a lot of bankruptcies filed by fall or winter.

So far, 2020 has been a relatively slow year for bankruptcy courts. Nationwide, total bankruptcy filings were down about 23% compared to the first six months of 2019. In South Dakota, by the end of July, bankruptcy filings were down about 16% compared to the first seven months of 2019, said South Dakota Bankruptcy Court clerk Frederick Entwistle.

Bankruptcy attorneys and financial counselors have recommended to clients that they hold off on filing for bankruptcy until the worst of their financial losses have ended. Often, that meant waiting until finding a job and figuring out what their new monthly income would be. If an individual files for bankruptcy but has to keep living off of credit cards or other forms of debt, any debt incurred after the initial filing wont be discharged or reorganized as part of the bankruptcy proceeding.

South Dakotans, in general, also tend to avoid bankruptcy. The state currently ranks 45th lowest in the per-capita rate of bankruptcy filings out of the 50 states and has had one of the lowest per-capita bankruptcy filing rates for more than a decade. Over the past five years, there have been fewer than 1,100 personal bankruptcies filed in the state each year. In 2019, just 964 people or married couples filed for either chapter 7 or chapter 13 bankruptcy.

Recessions, though, tend to push people beyond their financial limits faster and farther than they can cope with. In 2010, when the effects of the Great Recession of 2008 peaked in South Dakota, 2,000 people filed for bankruptcy protection, nearly double the number from before the Great Recession began.

COVID-19 also came at a time when farmers and ranchers, South Dakotas economic bedrock, were struggling against a trade war and low prices for grain, soybeans and cattle. In fact, January and February of 2020 saw overall bankruptcy filings in South Dakota increase over the same period in 2019 due to a jump in farm bankruptcies, said Gerry.

Much of what happens over the next few months will depend on what Congress comes up with as far as economic stimulus, and how long it takes those currently unemployed to get back to work. Avoiding a surge in bankruptcies, though, will take a lot more stimulus and far faster employment and wage growth than is likely to occur.

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COVID Worry: Experts Say Wave Of Bankruptcies Likely In SD - Yankton Daily Press

Farm bankruptcies increased 8% over a 12-month period, with 580 filings from June 2019 to June 2020. A six-month comparison, however, shows the number of new Chapter 12 filings slowing. Several contributing factors are likely at play as farmers struggle to stay afloat during the COVID-19 pandemic.

The Midwest, Northwest and Southeast were hardest hit, representing 80% of the filings across the U.S. Wisconsin led the nation with 69 filings, followed by 38 in Nebraska. Georgia and Minnesota each had 36 filings.

A closer examination of the numbers shows that while year-over-year filings increased for the month of June, filings slowed during the first six months of 2020 compared to the first half of 2019. The latest AFBF Market Intel, written jointly with the Association of Chapter 12 Trustees, shows from January to June 2020, there were 284 new Chapter 12 bankruptcy cases, 10 fewer than the same time in 2019. The reduction in filings coincides with aid distributed in the CARES Act that compensates farmers and ranchers for losses incurred from January through mid-April of this year. According to the Association of Chapter 12 Trustees, approximately 60% of farm bankruptcies are successfully completed the highest successful percentage of all the reorganization chapters.

Every farm bankruptcy potentially represents the end of a familys dream, said American Farm Bureau Federation President Zippy Duvall. The fact that we saw bankruptcy filings slow in the first six months of 2020 shows how important the economic stimulus alongside the food and agricultural aid from the CARES Act have been in keeping farms above water, but the economic impact of the pandemic is far from over. Its imperative that Congress addresses the challenges facing farmers and ranchers in current coronavirus relief legislation.

As of August 3, $6.8 billion in CFAP payments have been delivered to farmers and ranchers. Many farmers, particularly those who are not regularly eligible for aid, have not applied for assistance or may not know the assistance is available. Farmers can learn more about coronavirus assistance at http://www.farmers.gov/cfap.

AFBF Chief Economist John Newton said, The bankruptcy numbers dont tell the whole story. The fact that the bankruptcy process is now virtual probably contributed to a decline in numbers. CARES Act assistance was also a bandage that slowed the bleeding on many farms, but those protections will soon expire. Without more help we could expect to see filings begin to rise again.

Contact: Mike TomkoDirector, Communications(202) 406-3642miket@fb.orgTerri MooreVice President, Communications(202) 406-3641terrim@fb.org

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Mixed News on Farm Bankruptcies Amid Pandemic - Farm Bureau News

As a part of its response to the economic turmoil caused by the Covid-19 pandemic, the government of India on June 5 promulgated an ordinance suspending the operative provisions of the Insolvency and Bankruptcy Code for a period of at least six months, from March 25. This move received widespread praise from businesses, which were already reeling under considerable economic stress.

While the Insolvency and Bankruptcy Code was envisioned as a mechanism to help restructure struggling businesses, in practice, it has proven to be a popular and powerful tool not just for restructuring, but also for recovering debt. With civil suits taking anywhere upto 10 years to conclude, suppliers and contractors have managed to use the threat of insolvency proceedings to recover their dues.

Reports suggest that nearly Rs 70,000 crore worth of debt was recovered in 2018-19, up from about Rs 5,000 crore in 2017-18. This number was expected to be around Rs 100,000 crore in 2019-20.

If the Insolvency and Bankruptcy Code was allowed to continue even after the pandemic, banks and suppliers would have rushed to the National Company Law Tribunals seeking to recover their dues. This would only have worsened the financial pressure on businesses.

However, the ordinance suspending the bankruptcy code may not be the panacea Indian business hopes it will be. Already, its constitutionality has been challenged before the Madras High Court. The Code was suspended by introducing Section 10A into it. But a close reading of the section shows that insolvency proceedings with respect to debts falling due for a period of six months after March 25 have been suspended for ever. This period of six months can be extended up to a year by the government.

In effect, this means that an invoice raised on January 26, 2020, with a credit period of 60 days, cannot be the basis of insolvency proceedings, even if the crisis is resolved and the business environment improves. The same is the case for a bank loan extended on August 31 , 2019, with its first installment payable after one year.

The governments stated aim was to provide respite from Covid-related debts, and foster a climate where businesses need not worry about potential insolvency proceedings for debts they could not repay on account of the disruption caused by the lockdown. However, such benefits could have been easily achieved by a temporary suspension of Insolvency and Bankruptcy Code proceedings. In fact, countries such as Singapore have adopted such an approach.

In practice, the government has ended up providing a carte blanche to businesses to avoid paying their debts, so long as they incidentally fell due during the lockdown. It is difficult to see the rationale for this policy. Not every debt that falls due after March 25, 2020, resulted in a default because of the pandemic. It could well be that a business was already struggling to meet its obligations before the pandemic even began.

In any case, there is no reason why even a Covid-related debt should not be recovered after the economic situation has stabilised.

The after-effects of the ordinance will be felt most keenly by Indias struggling banks. The India Ratings and Research agency estimates that non-performing assets that might be generated on account of the lockdown from the top 500 debt-heavy private sector companies to be as high as Rs 67,000 crore. This is a 6.63% addition to NPAs, taking the aggregate NPAs in India to a staggering 18%-20% of outstanding loans.

To make matters worse, the Indian economy is expected to shrink by as much as 5%, which may dent the appetite for fresh borrowing. All of this is bound to compound the strain on Indian banks. Further, none of the alternatives remedies available to a bank (such as approaching the Debt Recovery Tribunal or initiative proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act) can match the Insolvency and Bankruptcy Code in terms of efficacy. This is because no other remedy allows for a resolution plan, that is, the option to sell the business to prospective bidders as a going concern and repay the creditors.

Conventional remedies depend on attaching the assets and funds the business has available, over which multiple creditors will compete.

In the last three or four years, the Code has demonstrated that attempting to restructure or resell the business itself is more effective than attempting to realise value from individual assets. Even those who criticise the Code agree that it has vastly improved the recovery rates that conventional remedies offered, from about 25% to approximately 43%, in less than half the time, according to the Insolvency and Bankruptcy Board of India.

The comparable number for the Debt Recovery Tribunals was 3.5% and Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act proceedings 14.5%. It is difficult to justify an embargo on a bank using this regime, to restructure a business that cannot find its feet even after the economic situation has stabilised.

Apart from banks, the move is also likely to hurt the very businesses it sought to protect: in the absence of the Code, suppliers will struggle to recover dues, and generate cash flow. They will now be forced to resort to more cumbersome and expensive alternate remedies available under the law, such as summary suits. A summary suit is usually decided only on the documents placed before the court and oral arguments. There is no oral evidence led and no cross-examination of witnesses.

However, in practice, summary suits are simply not as efficacious in terms of timelines and simplicity of proof. The threshold for a debtor to avoid a summary procedure is fairly low. She need only show that she has a probable defence or the prospect of success. If she does, the matter will then proceed to trial, which in India takes several years to complete. Moreover, if the creditor does not manage to secure the assets of the debtor at an interim stage, the business may even dispose of its assets.

The preference for the Insolvency and Bankruptcy Code among suppliers is borne out by the numbers as well. In the three years since its enactment, nearly 48% of the claims before the National Company Law Tribunal were brought by operational creditors.

In the long run, the ordinance suspending the Code may actually hurt suppliers and banks, creating a risk to the health of Indias economy. A constitutional challenge to it may actually carry some muster.

Dhruva Gandhi and Vinodini Srinivasan are advocates at the Bombay High Court. They are graduates of the National Law School of India University, Bangalore.

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Businesses cheered moratorium on bankruptcy proceedings but it may actually hurt them - Scroll.in

Despite being one of the biggest airlines of Brazil with a fleet of over 100 planes, Gol Linhas Areas Inteligentes (GOL) faces an uncertain future ahead, as its liquidity is drying up and there are no signs of recovery. The bailout package that the Brazilian government discussed with major airlines a couple of months ago seems to be out of the picture and Gol, along with others, is unlikely to receive any substantial help from the state in the near term. At the same time, the airlines cash burn is going to increase in Q3, as Gol is about to repay a $300 million loan to Delta (NYSE:DAL) in the next few weeks, which raises the chances of a liquidity crisis happening in the next couple of months. Back in June, the airlines own independent auditor said that Gol could face insolvency in the foreseeable future. Considering this, we believe that Gol could become bankrupt and its better not to invest in the company since the risk is too high, while growth opportunities are limited.

The biggest advantage of Gol is that it operates solely a Boeing 737 fleet, which makes the airline more efficient in comparison to its competitors. As a low-cost airline, it has one of the lowest operating expenses, which during normal times is considered a substantial competitive advantage. However, as COVID-19 started to spread all around Brazil, Gol was forced to shrink its fleet and return 18 leased 737-800 planes, while keeping the option to reduce its fleet by additional 30 planes in the next couple of years. The airline also decreased the number of its 737MAX orders from 219 to 95 planes and reduced the salaries of its workers to improve the cash burn rate. Despite those cash preservation measures, its unlikely that Gol will survive in its current state without going through a restructuring process, which will wipe out all the current shareholders.

In its Q2 report, the airline said that its revenues decreased by 88.6% Y/Y to R$358 million, while its traffic was down 92.3% Y/Y. At the same time, its daily cash burn was R$3 million and theres every reason to believe that the cash burn will only increase in Q3. As the airline faces an uncertain future ahead, we dont see any upside for its stock.

The biggest disadvantage of Gol is that its exposed to Brazil. With more than 3 million confirmed COVID-19 cases, Brazil is the second-most infected country in the world, after the United States, and its healthcare system is on the brink of collapse. The pandemic also disrupted the countrys economy and since the beginning of the year, the Brazilian real depreciated by more than 35% to the United States Dollar. This is bad news for Gol, since the airline makes most of its revenues in Brazilian currency, while the majority of its debt is dollar-denominated. At the same time, as the countrys GDP is about to shrink by more than 5% in 2020, Gol will have a hard time recovering to its pre-COVID-19 levels in its current state anytime soon.

Brazils Projected GDP Growth. Source: Statista

Back in June, Gols independent auditor KPMG stated that the airline could become insolvent and will not be able to survive the pandemic. The companys Latin American competitors LATAM and Avianca already filed for Chapter 11 and Gol could face the same destiny. A month after the warning was issued, Gol decided to fire KPMG and hired Brazilian Grant Thornton Auditores Independentes as its new independent auditor. Such a move raised concerns and several law firms started to investigate whether the company is committing fraud and hiding something from its shareholders. In one of its statements, Pomerantz law firm said the following:

The investigation concerns whether Gol Linhas and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices.

In its latest conference call, Gols management stated that the airline has R$3.3 billion of liquidity at the end of June. In Q3, the airline will repay R$2.9 billion worth of loans and will continue to burn cash on a daily basis, since air travel is not going to recover anytime soon. In addition, R$0.7 billion of debt will mature in Q4 and the company is risking becoming insolvent by the end of the year. While it managed to raise an additional R$1.2 billion from its loyalty program, the airline will still face a liquidity crunch in the following months, as it will not be able to make any profits and generate cash in the current environment, while burning money at the same time.

Source: Gol

However, even if Gol manages to survive until the end of the year, the companys high debt load will inevitably lead the airline to bankruptcy. At the end of Q2, Gols total debt was R$18.94 billion. While the majority of that debt matures in 2024 and beyond, it will prevent the airline from creating shareholder value anytime soon. By having one of the worst profitability margins among its peers, we believe that Gol is uninvestable even if it somehow manages to avoid a liquidity crunch.

Source: Capital IQ

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Gol Linhas Areas: Bankruptcy Appears To Be Imminent - Seeking Alpha

Youve probably read that one iconic retailer after another is going bankrupt. You may think this means they are going out of business. But mostly it doesnt.

It just means they dont have the cash to pay their debts; and a helpful provision of the law that they can use (but you cant) known as Chapter 11 allows them to go before a bankruptcy judge, stiff their creditors, reduce the debt they owe, lay off workers, gut pension funds, and carry on; sometimes with new owners, sometimes with the same scoundrels in control.

The list includes Neiman Marcus, Lord & Taylor, J. Crew, JC Penney, Hertz, Pier I, Brooks Brothers, Golds Gym, and dozens of others.

Theres another wrinkle. Most of these retailers are owned by private equity companies, whose business model is to loot the place and then take it into bankruptcy.

Heres where Argentina comes in. There is no Chapter 11 for countries. So if a heavily indebted nation tries to walk away from its debts, it gets frozen out of capital markets, and suffers even more poverty. Argentina has been reeling from the corona epidemic, on top of repeated currency crises.

Yesterday, after being squeezed and squeezed by its American bondholders, Argentina and most of its creditors finally made a deal. Argentina will settle its existing debt at 55 cents on the dollar, allowing for a restructuring and some breathing room for recovery. Argentinas progressive president, Alberto Fernndez, took a fairly hard line with bondholders who were demanding more.

And heres the most revealing part: Some of Argentinas creditors, who speculated in its debt, are the same crowd who play financial games with Americas retailers. The law is stacked in their favor in both cases. And in both cases, its poor and working people, whether U.S. retail workers or Argentine citizens, who get screwed so that billionaire speculators can get even richer.

I actually wrote a book,Debtors Prison, about this double standard in bankruptcy, which dates to the reign of Queen Anne.

Bottom line: We need to reform the bankruptcy laws so that nations have their own version of Chapter 11and private equity and hedge fund operators can no longer abuse it.

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Why Brooks Brothers Can Use Bankruptcy and Argentina Can't - The American Prospect

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Love's Furniture hiring to staff some of former Levin's sites acquired in bankruptcy court - TribLIVE

Some have been able to file for Chapter 11 and reorganize, while others have liquidated and closed stores for good.

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August3, 20202 min read

As Congress continues to kick the can on a second round of federal stimulus, national retail, recreation and restaurant franchises remain vulnerable to closures and liquidations (which is to say nothing of smaller, independently owned businesses). Lord & Taylor, Men's Wearhouse and Jos. A Bank (the latter two owned by the same parent company, Tailored Brands) all filed for Chapter 11 bankrupty protection over the weekend. The three department stores join a list of major American chains across industries that were already teetering priorto the pandemic but have buckled amid stay-at-home orders and continued surges in coronavirus infection.

Below is a list, by sector, of noteworthy brick-and-mortar powerhouses that have been forced to reorder their finances, search for new ownership orliquidate some or all assets since March. (Click each brand's hyperlink for more information.)We will update the list ifneeded.

Related:Microsoft Is Permanently Closing Its Retail Stores

Related:GNC Is Closing 248 Stores After Filing for Bankruptcy. Here's the Full List

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The Most Notable Major Chains That Have Filed for Bankruptcy During the Pandemic - Entrepreneur

PHILADELPHIA, Aug. 05, 2020 (GLOBE NEWSWIRE) -- Money is fragile, and when we are in possession of something fragile, we become worried. The finances are safe when nothing surprising happens, but when a sudden outbreak pandemic like corona knocks at the door, the financial graph takes a downward curve, sometimes leading to even bankruptcy. When you are unable to repay the debts to creditors, you opt for bankruptcy. The creditors often come up with a court order, and to seek relief from all the debts, you see bankruptcy as an optimal way. But stay in that thought for a moment and look for any options around to break through this financial calamity and create a debt-free future. Tete-a-Tete, with a law firm like Philadelphia Bankruptcy Lawyer, having professionalism, integrity, and complete legal knowledge, is the ultimate guide towards solvency, leading to a debt-free future.

COVID pandemic is extremely stressful, and along with that, if you are declared bankrupt, it adds to the straw that broke the camel's back. It snatches your mental peace and leaves you with certain physical ailments as well. A bankruptcy lawyer throws light on how badly you are affected because of such debts and what are the possibilities to overcome them! Recently several sectors were majorly hit due to the Corona crisis, aviation being one of them where airlines were going bankrupt, later they also opted to hire a bankruptcy lawyer. Timely botheration, action, and meeting a prudent attorney can save you from such adverse occurrences.

Bankruptcy can be complicated, varying from case to case, consider contacting or fixing an appointment. Sometimes we go blind with the advertisements, hoardings, word of mouth, or even no criteria at all. It's advisable to have a detailed conversation phonetically and shortlist some potential firms before finalizing them. Firms like Bucks County Bankruptcy Lawyer hold expertise in bankruptcy cases, know clientele need, updated with recent regulations, knowledgeable about chapters 7&13, confidant, credible and empathetic towards clientele's financial crisis.

Before declaring bankruptcy, law firms give a better understanding of how to resolve your case, turn the tables around, and give back your lost power.

Media Contact:

328 W Broad St Quakertown, PA 18951Email: support@ymalaw.comPhone - (215) 607-7478Website- https://www.youngmarrlaw.com/

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Young, Marr & Associates Law Firm: How Can You Save Yourself From Insolvency and Bankruptcy in This Pandemic Crisis? - GlobeNewswire

The Jos. A. Bank men's clothing store in River Ranch will close as part of parent company Tailored Brands' Chapter 11 bankruptcy plans to close 500 stores.

The company which also owns the Men's Wearhouse chain, filed on Sunday and plans to eliminate 20% of its corporate positions by the end of the second quarter. It had about 19,300 employees and 1,274 stores as of Feb. 1, according to aUSA Today report.

The store at 1900 Kaliste Saloom Road Suite 200 has been removed from its website. It's the only Louisiana store the company plans to close, reports indicate.

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The Acadiana Mall store has reopened its 5,818-square-foot space Men's Wearhouse store near Macy's since the coronavirus shutdown, mall manager Nikki Nugier said.

Louisiana will remain under Phase 2 of its reopening plan for another 21 days, Gov. John Bel Edwards announced Tuesday.

Gulf Island Fabrication said it is delaying the closing of its Jennings shipyard until the fourth quarter because social distancing measures a

The Jos. A. Bank men's clothing store in River Ranch will close as part of parent company Tailored Brands' Chapter 11 bankruptcy plans to clos

Debbie Spallino is chief financial officer with Bank of Commerce and Trust. She and her husband, Shane, own Cajun Claws Seafood Boilers in Dus

Parish, Well serial number, well name, permit date, field name, operator, location

Cali Comeaux has been named marketing and communications manager at Downtown Lafayette Unlimited, a private, nonprofit that works with the Dow

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Tailored Brands files for bankruptcy, to close River Ranch Jos. A. Bank store - The Advocate

U.S. cities are fast running out of cash.

The pandemic will reduce local government revenues by an estimated US$11.6 billion in 2020. With COVID-19 requiring residents to stay home and stores to shutter, the bulk of this reduction comes from a slump in local sales taxes. Declines will continue into 2021.

State revenues are heading in the same direction, so many U.S. cities will need to rely on help from the federal government. Aid to cities may be part of the next pandemic aid package now being discussed by members of the House and Senate. But so far, the Republicans bill leaves out any new funding for state and local governments, while the Democrats bill includes $1 trillion for it.

And if federal assistance arrives, it will not fix every citys budget.

The pandemic has hit budgets so hard that even cities in relatively good financial health including those with rainy day funds to help them through an emergency will face significant changes to staffing and services.

For cities in the poorest shape, the pandemic could mean bankruptcy.

Bankruptcy is a legal process where people, companies and governments who cannot pay their debts seek to reduce them.

Which debts get paid during a bankruptcy are important decisions. They involve how comfortable a city employees retirement might be, the level of health insurance for pensioners and workers, the extent of labor protections for employees and the future cost of borrowing for a city.

City bankruptcy was created by Congress after the Great Depression, in response to 4,770 different units of city government going belly up. Twenty-seven states now allow their cities to file for bankruptcy.

Those states that do not allow city bankruptcy Georgia and Iowa explicitly prohibit filing, with the other 21 states having no specific allowance or prohibition manage the problem of city indebtedness in various ways, ranging from strict budget oversight to the disbanding of heavily indebted cities. Since 1938, city bankruptcy has been used around 700 times.

A citys bankruptcy differs from corporate bankruptcy in that it does not allow for the liquidation of assets. For cities, bankruptcy is used to reduce debts, not sell off things - such as public roads and buildings - to pay off debts. The bankruptcy judges role is to determine whether the proposed reduction is fair to all people the city owes money to, which may include workers, pensioners, bankers, suppliers and investors.

But bankruptcies can look different in different cities.

We are scholars who research changes in how cities go about budgeting. Our work has showed that the city bankruptcies that followed the Great Recession of 2007 and 2008 were not uniform.

If you were in a big city, your government owed money to lots of people. The converse was true in small cities. As the number of participants in a bankruptcy increases, the task of deciding how much different creditors should get repaid becomes more complicated.

Westfall Township, Pennsylvania, home to about 2,000 people, declared bankruptcy in 2009 after losing a lawsuit to New Jersey real estate developers David and Barbara Katz. Courts ruled that the city owed the Katzes $20.8 million after improperly denying them permission to develop projects in the township.

With annual revenues of just $1 million, Westfall had few options but to file for bankruptcy.

Resolving Westfalls bankruptcy meant reaching a new agreement with the Katzes. The bankruptcy court approved a $6 million settlement with the developers and gave Westfall 20 years to pay. The city would also raise property taxes and delay the repayment of other debts. By 2014, Westfalls budget had recovered enough for Pennsylvania to remove it from its list of distressed cities.

Bankruptcy proceedings were more complicated in Vallejo, California, which is on the northern end of San Francisco Bay. Vallejo, population 120,000, had a 2008-2009 budget of $79.6 million. In 2008, the city lost around one-quarter of its revenues as local sales taxes and real estate development fees collapsed. Vallejo suddenly found itself unable to pay all of its bills.

The City Council voted unanimously to file for bankruptcy.

In its bankruptcy filing, the city estimated it had between 1,000 and 5,000 creditors. The most contentious part of the bankruptcy concerned the citys obligations to its own unionized employees. Vallejo argued that its bankruptcy should include the option of reducing employee wages and benefits, and changing working conditions, if necessary, without union consent.

The judge agreed and, in doing so, expanded what types of debt could be reduced in bankruptcy. This was, and remains, controversial. Although unions have pushed back, later bankruptcies have confirmed the courts decision.

Vallejo ultimately chose not to impose new employment contracts on most of its employees.

That decision helped Vallejo avoid costly legal battles but the citys main expenditures, wages and pensions, remained largely unaltered. The city emerged out of bankruptcy solvent but struggling. Filing for bankruptcy ended up costing Vallejo over $20 million in court and legal fees.

Vallejos bankruptcy foreshadowed an even more complex one in Detroit, where revenue decline and failed Wall Street bets left the city unable to balance its budget.

Detroit listed 100,000 creditors in its 2013 bankruptcy filing, totaling $18.5 billion in debts. Like Vallejo, Detroit would have to decide which creditors to stiff, effectively asking them to pay for the citys budget failures.

The eventual settlement would reduce Detroits debts by $7 billion, mostly by slashing the amount of borrowed money the city would have to repay to banks and investors.

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But no creditor would walk away unscathed. Wages, pensions and health care for city employees were all cut. The city also entered into a complex Grand Bargain brokered by local philanthropists with the state of Michigan and pension holders that helped settle the citys largest debt, which was to pensioners, while keeping in the city its one major asset, the Detroit Institute of Arts collection.

The administrative and legal costs of the Detroit bankruptcy came in at around $100 million.

The bigger the city, the more complicated and expensive the bankruptcy. More creditors means more lawyers making competing claims on the citys dwindling revenues.

It also makes the process of picking winners and losers more complex and something that can involve testing the limits of bankruptcy law. When these limits expand, just what going bust means can change dramatically. Things that once seemed untouchable, like pensions, can become vulnerable in bankruptcy courts.

With many budgets in tatters, the prospect of growing numbers of city bankruptcies looms. Distressed cities will have to figure out what the process means for them.

It is rarely possible to predict what any city will decide. With any part of a citys operations - including salaries, pensions, road repairs, borrowing, park maintenance, policing, libraries - potentially fair game, everyone involved faces great uncertainty. There is no single, predictable path through city bankruptcy.

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Next COVID casualty: Cities hit hard by the pandemic face bankruptcy - The Conversation US

As part of its bankruptcy proceedings, rental car giant Hertz will have to offload nearly 200,000 cars by the end of this year, according to a recent United States Securities and Exchange Commission filing.

Hertz, which filed for bankruptcy in May, must "dispose of" at least 182,521 leased cars by December 31, 2020, the filing reads. This is part of a $650-million temporary deal the company made with a creditor group, reported The Wall Street Journal.

The deal requires Hertz to pay its asset-backed securities lenders $650 million of rent in equal installments per month from July to December. An unnamed person familiar with the deal told The Journal's Becky Yerak that this amounts to "about half of what Hertz is contractually obligated to pay."

They also said that "Hertz is also trying to arrange up to about $2 billion in financing to help it get through chapter 11."

The Journal reported that the settlement is tentative and still needs to be approved in court.

But, under it, Hertz will have to get rid of 182,521 leased cars, which will leave it with approximately 310,000 leased cars. Hertz will be allowed to retain $900 from each car it sells, according to The Journal. The rest of the money made from selling the cars will go toward repaying the lenders.

It's not clear how the cars will be sold perhaps they'll be available through Hertz's own car sales website but this could be good news for people shopping for a used car. Used car sales have rebounded well during the COVID-19 pandemic while new-car sales are lagging.

In May, before the bankruptcy announcement, Business Insider reported that the rental car giant put more than 20 Chevrolet Corvette Z06s up for sale at steeply discounted prices. They all sold within days.

If you're thinking Hertz offloading this many cars this fast might be a chance to get a good deal, you're in luck: You can check out a guide on how to do it here.

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Hertz must offload almost 200,000 cars by the end of 2020 as part of its bankruptcy deal - Business Insider - Business Insider

It is no secret that business bankruptcies are surging in the wake of the COVID-19 pandemic. In fact, chapter 11 filings increased 26% in the first half of 2020,[1] and some expect the number of cases to increase even more in the coming months.[2] From retailers to airlines to telecommunications companies, few sectors of the economy are immune. As a result, more and more businesses will face the prospect of one or more of their customers filing chapter 11.

When a customer files for bankruptcy there are many issues to consider, which vary depending on the nature of a businesss relationship with the bankrupt customer, the debtor. One consideration common to all businesses, however, is whether the debtor will pay for goods and services while the bankruptcy is pending. The Bankruptcy Code provides that debtors must pay certain obligationssuch as nonresidential lease obligationsas they come due. Debtors may pay other creditors in the ordinary course, but they are not specifically required to do so.

What may a business do if a bankrupt customer fails to pay for goods and services provided during the bankruptcy proceeding? One option is to file a request for an administrative expense claim with the bankruptcy court. Courts grant these claims to creditors that provide valuable goods and services to the debtor as an incentive for creditors to continue doing business with the debtor.[3] These administrative claims receive higher priority for payment than general unsecured claims that accrued prior to the bankruptcy, thus providing greater assurance of payment. In order to confirm a chapter 11 plan of reorganization, a debtor must pay all administrative expense claims in full on the effective date of the confirmed plan, unless a creditor agrees to accept a lesser amount.

Holding an administrative expense claim can be a valuable safeguard against the failure of a bankrupt customer to pay for goods and services during its bankruptcy, but there is no assurance the claim will ultimately be paid. For one, it is often uncertain ifand whena debtor will confirm a plan of reorganization, the trigger that requires the debtor to pay administrative expense claims. The debtor may not be able to confirm a plan or, if it does, it could take months or years to do so. In the meantime, a debtor customer may accrue significant liabilities.

This is currently playing out in the bankruptcy of Dean Foods, the largest milk producer in the country, which filed for bankruptcy in the Southern District of Texas in November 2019. In that case, Dean Foods sold substantially all of its assets through a bankruptcy sale process, with the largest portion of those assets sold to Dairy Farmers of America (DFA). Dean Foods ceased paying many of its equipment lessors, vendors, and other creditors around the time it consummated the sales. As a result, many of Dean Foods creditors filed applications for administrative expense claims for millions of dollars worth of goods and services, much of which were provided in the months leading up to the sales. As of the writing of this article in July 2020, Dean Foods has not filed a plan of reorganization and it is uncertain whether there will be enough funds to pay all administrative claimants in full upon confirmation of a plan. Instead, the bankruptcy court has authorized an administrative claims protocol under which creditors may opt in to the protocol and agree to waive at least 20% of their administrative expense claim in exchange for an immediate payment of 30% of the claim.

Even when a debtor does reach the plan confirmation stage, it may attempt to confirm a plan that provides for less than full payment of administrative expense claims. Despite the requirement that administrative claims be paid in full upon confirmation, debtors have been able to side step this requirement in some cases by providing that holders of administrative claims are deemed to consent to less than 100% payment of their administrative expense claims unless they timely file an objection to that treatment. Thus, unwary creditors may find themselves holding administrative expense claims that ultimately receive less than the 100% payment they may have expected.

The bottom line is that businesses must be proactive when their customers file bankruptcy. While administrative expense claims provide an incentive to continue doing business with a customer during its bankruptcy proceedings, they are not a panacea and even have their own pitfalls. Businesses should consider taking the following actions during their customers bankruptcies:

Which option to exercise will vary from case-to-case, so it is highly recommended that you speak with an attorney experienced in bankruptcy and restructuring matters who can advise you as to the best possible option based on your particular circumstances.

[1] Chapter 11 Business Bankruptcies Rose 26% in First Half of 2020, Wall Street Journal, https://www.wsj.com/articles/chapter-11-business-bankruptcies-rose-26-in-first-half-of-2020-11593722250.

[2] A Tidal Wave of Bankruptcies is Coming, The New York Times, https://www.nytimes.com/2020/06/18/business/corporate-bankruptcy-coronavirus.html

[3] Despite the Bankruptcy Code requirements to pay certain obligations as they come due, some debtors refuse to do so and the courts remedy is often to grant the creditor an administrative expense claim. Thus, even creditors that would expect to be paid in the ordinary course may nonetheless end up in the same position as creditors which are not required to be paid in the ordinary course.

[4] Reclamation rights must be asserted shortly after the commencement of the case so it is imperative to evaluate this option as soon as possible after the bankruptcy filing.

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Buchalter COVID-19 Client Alert: Doing Business with a Customer in Bankruptcy in the Time of COVID-19: Administrative Expense ClaimsTake Them to the...

Farm bankruptcies increased 8% over a 12-month period, with 580 filings from June 2019 to June 2020. A six-month comparison, however, shows the number of new Chapter 12 filings slowing. Several contributing factors are likely at play as farmers struggle to stay afloat during the COVID-19 pandemic.

The Midwest, Northwest and Southeast were hardest hit, representing 80% of the filings across the U.S. Wisconsin led the nation with 69 filings, followed by 38 in Nebraska. Georgia and Minnesota each had 36 filings.

A closer examination of the numbers shows that while year-over-year filings increased for the month of June, filings slowed during the first six months of 2020 compared to the first half of 2019. The latest AFBF Market Intel, written jointly with the Association of Chapter 12 Trustees, shows from January to June 2020, there were 284 new Chapter 12 bankruptcy cases, 10 fewer than the same time in 2019. The reduction in filings coincides with aid distributed in the CARES Act that compensates farmers and ranchers for losses incurred from January through mid-April of this year. According to the Association of Chapter 12 Trustees, approximately 60% of farm bankruptcies are successfully completed the highest successful percentage of all the reorganization chapters.

Every farm bankruptcy potentially represents the end of a familys dream, said American Farm Bureau Federation President Zippy Duvall. The fact that we saw bankruptcy filings slow in the first six months of 2020 shows how important the economic stimulus alongside the food and agricultural aid from the CARES Act have been in keeping farms above water, but the economic impact of the pandemic is far from over. Its imperative that Congress addresses the challenges facing farmers and ranchers in current coronavirus relief legislation.

As of August 3, $6.8 billion in CFAP payments have been delivered to farmers and ranchers. Many farmers, particularly those who are not regularly eligible for aid, have not applied for assistance or may not know the assistance is available. Farmers can learn more about coronavirus assistance at http://www.farmers.gov/cfap.

AFBF Chief Economist John Newton said, The bankruptcy numbers dont tell the whole story. The fact that the bankruptcy process is now virtual probably contributed to a decline in numbers. CARES Act assistance was also a bandage that slowed the bleeding on many farms, but those protections will soon expire. Without more help we could expect to see filings begin to rise again.

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American Farm Bureau: Mixed news on farm bankruptcies amid pandemic - Drgnews

The COVID-19 pandemic is also cooking up some high-profile restaurant bankruptcies.

California Pizza Kitchen filed for Chapter 11 bankruptcy protection on Wednesday. The mostly sit-down pizza outfit with some 200 locations has been crippled by the pandemic, noting in its bankruptcy filing sales were down about 40% year-over-year in the last week of June.

The company will look to cut $230 million in debt via its trip through the courts.

There have now been nine bankruptcies of outright restaurant chains or operators of franchises since early April (graphic below). With each month that has passed, the filings have become prominent as restaurants struggle with weak traffic after being allowed to reopen by states, piles of debt and sky-high rent. Besides California Pizza Kitchen, the other two high-profile names include childrens fun house Chuck E. Cheese and Wendys and Pizza Hut franchisee NPC International.

Chuck E. Cheese operates 555 locations in the U.S., which hang in the balance as it looks to restructure in courts. NPC International maintains a portfolio of 1,600 locations that also have a questionable post bankruptcy future.

Credit rating agency Fitch has warned more bankruptcies in the restaurant space wait in the wings.

Less frequent visits due to shifts in dining to delivery service or to increasingly popular healthier quick-service options will put more pressure on traffic at some brands at the same time the restaurants face increased competition from ready-to-cook meals available in supermarkets or via home delivery,' said Fitch director Lyle Margolis in a recent report.

Fitch warned that Checkers Drive-In Restaurants and Steak n Shake Operations are at risk of default. The Wall Street Journal reported in late June that Checkers had hired restructuring advisors to explore a potential restructuring.

Ultimately, in life after COVID-19 the local restaurant scene may be no more than a KFC, McDonalds, Burger King and one or two overpriced craft cocktail bars serving tapas which somehow managed to survive the financial distress from the pandemic.

We have to have a bailout [of the restaurant industry], said celebrity chef and owner of restaurant Blue Dragon Ming Tsai onYahoo Finances The First Trade. I dont know if the government understands the severity of this problem. We may be left with just chain restaurants and fast-food restaurants if the government doesnt react.

With government assistance nowhere in sight, Tsai may not be too far off the mark as seen through the rising number of restaurant bankruptcies.

Tsai thinks when its all said and done with the pandemic, some 50% of the countrys 1 million restaurants may no longer be open. His estimate is in line with others Yahoo Finance has talked with in recent months. All experts agree that fresh dine-in restrictions by states on fears of a second wave of COVID-19 infections would be the final straw for small- to mid-size restaurants and even franchisees of well-known chains.

You dont know how long it lasts, the predictions are going to be unreliable for the next couple of quarters, said long-time Dennys CEO John Miller on the industry upheaval. There are PPP loans, Main Street lending, a number of programs to help people get through the difficult time. As long as it recovers as fast as the virus is arrested one way or another, then we believe certainly within a year to a year and a half, things could be in pretty good shape and not as damaging as people might believe at the moment. There will be some shakeout.

Brian Sozziis an editor-at-large and co-anchor ofThe First Tradeat Yahoo Finance. Follow Sozzi on Twitter@BrianSozziand onLinkedIn.

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These restaurants have filed for bankruptcy and many more are at risk - Yahoo Finance

An employee works inside a Jos. A. Bank retail store in San Francisco. The parent company Tailored Brands earlier said it would close up to 500 stores and cut 20% of corporate jobs. Justin Sullivan/Getty Images hide caption

An employee works inside a Jos. A. Bank retail store in San Francisco. The parent company Tailored Brands earlier said it would close up to 500 stores and cut 20% of corporate jobs.

A collapse in demand for suits and other office attire is leading another storied retailer across the brink, with the parent company of Men's Wearhouse and Jos. A. Bank filing for bankruptcy.

Parent company Tailored Brands had been struggling with debt and flagging demand before the coronavirus pandemic. But the temporary store closures and collapse in apparel sales during the health crisis took their toll.

Tailored Brands which also owns Moores Clothing for Men and K&G brands said in mid-July it would it would shutter up to 500 stores and cut 20% of corporate jobs.

Men's Wearhouse and Jos. A. Bank are joined in pandemic bankruptcy by upscale rival men's clothier Brooks Brothers, preppy retailer J. Crew, the women's retail group that owns Ann Taylor and Loft, as well as department stores Lord & Taylor, Neiman Marcus and J.C. Penney, among others.

"The unprecedented impact of COVID-19 requires us to further adapt and evolve," Tailored Brands CEO Dinesh Lathi said in a statement announcing the bankruptcy late on Sunday. "Reaching an agreement with our lenders represents a critical milestone toward our goal of becoming a stronger Company that has the financial and operational flexibility to compete and win in the rapidly evolving retail environment."

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Men's Wearhouse, Jos. A. Bank Parent Company Files For Bankruptcy : Coronavirus Live Updates - NPR

As it exits bankruptcy and re-emerges as a private company, Little Rock-based Windstream Holdings reported a second quarter net loss of $162.4 million on Thursday (July 30).

Windstream reported quarterly revenues of $1.185 billion, down from $1.286 billion a year ago. Its second quarter net loss of $162.4 million was in improvement from a year-ago loss of $544.1 million. Net loss per diluted share was $3.80 versus $12.76 one year ago.

Embroiled in bankruptcy negotiations for more than a year, Windstream has shed more than $4 billion in corporate debt, renegotiated terms with its largest vendors, and is moving to reposition itself as high-speed broadband and enterprise service provider. Windstream has secured approximately $2 billion in new capital to expand 1 gig Internet service in rural America.

Windstream delivered solid second-quarter results bolstered by strong consumer broadband growth and increasing demand for enterprise strategic products and services. With our plan of reorganization confirmed by the court, we are poised to emerge later this summer from restructuring stronger than ever to expand broadband to rural America and help businesses succeed in the digital transformation, said Tony Thomas, president and CEO of Windstream.

Additional quarterly highlights include:

For the three months ended June 30, 2020, Windstream added more than 22,000 Kinetic broadband customers, representing the companys highest quarterly net add growth in over a decade.For the first six months of the year, its kinetic division added more than 40,000 net new broadband customers, surpassing the companys full-year guidance of 40,000 new broadband customers. As a result, the company is increasing its 2020 full-year guidance to 60,000 net broadband customers.Enterprise strategic revenues grew 24% for the first six months of the year compared to the same period a year ago.

BANKRUPTCY EXITIn late June, a federal bankruptcy court in New York signed off on Windstreams exit plan, a move expected to result in a late August resolution.

Windstream initially filed for Chapter 11 bankruptcy a year ago after a legal ruling by U.S. District Judge Jesse Furman in New York determined that it had violated bond agreements after splitting off the former Communications Sales & Leasing (CS&L) in April 2015. CS&L was the previous name of Uniti, a real estate investment trust that was spun out of Windstream and manages its fiber optic network.

Furmans decisive ruling arose from challenges by Aurelius Capital Management and U.S. Bank National Association that the 2015 deal was invalid under the terms of a debt exchange offer and consent solicitations in respect to senior notes issued by its Windstream Services LLC to finance the spinoff. The court further ruled that Aurelius was entitled to a $310.5 million judgment, plus interest from and after July 23, 2018.

At the time of the ruling, Windstream said it would bankrupt the company, which led to the Chapter 11 filing. It also led Windstream, a former Fortune 500 company, to be delisted on the NASDAQ stock exchange.

The biggest obstacle to resolving the bankruptcy status was between Windstream and Uniti.

In a settlement announced in March and approved in May, Uniti agreed to invest up to $1.75 billion in growth capital improvements, consisting of long-term fiber and related assets in certain Windstream properties over the initial term of new leases.

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Windstream posts 2Q loss of $162 million as bankruptcy exit looms - talkbusiness.net

There are two Neiman Marcus stories playing out these days.

One is about how the luxury chain based in Dallas can survive the pandemic and exit bankruptcy as the largest of its class.

The other is a dramatic, high-stakes fight over an asset unfolding in bankruptcy court.

A Neiman Marcus creditors committee believes that Munich-based MyTheresa, a luxury e-commerce business, was improperly transferred by Neimans board in September 2018 from the retailer to its owners at the time, Ares Management and the Canada Pension Plan Investment Board.

Ares and the pension fund led the $6 billion leveraged buyout in 2013 that left Neiman Marcus with unsustainable debt and sent it into bankruptcy court after the pandemic shuttered its stores.

The committee says that when that transfer happened, the board inflated the total assets of Neiman Marcus by billions of dollars to prove that the retail chain had sufficient capacity to make the transfer.

The Dallas-based retailer valued its business at more than $7 billion in 2018 before the transfer of MyTheresa. The committee said in its filing Friday that its investigation valued the retailer at $3.9 billion at the time, which means it was insolvent.

Neiman Marcus contended in court documents that it was paying its bills and was not insolvent. The transfer of assets from an insolvent company is a fraudulent transaction under bankruptcy law and can result in the asset being moved back within the reach of creditors.

There is also ample indirect evidence of fraudulent intent and multiple badges of fraud. In approving and effectuating the distribution, the [Neiman Marcus Group] Board was presented with various alternatives, including the option of paying fair value for the MyTheresa asset, but chose to upstream the asset for no consideration, the committee said in its report.

U.S. Bankruptcy Judge David Jones authorized the committee to investigate the transfer of MyTheresa after a long hearing in June during which he concluded that the witnesses to the transfer Neiman Marcus presented were unprepared, uneducated and borderline incompetent.

The lawyers for the creditors committee, Neiman Marcus and the private equity former owners of Neiman Marcus reached an agreement Friday to release the redacted documents.

The issue was to be heard at a hearing Tuesday that has now been rescheduled for Thursday.

The creditors of Neiman Marcus say the MyTheresa transfer was an asset grab by Ares and the Canada Pension Plan Investment Board. The committee believes that creditors have legal claims to the MyTheresa asset in the Neiman Marcus bankruptcy case.

The fight over MyTheresa is not new. Bondholder Marble Ridge Capital has been raising the issue the past two years, including in Dallas County District Court, where it lost a case on a technicality. Marble Ridge is one of the nine representatives on the creditors committee, along with Chanel, Este Lauder, Rakuten and others.

It all started in March 2017 when Neiman Marcus moved MyTheresa into an unrestricted subsidiary that wasnt tied to the companys almost $5 billion of debt. At the time, the creditors committee report said, MyTheresa was valued at $670 million, and it was valued at $822 million when the ownership transfer was made in 2018.

MyTheresa had appreciated to $976 million by the time Neiman Marcus filed for bankruptcy, according to the creditors report.

Ares responded in a court filing that Neiman Marcus creditors knew about the transfer and approved it.

Its not clear how or whether the issue will be resolved, but at a hearing Friday, lawyers representing all parties agreed that no one wanted to obstruct Neiman Marcus goal to exit bankruptcy this fall.

Other major issues expected to be presented to the bankruptcy court for approval Thursday include store closings and bonuses for top executives.

Twitter: @MariaHalkias

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Bankruptcy court will try to resolve a fight between Neiman Marcus and its creditors - The Dallas Morning News

Airline demand drops have driven multiple Latin American airlines into bankruptcy. Used effectively, ... [+] this process could strengthen the region's aviation sector.

Two of the largest airlines in Latin America, Avianca and Latam, along with Mexicos AeroMexico, have filed for bankruptcy protection following the coronavirus outbreak. In the period from 2008-2012, most of the US airline capacity went through bankruptcy and the result was a few big mergers followed by years of record profitability for the industry. It also meant that many retired employees lost lucrative defined benefit pension plans and the consolidation produced efficiencies by eliminating excess capacity and reducing total industry headcount. Will Latin America see the same financial results from this current crisis?

The situation is obviously quite different. Worldwide airline demand has dropped to low levels, and the return of that traffic is uncertain both in terms of its timing and whether or not all traffic will even return at all. Latin American aviation has seen growth with low cost airlines, like the US and Europe, with carriers like Volaris in Mexico, Sky Airline in Chile, Azul in Brazil, and Viva Colombia. But as American, United, Delta, Northwest, Continental, and US Airways consolidated into three carriers and became financially much stronger, will the traditional players in Latin America be able to do the same and have success against the upstarts?

The answers to these two questions is uncertain, but if these carriers are aggressive the results should ultimately result in a stronger Latin American aviation sector. The five key things to do are:

Blue medical mask for protection against virus and other diseases. The graph shows how this virus ... [+] has damaged the economy and forced companies into bankruptcy.

Production cost is an airlines weight, and you cant win a race when youre overweight. Lower unit costs come from high productivity in all labor groups and physical assets, simplifying the operation, re-thinking distribution, and being realistic about the service to offer customers based on length of flight. Product features that can result in revenue premiums, because some customers will pay a higher ticket price, have to be made in proportion and should be evaluated as to whether offering such features is margin accretive. The growth of low cost carriers, just like in the rest of the world, shows that many customers want a low price over anything else. Larger, higher service airlines need to be able to offer low prices to those customers while still attracting higher paying passengers. The best way to thread this needle is with lower unit costs.

Every airline in the world is re-thinking their fleet plan given the dramatic change in demand and the recalibration of asset pricing in the OEM and aircraft lessor sectors. An airlines fleet determines not only where it can fly, but also how complicated its pilot training, maintenance, and support services will be. More complications always means higher costs for an airline. Using the flexibility that bankruptcy offers means that Latin carriers should be aggressive in re-structuring and simplifying their flown and ordered aircraft.

Ancillary revenue has become a critical component of airline revenue. Airlines have learned that by lowering base fares and charging separately for products that some choose but others avoid results in higher average unit revenue. Traditionally higher-service airlines dont need to go as far as airlines like RyanAir or Spirit but can create better pricing flexibility and attract a larger customer base when their revenue stream is more diversified. The realities of the coronavirus and the flexibility of bankruptcy restructuring gives Latin carriers a unique opportunity to change not only their unit costs, but also the robustness of their revenue engine.

ARTURO MERINO BENITEZ AIRPORT, SANTIAGO, CHILE - 2019/03/21: A LATAM Airlines Airbus 321 seen ... [+] landing at Santiago airport. (Photo by Fabrizio Gandolfo/SOPA Images/LightRocket via Getty Images)

Traditional airlines charge high fares to less price elastic business passengers and use low fares, and discretionary traffic, to fill seats still available. More successful airlines have figured out how to make money on every customer, including those paying the lowest fares. I dont mean this in a true accounting sense, meaning comparing those fares to the marginal cost of an empty seat on a flight already scheduled. I mean that they actively recruit passengers of all price elastic bands, because they know that however the plane is filled, it will be profitable. This comes from low unit costs and aggressive ancillary revenue production.

In both the US and Europe, difficult environments resulted in airline restructuring that included mergers. Airline mergers are complicated, distracting, and dont always work. But consolidation also has produced stronger companies and better controlled industry capacity. Latin America can benefit from this idea also, and this means that while these airlines in bankruptcy need to focus on items one through four on this list first, they should also try to position themselves to take advantage of tactical merger opportunities as they emerge from their own restructuring.

Bankruptcy is often seen as a sign of failure and mismanagement. But external events, like the massive demand destruction caused by the coronavirus, can also quickly change the financial position of airlines that may not have been perfect, but were viable before this. In these cases, bankruptcy can be an opportunity to fix core issues that will result in a stronger company with more growth opportunity. The relative strength of carriers like Delta, United, and American in the years prior to Covid-19 is in part due to the changes and initiatives made possible by bankruptcy and consolidation. Traditional Latin American carriers can do this same thing, and in the process became more competitive with low cost carriers and other countries carriers, and provide more stable employment and better customer service. But only if they use the toolbox that bankruptcy offers them!

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Five Ways Latin American Airlines Can Strengthen Through Bankruptcy - Forbes

The U.S. economy shrank by 33% from April to June, the worst quarterly plunge ever.

Yet, in Kentucky, bankruptcy filings actually dropped.

There were 34% fewer bankruptcy petitions from the first to the second quarter of 2020, according to new data from the Administrative Office of the U.S. Courts. The filings were also down more than a third when compared to the same period last year.

If that sounds like good news, experts warn the worst is yet to come. As the COVID-19 pandemic forces millions of Americans out of work and into debt, some Kentuckians are scraping by on unemployment insurance. Others might be waiting for their situation to bottom out before filing bankruptcy.

Weve got a tidal wave of bankruptcies coming, said Peter Brackney, a bankruptcy attorney in Lexington. The waters often recede before the wave comes in.

There are likely many reasons for the bankruptcy downturn. As the pandemic drags on for months longer than first anticipated, indebted consumers and business owners might be awaiting their financial nadir before petitioning a court for a discharge, or release from certain debts. Some debtors might be waiting for their employment situation to straighten out before entering bankruptcy proceedings. Others might be hoping for further relief from policymakers such as student loan debt forgiveness, considered a hail mary.

Some experts credited the governments emergency relief measures for mitigating the worst of the economic fallout. The centerpiece of the federal response was the $2.2 trillion CARES Act, which included the $669-billion Paycheck Protection Program, stimulus payments, forbearances on mortgages and student loans, and expanded unemployment benefits. A state moratorium on evictions has also staved off personal disaster for thousands of Kentuckians.

But relief measures arent expected to be permanent, and financial calamity continues to threaten those unable to make ends meet.

Steve Vidmer, a bankruptcy attorney in Murray, saw a clear lag in bankruptcy filings after Mattel closed its local Fisher-Price toys plant in 2002. Nearly 1,000 employees were laid off.

Here I assumed the floodgate was opened, Vidmer recalled. But it took a long time before people realized they might need to file for bankruptcy. Sometimes its not until months or years later that they realize theyre in a pickle they cant get out of.

Since April, bankruptcy filings are trending upward, if slowly. In April, there were 809 bankruptcy petitions filed in Kentucky; in June, there were 948.

Still, Junes filing total was 24% lower than June of last year. Meanwhile, theres some evidence consumer debts are getting worse. Americans will rack up an estimated $80 billion in new credit card debt in 2020, a roughly 8% increase, according to ananalysisfrom WalletHub.

The debt is there, but people havent paid the consequences yet, said Ed Flynn, a consultant with the American Bankruptcy Institute. After unemployment benefits expire and after foreclosures pick up again, he predicts bankruptcy filings will really go through the roof.

The typical debtor is not very high income, in Kentucky or anywhere else, Flynn said. It may take a year to really play out, but at some point, people are really going to feel the pain.

Graham Ambrose is an investigative reporter covering social services and youth issues. He is aReport for America Corpsmember. Contact him at gambrose@kycir.org.

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Kentucky Bankruptcies Dropped Last Quarter. It's The Calm Before The Storm - WKMS

Neiman Marcus bankruptcy scaled a couple of milestones Thursday, and executives are getting a raise after all.

The Dallas-based luxury retailer is on schedule to have its business plan approved in September and emerge from Chapter 11 by early December.

That timetable was firmed up with the conditional approval Thursday of a lengthy set of documents that include Neiman Marcus business plan and a settlement in the dispute over the transfer of its Munich-based MyTheresa business.

U.S. Bankruptcy Judge David Jones is expected to sign off on the plan next week, and he also approved big raises for CEO Geoffroy van Raemdonck, seven additional top executives and as many as 239 key employees.

In approving the salaries, Jones overruled the bankruptcy courts trustee, who serves as a watchdog in such a case and who formally opposed the pay to stay compensation. The additional pay for the top executives is capped at $9.95 million, including $6 million for van Raemdonck.

Separately, $8.7 million in additional pay was approved for 239 employees, including senior vice presidents, vice presidents and other key employees.

Neiman Marcus creditors and lenders didnt oppose the pay increases. The parties that will bear the cost of this support it, Jones said, adding that he was approving the salaries to maximize the opportunity for success and retain the best and the brightest in an environment that we dont understand one day to the next.

The retention and performance-based compensation plan was filed several weeks ago, but Jones delayed it, asking for more context about what he said is a complicated case.

Three metrics that were put in place to justify the extra pay were met and exceeded, according to testimony during the Thursday hearing from Mark Weinsten, chief restructuring officer of Neiman Marcus Group.

The dispute over the transfer of MyTheresa to Neiman Marcus former shareholders Ares Management and the Canada Pension Plan Investment Board was resolved with the creditors committee. Shares of MyTheresa will be returned to the pool of assets that will be used to help pay creditors. The total value of the settlement wasnt disclosed, but it includes 140 million shares of MyTheresa and $10 million in cash.

Neiman Marcus said late Thursday that it is pleased that a global settlement was reached regarding the MyTheresa claims.

An ongoing dispute could have held up its disclosure statement, which includes its business plan.

The settlement resulted in the approval of the disclosure statement and adds significant certainty to the restructuring process, and we continue to target early fall 2020 for emergence from bankruptcy, Neiman Marcus said in a statement.

Twitter: @MariaHalkias

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Neiman Marcus moves closer to its bankruptcy exit - The Dallas Morning News