Nearly 100 public companies got millions in small-business loans.
As Congress prepares to restock a depleted small-business loan fund, complaints are mounting about the publicly traded companies that sucked up hundreds of millions of dollars from the fund’s initial distributions.
At least 94 public companies obtained $365 million in forgivable loans from the taxpayer-backed Paycheck Protection Program, an Associated Press analysis found. The recipients included Potbelly Sandwich Shop, a chain of 400 restaurants; Hallador Energy, a coal company; and Quantum Corporation, a data storage company, according to regulatory filings. Each received $10 million from the program’s $349 billion fund. (The restaurant chain Shake Shack returned its $10 million loan.)
The federal government usually considers a business “small” only when it has fewer than 500 workers, but an exception in the loan program allowed some companies to qualify based on the number of workers they have at each location. That made many chain restaurants eligible for loans. Other exceptions allowed business in certain industries, including mining, to qualify with larger workforces.
JPMorgan Chase was by far the largest lender to public companies, loaning them $93 million, according to research by Morgan Stanley.
Treasury Secretary Steven Mnuchin said his department would be issuing new guidelines on Wednesday that would tighten the rules for which types of companies could get forgivable loans, potentially restricting publicly trade companies from accessing the relief funds.
Mr. Mnuchin, who said this week that the program was not intended to aid big companies that have access to capital, urged firms that received loans to return the money if they did not meet the eligibility requirements. If they did not, he said, the loan would not be forgiven and those firms could face “severe consequences.”
“If they pay the money back quickly, there will be no liability to Treasury and the S.B.A.,” he said. “If they don’t, they could be subject to investigation.”
Sentiment shifts again, and stocks and oil prices rebound from waves of selling.
Stocks rallied on Wednesday and oil prices reversed some of their tremendous losses as investors regrouped after two days of turmoil in financial markets.
The S&P 500 climbed more than 2 percent, and shares in Europe were also higher. The benchmark for American crude — which had been hammered out of concern that a glut in supply would soon overwhelm storage facilities — bounced back more than 20 percent.
Investors also rallied behind a handful of earnings updates that showed companies had not done as poorly in the first three months of the year as some had expected. After Snap, the owner of Snapchat, reported a surge in revenue and user growth, its shares rallied along with those of Twitter and Facebook.
Similarly, shares of some restaurant chains jumped after Chipotle Mexican Grill said on Tuesday that digital and delivery sales driven by the coronavirus crisis soared. Executives at Chipotle also said the company was preparing to reopen stores, as states lift stay-at-home restrictions. Chipotle was the best performer in the S&P 500 on Wednesday, with a gain of 14 percent.
Investors had other news to consider. The Senate on Tuesday passed a bipartisan $484 billion coronavirus relief package that would replenish a depleted loan program for distressed small businesses and provide funds for hospitals, states and coronavirus testing.
The gains came after the S&P 500 had fallen 3 percent on Tuesday, its sharpest decline in three weeks in a drop that had suggested a marked shift in sentiment among investors who had otherwise been buying stocks with every sign of progress in the fight against the coronavirus, effort to reopen the economy or indication that Washington would spend more to help. That optimism was briefly shattered on Monday when oil prices collapsed as energy traders panicked about disappearing demand for petroleum and the fact that there were few places left to store all the crude still being pumped.
But on Wednesday, some stability returned to the energy market, with the price of both West Texas Intermediate crude, the American benchmark. Shares of companies in the energy industry also rallied.
The plan to sell Victoria’s Secret to a private equity investor may be on the ropes.
The private equity firm that agreed in February to buy Victoria’s Secret is trying to terminate the deal as the retail chain takes a hit from the coronavirus outbreak.
Sycamore Partners had been planning to buy 55 percent of the lingerie chain in a deal with its parent company, L Brands, that was expected to close by July.
But in a Delaware court filing on Wednesday, Sycamore said that L Brands had breached certain aspects of the agreement and made representations that were now false with its response to the pandemic. L Brands shares plunged by about 20 percent.
The public health crisis, which has hit apparel chains especially hard, has forced non-essential retailers to close stores, cut corporate salaries and furlough staff. Sycamore pointed to such actions as evidence that L Brands violated the terms of its agreement, including the obligation to essentially conduct business as usual and to refrain from changing “any cash management policies, practices, principles or methodologies.”
In the filing, Sycamore pointed to the temporary closure of nearly all Victoria’s Secret and Pink stores, its furlough of most employees, salary cuts for senior staff and its failure to pay rent on U.S. stores in April. The firm said that Victoria’s Secret was now “saddled” with merchandise of “greatly diminished value.”
“That these actions were taken as a result of or in response to the Covid-19 pandemic is no defense to L Brands’ clear breaches of the transaction agreement,” the firm said.
L Brands, which also owns Bath & Body Works, said in a Wednesday statement that it believed Sycamore’s attempt to terminate the acquisition was “invalid,” and that it planned to “vigorously defend the lawsuit” and work toward a close of the deal.
Murdoch’s Fox Corporation cuts executive pay.
Rupert Murdoch’s Fox Corporation, the owner of Fox News and the Fox television network, announced pay cuts to its executive ranks that will affect 700 employees as it worked to mitigate the effects of the coronavirus outbreak. .
Fox Corporation’s chief executive, Lachlan Murdoch, the elder son of Rupert, made the announcement in a memo sent to the company’s 7,700 workers on Wednesday.
“While we don’t know exactly when we will return to normal and full operations across the company, we have decided to take several new actions to ensure that we remain strong and are well-positioned when this crisis recedes,” Lachlan Murdoch said.
He and the family patriarch will forgo their salaries through September, even though most of their compensation comes from stock awards and bonuses. Rupert Murdoch makes $5 million in salary but his compensation tops $29 million with incentives and stock. Lachlan Murdoch makes $3 million in salary, with an additional $20 million coming from stocks and bonuses.
Executives who report to Mr. Murdoch will see a 50 percent reduction in pay for the same period, and those working at the level of vice president will have their salaries reduced by 15 percent from May through July.
Lachlan Murdoch stressed the importance of helping front line workers impacted by the coronavirus and suggested that employees could try “virtual volunteering.” His call for a work force effort against the virus stands in contrast to how some Fox on-air personalities have talked about the pandemic. The Fox News hosts Jeanine Pirro and Laura Ingraham recently promoted anti-lockdown rallies across the country.
Fannie and Freddie can now buy mortgages with missed payments.
A federal regulator took another step Wednesday to help mortgage firms dealing with a surge in missed payments form homeowners affected by the coronavirus pandemic.
The Federal Housing Finance Agency said that it would allow those firms to sell newly minted loans on which borrowers have stopped making payments to Fannie Mae and Freddie Mac — the two government-backed mortgage giants. The agency said the program would be for a limited time and only for mortgages meeting eligibility criteria. It did not offer specific details, so it was not clear how many mortgages would qualify for the program.
Normally, Fannie and Freddie, which are regulated by the agency, do not buy new loans that are in a state of payment forbearance. But the regulator said it was taking this step to help keep the mortgage market running and make it easier for firms to keep writing new mortgages.
Fannie and Freddie typically buy mortgages and bundle them into securities sold to investors, guaranteeing those mortgages against the risk of default to encourage investors to buy the securities, which in theory frees up mortgage firms to write more home loans.
Tyson will close another meat processing plant.
Tyson Foods said on Wednesday that it would close its largest pork processing facility, the latest in a string of plant closings that has put a strain on the nation’s meat supply.
The plant in Waterloo, Iowa, had been running at reduced levels in recent days because workers were staying home, the company said.
Over the last few weeks, meat plants have become major “hot spots” for the coronavirus pandemic, with some reporting widespread illnesses among workers, posing a serious challenge to meat production. Other major meatpackers like Smithfield, JBS and Hormel have also closed plants in recent days.
Tyson said it would invite the Waterloo plant’s 2,800 workers to be tested for the coronavirus at the facility later this week.
“The closure has significant ramifications beyond our company, since the plant is part of a larger supply chain that includes hundreds of independent farmers, truckers, distributors and customers, including grocers,” the head of Tyson’s fresh meats division, Steve Stouffer, said in a statement.
OSHA’s restraint on coronavirus inspections and rules is prompting concern.
The Occupational Safety and Health Administration, part of the Labor Department, has announced that there will be few inspections of workplaces for coronavirus hazards aside from those in high-risk activities like health care and emergency response.
Instead, it has called on employers to investigate coronavirus-related issues on their own, even in hot spots such as the food supply chain. That has left a vacuum of oversight in workplaces where the virus is taking a toll, former OSHA officials say.
“I wish they were more involved,” John Henshaw, who led the agency during the George W. Bush administration, said of OSHA’s role. “Certainly meatpacking — I don’t understand why they wouldn’t emphasize it.”
At the same time, OSHA has provided few of the incentives, like new workplace rules dealing specifically with infectious disease, that typically prompt employers to address hazards.
A Labor Department spokeswoman said that notwithstanding the new enforcement approach, “if OSHA were to find flagrant violations of the law, the agency would use all enforcement tools available.”
The Washington Post reported last week that the agency had received thousands of complaints from workers in a variety of industries saying they felt unsafe at work because of the virus.
Here are the latest reports from big companies.
Delta Air Lines reported its first quarterly loss in years. Delta’s shares were slightly higher early Wednesday. Its rival, United Airlines fell, however, after the company said it would sell new shares to raise about $1 billion in additional cash.
AT&T took a hit from the coronavirus in the first quarter with revenue lower by $600 million, mostly because of the loss of sports programming at its Turner division. But the company also clawed back some of the licensing fees it paid to the N.C.A.A. after the tournament was canceled. The company will try to convert its 35 million HBO subscribers to its streaming service, HBO Max, when it debuts May 27. Its shares were higher on Wednesday morning.
Kimberly-Clark saw sales of tissue and toilet paper climb by 13 percent in the first quarter, the company said Wednesday, as consumers stockpiled amid the pandemic. The company reported profit and sales that beat analyst estimates. Its shares climbed about 1 percent.
Shares of Netflix, however, fell even after it reported first-quarter earnings on Tuesday that showed a surge in demand for the service with stay-at-home orders in place around the world. The company said 15.7 million new customers signed up in the first three months of the year, but it cautioned that the spike in sign-ups meant it might see fewer new subscriptions later in the year. The company’s shares hit a record high last week as investors anticipated the increase in demand.
Catch up: Here’s what else is happening.
Kraft Heinz will continue to offer manufacturing employees a $100 bonus for the next two weeks, a company spokesman said on Wednesday. After two employees at a food production plant in Holland, Mich., tested positive for the coronavirus, Kraft Heinz closed the facility on Sunday for a deep cleaning and reopened it on Monday.
Delta Air Lines reported a loss of $607 million for the first three months of the year, its first quarterly loss in five years, as the travel industry started to collapse in the wake of the pandemic.
The French carmaker Renault plans to begin limited production at a plant outside Paris on Monday, joining carmakers like Volkswagen and Daimler that are gradually emerging from lockdown. Renault resumed production last week at factories in Portugal and Spain that make engines and gearboxes. Renault’s plant in Flins, about 25 miles west of Paris, will be the first vehicle assembly plant in France to reopen. Initially only about one-quarter of the work force will report for duty to reduce the risk of infection, a spokeswoman said.
General Motors said on Tuesday that it was shutting down its four-year-old car-sharing service, Maven, the latest such venture to close its doors. Maven, which allows customers to rent cars by the hour, has struggled to build a substantial following. It was forced to suspend services in March because of the coronavirus outbreak.
Reporting was contributed by Isabella Kwai, Stacy Cowley, Noam Scheiber, Sapna Maheshwari, David Yaffe-Bellany, Niraj Chokshi, Rick Gladstone, Keith Bradsher, Edmund Lee, Clifford Krauss, Vindu Goel, Kate Conger, Neal E. Boudette, Jack Ewing, Mohammed Hadi, Alan Rappeport, Carlos Tejada, Mike Ives, Katie Robertson and Kevin Granville.
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