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What We’re Reading This Week [September 8, 2022]

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Bed Bath & Beyond announced a series of measures to address declining sale performance, as announced by press release and reported by Yahoo! Finance. The company has received commitments for $500 million in additional financing. It also plans to sell up to 12 million additional shares of common stock, close 150 underperforming stores and lay off 20% of its corporate and supply chain staff. The company’s stock, which had surged from $4 a share to north of $28 from “meme trading,” sank following the news, trading at $8-9 a share.

Defaults on leveraged loans hit $6 billion in August, the highest monthly total in almost two years, as reported by the Wall Street Journal. Borrowers in the $1.7 trillion market may be facing the “double whammy” of weaker earning and rising interest rates. One-month LIBOR is predicted to reach 4.07% in May 2023, with similar expectations for SOFR. Barclays predicts that loan defaults, which are about 1% now, could rise to 3.25% or more a year from now.

The American Bankruptcy Institute reports that bankruptcy filings across all chapters increased in August 2022, a 10% increase over August 2021 and a month-over-month increase as well. Chapter 11 filings totalled 466 in August 2022 (up from 257 in July 2022) and subchapter V elections within Chapter 11 totalled 140. Although these numbers are still historically low, they indicate that businesses and individuals are increasingly looking to the bankruptcy system for financial relief.

The Wall Street Journal reports that Sears’ Chapter 11 plan, which was approved in October 2019, will finally go effective following the bankruptcy court’s approval of a $180 million settlement reached with former shareholders and executives of Sears. The unsecured creditors committee had alleged that a hedge fund controlled by Edward Lampert and other Sears shareholders illegally transferred assets valued at $2 billion, including Lands’ End Inc. and some of Sears’ best real estate, to the detriment of creditors. The bankruptcy case, which was filed in 2018, should close in 30-60 days.

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