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Bankruptcies in US likely to surge in 2021 on pandemic borrowing

Bloomber September 16 | Updated on September 16, 2020 Published on September 16, 2020

Century 21 Stores, an iconic New York off-price department store chain, filed for bankruptcy recently   -  Bloomberg

There have been 187 bankruptcy filings year-to-date by companies with more than $50 million in liabilities

The next big wave of US bankruptcy filings won’t happen until mid-2021, when companies that borrowed heavily to survive Covid-19 hit a wall, says bankruptcy attorney James Sprayregen of Kirkland & Ellis.

“You could think of it as a rat of debt working its way through the snake, and it takes a while for that to happen,” said Sprayregen, whose firm represented some of largest US companies that went bankrupt during the pandemic.

“A big wave has already happened and we have a semi-hiatus for maybe the rest of the year,” he said in a telephone interview Monday.

“A distressed debt surge in the second or third quarter of 2021 will include bankruptcies and restructurings,” said Sprayregen, a Kirkland partner who built its international restructuring group. “Debt-for-equity swaps will also leave some companies with new owners,” he said.

 

Besides energy, a large number of companies in the travel and leisure sector will need to address capital structures, according to Sprayregen, who splits his time between Chicago and New York.

After a boom in corporate distress when economies shut down to deal with the pandemic, 2020 had been expected to be the biggest bankruptcy year ever. The pace of bankruptcies was widely expected to pick up after last month, which was slower than May-July, but still the worst August on record.

In the past week there were just four filings by companies with more than $50 million in liabilities, including iconic New York department store chain Century 21 Stores. That is down from six filings a week, on average, from April to July, but in line with August’s weekly average.

Default risk

There have been 187 bankruptcy filings year-to-date by companies with more than $50 million in liabilities, according to data compiled by Bloomberg. That is the most for any comparable period since 2009, when there were 271 in the full year, the data show.

Global corporate defaults picked up after slowing in August, with five issuers added to the default tally last week, according to a September 11 report from S&P Global Ratings, which highlights risk in CCC rated debt.

So far in 2020, 152 out of 171 defaults, or nearly 90 per cent, were from entities rated CCC and below before default, said Sudeep Kesh, head of S&P Global Credit Markets Research.

Moodys Investors Service predicted more pain to come for global oilfield services and drilling companies. In a report published Monday, it cites elevated refinancing as a potential cause of bankruptcies.

Distress eases

The total amount of distressed bonds and loans traded fell by 1.7 per cent to $278 billion as of September 11, the third straight week of declines. That is down from $935 billion in March, data compiled by Bloomberg show. Volume of distressed bonds declined 0.9 per cent while loans fell 3 per cent.

There were 518 distressed bonds from 263 issuers trading as of Monday, down from 548 and 287, respectively, one week earlier. That is significantly less than the 1,896 issues from 892 companies at the March 23 peak, Bloomberg data show.

American Airlines Inc and Bombardier Inc topped the ranks of issuers with the most debt trading at distressed levels that hadn’t filed for bankruptcy as of September 11, data compiled by Bloomberg show.

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Published on September 16, 2020
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Bankruptcies in US likely to surge in 2021 on pandemic borrowing

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Last Updated : Sep 16, 2020 10:36 AM IST | Source: Moneycontrol.com

Apollo Hospitals share price gains 2% as Morgan Stanley retains overweight call

The research firm is of the view that COVID-19 has paused its growth trajectory. However, volume recovery, cost rationalisation and asset monetisation should keep B/S healthy.

 
 
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Apollo Hospitals Enterprise share price gained over 2 percent in the morning trade on September 16 after global research firm Morgan Stanley maintained its overweight call on the stock with the target of Rs 1,899 per share.

The research firm is of the view that COVID-19 has paused its growth trajectory. However, volume recovery, cost rationalisation and asset monetisation should keep B/S healthy, according to a CNBC-TV18 report.

All this, and growth resumption is likely in FY22 keeping us overweight on the stock, it said.

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The stock was trading at Rs 1,707.25, up Rs 34.30, or 2.05 percent. It has touched an intraday high of Rs 1,738.65 and an intraday low of Rs 1,684.50.

Apollo Hospitals reported a consolidated net loss of Rs 226.24 crore for the quarter ended June 30, 2020, on account of the impact of COVID-19 pandemic. The company had posted a net profit of Rs 49.15 crore for the year-ago same period.

Revenue from operations stood at Rs 2,171.50 crore in the quarter under review. It was Rs 2,571.89 crore in the year-ago period.

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According to Moneycontrol SWOT Analysis powered by Trendlyne, the company has been effectively using shareholders fund - Return on equity (ROE) improving since last two years. The stock is showing strong momentum: Price above short, medium and long term moving averages.

Moneycontrol technical rating is very bullish with moving averages and technical indicators being bullish.

Disclaimer: The views and investment tips expressed by experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Sep 16, 2020 10:36 am
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Bankruptcies in US likely to surge in 2021 on pandemic borrowing

China Coronavirus Vaccine: In coronavirus vaccine race, China inoculates thousands before trials are completed | World News - Times of India

In coronavirus vaccine race, China inoculates thousands before trials are completed

Representative photo: AP
SHANGHAI/SINGAPORE: China is inoculating tens of thousands of its citizens with experimental coronavirus vaccines and attracting international interest in their development, despite expert concerns over the safety of drugs that have not completed standard testing.
China launched a vaccine emergency use programme in July, offering three experimental shots developed by a unit of state pharmaceutical giant China National Pharmaceutical Group (Sinopharm) and U.S.-listed Sinovac Biotech. A fourth Covid-19 vaccine being developed by CanSino Biologics was approved for use by the Chinese military in June.
Aiming to protect essential workers and reduce the likelihood of a resurgence, the vaccines are also grabbing attention in the global scramble by governments to secure supplies, potentially helping reframe China's perceived role in the pandemic.
Beijing has not released official data on the uptake in domestic targeted groups, which include medical, transport and food market workers.
But China National Biotec Group (CNBG), the Sinopharm unit developing two of the emergency use vaccines, and Sinovac have confirmed that at least tens of thousands of people have been inoculated. Additionally, CNBG said it had given hundreds of thousands of doses; one of its vaccines requires an individual receive two or three shots to be inoculated.
Beijing has engaged a public, top-down approach to endorse the experimental vaccines and foster community support. Among those lining up for shots early on were the chief executives of Sinovac and Sinopharm and the military's research chief.
The chief biosafety expert at the Chinese Center for Disease Control and Prevention (CDC) revealed this week that she too had been injected in April as she announced the potential that at least some of the vaccines would be ready for public use as early as November.
"So far, among the people who who were vaccinated, no one has been sick with the disease," Guizhen Wu said on state TV. "So far, (the vaccination scheme) works very well. No side effect occurred."
Wu's comments were broadly in line with comments by CNBG last week that none of tens of thousands of people who travelled to high-risk countries and regions after being vaccinated had been infected, and there was "no case of obvious adverse reaction".
SAFETY CONCERNS
China's approach runs counter to that of many Western countries, where experts have warned against authorizing the emergency use of vaccines that have not completed testing, citing a lack of understanding about longer-term efficacy and potential side effects.
Anna Durbin, a vaccine researcher at Johns Hopkins University, described China's emergency use programme as "very problematic," saying it was impossible to judge efficacy without a clinical trial standard control group.
"You're vaccinating people and you don't know if it's going to protect them," Durbin told Reuters, adding recipients of the experimental vaccines could eschew other protective measures.
Vaccine safety came into sharp focus last week when AstraZeneca Plc paused late-stage clinical trials of its Covid-19 vaccine, one of the most advanced in development.
The company resumed British trials over the weekend after receiving the green light from safety watchdogs, and, along with other leading Western vaccine makers has pledged to uphold scientific study standards and reject any political pressure to rush the process.
Russia is one of the few other countries to authorise the use of an experimental vaccine, making its own "Sputnik V" vaccine mandatory for certain groups including teachers. India is considering emergency authorization for a vaccine, particularly for the elderly and people in high-risk workplaces.
FOREIGN BUYERS
The UAE authorized the emergency use of a Sinopharm vaccine this week, the first international emergency clearance for one of China's vaccines, just six weeks after human trials began in the Gulf Arab state. UAE officials reported mild and expected side effects, but no severe side effects, during those trials.
CanSino has been approached by several countries, a source familiar with the discussions told Reuters, adding the military's approval helped attract foreign interest. The person declined to name the countries engaged in talks.
CanSino, which has trials planned in Pakistan and Russia for the vaccine developed with China's military research unit, did not respond to a request for comment.
Zhang Yuntao, CNBG vice president told Reuters his company has received interest from foreign countries to buy about 500 million doses of its experimental vaccine.
"China clearly wants to reorient that narrative in a way that it is viewed as a solution rather than a cause of the pandemic," Yanzhong Huang, Senior Fellow for Global Health, Council on Foreign Relations, a U.S.-based think tank.
"That narrative, ironically, may become more convincing when Trump's America First approach denies many countries opportunities to access the U.S.-made vaccines."
Philippine President Rodrigo Duterte on Monday vowed to prioritise China and Russia in his country's global shopping for a vaccine, saying his government had already had talks with both. He said China was unlike other countries seeking a "reservation fee" or advance payment.
"The one good thing about China is you do not have to beg, you do not have to plead," Duterte said. "One thing wrong about the western countries; it's all profit, profit, profit."

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