July 13th, 2020

First Eagle expands into asset-based lending with new hires

First Eagle Alternative Credit is expanding into asset-based lending in a bid to capitalize on higher yields and expectations of comparatively lower defaults.

The firm has tapped Larry Klaff and Lisa Galeota, both previously at Gordon Brothers Finance Co., to lead the effort, according to a statement. They will both report to Chris Flynn, president of First Eagle.

“This is part of a growth initiative to continue to expand the product set and this is one that fits very nicely for us,” Flynn said in an interview. “It allows us to provide good risk-adjusted returns to our investors but also one more solution to our sponsors.”

First Eagle joins other firms including JPMorgan Asset Management and Arena Investors in seeking opportunities in asset-backed debt, particularly in the wake of the Covid-19 pandemic. The company sees lower defaults in this type of lending than other strategies, and can be viewed as counter cyclical, Flynn said.

“It will be in more demand today than it was in the past,” Flynn said. “This is an asset class we’ve wanted to add for several years, but it was about finding the right time and the right people.”

First Eagle may look to grow its footprint with other strategies in the future, according to Flynn.

“As we continue to expand our platform, we will look to do senior secured all the way down the capital structure to non-control equity, so I wouldn’t be surprised if you see other similar add-ons or bolt-ons from the firm going forward,” he said.

First Eagle is an alternative credit manager for direct lending and broadly syndicated investments, through public and private funds, collateralized loan obligations, separately managed accounts and co-mingled funds. The firm, a unit of First Eagle Investment Management, had $23 billion in assets under management as of March, according to its website.

July 13th, 2020

5 ways private equity firms are helping portfolio companies switch gears during the Covid-19 pandemic

Guiding portfolio companies through the Covid-19 pandemic is the biggest challenge facing private equity firms and service providers today. Firms throughout the middle market are focused now on helping portfolio companies make decisions about reopening their businesses, asessing the impact of the coronavirus on their businesses and forging a strategy on moving forward.

“This has been the world’s largest work-from-home experiment, and how we leverage the information we collected and understand the new normal will be crucial,” says Bryan Berthold, global lead, workplace experience, at Cushman & Wakefield.

Here are insights from 5 companies leading the way: Watermill, New Heritage, Monroe, Cushman & Wakefield and Eisner Amper.

July 13th, 2020

How May Google Fight an Antitrust Case? Look at This Little-Noticed Paper

Google controls products that aid in every step of that process, including the different pieces of software for advertisers and publishers that run auctions for ad space. Because publishers sometimes post their open ad space to multiple digital ad companies — including Google’s — the companies can compete with one another to see who can obtain the most money from an advertiser to use the slot.

Google’s critics say it has achieved a level of dominance in the ad tech market that makes fair competition impossible. They argue that Google has, in the past, been able to position itself as the final bidder against other ad tech providers, essentially giving its services an unfair advantage. And they say the company can now use its immense trove of data to get a leg up on other platforms, potentially allowing it to charge prices that are not competitive.

In the paper filed in Australia, Daniel Bitton, a partner at the law firm Axinn, Veltrop and Harkrider, which has represented Google for years in antitrust cases, and Stephen Lewis, an economic consultant, take on many of those criticisms.

The two argue that the company competes with a wide array of firms to run the market for ad space, including Amazon and lesser-known players like the Trade Desk. (Only one other company listed on a chart produced by the Google advisers also owns products servicing every part of the ad buying process: AT&T.)

Mr. Bitton and Mr. Lewis note that Google’s systems work with other companies’ products. And they argue that Google’s products have made the process of buying ads more efficient or offered strong alternatives for buyers and sellers. They denied that the company’s software gave it an inappropriate advantage over its competitors’ bids for ad space — and say the company made changes in recent years that make it impossible for its products to have the guaranteed final bid in an auction.

A Justice Department case could also focus on concerns about Google’s ad tech business beyond what is tackled in the Australia paper, like whether it charges unfair fees to publishers for helping them sell ad space.

“The antitrust laws are about protecting competition, not individual competitors,” Mr. Bitton and Mr. Lewis write. “Trying to protect individual competitors or market participants, when a marketplace is as dynamic as ad tech, carries significant risk of stifling competition and innovation, rather than promoting or protecting it.”

July 12th, 2020

An Evangelist for Remote Work Sees the Rest of the World Catch On

Some companies I’ve talked to have said that their employees are more productive since the pandemic began. Others say the inverse is true. What’s it been like at Automattic?

I believe that if you do distributed work well, you’re a lot more productive. But the pandemic has affected a lot of people’s lives. School is canceled. People are working from home that might not normally work from home. So we definitely have seen a hit to productivity, not to mention the stress, which has been even compounded by the social unrest.

One of the biggest problems you have with distributed work is typically over-work, not under-work. We track vacation time and what we call “A.F.K.” or “away from keyboard” time, to notice when people aren’t taking enough. And we started to notice that people weren’t taking enough, because they were canceling their trips.

Some people say they can actually get a whole lot of work done in a much more condensed amount of time when they’re working remote. They can be just as efficient while working fewer hours, because so much of their work day previously was filled up with things that ultimately weren’t productive. And some say they can spend the same amount of hours working and accomplishing even more. What’s your view on the appropriate amount of time people should be working?

For most roles at Automattic, what you’re accountable for is a result. You could work 60 hours and not do a lot, or you could work 20 hours and do a ton. It’s really about result. And I do believe beyond a certain point, there is a diminishing marginal return to work. I also believe below a certain point, you’re probably not going to be able to keep up with people who are working something around like a 40-hour week. But in the middle of the bell curve, there’s a lot of flexibility.

What is your office like there in Houston?

I have had to adjust during the pandemic, because I’m used to working at home alone, and I have other people here with me. So I actually moved upstairs to a room that was unused and just set it up as a closed office with a door. I have lots of art around me, because I find art really inspiring. I have some Sonos speakers to listen to music, and a cool wood desk that connects me to nature while I’m here, and a meditation cushion here.

This column is called Corner Office, and most people who choose to have offices are usually the bosses. And I’ve been to the offices of billionaire C.E.O.s that have their own private bathroom, beautiful art and couches. But these are all things that you can have in your house. What I love about distributed organizations is every single employee can have a corner office.

July 10th, 2020

Amazon Backtracks From Demand That Employees Delete TikTok

ByteDance has made a series of moves in response to the concerns. The company said that it would separate TikTok from much of its Chinese operations, and that users’ personal data would be stored in the United States and not in China. In May, ByteDance hired Kevin Mayer, a former Disney executive, to be chief executive of TikTok based in Los Angeles. It has said that managers outside China call the shots on key aspects of its business, including rules about data.

On Monday, TikTok also said that it would withdraw from app stores in Hong Kong, where a new national security law from China was enacted. The company said it would make the app inoperable to users there within a few days.

After Amazon’s first email on Friday, TikTok said in a statement that user security was “of the utmost importance” and that it was committed to user privacy. It added, “While Amazon did not communicate to us before sending their email, and we still do not understand their concerns, we welcome a dialogue.”

Before Amazon sent out its second message on Friday, Senator Josh Hawley, Republican of Missouri, who has called for investigations into the national security ramifications of Chinese apps, said, “The whole federal government should follow suit.”

TikTok has long been a concern of American intelligence officials, who fear the social networking app is a thinly veiled data collection service. Over the past six months, security researchers have only furthered those concerns with a series of discoveries.

Last month, a researcher uncovered that TikTok had the ability to siphon off anything a user copied to a clipboard on a smartphone — passwords, photos and other sensitive data like Social Security numbers, emails and texts. The researcher began posting the findings on the online message board Reddit.

The researcher, who goes by the handle Bangorlol, also said that TikTok was capturing data about a user’s phone hardware and data on other apps installed on the phone. Many of these abilities are found in other apps, but TikTok’s developers had gone out of their way to prevent anyone from analyzing the app, the researcher said.

July 10th, 2020

Edward Kleinbard, Tax Lawyer Turned Reformer, Dies at 68

Edward Kleinbard, a prominent tax lawyer who helped global corporations find creative ways to cut their taxes before he moved to academia and shined a light on the practices of the types of companies he had once advised, died on June 28 in Los Angeles. He was 68.

He had been treated for cancer for several years, a brother-in-law, Kris Heinzelman, said in confirming the death, at Keck Hospital of USC.

Mr. Kleinbard’s career cut an unusual arc. He spent more than 30 years as a corporate tax lawyer, helping companies and financial institutions on Wall Street and elsewhere cut their tax bills. He then devoted the last decade to the cause of raising taxes, as a means of combating inequality and poverty. As a member of the law school faculty at the University of Southern California, he used his insider’s expertise to show in particular how multinational companies avoid taxes.

Mr. Kleinbard began to publish a series of articles on the inequities in the tax system, especially how multinational corporations like Google, using techniques nicknamed “Double Irish” and “Dutch Sandwich,” dodged billions of dollars in taxes by pushing profits into tax havens offshore.

He coined the term “Stateless Income” and titled an article on Starbucks’s tax avoidance “Through a Latte Darkly.”

In 2013, after a Senate investigation into Apple’s offshore tax strategy, Mr. Kleinbard summarized the company’s aggressive moves this way: “There is a technical term economists like to use for behavior like this. Unbelievable chutzpah.”

He became a regular contributor to The New York Times in its Op-ed online feature “Room for Debate,” and in 2014 he published his first book, “We are Better Than This,” which explored how tax policy could be used to solve the country’s surging inequality.

Most tax policy discussions were “backward,” he contended. Policymakers should identify their spending priorities — ideally to invest in the country’s citizens — and then discuss the proper tax policies to pay for them.

“The starting point in every case,” he wrote, “should not be determined by establishing an arbitrarily small amount of tax to collect, and then treating government like an institutional Procrustes, whose only responsibility it is to amputate the welfare of our fellow citizens to suit that amount.”

Michael Schler, tax counsel at the law firm of Cravath, Swaine & Moore, who had known Mr. Kleinbard since the 1970s, said of him in an interview: “He was one of the smartest tax lawyers around. Having been in private practice as a lawyer, he understood how big corporations are getting around and taking advantage of various tax rules. And by being in academia and by being a good writer, he was able to bring all that to the public’s attention.”

Mr. Kleinbard was known as a demanding boss and a perfectionist who required much of his colleagues — and of himself. He was sometimes described as a curmudgeon, but with a biting sense of humor, often delivered deadpan.

In one 2016 email exchange with this reporter, he asked for help in publicizing a Tedx Talk he had given on poverty and inequality.

“Kendall Jenner’s latest YouTube contribution has 4.5 million hits,” he wrote, “and I am trying to catch up.”

Edward David Kleinbard was born on Nov. 6, 1951, in Manhattan and grew up in Rye, N.Y. His father, Martin Kleinbard, was a litigator with Paul, Weiss, Rifkind, Wharton & Garrison. His mother, Joan Kleinbard, is an author who writes under the name Joan Gould.

Mr. Kleinbard graduated from Rye Country Day School in 1969 and earned both bachelor’s and master’s degrees in history from Brown University in 1973, writing his master’s thesis on Renaissance Venice.

He received his law degree from Yale University in 1976 and spent a year at Cravath before moving to the international firm Cleary Gottlieb Steen & Hamilton, where he practiced tax law for 30 years and became an expert on structuring complex tax-reducing financial instruments for Wall Street. He was an adviser to some of the country’s biggest investment banks, including Goldman Sachs and Citigroup.

In 2007, in an unusual move for a senior corporate lawyer, he left Cleary Gottlieb and became the chief of staff for the Joint Committee on Taxation, a nonpartisan joint congressional committee that helps lawmakers on prospective tax policies.

But he grew frustrated with the slow pace of the legislative process and left the committee in 2009 to join the law school faculty at U.S.C., where he taught tax law. He also pursued his love for photography, hiking and long-distance bicycling, which took him across the United States, Canada and Europe.

In addition to his mother, Mr. Kleinbard is survived by his wife, Norma Cirincione, with whom he no longer lived; his son, Martin; his sister, Kathy Heinzelman; his brother, David; his partner, Suzanne Greenberg; and a granddaughter.

Mr. Kleinbard submitted to his publisher the manuscript for a book the day before he went into the hospital for surgery in March, said Leslie Samuels, a senior counsel at Cleary Gottlieb who had worked with Mr. Kleinbard there. The book, titled “What’s Luck Got to Do With It?,” explores the role luck plays — whether through inherited wealth, geography or racial heritage — in worsening inequality.

Mr. Samuels recalled how Mr. Kleinbard would roll his eyes at how many of his wealthy clients were oblivious to their good fortune. He recalled Mr. Kleinbard saying: “They’re not so smart — they are just lucky. I was lucky.”

July 10th, 2020

Facebook Said to Consider Banning Political Ads

SAN FRANCISCO — Facebook is considering banning political advertising across its network before the November general election, according to two people with knowledge of the discussions, after facing intense pressure for allowing hate speech and misinformation to flourish across its site.

The decision has not been finalized, said the people, who spoke on condition of anonymity because the discussions were confidential, and the company could continue with its current political advertising policy. Discussions on potentially banning political ads have simmered since late last year, they said, as insiders weighed the idea while reaching out to political groups and candidates for feedback.

But the issue has come to the forefront in recent weeks, with the November election looming and as Facebook grapples with intensifying scrutiny over content posted to its platform. The core of the debate is whether banning political ads would help or harm “giving users a voice,” said the people with knowledge of the discussions. Stopping ads could stifle speech for some groups, they said, though allowing political ads to run could also allow more misinformation that could disenfranchise voters.

A Facebook spokesman declined to comment. Bloomberg News earlier reported the potential change in policy.

If a ban on political ads were to happen, it would be a reversal for Facebook and its chief executive, Mark Zuckerberg. The social network has long allowed politicians and political parties to run ads across its network virtually unchecked, even if those ads contained falsehoods or other misinformation.

Mr. Zuckerberg has repeatedly said he would not police politicians’ ads and stated that the company was not an arbiter of truth because he believes in free speech. He has also said that removing political ads from the network could harm smaller, down-ballot candidates who are less well-funded than nationally prominent politicians. Political advertising makes up a negligible amount of Facebook’s revenue, he has said, so any decision would not be based on financial considerations.

But that hands-off approach has led to an intense backlash against the social network. Lawmakers, civil rights groups and Facebook’s own employees have assailed it for letting hate speech and misinformation fester on its site. Last month, the Biden presidential campaign said it would begin urging its supporters to demand that Facebook strengthen its rules against misinformation. More recently, advertisers such as Unilever and Coca-Cola have paused their advertising on the platform in protest.

That was punctuated this week by the release of a two-year audit of Facebook’s policies. The audit, conducted by civil rights experts and lawyers who were handpicked by the company, concluded that Facebook had not done enough to protect people on the platform from discriminatory posts and ads. In particular, they said, Facebook had been too willing to let politicians run amok on the site.

“Elevating free expression is a good thing, but it should apply to everyone,” they wrote. “When it means that powerful politicians do not have to abide by the same rules that everyone else does, a hierarchy of speech is created that privileges certain voices over less powerful voices.”

Mr. Zuckerberg has stuck to his free speech position even as other social media companies have taken more action against hate speech and inaccurate posts by politicians and their supporters. Twitter recently started labeling some of President Trump’s tweets as untruthful or glorifying violence, while Snap has said it would stop promoting Mr. Trump’s account on Snapchat because his speech could lead to violence. Twitch, the video game streaming site, suspended Mr. Trump’s account entirely, and the internet forum Reddit banned a community of Mr. Trump’s supporters for harassment.

Last year, Twitter said it would ban all political ads because the viral spread of misinformation presented challenges to civic discourse.

Vanita Gupta, chief executive of the Leadership Conference on Civil and Human Rights, said it was positive that Facebook was thinking through its options but that “what they need to have in place is a system that actually catches real-time voter misinformation.” She added, “Voter suppression is happening every day, and their inaction is going to have profound ramifications on the election.”

On Friday, some of the top Democratic outside groups that are major spenders on Facebook said they had not discussed with the company any potential banning of political ads closer to the election. A spokesman for the D.N.C. referred questions to a tweet from Nellwyn Thomas, the D.N.C.’s chief technology officer, who wrote on Friday: “We said it seven months ago to @Google and we will say it again to @Facebook: a blunt ads ban is not a real solution to disinformation on your platform.”

Democratic officials have argued that blanket bans or restrictions on political ads are not a sufficient way to root out disinformation, particularly as that kind of content can spread in closed Facebook groups. Banning ads also restricts important digital tools that campaigns have come to rely on for activities such as acquiring new donors and raising money to getting out the vote, they said.

Some Democrats added that the Trump campaign has a significant structural advantage on Facebook, having built up a community of more than 28.3 million followers. Joseph R. Biden Jr., the presumptive Democratic nominee for president, has only around 2.1 million followers on the social network. Removing the ability to pay for ads would give Mr. Trump a far greater reach online than Mr. Biden, they said.

A spokesman for the Trump campaign did not immediately respond to requests for comment.

Facebook is by far the preferred and most popular platform for campaigns. The Trump campaign has spent more than $55 million on Facebook since 2018, and the Biden campaign has spent more than $25 million.

Mike Isaac reported from San Francisco, and Nick Corasaniti from New York.

July 10th, 2020 July 10th, 2020

Cirque du Soleil lenders plan formal bid to displace TPG offer


Lenders to Cirque du Soleil Entertainment Group are working on an offer to replace the bid made by TPG and other shareholders of the company, which is restructuring under bankruptcy protection.

The lenders are set to present a binding “credit bid” to a committee of Cirque’s board by Tuesday, a court hearing was told Friday. Credit bidding involves canceling outstanding debt as part of an offer to acquire a debtor’s assets. Cirque’s creditors have said previously they would also be willing to inject as much as $375 million to help the company restart.

Montreal-based Cirque filed for protection in Canada last week after the coronavirus pandemic forced it to close shows around the world, triggering a fight for control of one of the best-known brands in live performance.

The company had entered into a stalking-horse agreement with its existing shareholders — including TPG, China’s Fosun International Ltd. and Caisse de Depot et Placement du Quebec — for a $300 million capital injection. The creditors’ group rejected that offer, which would have left them with a 45% equity stake.

A stalking horse bid sets a minimum bar for other bidders. If approved by the Cirque committee, the creditors’ offer would head for a court hearing on July 17.

As of March 31, Cirque owed its first lien creditors $901 million and its second lien creditors $154 million. It also owed $32 million to the Caisse and an equal amount to Fonds de solidarite des travailleurs du Quebec.

Cirque had $1.47 billion in liabilities at the end of 2019, about five times shareholders’ equity.

Quebecor Inc. and Cirque founder Guy Laliberte have expressed interest in investing in the company.

July 10th, 2020

Auctions Are Crimped as the Pandemic Forces Them Online

Just about every area of personal finance has been affected by the coronavirus pandemic. That economic shock reaches all the way to some of the most aspirational purchases on the planet: art, cars, watches and wine.

The mechanism to buy and sell many of these objects — frothy, in-person auctions, with attendees dressed smartly and cocktails readily available — has been rendered untenable since March because of social-distancing measures meant to stop the spread of the virus.

But the desire remains, with sellers looking to shed valuable items to shore up their own balance sheets, and buyers who have reserves looking to collect on the cheap.

To meet that demand, the rarefied world of the auction house has been forced online.

The electricity you feel in a room, as the bidding heats up and prices soar, is gone. But auction houses are working to make sure selling their high-ticket objects doesn’t devolve into an eBay frenzy, where wealthy buyers are sitting around in their pajamas stalking deals on their laptops.

To counteract that down-market feel, auction houses have become creative. Sotheby’s, for one, built a platform for its online-only auctions that prevents people from entering a bid just as the time is about to expire, a strategy known as sniping.

“If someone snipes at the last minute, the sale extends for another five minutes,” said Richard Lopez, head of online sales and a senior watch specialist at Sotheby’s.

Auctions tend to be seasonal, and many are smaller now that they are online. Several annual California car auctions next month in Pebble Beach and Monterrey are planning to present half the number of cars online that they did in in-person auctions last year. But because sellers may need cash, there may also be more deals for people with money to invest in these illiquid assets.

Bidding and buying will require greater due diligence ahead of the auction, because items will be difficult to see, feel and assess.

“The pandemic has caused people who under normal circumstances have shied away from the internet to increase their interest in buying online,” said David Sleeman, executive director of the Winston Art Group, an appraisal firm. But that means those new online buyers need “to research the sellers’ reputation and feel a level of trust that they’re going to be on the up and up.”

Sotheby’s contemporary art sale, held online at the end of June, was the first big test of virtual auctions. In-person viewing was limited by New York’s reopening guidelines.

Some major pieces of art still sold for top dollar. A Francis Bacon triptych sold for nearly $85 million, above its estimate. A Jean-Michel Basquiat drawing went for $15 million, which was $3 million more than the high estimate.

But some of the other featured paintings, including one by Roy Lichtenstein and another by Clyfford Still, fetched prices in the middle of their ranges.

“We’ve been lucky at Sotheby’s because with our online platform, we’ve been able to switch over with the same level of trust,” Mr. Lopez said. (When asked what was lost online, he responded without hesitation: “The fun.”)

Still, the push to move auctions online has its risks. Stories abound of buyers being duped by high-end galleries.

“Acquiring real estate, a business — there would be a lot of due diligence,” Mr. Sleeman said. “But oftentimes when a collector is considering making a purchase of an equally expensive painting, they don’t do the same due diligence.”

On the positive side, moving big purchases online could drive greater advance research, Mr. Sleeman said. Some art fairs are requiring dealers to publish their prices online, he said, adding a level of transparency that wasn’t there, or at least not as easily accessible, before the pandemic.

What’s expensive is always relative. A $28,000 Rolex is inexpensive compared with a $7.5 million car, but there is one model from the iconic watchmaker that has had a star turn during the pandemic: the Rolex Daytona with a ceramic bezel.

The watch has a retail price of $13,000 but has been selling for $20,000 to $30,000 in online auctions. Sotheby’s recently sold one for $28,000. “You can buy it retail, but the wait list is two to three years,” Mr. Lopez said.

Watches lend themselves to the online scrolling so many of us have been doing to pass the time. And that has pushed Sotheby’s watch department to move to weekly and monthly auctions, scrapping its previous format of semiannual New York auctions.

“We were getting a lot of consignors who wanted the cash for doomsday, and collectors who were willing to purchase because they were home and bored,” Mr. Lopez said. “We couldn’t get them to go with the traditional timeline for the bigger auctions.”

Data on who is buying what from where has allowed the auction house to further refine and target the watch auctions.

Part of the thrill of buying a collectible car is strolling among scores of polished, perfect automobiles. Once they leave the auction grounds, most of these cars will be parked in climate-controlled garages, shielded from the sun-dappled fields where they are shown, driven and coveted.

Next month would normally send some of the world’s most expensive cars to the Monterrey Peninsula for the annual Pebble Beach Concours d’Elegance, where rare automobiles are parked for a day on the 18th fairway at Pebble Beach Golf Links.

That’s not happening this year. Both Gooding & Company and Bonhams, two auction houses with large automotive departments, will present about half the cars they would have in a live auction, and rely on video and limited in-person viewing to drum up interest. Both houses are upbeat about the online demand.

“People are getting in touch with things that make them happy and that they love,” said David Gooding, president of his namesake company. “If they’re passionate about cars, they’re tapping into that passion. We’re seeing demand and interest as strong as ever.”

There is far less ambivalence now than ahead of a typical live auction. Sellers really want to sell their cars, and buyers are focused on getting the car they want. A few cars are priced in excess of $2 million, but many are in the $50,000-to-$100,000 range, he said.

To assure the cars’ condition, the auction house is maintaining them in a Los Angeles warehouse. “It’s critical for us to know what we’re selling and representing,” Mr. Gooding said.

Bonhams is similarly storing its cars, splitting them between Los Angeles and Bedford, N.Y., where specialists can arrange virtual or in-person viewings before the August sale.

Some of the highest-priced cars may be the easiest to sell at an online auction, said Jakob Greisen, head of Bonhams’ U.S. motoring department. The sale’s signature car is a 1934 Alfa Romeo 8C 2300 Cabriolet by Figoni, estimated to sell for as much as $7.5 million.

“Few people are going to walk in and say, ‘I’ll have that 90-year-old car I’ve never heard about,’” Mr. Greisen said. “It’s for a really sophisticated buyer who has had more time to think about their hobby and their passion.”

Where he thinks sales could struggle is in what he termed the impulse-buy range — around $250,000 — because people will not be walking around and getting excited by a car that they realize they can afford.

Fine wine can sit in a bottle for decades and, potentially, get better. But the primary mechanism for selling first-growth wine from Bordeaux, France — the most reliably collectible region in the wine world — is to sell wine futures a few months after the wine is put into a barrel. Futures, the prices for wine that won’t arrive in buyers’ cellars for several years, have traditionally been set by working with wine brokers through a marketplace called the Place du Bordeaux.

This year, the process of tasting young wines to divine which ones will age well was disrupted because no one could travel to Bordeaux to sample the 2019 vintage. To sell the wine, which is considered a top vintage, Bordeaux producers are discounting it heavily, said Tom Gearing, chief executive and a co-founder of Cult Wines, which manages about $165 million of investment-grade wine.

“With the uncertain economy, people are in the position to ask, ‘Do I really want to shell out money for a wine I won’t have physically for two years?’” he said.

To encourage buyers, producers, even among the top five Bordeaux houses like Rothschild and Margaux, have discounted this vintage as much as 25 percent from the 2018 vintage (which is considered not as good). As with all of these passion investments, fine wine is a deal only if you are among the lucky few who have weathered the economic crisis with disposable income and confidence in the future.

July 10th, 2020

Trump’s Taxes May Be Released — Eventually

Our DealBook Debrief conference calls are back, starting next week. On Thursday, July 16 at 11 a.m. Eastern, we will be joined by the White House correspondent Maggie Haberman to discuss how the Trump administration is addressing election-year concerns amid the risk of a renewed wave of infections. R.S.V.P. here for the call. (Want this delivered to your inbox each day? Sign up here.)

The U.S. Supreme Court saved the most politically explosive cases of its current term for last. Yesterday, the court ruled on requests for access to President Trump’s financial records. The president had claimed that he could block the subpoenas on the grounds that he is immune from criminal proceedings while in office.

It was a split decision: New York won, Congress lost (for now). Both elements of the matter were decided by 7-to-2 majorities:

• Mr. Trump cannot block a subpoena from the Manhattan district attorney, served to his accounting firm, Mazars USA. New York prosecutors are seeking Mr. Trump’s business and personal tax records in an investigation into hush-money payments made during his election campaign.

• Congressional committees cannot access similar records from Capital One, Deutsche Bank and Mazars USA as part of investigations into the hush-money payments and possible conflicts of interest. They must narrow the parameters of their requests, the justices ruled, and heed the competing needs of government branches.

The fights will continue in lower courts. Mr. Trump will have to devise a new argument to keep his records secret in the New York case, while Congress will need to do the same in its case. The companies served with subpoenas say they will comply with whatever the courts decide.

• Neither case is likely to be resolved before November’s presidential election, according to Martin Lederman, a professor at Georgetown University’s law school. And because the New York case is part of a grand jury investigation, even if the records were released they would be shielded from public view.

“The justices are certainly not ignorant of practical outcomes,” Professor Lederman said. The court seemed more concerned with constitutional matters “than whether decisions help or hurt Donald Trump in November.”

• The justices appointed by Mr. Trump — Neil Gorsuch and Brett Kavanaugh — ruled against him in the New York case, joining the four left-leaning justices and Chief Justice John Roberts in rejecting his claim of “absolute immunity.” As The Times’s Peter Baker put it:

The forceful decisions represented a declaration of independence not only by Mr. Trump’s own justices but by the Supreme Court as an institution, asserting itself as an equal branch of government in the Trump era.

An intriguing question: If Mr. Trump loses the election, will Congress continue to pursue its investigations into his finances? If not, and the New York grand jury evidence stays sealed, the contents of those long-sought-after tax returns may remain a mystery — forever.

The former top federal prosecutor in Manhattan testified about his firing. Geoffrey Berman, whom President Trump dismissed last month, told House investigators about efforts by Attorney General Bill Barr to pressure him into resigning, which he resisted.

Starbucks will require masks in its U.S. stores. Customers at the coffee giant’s 9,000 American locations will have to abide by the rule starting July 15. In locations where local rules don’t require mask-wearing, customers without face coverings can use drive-throughs or curbside pickup.

Ford’s C.E.O. rebuffed employee calls to stop making police vehicles. Jim Hackett, the automaker’s chief, wrote in a letter to senior executives that while he supports the Black Lives Matter movement, first responders “play an extraordinarily important role in the vitality and safety of our society.”

First-round offers for the New York Mets are in. Bidders for New York’s second-best Major League Baseball franchise reportedly include the hedge fund mogul Steve Cohen; a group backed by Jennifer Lopez and Alex Rodriguez; and the Wall Street executives David Blitzer and Josh Harris, who own the N.B.A.’s Philadelphia 76ers and N.H.L.’s New Jersey Devils.

Chelsea Clinton reportedly may start a venture capital firm. The former first daughter and hedge fund executive is said to be considering a company called Metrodora Partners, which would focus on health and learning start-ups, according to Axios.

Joe Biden is leading President Trump in polls on virtually every issue except the economy. Yesterday, the presumptive Democratic presidential nominee unveiled an economic platform wrapped up in populism, in an effort to close that gap.

“Build Back Better” is Mr. Biden’s slogan, with an emphasis on shoring up American manufacturing via huge investments in areas like 5G wireless technology and electric vehicles. He said it would be a level of spending “not seen since the Great Depression and World War II.”

He attacked Wall Street and big companies, saying that it was “way past time to put an end to shareholder capitalism” and criticizing Mr. Trump for focusing on the stock market as a barometer of America’s economic health. “The days of Amazon paying nothing in federal income tax will be over,” Mr. Biden added.

How would he pay for all this? Mr. Biden is proposing nearly $4 trillion in tax increases — largely by reversing Trump tax cuts for the wealthy and for companies — and deficit spending that builds on the $3 trillion in borrowing that Washington has approved in coronavirus economic aid.

Is Mr. Biden really shifting significantly to the left? Some thoughts:

• Attacking “shareholder capitalism” isn’t particularly radical. Since last year, the Business Roundtable, the trade group for blue-chip corporate America, has called for companies to focus on more than just their shareholders.

• The financial advisory firm Signum told clients yesterday that Mr. Biden’s platform excludes the most progressive ideas touted by Democrats, including “Medicare for all” and the Green New Deal. By Signum’s reckoning, Mr. Biden’s announcement makes “just enough concessions to the progressive wing to avoid an open rift in the party.”

• What’s more, many on Wall Street say they’ll put up with higher taxes if it means a change of administration. “The majority of people I talk to on Wall Street think it’s worth taking the hit to get Trump out of office,” an unnamed senior banker told Vanity Fair’s Bill Cohan.

The biggest American banks will report their second-quarter earnings next week, and it could be rough.

Loss provisions will rise, but so will fees. Lenders were quick to add billions to their loan-loss provisions at the end of the first quarter, and analysts expect at least as much to be added in the latest quarter, too. For the full year, S&P expects that credit losses will account for around three-quarters of the world’s largest banks’ pre-provision earnings, more than double the share last year.

• The good news is that companies have taken on cheap debt and eagerly issued new shares into climbing stock markets, increasing banks’ fee income. That means that despite the drain on earnings from fresh provisions, banks with strong underwriting businesses, like Goldman Sachs, JPMorgan Chase and Morgan Stanley, could see a quarter-on-quarter rise in profit. All banks, however, are expected to announce huge drops in earnings versus the same quarter last year.

Global banks face $1.3 trillion — with a “T” — in credit losses this year. That’s more than double last year’s $600 billion, according to S&P. Losses will remain high next year, when the strength of banks’ provisions will be tested by a surge in charge-offs as payment holidays and government support measures expire. “From a bank credit risk perspective, perhaps the greater danger at this time is the reduction of such support too early, resulting in a longer and deeper economic contraction, further impairing banks’ asset quality and increasing credit losses,” according to S&P’s analysts.

The social network’s Chinese owner, ByteDance, is under pressure to devise ways to shield the service from potentially damaging actions by governments uneasy with the company’s perceived ties with Beijing.

The White House may ban TikTok and other Chinese social media apps, Secretary of State Mike Pompeo said earlier this week. The Verge’s Adi Robertson runs through how that might work: One option is for the Committee on Foreign Investment in the U.S., the regulatory panel focused on national security, to force ByteDance to divest U.S.-based assets.

• India recently banned TikTok and other Chinese-owned apps like WeChat, saying they pose a “threat to sovereignty and integrity.”

ByteDance is reportedly considering a new headquarters for TikTok outside China and a new management board, according to The Wall Street Journal. And it has pulled TikTok out of Hong Kong, following a new security law that binds the territory closer to China.

• In May, TikTok hired a well-known Disney executive, Kevin Mayer, as C.E.O., in part to help the social network navigate Washington. And it has long stressed that it doesn’t share user data with Beijing, and argues it wouldn’t do so if asked.

Users are scared anyway. High-profile users like Casey Neistat warned their followers about the possibility of a TikTok shutdown, while the widely followed gamer Ninja said he had deleted his account because of concerns over the app’s perceived connections to Beijing.

Deals

• Sony agreed to invest $250 million in Epic, the gamemaker behind “Fortnite.” (Business Insider)

• Coinbase, the big cryptocurrency exchange, is reportedly considering going public this year through a direct listing of its shares. (Reuters)

Politics and policy

• Treasury Secretary Steven Mnuchin said that the White House was working with the Senate on another round of pandemic aid, which is likely to be smaller than what House Democrats want. (WSJ)

Tech

• Google could reportedly avoid an E.U. antitrust inquiry into its takeover of Fitbit if it pledges to forgo using the fitness device’s data for ad-targeting purposes. (Reuters)

• SoFi, the online lender, has applied again for a national banking charter. (Axios)

• “Why Is a Tech Executive Installing Security Cameras Around San Francisco?” (NYT)

Best of the rest

• Twitter’s Jack Dorsey plans to fund a test of universal basic income in 14 cities. (Business Insider)

• The upside-down markets, as explained by Alice in Wonderland. (Reuters Breakingviews)

• “How the Mafia infiltrated Italy’s hospitals and laundered the profits globally” (FT)

July 10th, 2020 July 9th, 2020 July 9th, 2020

Consumer demand for gloves will rise 20% this year: Sri Trang Gloves

Viyavood Sincharoenkul of Sri Trang Gloves estimates that demand for its products will rise 20% this year compared to a year ago, as the coronavirus led to an expansion in non-medical usage. He also gives a rundown of the company’s expansion plans.

02:50

Thu, Jul 9 20209:20 PM EDT

July 9th, 2020

How First Horizon-Iberiabank bucked trend of canceled bank deals

First Horizon and Iberiabank moved ahead with their merger at a time when the coronavirus pandemic derailed other pending deals.

For Bryan Jordan, First Horizon’s president and CEO, the pandemic validated the $3.9 billion merger, which closed on July 1, several weeks ahead of schedule, and created a nearly $80 billion-asset regional bank.

The plan is to eliminate nearly a tenth of operating expenses over the next 18 months, freeing up funds to reinvest in technological upgrades.

Those efforts have greater importance because of the pandemic, which has created uncertainty over credit quality and has accelerated use of digital platforms. Economic weakness and a series of emergency interest rate cuts by the Federal Reserve will likely pressure bank earnings for the foreseeable future.

“You have a two-faceted crisis — health and financial — so we do still have a long way to go,” Jordan said in a recent interview.

“First and foremost, it is important that we are positioned to meet the needs and demands of our customers in terms of delivering products and services, and that means the ability to make greater investments in technology and infrastructure,” he added.

Scale was the primary objective in November when First Horizon in Memphis, Tenn., and Iberiabank in Lafayette, La., agreed to the merger. The combined company, which kept the First Horizon name, has $58 billion in loans and $60 billion in deposits.

The companies would have been unable to wring out $170 million in expenses on their own, Jordan said. The merger “is clearly an opportunity to leverage two similar business models and achieve greater ability to make investments and deliver cost savings,” he added.

Many of the big decisions — choosing Memphis as the headquarters and selecting the management team — were already made when the pandemic hit and shelter-in-place orders made in-person meetings impossible.

Daryl Byrd, Iberiabank’s CEO, became executive chairman. William Losch III, First Horizon’s chief financial officer, kept that position, while Anthony Restel, Iberiabank’s CFO, is chief operating officer.

Advance planning allowed the companies to focus more on securing approvals from shareholders and regulators. Jordan said regulatory reviews remained on track largely because executives provided detailed integration plans well before the pandemic hit.

“We had spent four months building teamwork and culture, and our teams had already really come together,” Jordan said. “When the travel restrictions came on, we had already built the relationships across the organization. We were well positioned to move ahead and combine.”

Jordan said an in-depth credit review as part of the deal’s due diligence, including assumptions for an eventual recession, gave the management teams confidence to proceed when the pandemic created uncertainty in sectors such as hospitality, energy and health care. Still, each company conducted another review in light of the outbreak.

“We weren’t preparing for a pandemic like this, but we did go into this merger planning for the possibility of a downturn at some point,” he said.

“We went in with a strong knowledge of the credit and risk profiles,” Jordan added. “When we got into the pandemic and started to review the credit portfolio we were already very confident in the strength of the underwriting.”

Both companies have also been active in the Paycheck Protection Program.

First Horizon has disclosed about 13,000 PPP loans totaling $2.1 billion, while Iberiabank has originated 8,300 loans for $1.8 billion. That could bring in more than $105 million in fees in coming quarters, based on the program’s median 3% rate.

As a bigger company, First Horizon will have more heft in key businesses as it looks to withstand the downturn and offset the pinch of low rates.

“We had already built the relationships across the organization" before travels restrictions were imposed, says First Horizon CEO Bryan Jordan. "We were well-positioned to move ahead.”
“We had already built the relationships across the organization” before travels restrictions were imposed, says First Horizon CEO Bryan Jordan. “We were well-positioned to move ahead.”

The fixed-income business “has proven over many years to be countercyclical in times like these,” Jordan said. “We have mortgage [warehouse lending] at First Horizon, and Iberia has a strong mortgage business that gives us more exposure at a time when demand is very strong.”

At the same time, demand for digital banking services has spiked since the pandemic struck.

First Horizon noted during a recent virtual conference that about 80% of its banking interactions were being handled remotely, versus about 50% before the outbreak.

But branches still have relevance, Jordan said, noting that First Horizon should complete its purchase of 30 locations in three states from Truist Financial later this month. That deal includes $2 billion in deposits that BB&T and SunTrust had to divest to secure approval for their merger.

The branches “are very important to us,” Jordan said. “They fill in the middle part of North Carolina — important markets — and we pick up some nice locations in Virginia and Georgia.”

The branch deal, originally expected to close in the second quarter, was delayed to avoid taking unnecessary risks.

“In March and early April, there was very little opportunity to communicate with new customers [and] a lot of the branches weren’t open,” Jordan said.

“We had real questions about training, about how to make technology changes, all the things that have to be done with branch acquisitions,” he added. “We all agreed that it was important to the customers do defer to a time when we could do it right and not create more uncertainty.”

Uncertainty hangs over the near-term outlook for lending and further M&A, Jordan said.

“I think we’re in a place today where the economy is starting to show signs of recovery, and we’re starting to see some positive results” in employment reports, Jordan said. “But as a society, we have to place a priority on social distancing and wearing masks to keep the economy recovering.”

With new virus cases rising, Jordan said the pace of the recovery, and the severity of credit issues, remains difficult to gauge.

“We’re spending a tremendous amount of time looking in great detail at our loan portfolio, talking with our borrowers, providing support where we can,” he said. “I think we will get a better handle on the impact in the back half of 2020.”

July 9th, 2020

Hedge Funds Duel in Bankruptcy Court Over McClatchy Newspapers

A battle of the hedge funds is brewing in the bankruptcy auction of the McClatchy Company, one of the nation’s largest and most decorated newspaper chains, pitting Chatham Asset Management and Brigade Capital Management, both debt holders in the chain, against a newcomer to the proceedings, Alden Global Capital.

Chatham and Brigade seemed to have an advantage going into the planned court-supervised sale of McClatchy. In April, McClatchy said it had received an offer worth more than $300 million from the two firms, which had taken on much of McClatchy’s debt in a Chapter 11 restructuring. The two hedge funds planned to use that debt as part of the bid, which would keep the chain, with 30 newsrooms across the country, intact.

Alden, a New York hedge fund that has become a force in the newspaper business, tried to disrupt the Chatham-Brigade proposal on Wednesday by filing an emergency motion in a U.S. Bankruptcy Court. Alden asked Judge Michael E. Wiles to stop any attempt to buy McClatchy through a credit bid, a transaction that would allow Chatham and Brigade to use the company debt they had assumed toward the purchase price.

Alden’s maneuver suggested that it, too, had an interest in acquiring McClatchy, a 163-year-old chain that fell on hard times not long after its $4.5 billion purchase in 2006 of a much larger rival, Knight Ridder.

At a remote hearing on Thursday, Alden’s interest was confirmed by a lawyer for the hedge fund, Lisa G. Beckerman of Akin Gump Strauss Hauer & Feld. She said Alden was prepared to “top” the previous bid, but argued that Chatham and Brigade would have an unfair advantage if they were allowed to make the debt they had accrued part of their offer. Judge Wiles denied Alden’s motion, permitting Chatham and Brigade to go ahead with their plan.

The court also scheduled a new date for the start of the auction process, setting it for Friday. It had previously been scheduled to start on Wednesday.

Chatham is not a newcomer to the newspaper industry. It is the principal owner of American Media, which operates the National Enquirer supermarket tabloid, and a major investor in Postmedia, the publisher of Canadian newspapers including The National Post, The Montreal Gazette and The Ottawa Citizen.

A lawyer identified as a representative of the Knight Foundation listened in on the hearing as a nonparticipant. The Knight Foundation is a journalism nonprofit organization with an endowment of more than $2 billion. It originated with the family whose newspaper chain merged with another to form Knight Ridder, the company bought by McClatchy 14 years ago.

McClatchy, a business that has been in the same family since 1857, with the founding of the forerunner of The Sacramento Bee, is the publisher of The Miami Herald, The Charlotte Observer and The Kansas City Star, among other major dailies. A consistent winner of top journalism prizes, it says it is the second-largest newspaper chain in the United States.

The Alden-owned MediaNews Group has drastically cut costs at newspapers it manages. In 2018, staff members at The Denver Post, a MediaNews Group daily, openly rebelled, publishing a special section filled with articles critical of ownership. “If Alden isn’t willing to do good journalism here,” The Post’s editorial board wrote in the lead editorial, “it should sell The Post to owners who will.”

Alden owns 32 percent of Tribune Publishing, the chain that operates The Chicago Tribune, The Baltimore Sun and newspapers in nine other major metropolitan areas in the United States. Last week the hedge fund increased its influence on Tribune Publishing when it gained a third seat on its seven-member board. Alden also has an interest in another newspaper chain, Lee Enterprises, and its MediaNews Group controls roughly 200 publications.

From 2004 to 2019, roughly half of all newspaper jobs in the United States were eliminated as the cumulative weekday circulation of print papers fell to 73 million from 122 million, according to a University of North Carolina study.

At the same time, advertising revenue fell sharply as readers gave up print newspapers, a longtime home of lucrative retail ads and classified notices, in favor of digital devices. Google and Facebook came to dominate the online ad market, hampering publishers’ attempts to generate the necessary revenue from digital ads.

Wall Street ownership of newspapers has become common, and Alden helped drive that trend since the Great Recession, when it started grabbing stakes in distressed news media companies.

Alden’s emergency motion was first reported by McClatchy DC, a news site staffed by McClatchy journalists in Washington.

July 9th, 2020

A Coffee Chain Reveals Flaws in the Fed’s Plan to Save Main Street

WASHINGTON — La Colombe, a Philadelphia-based purveyor of fancy coffee and canned draft lattes, has seen its business fall off sharply in 2020 as the coronavirus pandemic shuttered its cafes and closed the upscale restaurants that serve its brew. But the company has fallen through the cracks when it comes to government relief.

La Colombe didn’t think it qualified for the government’s forgivable small-business loan program given its size and canned coffee manufacturing business. It is too small to have ready access to the debt markets big companies use to raise funds — markets that are chugging along with the help of Federal Reserve backstops.

The company’s leaders thought that another Fed program, one intended to help midsize businesses by providing loans, would be their best shot at getting help. But when the central bank announced the details in early April, it was clear that La Colombe would not qualify. The company has too much debt relative to earnings to meet the Fed’s leverage restrictions.

“That just doesn’t make sense for companies like La Colombe, because we’re growing so quickly,” said Aren Platt, who leads special projects for the company.

The Fed’s Main Street loan program for medium businesses was destined to be a challenge. The central bank had never tried lending to midsize companies before, and it is difficult to help a very diverse group of businesses without putting taxpayer money at risk. The Fed, the Treasury Department and members of Congress have also at times appeared to be on different pages about what they want the program to achieve.

The central bank and the Treasury, which is providing money to cover any loans that go bad, spent months devising the program, negotiating over credit risk and vetting terms. Many officials within the Fed wanted to create a program that businesses would actually use, but some at Treasury saw the program as more of an absolute backstop for firms that were out of options. Steven Mnuchin, the Treasury secretary, has resisted taking on too much risk, saying at one point that he did not want to lose money on the programs as a base case.

What has emerged after three months, two overhauls and more than 2,000 comments filed with the Fed is a program that seems to be incapable of pleasing much of anyone.

First announced on March 23, the Main Street program finally allowed banks to register as lenders in mid-June — but only about 450 of the nation’s thousands of eligible banks have registered so far. Banks have reported that many clients are not interested in using the program, the Fed chair, Jerome H. Powell, acknowledged to concerned lawmakers during testimony in late June.

Small-town bankers say some clients have gotten spooked by the substantial paperwork involved in using the program. Big companies often have more attractive options elsewhere in the market. Some, like La Colombe, have too much debt to apply. That problem is echoed across the comment letters by companies that were expanding their footprint pre-pandemic.

It will be hard to declare the program an outright failure even if few companies use it, because the Fed and Treasury have set out limited — and often fuzzy — goals. Officials say that they want to give healthy companies an option for credit access if market conditions worsen, but want to be responsible with the loans they make.

“Success would be that we have broad national coverage,” said Eric Rosengren, president of the Federal Reserve Bank of Boston, which is overseeing the effort. “This is for businesses that have a good business model, that were disrupted by the pandemic, and that are going to be able to recover from that so that they will be able to pay off the loan.”

The program is intended to help a narrow set of companies, particularly given its strict terms, experts said.

The Fed takes on 95 percent of the risk, but banks have to retain 5 percent of any loan they underwrite through the Main Street program, a stipulation meant to discourage them from dumping bad debt on the Fed. Because they must have “skin in the game,” they are likely to avoid underwriting loans if the economy is in crisis and it looks like a big chunk of borrowers might default.

The program also comes with reporting requirements and other restrictions — including limitations on executive pay and capital distributions, like dividends, that Congress set out in the relief legislation. If the economy is muddling along and credit is basically available, some companies will find borrowing through the Main Street program unattractive because of the strings attached.

It’s a Goldilocks design: Firms won’t use it if credit conditions are healthy and banks won’t use it if they are too unhealthy. It could help companies access credit if the situation is just right — for instance, if credit conditions tighten with a second virus wave in the fall, but banks and borrowers expect the economy to recover before long.

“There are some tough conditions that go with taking that money,” Bruce Winfield Van Saun, chief executive at Citizens Financial Group, said at a May 27 investor conference. “So I think many companies will seek other funding from banks or from asset-based lenders if they can achieve that.” He added that “if the situation stays tough or worsens, then I think you’ll see more companies avail themselves of Main Street lending.”

The program fully opened on Monday, and Mr. Rosengren said banks had already offered loans for companies that had been hard-hit, like movie theaters. He declined to say how many, and said he expected demand to ramp up over time. The Boston Fed disclosures show that hardly any of the biggest banks, other than Bank of America, are willing to publicly say that they will make loans to new customers through the program.

  • Updated July 7, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.


An analysis by Goldman Sachs economists found that there are potential borrowers for whom the program’s terms would be attractive given current financing conditions and to whom banks could profitably lend money — mostly smaller and riskier companies. But they expect little usage because of the program’s conditions. Larger risky companies might also find the facility attractive, but the program limits would likely shut them out.

Another incentive of the program — removing loans from bank balance sheets to make room for more loans — also seems like it isn’t a priority now, a J.P. Morgan economist, Michael Feroli, wrote in an research note. He pointed out that a separate Fed program that takes small-business loans from bank balance sheets saw fairly limited use, suggesting that banks are not widely worried about clearing up balance sheet space.

Lawmakers have repeatedly pushed policymakers to make the program more inclusive and widely available. But Mr. Mnuchin has been relatively cautious about taking on credit risk, occasionally describing the Main Street program as a backup option that could be successful without ever being used by providing certainty to the market that credit would remain available.

“In the perfect world we announced all these facilities, the markets work, and we don’t need to use them,” he said on CNBC in May. “But they’re there and they’re going to be ready and they’re going to serve as backstops.”

Criticism of the program’s terms has prompted multiple revisions by the Fed and the Treasury to make it more attractive to borrowers and lenders.

Banks can now make smaller loans of as little as $250,000, and borrowers can have up to five years to repay the loan.

Even so, Mr. Powell told lawmakers on June 30 that banks were “not getting a ton of interest from borrowers,” adding that they expected demand to grow. “We continue to be open to playing with the formula and making adjustments going forward.”

Mr. Powell signaled that the minimum loan size could drop further, and Mr. Mnuchin said that the Treasury and the Fed were looking into asset-based lending — which could allow more indebted firms to borrow by using their shops and factories to secure the loans. That is what La Colombe is pushing for, sometimes through its local lawmakers.

It is unclear how much tweaks around the edges will help even if the economy takes a turn for the worse and credit availability dries up. The Fed can offer only loans, not grants, so companies that use the program will exit with more debt to service.

“There are limits to how good the program can be, because it’s a loan,” said Nellie Liang, a former Fed official now at the Brookings Institution. Still, she said, policymakers “should err on the side of being generous, especially for smaller businesses,” adding, “If the program is too modest going in, the economy can get worse, more firms fail, and even more support would be needed.”

July 9th, 2020

Hiring Outlook Remains Dim As Unemployment Claims Continue to Pour In

The number of new state unemployment claims dipped last week, but job losses continue to batter the economy as rising coronavirus cases pushed some regions of the country to reverse course and reimpose shutdown orders on businesses.

More than 1.3 million workers, seasonally adjusted, filed new claims for regular unemployment benefits last week, the government reported on Thursday. Another million first-time claims were filed under the federal Pandemic Unemployment Assistance program. Taken together, the report paints a disappointing picture of recovery: Total new unemployment claims have edged up from their mid-June lows.

Although hiring nationwide has picked up in recent weeks, most of the payroll gains were temporarily laid-off workers who were rehired. The pool of employees whose previous jobs have disappeared and who must search for new ones has grown.

“Their circumstances may be more challenging to rectify than those who were laid off because of a temporary closure,” said Elizabeth Akers, who was a staff economist with the Council of Economic Advisers under President George W. Bush. “Finding new jobs will be more difficult. There’s been scarring in the economy.”

Recent readings from employment sites also point to more lasting damage to the labor market. Overall job openings at ZipRecruiter rose last week, for instance, but the number of new jobs posted declined for the fourth week in a row.

“For now, at least, that suggests the increase in vacancies is being driven by a slowdown in hiring, not an increase in labor demand,” said Julia Pollak, ZipRecruiter’s labor economist.

“Recent jobs reports are encouraging, but the increase in employment entirely reflects rehires of workers on temporary layoff,” she added. “The recovery in new hiring has yet to begin.”

The longer the pandemic dampens or halts shopping, dining out, travel and business operations, the more likely it is that jobs put on a brief hold simply vanish.

Brooks Brothers, the nation’s oldest apparel brand in continuous operation, filed for bankruptcy this week and permanently closed 51 stores. And airlines announced that they might lay off or furlough tens of thousands of employees in October despite billions of dollars in government aid because air travel has not rebounded.

In Texas, where a jump in coronavirus cases has led to a new round of business closings and other restrictions, unemployment claims have risen. More than 117,000 people filed for benefits in Texas last week, a jump of more than 20,000 from a week earlier. It was the second straight weekly increase and the most new filings since late May, although still below the peak in early April.

A wide range of indicators recently have suggested that the economic rebound is losing momentum in states where virus cases are rising quickly.

The unemployment data released Thursday didn’t paint a clear picture, however. New filings fell in Oklahoma, Florida and other virus hot spots, and rose only slightly in Arizona. Claims rose in New Jersey and New York, states where the virus is comparatively under control. And economists caution against reading too much into week-to-week changes in state filings, which can be volatile.

Congress created the emergency Pandemic Unemployment Assistance program in March to extend benefits to independent contractors, self-employed workers and others who don’t qualify for regular state unemployment insurance. The effort got off to a slow start: Many states struggled to roll out the program while dealing with a record number of regular unemployment claims. Jobless workers across the country reported encountering jammed websites, lost paperwork and confusing or contradictory instructions.

Those issues have spilled into the data itself. Backlogs, data-entry errors and other issues have made it hard to know how many people are receiving benefits under the program, or exactly when their claims were first filed. At least some states appear to be counting the same recipients multiple times.

But economists say there is little doubt that the program is helping millions of workers who would ordinarily fall through the cracks of the unemployment safety net. More than 10 million people have filed claims under the emergency pandemic program, which is set to expire at the end of the year.

A weekly $600 federal supplement for all jobless workers is scheduled to end this month. The Paycheck Protection Program, an effort designed to preserve jobs by offering forgivable loans to small business, was recently extended through October.

Liz Etheredge, the chief executive of Mecklenburg Paint in Charlotte, N.C., said the federal loan made it possible for her to keep workers employed.

The spring paint season was just starting when the pandemic hit. “Oh, gosh, things just pretty much stopped,” said Ms. Etheredge, whose company also handles property management.

  • Updated July 7, 2020

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • Is it harder to exercise while wearing a mask?

      A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.

    • I’ve heard about a treatment called dexamethasone. Does it work?

      The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.

    • What is pandemic paid leave?

      The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.

    • Does asymptomatic transmission of Covid-19 happen?

      So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • How does blood type influence coronavirus?

      A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.


Initially she helped most of her 30 employees apply for unemployment benefits, which she said was time consuming and confusing. “One day I waited on hold for three hours to reach somebody” with the state to work out glitches with benefit applications, she said, “and then another day I waited two hours.”

She applied for a Paycheck Protection Program loan, hoping to avoid permanently laying off painters.

“It came just in time,” said Ms. Etheredge, who was able to avoid using up her savings.

She has put everyone back on the payroll through the use of her loan money, so she expects that the entire amount will be forgiven.

“I just worry how this country is going to pay it all back,” she said.

Thomas Falls Jr. used the federal loan program to help pay workers at his family’s commercial cleaning company, Falls Facility Services in Birmingham, Ala.

About a quarter of his business, which spans much of the state, dried up when the pandemic started, Mr. Falls said. He was forced to lay off about 25 workers south of Montgomery when the schools they cleaned closed. A new contract at a county government building elsewhere in the state and demand for enhanced sanitizing at other offices, though, made it possible to keep the rest of his 200 employees on the payroll, and even hire a few more.

“We were kind of fortunate,” said Mr. Falls, who said he planned to rehire the rest of his employees once schools reopened.

Lisa D. Cook, a professor of economics and international relations at Michigan State University, worries what will happen when these assistance programs dry up.

“At the heart of this is job loss,” said Ms. Cook, who testified before a congressional committee this week. State and local governments are laying off health care and education workers, and eviction bans are expiring even though a significant chunk of household renters and businesses are having trouble making payments.

“I just worry about this all piling up in the system,” she said.

Many jobless workers may have to wait a long time for the labor market to improve. The Organization for Economic Cooperation and Development said this week that high unemployment would probably persist in the United States and other developed countries at least until 2022.

July 9th, 2020

M&A wrap: Bregal, Palladium, Rallyday, TA, KKR, Allstate, Lovell Minnick, ParkerGale, Charlesbank


Mergers & Acquisitions is recognizing nine dealmakers as the 2020 Rising Stars of Private Equity:

  • David Farsai, Principal, Mainsail Partners, who is the first at the firm to rise from associate to principal
  • Andrea McGuirt, Senior Associate, Palladium Equity Partners, who established a strategy for sourcing and executing opportunities in the current deal environment
  • Molly Fitzpatrick, Vice President, Rallyday Partners, who led three investments and a divestment for the new PE firm
  • Jenny Zhang, Vice President, Investments, Grain Management, who helps portfolio companies in the telecom infrastructure sector find organic growth opportunities
  • Ross Stern, Principal, Summit Partners, who played a role in nearly $1.3 billion worth of healthcare company investments
  • Arjun Mehta, Vice President, Bregal Sagemount (pictured), who has made eight platform investments and seven add-on acquisitions
  • Miguel Tejeda, Vice President, Motive Partners, who stands out for his investment acumen and ability to distill complicated concepts and processes
  • Clara Jackson, Principal, TA Associates, who has become a trusted supporter during the pandemic to help portfolio companies remain sustainable
  • KJ McConnell, Principal, GTCR, who played a leading role in about 10 of the group’s last dozen deals

These outstanding up-and-coming investment professionals have been excelling during a period of profound change in the U.S. and in the world. The publication of this list comes at a pivotal moment in time. The country is beginning to open up after three months of quarantine from the coronavirus, while a second wave picks up steam in the Sun Belt from South Carolina to California and including Texas. Dealmaking under quarantine while working from home has proved challenging, to say the least.
Social justice issues have taken on fresh urgency. There is heightened awareness of systemic racial injustice and police brutality against Blacks after the deaths of George Floyd and many others. Meanwhile, the U.S. Supreme Court ruled recently that, “An employer who fires an individual merely for being gay or transgender defies the law.” On immigration policy, the Court recently put the brakes on dismantling the Deferred Action for Childhood Arrivals, or DACA. Meanwhile, the President is asking the Court to overturn the Affordable Care Act, also known as Obamacare.

Click here for full coverage of Mergers & Acquisitions’ 2020 Rising Stars of Private Equity.

Ten private equity firms have pledged to each create and post five board seats to make them available to minority and women candidates, participating in an initiative to increase diversity on company boards of directors. Aurora Capital Partners, Clearlake Capital, Genstar Capital, Grain Management, Hellman & Friedman, Hg, Insight Partners, K1 Investment Management, TA Associates and Vista Equity Partners have committed to the board initiative announced by Diligent Corp., provider of company governance
software and a portfolio company of Clearlake and Insight. Read our full coverage: Clearlake, Insight, Vista and other private equity firms create 50 new board roles for diverse candidates.

DEAL NEWS
KKR & Co. (NYSE: KKR) agreed to buy Global Atlantic Financial Group in a deal that gives it a major presence in the insurance industry and adds long-term capital. The alternative-investment manager will acquire Global Atlantic’s outstanding shares in a transaction that could be valued at more than $4 billion. Read the full story by Bloomberg News: KKR buys Global Atlantic, adding almost $90 billion in assets.

Allstate Corp. (NYSE: ALL) is buying National General Holdings Corp. for $4 billion. “Acquiring National General accelerates Allstate’s strategy to increase market share in personal property-liability and significantly expands our independent agent distribution,” says Allstate CEO Tom Wilson.

Greenbriar Equity Group-backed GB Auto Service has acquire automotive service providers Sun Devil Auto and Sun Auto Service. “The automotive aftermarket is a key area of focus for Greenbriar due to its size, channel structure and defensive characteristics, which create a diverse set of investment opportunities,” says Greenbriar director Matt Burke. Capstone Headwaters advised the sellers.

Sagewind Capital LLC has invested in QuantiTech LLC. The target offers technical engineering services to the Army, Air Force and NASA.

HKW-backed Fresh Direct Produce has acquired Mike and Mike’s Inc., a distributor of organic fruits and vegetables.

Lovell Minnick-backed Attom Data Solutions has acquired real estate technology company Home Junction Inc.

ParkerGale-backed Ipro Tech has acquired NetGovern, a provider of information, risk and compliance software.

MJH Life Sciences has acquired healthcare multimedia platform Pharmaceutical Commerce.

FUNDRAISING
Charlesbank Capital Partners has closed its second credit fund at $700 millon. The fund will focus on credit investments in North American middle-market companies that are valued up to $1.5 billion. Monument Group and GrovePeak served as placement agents.

DEAL TRENDS
In the tech-centric payments industry, the number of women in C-suite roles is rising after decades of incremental progress, but the path to leadership for Black people in the payments industry remains steep and lonely. Read the full story: Black women in payments see a chance for change after tragedy

PEOPLE MOVES
Nicholas Basso was hired by private equity firm Peak Rock Capital as a managing director where he is focusing on credit investments. He was previously with with Oaktree Capital Management.

Pamela Baxter has joined private equity firm MidOcean Partners an an operating partner. She most recently served as CEO at Bona Fide Beauty Lab.

Lee Garber has been promoted to partner at investment firm NewSpring Holdings, Mike Kubacki has been promoted to chief financial officer of the Firm, and Bharat Santhanam has been promoted to senior associate.

David Groban and Elliott Weinstein have joined private equity firm Searchlight Capital Partners as managing directors. Groban was previously with MatlinPatterson Global Advisers, while Weinstein joins from Centerbridge Capital Partners.

Matthew Frankel and Michael Weinberg have been promoted to managing partners at Levine Leichtman Capital Partners. Stephen Hogan and David Wolmer have been promoted to executive officers, Micah Levin and Matthew Rich have been promoted to senior managing directors.

Daniel Kim was hired by private equity firm HKW as a partner where he is concentrating on the technology sector. He was most recently with Bregal Sagemount.

Charles Sun has been promoted to vice president at Pritzker Private Capital. He focuses on the healthcare sector.

John Hubbard has been named CEO at Genstar-backed Signant Health. He was previously with PPD.

William Medof has been named chief operating officer at Bregal Sagemount-backed Procurement Advisors. He was most recently with Georgia-Pacific Corrugated.

Anastasia Kaup was hired by law firm Duane Morris as a partner where she is focusing on private equity. She was previously with Mayer Brown LLP.

George Klidonas has joined law firm Latham & Watkins as a partner where he is focusing on restructurings and special situations. He was most recently with Kirkland & Ellis.

CORONAVIRUS IMPACT
Under normal circumstances, M&A demands a robust set of tools and services to be successful. In today’s environment in which the stakes have been raised by the coronavirus crisis, professional help from service providers is more important than ever. Private equity firms and their portfolio companies want to know what actions they can or should take, and what their peers are considering, to make the best decisions possible in response to the Covid-19 pandemic. Through talking with many different affected parties, service providers have streams of data and information that can help investors make informed decisions and minimize negative economic impacts on their investments. Mergers & Acquisitions examines offerings from EHE Health, Norgay Partners, Cepres, Valuation Research Corp. and Axial. “The stakes are high today,” says Greg Mansur, chief client officer at EHE Health, which provides a playbook on getting companies back to work safely. “We want to be part of the solution for our clients. We want to help them through this and help America get back to work.” Read our full coverage: 5 service providers guide dealmakers through the next phase of the pandemic.

As transactions previously delayed due to the pandemic begin to pick up, acquirors and investors in the middle market should evaluate the target’s performance during the unprecedented disruption presented by the pandemic, and adjust expectations for the immediate and medium term. Supplemental due diligence is not only prudent — it is likely to be required as a condition to the placement of any representations and warranties insurance. Essential considerations include whether the target has been able to innovate and whether the valuation agreed to in a letter of intent should be revisited. Buyers should also review any termination provisions to determine whether any breakup fee would be payable. See our full coverage: 11 factors for dealmakers to consider before buying a company during the pandemic.

Many companies are unprepared to face the tremendous economic challenges brought on by the pandemic. For buyers, navigating this new world of distressed M&A may be the hardest obstacle to overcome in transactions with insolvent organizations. Read the full article: Coronavirus puts spotlight on distressed M&A.

Digital technologies like artificial intelligence and advanced analytics can help organizations to accelerate their pace and expand their insights quickly—advantages that are especially crucial in times of rapid change. See the full story: How analytics can rebalance M&A in the wake of the coronavirus.

Arizent, the parent company of Mergers & Acquisitions, released a new survey May 15 to understand how executives across industries were dealing with the impacts of the Covid-19 crisis after operating in a “new normal” environment for two months. As the coronavirus pandemic continues to extend its grip on the globe — infecting more than 1.41 million Americans (over 4.44 million globally) by the middle of May — executives must navigate their organizations through uncharted territory, with the possibility that the virus may not disappear any time soon. This is forcing C-suites to make big, lasting decisions with few guideposts to aid them. The April survey found that there was a surprisingly smooth, albeit hurried transition to remote, with most companies, including private equity firms and investment banks, feeling that they performed on par or above their own expectations. However, technology gaps did arise, as some companies found that customers either didn’t have the equipment to access their accounts digitally or needed training from staff working remotely. In the middle market, dealmakers report that “opportunities have thinned somewhat but have not disappeared,” as one private equity investor put it. “Investor base still has liquidity to invest.” Said one investment banker focused on real estate: “Pending deals were either put on hold, cancelled or delayed. Asset prices for listings are being re-evaluated or renegotiated with the sellers and buyers expecting discounts.” For more, see: Exclusive survey: How private equity firms, investment banks and other companies are surviving the pandemic.

What do you do when you’re a dealmaker under quarantine, and face-to-face meetings are out of the question? For Work from Home (WFH) strategies, Mergers & Acquisitions turns to eight prominent dealmakers from private equity firms, investment banks, lenders and law firms. “I miss the excitement of a great conference; wearing my nice clothes, early morning breakfasts, the one-on-ones, drinks with my women ‘tribe,’ and dinner at a steakhouse, even though I am a vegan,” says Amy Weisman, managing director, business development, Sterling Investment Partners. In some respects, it is easier to build relationships now, explains Nanette Heide, partner, co-chair, private equity group, Duane Morris. “Meeting folks over a video conference from their home is immediately humanizing.” M&A pros also point out that human factors play a role. “Emotional Quotient (EQ) is more important than ever during trying times,” says Jeremy Holland, managing partner, origination, The Riverside Co. “It’s critical to remember that the dealmaker on other side of the (now figurative) deal table is a person, too. They have good and bad days and presumably know many people in high-risk categories, potentially even themselves. Being extra thoughtful about each interaction is important.” Read our full coverage: Dealmaking under quarantine: 8 private equity and M&A pros share strategies while social distancing.

FEATURED CONTENT
Portfolia Rising America Fund “invests directly in early and growth-stage companies in the U.S. led by people of color and/or LGBTQ founders, or products and services that cater to these markets,” says investment partner Lorine Pendleton in a Q&A with Mergers & Acquisitions. “These are founders, ecosystems, products and services historically overlooked by traditional venture capitalists but positioned for significant growth and profitability.” The firm is led by five women of color. In addition to Pendleton, the firm’s leaders are: Noramay Cadena, co-founder and managing partner of MiLA Capital; Daphne Dufresne, a managing partner of GenNx 360 Capital Partners; Juliana Garaizar, an angel investor; and Karen Kerr, executive managing director at GE Ventures. “We believe that strength lies in differences and seek out entrepreneurs and startups who are using shifting demographics and their own diversity of experience and thought to create innovation that offers outsized opportunities for returns and impact.” The fund had its first close earlier in 2020 and has made two investments to date: The first investment is in MoCaFi, a fintech startup founded by Wole Coaxum, a former JPMorgan Chase commercial banking executive and entrepreneur, who is African American. “MoCaFi offers a mobile-first banking platform that brings digital banking products to underbanked or unbanked communities (an 88 million U.S. market), allowing them to build credit and financial mobility,” Pendleton explains. The second investment is in a women’s tele-medicine network. For more, read the full interview: Led by 5 women of color, Portfolia Rising America Fund backs mobile banking and women’s telemedicine startups.

“As stewards of capital we have an outsized role in determining which businesses to support,” says Mina Pacheco Nazemi of Barings Alternative Investments. “As asset allocators, we need to hold ourselves accountable. I can do more. Will you join me?” Dealmakers begin to weigh in, as Gerge Floyd’s death sparked two weeks of Black Lives Matter protests against police brutality and racial injustice. Read the story: “Justice doesn’t just happen. It requires action, dedication and accountability,” says one private equity investor.

In the challenging times we face now, it’s more important than ever to come together as a community and recognize the people and companies that excel and lead. We invite you to join us in honoring the 2019 winners of Mergers & Acquisitions’ M&A Mid-Market Awards. In contrast with the volatile coronavirus-driven conditions unfolding in 2020, the dealmaking environment of 2019 was remarkably stable. Among the PE firms benefitting from the auspicious fundraising climate was Vista Private Equity, which raised a $16 billion fund – the largest technology-focused PE fund ever raised. Mergers & Acquisitions is honoring Vista founder and CEO Robert F. Smith with our 2019 Dealmaker of the Year award. In addition to leading his firm’s unprecedented fundraising, Smith excelled in philanthropy. When he spoke at the commencement of Morehouse College, he announced he would pay off all the student loans of the HBCU’s 2019 graduates, providing a helping hand in the student debt crisis facing many U.S. families. The financial services sector saw a lot of consolidation in 2019. Piper Jaffray wins our 2019 Deal of the Year for buying Sandler O’Neill to form Piper Sandler, which instantly became a leading investment bank in the financial services sector. And Stifel wins our 2019 Investment Bank of the Year for growing dramatically and making several acquisitions. Read our full awards coverage: Meet the winners of Mergers & Acquisitions’ M&A Mid-Market Awards.

To celebrate deals, dealmakers and dealmaking firms, Mergers & Acquisitions produces three special reports every year: the M&A Mid-Market Awards; the Rising Stars of Private Equity; and the Most Influenital Women in Mid-Market M&A. For an overview of what we’re looking for in each project, including timelines, see Special reports overview: M&A Mid-Market Awards, Rising Stars, Most Influential Women.

Editor’s Note: M&A wrap is a bi-weekly column, published on Mondays and Thursdays

July 9th, 2020

Rethink Impact’s Latest V.C. Fund Beats Expectations

Want this delivered to your inbox each morning? Sign up here.

Rethink Impact, a venture capital firm that invests exclusively in tech start-ups founded by women, plans to announce today that it has raised $182 million for its second fund, surpassing expectations.

Founded in 2016 by Jenny Abramson and Heidi Patel, Rethink has invested in an array of start-ups, including Guild Education, which partners with companies to offer workers employer-sponsored education programs, and Ellevest, a women-focused financial information start-up co-founded by Sallie Krawcheck, a former Citigroup C.F.O. It mostly invests in Series A and B funding rounds, alongside other venture firms.

The new fund will invest in female entrepreneurs at a crucial time, Ms. Abramson said: Venture investments in start-ups founded by women accounted for just 4.3 percent of all deals in the first quarter, down from 7 percent a year ago, according to Pitchbook.

• “Female entrepreneurs, entrepreneurs of color and others are finding it harder than ever to get a meeting with a V.C.,” Ms. Abramson told Michael.

• The firm had originally sought to raise $150 million for the new fund, she added. Rethink Impact’s first fund raised $112 million in 2017.

Backers of the fund include Pivotal Ventures, the investment fund started by Melinda Gates; the Ford Foundation; and UBS. “If we want to expand women’s power and influence in tech, one of the best actions we can take is invest in female entrepreneurs, which is why organizations like Rethink Impact are so critical,” Ms. Gates said in a statement.

United Airlines could furlough as many as 36,000 employees, or nearly 40 percent of its work force. Federal aid funds run out in September, and if travel demand continues to be weak at that time, the airline “simply cannot continue at our current payroll level,” it said in a memo to its staff.

Brooks Brothers filed for bankruptcy protection and said it would close 51 stores, out of its roughly 250 locations in North America. The clothing brand, founded in 1818, said it expected to find a buyer “within the next few months.”

The price of gold is soaring on fears of stalled economic growth. Analysts say the haven asset could break its previous record of around $1,900 per ounce, with investors piling into funds that hold the precious metal.

A dearth of protective gear is affecting health facilities across the U.S., renewing pleas for White House intervention. The country set another record for new coronavirus cases recorded yesterday, the fifth in nine days. A surge in cases in Tulsa, Okla., was “more than likely” linked to President Trump’s campaign rally there last month, according to the director of the local health department. (Mr. Trump’s next rally is at an airport hangar in Portsmouth, N.H., on Saturday.)

The British government announced new measures to save jobs, including tax cuts, retention bonuses and even a 50 percent discount at restaurants and pubs. The government-backed furlough plan expires in October, and officials fear that a wave of layoffs could follow.

The U.S. Supreme Court yesterday upheld a Trump administration rule that gives employers more ways to opt out of the Affordable Care Act’s requirement on providing free contraception coverage. Under the new rules, any employer — not just religious organizations — may refuse coverage on the grounds of “sincerely held moral convictions.”

The decision could leave more than 120,000 women without access to birth control via their employers’ insurance, according to the government’s estimates. The Trump administration stood for a religious organization at the high court, arguing against Pennsylvania and New Jersey, which had challenged the rule.

• The left-leaning justices Elena Kagan and Stephen Breyer joined their five conservative colleagues in the 7-to-2 decision. Ruth Bader Ginsburg — who was vociferous in her opposition during oral arguments in May — dissented, joined by Sonia Sotomayor.

Contraception is an economic issue in addition to being a health matter. A group of industry associations and businesses, including Amalgamated Bank, Bloomberg L.P. and Trillium Asset Management, argued in a “friend of the court” brief that broader exceptions to the requirement threaten women’s freedom to plan careers and families, jeopardizing economic growth.

That was the point of the Obamacare requirement, according to Nelson Tebbe, a professor of constitutional law at Cornell. “The contraception mandate’s connection between free coverage and women’s opportunity isn’t obscure,” he told DealBook. “We know from prior rulings and factual findings that women will be harmed and that the harm will be substantial and irreparable.”

• This is not necessarily the end of the legal fights: Justice Kagan said states could still argue that the exceptions are “arbitrary and capricious.” A lower court left this question unaddressed, so the high court didn’t consider it either.

America’s education system, from public primary schools to Ivy League universities, is grappling with what to do when classes resume after the summer break.

New York City said its public schools would not reopen fully in the fall. The school system, the biggest in the U.S., will instead allow students back from one to three days a week to comply with health guidelines. School officials in Los Angeles, another huge district, are prepared to continue with remote teaching amid a surge of coronavirus infections in California.

The Trump administration is pushing for schools to reopen sooner rather than later. Mr. Trump threatened to cut federal funding for school systems that don’t return quickly to in-person teaching — though his leverage there is limited — and has pressured federal agencies to water down guidelines for a safe return to schools.

• Local officials are chafing at federal directives that come without additional funds for tests and safety supplies. Gov. Andrew Cuomo of New York said yesterday: “We will open the schools if it is safe to open the schools. Everybody wants the schools open.”

Harvard and M.I.T. sued the administration over new rules on visas that would expel foreign college students from the U.S. if their colleges offer online-only classes in the fall. The schools argue that the policy is an attempt to force them to reopen against their wishes and could strip them of tuition revenue.

Don’t lose sight of the bigger picture, especially the economic costs of school closures:

• It will cost students trillions in future earnings, representing a double-digit hit to G.D.P., according to the Brookings Institution.

• It has also hits parents’ productivity, with a study in April finding that eight weeks of school closings cost about 3 percent of U.S. economic output.

The trading app Robinhood has enabled thousands of people to buy and sell stocks, bonds and options with just a few taps. But that has led to heartbreak and outrage as well, The Times’s Nathaniel Popper writes.

It’s built on making trading as easy as possible. Customers don’t pay commission on trades, and they get a free share of stock by scratching images off what looks like a virtual lottery ticket. The app’s home screen has a list of trendy stocks that users can trade with as few as two taps.

• That approach has drawn big-name backers like Sequoia and the investor and actor Ashton Kutcher. Robinhood is currently valued at about $8.3 billion.

The company’s business is centered on encouraging as much trading as possible, since Robinhood makes money by sending customer orders to Wall Street firms — far more than traditional rivals like Charles Schwab make. And more than at any other retail brokerage firm, Robinhood’s users trade the riskiest products — like options — at the fastest pace, according to an analysis by the research firm Alphacution.

Customers, many of whom are inexperienced, have lost money quickly. One college student killed himself last month after racking up large losses.

• Vlad Tenev, a founder and co-C.E.O. of Robinhood, told The Times that only 12 percent of the traders active on the platform each month used options. And even though some of its customers lose money, he said that young Americans risked greater losses by not investing in stocks at all.

Speaking of speculative trading, something strange is afoot on TikTok, the social network where young people share meme-laden videos. Users have been urging their followers to buy Dogecoin, the cryptocurrency that started in 2013 as a joke centered on a dog-based meme popular at the time.

Dogecoin’s price has soared on heavy trading volume, and viral videos on TikTok — which has 800 million active users — are the only reasonable explanation. Each unit of the cryptocurrency trades for a fraction of a cent, and the videos assert that if everyone buys at the same time, it could rise to $1 (a mere 23,000 percent higher than its current price). The cryptocurrency has more than doubled in price this week.

• This “should serve as a reminder to everyone in the space that the most popular use case for crypto is still purely speculation,” an analyst told CoinDesk. (Want to go even deeper on all this? CoinDesk put out a podcast episode about it.)

Deals

• Ant Financial, an arm of Alibaba, reportedly plans to go public in Hong Kong and is aiming for a valuation of more than $200 billion. (Reuters)

• KKR agreed to buy Global Atlantic, a former life insurance unit of Goldman Sachs, for $4.4 billion. (FT)

• Alden Capital, which has scooped up dozens of local newspapers, has challenged a takeover bid for the bankrupt publisher McClatchy by a fellow hedge fund, Chatham Asset Management. (McClatchy)

Politics and policy

• Most of America’s banking giants aren’t participating in the Fed’s midsize-business lending program. (NYT)

• The White House hasn’t yet published President Trump’s annual financial disclosure report — and it blamed the pandemic for the delay. (NYT)

Tech

• Shares in Twitter rose after a job posting by the company suggested that it was exploring a subscription service. (Bloomberg)

• Only about 8 percent of people who downloaded the streaming app Quibi are paying for a subscription after the end of the free-trial period, one analyst firm estimates. (Protocol)

Best of the rest

• Why Patrick Mahomes’s $503 million contract extension with the Kansas City Chiefs isn’t as big as it seems. (NYT)

• “Pandemic Is a Great Incubator for Financial Fraud” (Bloomberg Opinion)

• “What It’s Like to Enter the Work Force From Your Childhood Bedroom” (NYT)

We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.