What We’re Reading This Week [March 13, 2023]
On March 6th, The Wall Street Journal reported that remote working environments have seriously jeopardized the recovery of business-focused hotels, boosting default risks within the sector. While leisure travel has rebounded since the second half of 2022, the recovery for facilities with large meeting rooms that rely on business trips and conferences, has been much weaker, due in part to many office workers still working remotely. As a result, low occupancy rates for business-focused hotels have driven down their property values, causing lenders to ask for more capital before agreeing to continue to finance their loans. Some experts warn these trends, combined with rising interest rates and slowing economic growth generally, may push these hotels into default. Already, in January 2023 alone, as many as ten hotel owners in the U.S. have filed for bankruptcy, compared with just two a year earlier in January, 2022. Remote Work Threatens Business Hotels’ Recovery, Boosting Default Risks – WSJ
On March 6th, the New York Post reported that Binance, the world’s biggest cryptocurrency exchange, is facing mounting scrutiny from regulators and lawmakers, after the very public bankruptcy filing of its rival crypto platform, FTX. Binance is currently composed of two divisions: Binance and Binance US, with the former being shielded from exposure to U.S. oversight. When FTX fell into bankruptcy in November 2022, Binance became “the undisputed giant of the crypto world.” However, that giant is now facing closer scrutiny from U.S. regulators as they examine evidence that the exchange’s U.S. and global arms are more interconnected than previously described. A bipartisan group of U.S. lawmakers is also demanding more information from Binance, citing evidence “that the exchange is a hotbed of illegal financial activity that has facilitated over $10 billion in payments to criminals”. Regulators Put More Pressure on Binance, the Crypto Giant – The New York Times (nytimes.com).
On March 3rd, Yahoo! Finance reported that the financial lifeline that pulled Bed Bath & Beyond Inc. from the brink of bankruptcy last month may be at risk due to tumbling stock prices. Hedge fund Hudson Bay Capital had provided Bed Bath & Beyond with $225 million upfront and promised to pay out another $800 million over the next eight months. Such deal was being characterized as a “transformative transaction”. However, the cash infusion had certain covenants that required Beth Bath & Beyond to maintain an average stock price of at least $1.25-$1.50, a metric that has become increasingly challenging for Bed Bath & Beyond to meet. Failure to secure the delayed cash infusion has certain investors again fearing the retailer’s bankruptcy filing.
On March 2nd, CNN Business reported that Target, Macy’s and Best Buy are seeing consumer demand starting to buckle from the strain of inflation impacting the way that customers shop. As a result, these chains and others are generally pulling back on merchandising discretionary goods like clothing, electronics and home improvement and have instead shifted to merchandising items such as groceries and other household basics. Some experts predict the slowdown and shift may result in more discounts for customers as stores attempt to discard excess inventory but that nonetheless, these changes in consumer behavior will likely lead to an overall sales decline in 2023. Target, Macy’s and Best Buy say consumers are strained | CNN Business
