300 Pizza Huts, mostly dine-in locations, to close

Up to 300 Pizza Hut restaurants will be closed, most of them dine-in locations not well suited for carryout and delivery at a time when millions of people are sheltering and eating at home.

Pizza sales have exploded during the pandemic. Domino’s last month reported a 30% spike in quarterly profits. On Monday it said that it was hiring more than 20,000 people to handle surging orders.

Franchisee NPC International said Monday in documents filed in bankruptcy court that it had come to an agreement with Pizza Hut to close hundreds of locations. The Leawood, Kansas, company filed for bankruptcy protection last month.

NPC owns 1,225 Pizza Huts and 385 Wendy’s restaurants in 27 states. There are 6,700 Pizza Hut restaurants in the U.S.

In its filing, NPC said that closing stores not designed for pick-up or delivery will allow it to invest in smaller stores that can better handle online orders.

In May, Pizza Hut’s U.S. carryout and delivery sales reached an eight-year high, according to Yum Brands Inc., the Louisville, Kentucky, company that also owns KFC and Taco Bell.

But Pizza Hut’s U.S. sales grew just 1% in the April-June period; rival Domino’s Pizza, which has smaller, carryout-focused stores, posted a 20% jump in U.S. sales.

Yum Brands in a prepared statement said the stores being closed had underperformed others owned by NPC, and that shedding them would strengthen NPC’s remaining portfolio.

Associated Press

Lord & Taylor, Men’s Wearhouse owner file for bankruptcy

NEW YORK (AP) — Lord & Taylor, one of America’s oldest department stores, has filed for bankruptcy, joining a growing list of stores slammed by the coronavirus pandemic. Tailored Brands, the parent company of Men’s Wearhouse and Jos. A. Banks, filed for bankruptcy as well.

Many of the companies that have filed for Chapter 11 in recent weeks were already struggling, but the forced closure of non-essential stores in March pushed them to the brink.

Lord & Taylor, which was sold to the French rental clothing company Le Tote Inc. last year, filed Sunday for bankruptcy protection in the Eastern Court of Virginia.

In an announcement on its website the company, one of the oldest American department stores, said it was looking for a new owner.

Like many retailers, Lord & Taylor was already struggling with the shift to online shopping even before the pandemic struck this spring. Last year, it sold its flagship building on New York’s Fifth Avenue after more than a century in the 11-story building.

The company was founded as a dry goods store in 1826. There are several dozen Lord & Taylor stores across the country.

Tailored Brands, which filed for Chapter 11 Sunday in the Southern District of Texas, said it would continue to operate Men’s Wearhouse and Jos. A. Banks stores, along with K&G Fashion Superstore and Moores Clothing for Men, which it also owns. It said in a release that a restructuring plan is expected to reduce the company’s funded debt by at least $630 million and provide increased financial flexibility.

As many people have switched to working at home, brands that sell clothes targeted at offices workers have had a particularly hard time. Brooks Brothers and the parent company of Ann Taylor are among those that have also filed for bankruptcy.

As of July 23, roughly 40 retailers, including big and small companies, had filed for Chapter 11 bankruptcy so far this year. That exceeds the number of retail bankruptcies for all of last year. About two dozen of them have sought bankruptcy protection since the pandemic started.

Others include J. Crew, J.C. Penney, Neiman Marcus, Stage Stores, and Ascena Retail Group, which owns Lane Bryant in addition to Ann Taylor.

Associated Press

Muji's US unit files for bankruptcy due to COVID-19 pandemic

TOKYO - Ryohin Keikaku Co., the operator of the Muji-brand goods store chain, said Friday its US unit filed for bankruptcy protection after the coronavirus pandemic caused store closures and hit sales hard.

Total liabilities left by the subsidiary Muji USA Ltd. were $64 million, the Tokyo-based company said.

The Japanese retailer, which entered the US market in 2006, said the subsidiary suspended operations at all of its 18 outlets across the United States in March due to the outbreak.

The subsidiary is considering closing some unprofitable stores but plans to continue business in the United States while proceeding with restructuring efforts, the parent said.

It also said the filing for Chapter 11 bankruptcy protection by the subsidiary will not affect the bottom line of Ryohin Keikaku, which has already written down the value of its shareholdings in the U.S. arm to zero.

Also Friday, Ryohin Keikaku reported a group net loss of 4.12 billion yen ($38.6 million) for the first quarter through May, a turnaround from the 6.59 billion yen in profit a year earlier. Sales dropped 29.9 percent to 78.75 billion yen.

The company recently changed its settlement period from the end of February to the end of August. Still in transition, its current fiscal period ends in six months.

kyodo News

Brooks Brothers, founded in 1818, files for bankruptcy

Brooks Brothers, the retailer known for dressing the great and good of the United States since 1818, filed for bankruptcy Wednesday, buckling under the pressure from the coronavirus pandemic after years of faltering sales as customers embraced more casual apparel and sales shifted online.

The company, founded and based in New York, filed for Chapter 11 restructuring proceedings in the US Bankruptcy Court for the District of Delaware. Claudio Del Vecchio, the Italian industrialist who bought the brand in 2001 and still owns the company, told The New York Times in May that he would not rule out Chapter 11 as a possibility.

Brooks Brothers said in an emailed statement Wednesday that the filing would allow it to obtain additional financing as it facilitated a sale.

The bankruptcy is the latest high-profile retail fall during the pandemic. Since May, major names like J.C. Penney, Neiman Marcus and J.Crew have all been pushed into Chapter 11 proceedings. The chains, including Brooks Brothers, plan to keep operating, though likely in a pared-back fashion.

“Brooks Brothers is the most iconic American brand,” said William Susman, managing director at Threadstone Advisors. “While in a different form, I am confident the brand will survive and continue for years to come. This is a case of a failed company, not a failed brand.”

Brooks Brothers, known for its suits and preppy clothes, has been hit especially hard by the virus crisis. It is an era of remote work and job interviews through Zoom, and the postponement of celebrations like weddings, bar mitzvahs and graduations.

The company, which is the oldest apparel brand in continuous operation in the United States, said it had decided to close 51 US stores out of its roughly 250 locations in North America. Earlier this year, Brooks Brothers said it would close its 3 factories in the US — in New York City; Haverhill, Massachusetts; and Garland, North Carolina — spurring concern around the future of the brand and its identity as a “Made in America” name.

Brooks Brothers said in its Wednesday email that it expected to complete the sale “within the next few months.”

-The New York Times Company-

A tidal wave of bankruptcies is coming

Already, companies large and small are succumbing to the effects of the coronavirus. They include household names like Hertz and J. Crew and comparatively anonymous energy companies like Diamond Offshore Drilling and Whiting Petroleum.

And the wave of bankruptcies is going to get bigger.

Edward Altman, creator of the Z score, a widely used method of predicting business failures, estimated that this year will easily set a record for so-called megabankruptcies — filings by companies with $1 billion or more in debt. And he expects the number of merely large bankruptcies — at least $100 million — to challenge the record set the year after the 2008 economic crisis.

Even a meaningful rebound in economic activity over the coming months won’t stop it, said Altman, the Max L. Heine professor of finance, emeritus, at New York University’s Stern School of Business. “The really hurting companies are too far gone to be saved,” he said.

Many are teetering on the edge. Chesapeake Energy, once the second-largest natural gas company in the country, is wrestling with about $9 billion in debt. Tailored Brands — the parent of Men’s Wearhouse, Jos. A. Bank and K&G — recently disclosed that it, too, might have to file for bankruptcy protection. So did Weatherford International, an oil field services company that emerged from bankruptcy only in December.

More than 6,800 companies filed for Chapter 11 bankruptcy protection last year, and this year will almost certainly have more. The flood of petitions from the worst economic downturn since the Great Depression could swamp the system, making it harder to save the companies that can be rescued, bankruptcy experts said.

Most good-size companies that go into bankruptcy try to restructure themselves, working out payment agreements for their debts so they can stay open. But if a plan can’t be worked out — or isn’t successful — they can be liquidated instead. Equipment and property are sold off to pay debts, and the company disappears.

Without reform in the system, “we anticipate that a significant fraction of viable small businesses will be forced to liquidate, causing high and irreversible economic losses,” a group of academics said in a letter to Congress in May. “Workers will lose jobs even in otherwise viable businesses.”

Among their suggestions: increasing budgets to recall retired judges and hire more clerks and giving companies more time to come up with workable plans to prevent them from being sold off for parts.

“Tight deadlines may lead to overly optimistic restructuring plans and subsequent refilings that will congest courts and delay future recoveries,” they wrote.

The pandemic — with its lockdowns, which have just started to ease — was enough on its own to put some businesses under. The gym chain 24 Hour Fitness, for example, declared bankruptcy this week, saying it would close 100 locations because of financial problems that its chief executive attributed entirely to the coronavirus.


But in many cases, the coronavirus crisis exposed deeper problems, like staggering debts run up by companies whose business models were already struggling to deal with changes in consumer behavior.

Hertz has been weighed down by debt created in a leveraged buyout more than a decade ago and added to it with the acquisition of Dollar Thrifty in 2012. As it was battling direct competitors, the ascent of Uber and Lyft further upended the rental car industry.

J. Crew and Neiman Marcus were carrying heavy debt loads from leveraged buyouts by private equity firms while struggling to deal with the changing preferences of shoppers who increasingly buy online.

Oil and gas companies like Diamond and Whiting borrowed heavily to expand when commodities prices were much higher. Those prices started to fall as production increased and plunged further still when Russia and Saudi Arabia got into a price war shortly before the economic shutdowns began.

(And then there are cases that have nothing to do with the pandemic but nonetheless take up time and energy in the courts. Borden Dairy, a Dallas company with a history that goes back to 1857, declared bankruptcy in January, a victim of declining prices, rising costs and changing tastes.)

A run of defaults looks almost inevitable. At the end of the first quarter of this year, US companies had amassed nearly $10.5 trillion in debt — by far the most since the Federal Reserve Bank of St. Louis began tracking the figure at the end of World War II.

“An explosion in corporate debt,” Altman said.

Having a lot more debt to deal with is likely to make the coming bankruptcies a bruising experience for unsecured creditors, who may include retirees with pensions or health benefits, vendors waiting to be paid, tort plaintiffs whose lawsuits are cut short and sometimes even current workers. If a company goes into bankruptcy with more secured debts than the value of its assets, the secured creditors — including vulture investors who bought up the debt for a song — can walk away with virtually everything.

The sums at play in some of these cases will be enormous. Altman expects at least 66 cases with more than $1 billion in debt this year, eclipsing 2009’s mark of 49. He also predicted 192 bankruptcies involving at least $100 million in debt, which would trail only 2009’s record of 242.

Robert Keach, a director of the American College of Bankruptcy, said many companies had so far managed to put off bankruptcy by amassing cash and conserving it as best they can: drawing down existing credit lines, furloughing workers, delaying projects and taking advantage of federal and state pandemic-relief programs.

But when those programs expire, the companies will start burning through their cash. That’s when bankruptcy filings are likely to soar and stay elevated, Keach said.

Expect “a COVID-19 cliff” in the next 30 to 60 days, he said.

Companies that received loans under the federal Paycheck Protection Program may be waiting to file, said Keach, who practices bankruptcy law with the firm of Bernstein Shur in Portland, Maine. The loans can be converted to grants if the companies meet certain requirements, and if the borrowers can put off bankruptcy until they’re sure they won’t have to pay the money back, they will have more cash when they file.

That’s an important consideration, because Chapter 11 is expensive. A bankrupt company must pay the fees of the lawyers and other professionals that help it reorganize as well as the fees of those who advise the official creditors’ committees.

The experts’ recommendations to Congress walk a fine line. They suggest allowing companies more time to come up with reorganization plans, even though Chapter 11 cases are supposed to move quickly so bankrupt companies don’t burn through their cash before they reorganize.

Generally, the longer a company stays in bankruptcy, the greater the chances of a liquidation. And that increases the likelihood that the company’s troubles will spread: Suppliers of raw materials could fold if a manufacturer languishes in bankruptcy, and smaller stores in entirely differently lines of business can suffer if a shopping mall anchor can’t stay open.

These risks are real, said Robert Gerber, who retired in 2016 as a bankruptcy judge in the Southern District of New York. One of his cases was the 2009 bankruptcy of General Motors, which moved at lightning speed to keep the automaker from going under for good.

“If GM had failed, God knows how many companies in the supply chain would have failed, and this would have snowballed terribly,” said Gerber, who is now of counsel with the Joseph Hage Aaronson firm. The cascade would have wiped out paychecks to workers throughout the supply chain, threatening other businesses and even the finances of the local governments that count on them for tax revenue.

That, Gerber said, makes it imperative that the bankruptcy system have the resources to deal with the coming rush of cases.

“Bankruptcy can’t print money for those companies,” he said, “but it can give a good number of them a chance of survival.”

2020 The New York Times Company

US department store JCPenney files for bankruptcy

NEW YORK - US department store JCPenney, which has not turned a profit since 2011, on Friday became the latest American retailer to be pushed into bankruptcy by the coronavirus pandemic.

The iconic business said it was filing for Chapter 11, a mechanism which allows a company that can no longer pay its debts to restructure.

The group, based in Plano, Texas, will close some stores across the US as a result, it said in a statement. 

It has $500 million in cash and has received financing commitments of $900 million from lenders, it added. 

The company missed a debt interest payment in April, fueling rumors of an impending bankruptcy. 

"The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country," chief executive officer Jill Soltau in a statement. 

"The American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business," she continued. 

"Until this pandemic struck, we had made significant progress rebuilding our company... While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt," Soltau said. 

Founded in 1902 in Wyoming by James Cash Penney, the chain survived the Great Depression and established itself in the second half of the 20th century as an anchor of giant suburban shopping malls, then symbols of American consumerism. 

But -- like clothing company J.Crew and department store Nieman Marcus, which have also filed for bankruptcy since the pandemic began -- it has struggled for years.

Its decline began a decade ago with the advent of online shopping and the rise of Amazon as well as trendy, cheap chains like H&M and Zara. 

In February, JCPenney had about 90,000 employees and nearly 850 stores in the United States, according to documents provided to the US Securities and Exchange Commission (SEC). 

The company plans to reduce its number of stores in stages as part of its comprehensive restructuring plan. 

It reported sales of $10.7 billion in 2019, a decrease of more than $7 billion in 10 years. 

Agence France-Presse

Gold's Gym files for bankruptcy due to COVID-19

Gold's Gym on Tuesday announced that it has filed for Chapter 11 bankruptcy protection due to the novel coronavirus pandemic, but its president and chief executive Adam Zeitsiff assured that they are "not going anywhere."

In a video message, Zeitsiff maintained that Gold's Gym "is not going out of business."


"The COVID-19 global pandemic has affected Gold's Gym deeply and in many ways," he admitted. "Our focus from the beginning of this crisis has been on the health and safety of our members, our team members, and the communities we serve."

Gold's Gym closed 30 company-owned gyms last month, in an effort to "maintain the strength and growth of the potential of the brand as well as ensure the continued viability of the company for decades to come."

"While the COVID-19 pandemic certainly impacted our company-owned gym operations, we expect the filing will have no further impact on current operations," the company said.

The company further assured that they will continue to support its system of nearly 700 gyms around the world. There are 26 Gold's Gym branches in the Philippines, all of which have been closed since the enhanced community quarantine was implemented in March.

"This pre-negotiated filing will enable us to emerge stronger and ready to grow, and it is our intent to be on the other side of Chapter 11 by August 1, if not sooner," the company said.

Gold's Gym was founded in 1965 by bodybuilder Joe Gold in Venice Beach, California.

news.abs-cbn.com

UK airline Flybe collapses as virus hits flights worldwide

LONDON — One of Britain's biggest airlines, Flybe, collapsed Thursday with all its flights grounded, the company said, as the coronavirus epidemic took a heavy toll on airlines around the world.

A statement on Flybe's website said the company had entered administration and could not arrange alternative flights for its passengers.

"All flights have been grounded and the UK business has ceased trading with immediate effect," said the airline, which avoided going bust in January only after being granted a tax holiday by the UK government.

Flybe, which employs 2,000 people, had failed to turn around its fortunes since being purchased by the Connect Airways consortium last year, initially owing to weak demand and fierce competition.

That has now been compounded by the coronavirus, with a slew of airlines cancelling flights and warning profits would take a hit from decreased demand.

The announcement came hours after British media reported that the airline could collapse following its failure to secure a £100 million state loan to help stabilize the business.

The COVID-19 virus' impact on travel "has made a bad situation much worse", sources told the BBC, while Bloomberg News reported Thursday that no agreement could be reached on a virus-related bailout.

Small British airlines have suffered recently from volatile fuel costs and a weak pound.

Flybe is the biggest operator of UK domestic flights. The no-frills airline carries around eight million passengers annually and flies from 43 airports across Europe and 28 in Britain.

Its owner, the Connect Airways consortium, is led by Virgin Atlantic and also includes investment firm Cyrus and infrastructure specialist Stobart.

Following Flybe's tax deferral earlier this year, rival companies including British Airways-parent IAG complained to the European Union that it was receiving unfair state aid.

The government has said its assistance does not breach EU rules and that help is based on the importance of the company's domestic services and regional economic reliance on them.

However, that contrasted with the fate of British holiday giant Thomas Cook, which collapsed without government assistance last September, causing the loss of 22,000 jobs worldwide and stranding 600,000 holidaymakers abroad.

Agence France-Presse 

Titanic shipyard rescued from bankruptcy

LONDON - Iconic Belfast shipyard Harland and Wolff, which built the Titanic, has been rescued from bankruptcy by InfraStrata, the British energy infrastructure company announced Tuesday.

The giant of Northern Ireland's industrial past has been purchased for £6.0 million or $7.4 million from administrators BDO, InfraStrata said in a statement.

This shipyard's main assets "comprise a multi-purpose fabrication facility, quaysides and docking facilities in the port of Belfast, ideally suited for the energy infrastructure industry," the statement said.

As well as building the doomed Titanic, which sank in 1912, Harland and Wolff built its two sister ships Olympic and Britannic, and also supplied almost 150 warships during World War II.

It has since moved away from shipbuilding and was until recently working mostly on wind energy and marine engineering projects.

Harland and Wolff, whose history dates back to 1861, sank into administration in August after its Norwegian parent, Dolphin Drilling, filed for bankruptcy having failed to find a buyer.

Harland and Wolff, whose huge yellow cranes have towered over the Belfast skyline for decades, employed more than 30,000 people in the early 20th century but had only 130 staff prior to its collapse.

"The 79 employees who did not opt for voluntary redundancy earlier in the year will be retained immediately following completion of the acquisition," InfraStrata said.

"The InfraStrata board plans to significantly increase the size of the workforce by several hundred over the next five years as it progresses the development of its infrastructure projects."

source: news.abs-cbn.com

Forever 21 files for bankruptcy

Fashion retailer Forever 21 Inc said on Sunday it has filed for Chapter 11 bankruptcy protection to restructure its business, joining a growing list of brick-and-mortar players who have taken a hit from fierce e-commerce competition.

The company said it plans to exit most of its international locations in Asia and Europe, but will continue operations in Mexico and Latin America.

The retailer said it received $275 million in financing from its existing lenders with JPMorgan Chase Bank, N.A. as agent, and $75 million in new capital from TPG Sixth Street Partners, and certain of its affiliated funds.

It lists both assets and liabilities in the range of $1 billion to $10 billion, according to the court filing in the U.S. Bankruptcy Court for the District of Delaware.

Since the start of 2017, more than 20 U.S. retailers, including Sears Holdings Corp and Toys 'R' Us, have filed for bankruptcy, succumbing to the onslaught of fierce e-commerce competition from Amazon Inc. 

source: news.abs-cbn.com

Sears, once a retail titan, files for Chapter 11 bankruptcy

Sears Holdings Corp filed for Chapter 11 bankruptcy on Monday with a plan to close 142 more stores, throwing into doubt the future of the century-old retailer that once dominated US malls but has withered in the age of internet shopping.

The Chapter 11 filing to reorganize debts of the parent of Sears, Roebuck and Co and Kmart Corp follows a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Chief Executive Officer Eddie Lampert in an attempt to turn around the company he bought in 2004.

Lampert had pledged to restore Sears to its glory days, when it owned the tallest building in the world and companies that included a radio station and Allstate insurance.

But the company has not turned a profit since 2011, and critics say Lampert let the stores deteriorate over the years, even as he bought the company's stock and lent it money. It has sold off the legendary Craftsman brand and is considering an offer from Lampert for the Kenmore appliance name. 

The company listed $6.9 billion in assets and $11.3 billion in liabilities in documents filed in the US Bankruptcy Court in the Southern District of New York.

The bankruptcy filing was sparked by a standoff between Lampert, the company's biggest shareholder and lender, and a special board committee, over a rescue plan proposed by Lampert.

Under the bankruptcy plan, Lampert's executive role will be replaced by a three-person committee, though he will remain as chairman of the board. Mohsin Meghji, a managing director of the M-III Partners corporate advisory firm, was appointed chief restructuring officer.

Shareholders generally lose their investment when a company files for bankruptcy, and the fate of Sears itself will depend on the willingness of creditors and suppliers to keep the company afloat.

The largest US toy retailer, Toys 'R' Us, tried to emerge from its 2017 bankruptcy filing but was forced to liquidate six months later after creditors lost confidence in its turnaround plan.

STORE CLOSURES, ASSET SALES

Sears said it will sell assets and begin closing 142 unprofitable stores by year-end with the aim of reorganizing around a smaller platform of around 700 of its best stores.

It is also weighing the sale of "a large portion" of its stores and said they could be bought by Lampert's hedge fund in a bankruptcy auction.

Meanwhile, Sears and Kmart stores are open for business. The company said it is continuing to pay employees' wages and benefits and is working with its vendors to ensure its shelves remain stocked.

"The company believes that a successful reorganization will save the company and the jobs of tens of thousands of store associates," Sears said in a statement.

The retailer employed about 89,000 workers in the United States as of February, compared with 246,000 people five years ago.

Sears said it has received a $300 million financing package to fund its operations during the bankruptcy proceedings and was negotiating an additional $300 million.

Sources told Reuters over the weekend that Lampert was expected to contribute towards a financing package of between $500 million and $600 million.

Shares in Illinois-based Sears closed at about 41 cents on Friday, down from over $100 in the years after hedge-fund star Lampert, once hailed as another Warren Buffett, merged it with discount store Kmart in a $11 billion deal in 2005.

Sears dates back to the late 1880s and its mail-order catalogues with merchandise from toys, medicine and gramophones to automobiles, kit houses and tombstones made it the Amazon.com Inc of its time.

Chicago's Sears Tower was the world's tallest building when it was completed in 1973, but in the following decades consumers increasingly turned to e-commerce and brick-and-mortar rivals such as Walmart Inc and Target Corp.

Lampert and his hedge fund ESL Investments Inc own just shy of 50 percent of Sears' shares and are its biggest creditor, with about $2.5 billion owed to the executive and funds he controls.

LAMPERT'S INVESTMENTS

One of the lingering questions for investors has revolved around the value of Sears' assets, which include prime real estate.

The company sold 235 of its best stores for $2.7 billion to a Lampert-created company, Seritage Growth Properties. Lampert also became Land's End Inc's biggest shareholder when the clothing manufacturer was spun out of Sears in 2014.

Those deals could be subjected to new scrutiny by Sears' creditors in bankruptcy court.

"When you go into a bankruptcy, you're living in a fish bowl and every transaction will be looked at and examined," said Corali Lopez-Castro, Managing Partner at law firm Kozyak Tropin & Throckmorton.

In an earlier attempt to avoid bankruptcy, Sears last year sold its Craftsman tool brand to power tool maker Stanley Black & Decker for $900 million. It also signed a deal to sell Kenmore appliances on Amazon.com. 

(Reporting by Tracy Rucinski in Chicago and Tom Hals in Wilmington, Delaware; Additional reporting by Rama Venkat in Bengaluru; Editing by Muralikumar Anantharaman and Louise Heavens)

source: news.abs-cbn.com

FOCUS: 'Lehman Weekend': the biggest bankruptcy in American history

WASHINGTON - It was "Lehman Weekend." The moment in September 2008 when the 150-year-old investment bank Lehman Brothers collapsed, precipitating the worst global economic crisis since the 1930s.

After failing to find buyers for the troubled financial giant, that was weighed down by risky debt holdings made up of at subprime mortgages, US authorities declined to offer a bailout and allowed the institution to fail.

Monday, September 15, 2008, at 1:45 am, Lehman Brothers filed for bankruptcy, taking the world by surprise leaving well over $600 billion in debt, as well as 25,000 employees in shock.

It was the biggest bankruptcy in American history. On Wall Street, the Dow Jones plunged 500 points, the largest drop since the attacks of September 11, 2001. Stunned traders streaming out of the building carrying boxes of their belongings became a symbol of the crisis.

Some were caught by surprise. But others, like Lawrence McDonald, a former trader and co-author of a 2009 book on the collapse -- "A Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers" -- said management had long been alerted to the excessive risks they took to increase short term profits.

The top Lehman leadership, housed on the bank's 31st floor, "drove us 162 miles (261 kilometers) an hour...right into the biggest subprime iceberg ever seen," he told AFP in 2009.

"It was 24,992 people making money and eight guys losing it," he said, lamenting that the management "bet the ranch" on toxic assets.

From 2005 to 2007, at the height of the real estate bubble, when mortgages were given to many homebuyers who could not afford them, and then packaged into securities and sold off, Lehman Brothers bought several mortgage brokerages and posted record profits.

But in mid-2007, the losses began to build. The knockout punch came nine months later, March 16, 2008, with the near bankruptcy of another investment bank, Bear Stearns.

- Between a rock and a hard place -

Bear Stearns was on the verge of bankruptcy also because of its massive bets on subprime mortgage securities, and was bought for a pittance by JPMorgan, in a sale brokered by the Federal Reserve. The deal shakes markets, which are now betting on Lehman's demise.

The Fed and Treasury tried to find a buyer, negotiating in vain with a South Korean bank, then with Bank of America and Barclays.

But while the government just a week earlier took over mortgage giants Fannie Mae and Freddie Mac -- government-sponsored private enterprises that guarantee more than $5 trillion in home loans -- in the end officials choose to abandon Lehman.

A few days later, Uncle Sam would rescue insurance giant AIG for $180 billion, before providing another $700 billion dollars in a controversial recapitalization plan to prop up banks: the Troubled Asset Relief Program (TARP) to try to shore up the teetering financial system.

Authorities found themselves between a rock and a hard place and have been widely criticized for sacrificing Lehman Brothers but saving other banks, such as Goldman Sachs.

"The thing we get the most criticism for is letting Lehman go down," said Henry Paulson, who served as Treasury secretary under then President George W. Bush and was at the helm at the start of the crisis.

"Many people say well they were able to save Bear Stearns, they were able to save AIG, why couldn't they save Lehman? We answer it and most people don't believe us," he complained to National Public Radio.

Officials concluded that Lehman was so weak, and had so little collateral, that a bailout would be simply unworkable.

Timothy Geithner, who lead the New York Fed during that time and late became Treasury secretary under President Barack Obama, said officials had very few options.

"Lehman was terribly weak even relative to the other weaker institutions in this context. The world was terrifically fragile," he told NPR.

"It was very hard to find someone strong enough in that moment of peril that was going to be capable of taking on the vast bulk of that risk."

But others, including Laurence Ball, head of the economics department at Johns Hopkins University, said in a 2016 report on Lehman that the reasons given do not add up and it was more likely there was political pressure on the Fed to allow the bank to fail.

"Another factor is that both Paulson and Fed officials, although worried about the effects of a Lehman failure, did not fully anticipate the damage that it would cause," Ball argued.

source: news.abs-cbn.com

Toys 'R' Us to shut or sell all US stores: reports

NEW YORK - Toys 'R' US plans to sell or close all of its US stores, potentially hitting 33,000 jobs, US media reported Wednesday.

The debt-plagued retailer, which filed for bankruptcy protection in September, told employees that it planned to file liquidation papers ahead of a Thursday court hearing, The Wall Street Journal and The Washington Post reported.

"We're putting a for sale sign on everything," CEO David Brandon said on a conference call with staff, according to the Journal.

Company officials did not immediately reply for a request for comment.

Started in 1948 amid the postwar US economic boom, Toys 'R' US has 881 stores in US territories and nearly 65,000 employees globally, according to the company's most recent press release last month.

The New Jersey-based company was saddled with debt following a leveraged buyout in 2005 by a consortium that included the KKR Group and Bain Capital. 

Much like other retailers, Toys 'R' Us has also been bruised by competition from Amazon and other online retailers.

A weak holiday shopping season weighed on the company's efforts to reorganize, analysts said.

Neil Saunders, managing director of GlobalData Retail, blamed the company's woes on poor leadership.

"As the competitive dynamics of the toy market intensified, management failed to respond and evolve. As such, the brand lost relevance, customers and ultimately sales," Saunders said in a note Wednesday.

"The main tragedy of liquidation will be the extensive loss of jobs. In our view, those on the shop-floor have been badly let down by management and those doing financial deals."

The company is exploring strategies for keeping the brand alive, including the sale of 200 US stores that could be packaged with its Canadian business, CNBC and the Journal reported. 

Brandon outlined this and other possibilities at the New Jersey meeting, CNBC reported. Brandon also told workers they have 60 more days of employment at the company.

In February, the company's British business announced plans for an "orderly wind-down" of the company's store portfolio. Toys 'R' Us employs 3,200 people at 100 stores in Britain.

source: news.abs-cbn.com

Bankrupt US retailers begin to catch a break

An unexpected helping hand from creditors, landlords and vendors is allowing more US retailers to stay in business following bankruptcy with most of their stores and employees in the fold.

The new approach marks a turning point for the beleaguered sector, which has seen at least 19 brick-and-mortar retail chains shut down the bulk of their operations since 2014.

Until this year, most bankrupt retailers, including American Apparel, Sports Authority and The Limited, were dismantled during their bankruptcy process. Investors and companies acquired their intellectual property and other assets, but refused to take on their business as a going concern because they saw little value in assuming costly store leases. Instead, they often opted to revamp some of the battered brands online.

 However, several creditors, landlords and vendors now see more value left in some retailers, and are seizing on an opportunity to minimize their own losses in the retail rout.

This could spell a slowdown in the decline in brick-and-mortar retail jobs, which fell by more than 100,000 this year, as more than 6,000 stores shuttered under increasing pressure from competition among traditional retailers as well as e-commerce firms such as Amazon.com Inc.

"We're seeing a set of situations come together in which the constituencies have more interest in the retailer surviving than not," said Holly Etlin, a managing director at AlixPartners LLP, a consulting firm that worked on the bankruptcy of Gymboree.

Jeans company True Religion Apparel Inc and perfume wholesaler and retailer Perfumania Holdings Inc are set to emerge from bankruptcy with at least some of their stores in operation, according to interviews with bankruptcy attorneys and a Reuters review of financial information of more than 15 retailers shared with bankruptcy courts.

These chains will follow a path blazed by Payless ShoeSource, which in August emerged from bankruptcy while keeping more than 3,400 out of its 4,200 stores worldwide, and preserving 19,000 of its 22,000 employees.

Last month, teen clothing shop rue21 Inc and children's apparel chain Gymboree Corp came out of bankruptcy in similar fashion, preserving much of their store footprints and employee headcount.

Most of these retailers were owned by private equity firms, which saddled them with debt in a risky bid to juice returns. But in bankruptcy talks, the chains are arguing successfully that they can generate enough cash to withstand the sector's woes if their debt mountains are slashed and payment obligations eased.

Creditors, landlords and vendors are more receptive to this approach, because their own financial projections show that liquidations would result in a limited recovery of what they are owed, according to interviews with debt investors and bankruptcy court filings.

Had rue21 liquidated, for example, many loan holders would have seen almost the entire value of their investment wiped out by the end of its five-month bankruptcy process, according to bankruptcy court filings and people familiar with the matter.

This new reality offers grounds for optimism for Toys "R" Us Inc, which last month became the largest retail bankruptcy in 13 years. The biggest US specialty toy retailer plans to emerge from Chapter 11 bankruptcy with many of its about 1,600 stores, employing 64,000 people, remaining open.

Toys "R" Us plans to argue that its annual cash flow of roughly $800 million would make it viable if its $5.2 billion in debt is significantly reduced, according to court papers and people familiar with the matter.

CREDITOR SUPPORT KEY

If a retailer's brand is strong enough and its operations can be improved, creditors see greater value in forgiving some of their debt in exchange for equity stakes, rather than recouping pennies on the dollar in a liquidation.

David Tawil, president at distressed-focused hedge fund Maglan Capital, said it makes sense for creditors to extend new money, often at high interest rates, in exchange for a fully restructured balance sheet and a better business plan.

"Otherwise, there may be a very, very steep haircut (in the value of the debt) to be taken upon a liquidation," Tawil said.

For example, a group of Gymboree investors, including distressed debt-oriented hedge fund Brigade Capital Management LP and buyout firm Searchlight Capital Partners LP, agreed to keep it in business by writing off most of their term loan and investing another $95 million, in exchange for equity ownership, court filings showed.

Gymboree and Brigade declined to comment.

"There is always risk taking (the company) through bankruptcy, but we believed that it was a better path with more upside versus liquidating, where the recovery is pretty minimal and you forego any upside opportunities," said Searchlight partner Eric Sondag. He added that Gymboree's strong brand was a key consideration in Searchlight deciding to back it.

Many landlords that rent out store space are also willing to provide relief rather than seeking another tenant amid a glut of unused mall space. Rue21's landlords granted rent reductions of about 20 percent on its remaining 758 stores, according to a person who asked not be identified because the terms of the lease deals are not public.

VENDORS WAIT LONGER TO BE PAID

Supplier support is also critical. Vendors can offer longer payment terms, helping retailers free up working capital to operate. They are often promised full repayment on their claims in return.

Hong Kong-based Li & Fung Ltd, a supply chain manager that helps retailers work with apparel and accessories makers, gave Gymboree a 75-day repayment period in exchange for full payment on its claims in the bankruptcy, people familiar with the matter said.

Before Gymboree filed for bankruptcy, the retailer also extended Li & Fung a $20 million secured claim, helping keep merchandise flowing to its stores, the sources added. Li & Fung declined to comment.

Toys "R" Us has also fought to keep suppliers onboard, accelerating its plan to file for bankruptcy to be able to pay them. It has been making progress in winning back vendors who curbed shipments over payment fears.

"We believe (in Toys 'R' Us)... they are a good channel and important to the toy industry," said Michael Araten, chief executive of K'Nex Limited Partnership Group, a toymaker that is now negotiating new shipment terms.

source: news.abs-cbn.com

Toys 'R' Us bankruptcy catches US toymakers flatfooted

This summer, toy supplier Product Launchers delivered 100,000 specially ordered DC Comics fidget spinners to Toys 'R' Us, unaware that the biggest US toy store chain was in financial trouble.

Now Product Launchers, which supplies other novelty items like squishies from 5 toymakers to Toy 'R' Us, expects it will not be paid for the $500,000 fidget spinner order and other items following the chain's Chapter 11 bankruptcy filing on Sept. 19, Product Launchers Chief Executive Linda Parry Murphy told Reuters.

"These toymakers were very reliant on Toys 'R' Us. It's their primary account, or the account that they were leaning on to make inroads in the toy industry, looking at the long term down the road," Parry Murphy said.

"But we've made a decision not to sell to Toys moving forward."

Meanwhile Barbie maker Mattel Inc, toy and board game company Hasbro Inc and other large vendors like Lego could get full payment after Toys 'R' Us asked a bankruptcy judge to approve $325 million of special financing to pay top suppliers owed before the Chapter 11 filing.

The unequal vendor treatment is not unusual in a Chapter 11 bankruptcy, but it shows the tough decisions vendors face when retailers file for bankruptcy, as dozens have in recent years, succumbing to competition on price and convenience from Amazon.com Inc.

The beneficiaries of the financing package are still unknown, but smaller vendors like Product Launchers do not expect to make the list. Its claim tops $1 million but the amount is well below the $2.5 million to $135 million listed as Toys 'R' Us' 50 largest claims.

Toy 'R' Us declined to comment on specifics about its relationship with Product Launchers or its other vendors.

Toys 'R' Us spokeswoman Nicole Hayes said in an email: "So far, we have seen great support from our vendors and look forward to continuing working with them for many years to come."

She said the company would rely on $2 billion in new financing to fund operations.

TOUGH CHOICES

Hundreds of vendors have faced similar concerns in their dealings with bankrupt retailers such as Sports Authority and hhgregg, which ended up going out of business. Toys 'R' Us is an extraordinary case, retail consultants said, because of the large number of toy vendors it relies on to fill its big-box stores.

Typically in bankruptcy proceedings, even small vendors like Product Launchers can expect to receive payment for orders made after a bankruptcy filing, but not for past-due bills. As a result, Product Launchers is ending ties with the toy chain.

"We've taken down all connections to them," said Parry Murphy. "I would rather focus on retailers that have strong financials and that we have a good comfort level about doing long-term business with."

At this point, she thinks Toys 'R' Us is too far behind the curve to catch up with deep-pocketed competitors like Amazon and Wal-Mart Stores Inc.

HOT ITEMS

The loss of Product Launchers and other vendors, coming on the verge of the holiday season when Toys 'R' Us generates about 40 percent of annual sales, shows one of the risks facing the big toy retailer during bankruptcy.

If consumers discover the chain is not stocking a hot seasonal item, they will not visit its stores or website, Toys 'R' Us said in court filings.

Toys 'R' Us relies on hundreds of small vendors to give its stores the appearance of plenty.

"Your store won't be attractive with just Mattel and Lego," said Israel Shaked of the Michel-Shaked Group consultancy.

Retail specialists agreed that the 2017 holiday season could determine the fate of many brick-and-mortar retailers that have struggled to remain relevant in a growing era of e-commerce.

"This holiday season will be a true litmus test for the in-store experience," said bankruptcy lawyer Corali Lopez-Castro. "The products have to be exciting and worthy of visiting the store or online. But really you want people in the store. That's where they can pick up the widget, the Lego, and the Barbie."

Toys 'R' Us' success in retaining vendors likely will hinge on confidence in its turnaround plan, dubbed "Project Sunrise," which envisions improved and integrated online and in-store shopping experiences.

Michael Araten, the chief executive of creative construction company K'NEX, is optimistic.

"The potential upside is massive," Araten said, adding that Toys 'R' Us would emerge from bankruptcy a "nimbler and stronger company that delights kids for generations."

source: news.abs-cbn.com

Toys 'R' Us files for bankruptcy ahead of holiday season

Toys 'R' Us Inc, the largest U.S. toy store chain, filed for bankruptcy protection on Monday, the latest sign of turmoil in the retail industry caught in a viselike grip of online shopping and discount chains.

Toys 'R' Us said it received a commitment for over $3 billion in debtor-in-possession financing from lenders including a JPMorgan-led bank syndicate and certain of the company's existing lenders.


The new financing, subject to court approval, is expected to immediately improve the company's financial health and support its ongoing operations during the court-supervised process, Toys 'R' Us said.

The company's Canadian unit intends to seek protection in parallel proceedings under the Companies' Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice, Toys 'R' Us said in a statement.

The filing is among the largest ever by a specialty retailer and casts doubt over the future of the company's nearly 1,600 stores and 64,000 employees.

It comes just as Toys 'R' Us is gearing up for the holiday shopping season, which accounts for the bulk of its sales.

source: news.abs-cbn.com
 

Puerto Rico files for bankruptcy

Puerto Rico announced a historic restructuring of its public debt on Wednesday, touching off what may be the biggest bankruptcy ever in the $3.8 trillion U.S. municipal bond market.

While it was not immediately clear just how much of Puerto Rico's $70 billion of debt would be included in the bankruptcy filing, the case is sure to dwarf Detroit's insolvency in 2013.

The move comes a day after several major creditors sued Puerto Rico over defaults its bonds.

Bankruptcy may not immediately change the day-to-day lives of Puerto Rico's people, 45 percent of whom live in poverty, but it may lead to future cuts in pensions and worker benefits, and possibly a reduction in health and education services.

The island's economy has been in recession for nearly 10 years, with an unemployment rate of about 11.0 percent, and the population has fallen by about 10 percent in the past decade.

The bankruptcy process will also give Puerto Rico the legal ability to impose drastic discounts on creditor recoveries, but could also spook investors and prolong the island's lack of access to debt markets.

BANKRUPTCY UNDER PROMESA LAW

The debt restructuring petition was filed by Puerto Rico's financial oversight board in the U.S. District Court in Puerto Rico on Wednesday, and was made under Title III of last year's U.S. Congressional rescue law known as PROMESA.

The Title III provision allows for a court debt restructuring process akin to U.S. bankruptcy protection. Puerto Rico is barred from a traditional municipal bankruptcy protection under Chapter 9 of the U.S. code.

The filing includes only Puerto Rico's central government, which owes some $18 billion in debt backed by the island's constitution.

On paper, it does not include $17 billion of sales tax-backed debt, known as COFINA debt, or debt from other agencies.

But those debts are likely to be pulled into the bankruptcy, or included in separate bankruptcy proceedings in coming days, Elias Sanchez, an adviser to Governor Ricardo Rossello, told Reuters on Wednesday.

Puerto Rico's massive pension debts will also likely get restructured in the bankruptcy.

"Title III was especially compelled by the commonwealth’s need to restructure $49 billion of pension liabilities," the oversight board said in Wednesday's filing.

BIGGER BANKRUPTCY THAN DETROIT

The previous largest U.S. public bankruptcy, Detroit's in 2013, covered some $18 billion in debt. The city was able to reach an agreed debt restructuring with stakeholders, in part by soliciting huge contributions from philanthropic foundations so it did not need to sell the city's art collection.

But "unlike Detroit, there isn’t billions of unencumbered artwork to fund a restructuring" in Puerto Rico, said David Tawil, whose fund, Maglan Capital, held Puerto Rico general obligation debt but has since sold it.

The legal proceeding does not mean negotiations toward a compromise must stop, Governor Rossello said in a statement on Wednesday.

"It is my hope that the Government’s Title III proceedings will accelerate the negotiation process," the governor said in the statement.

Rossello's fiscal plan for the island, approved by the oversight board in March, forecasts Puerto Rico having only $800 million a year to pay debt, less than a quarter of what it owes. The low figure alienated creditors and negotiations toward an out-of-court restructuring foundered.

Andrew Rosenberg, a lawyer for the general obligation bondholders, criticized the Title III filing, saying in a statement a consensual deal could have been reached.

"Just as a deal was within reach [on Tuesday], we understand that the oversight board intervened to block it," Rosenberg said in a statement. "For months, the oversight board has made every effort to sabotage consensual negotiations."

Francisco Cimadevilla, a spokesman for the board, denied the allegation, saying in an interview, "I can understand that might be a narrative on the other side, but it's just not the case."

Conversely, Susheel Kirpalani, a lawyer for COFINA bondholders, called bankruptcy "sound public policy," saying in a statement it "enables Puerto Rico to freeze numerous lawsuits" and "maintain essential services."

Analysts and experts agreed the case is likely to take time.

"It will be an orderly process that should be better for creditors in the aggregate than a chaotic and uncertain period involving proliferating lawsuits," said Moody's Investor Services analyst Ted Hampton.

Some expect creditors to challenge the filing, arguing the board did not meet requirements under PROMESA to conduct good faith negotiations out of court.

"We would agree there is a case to be made here," said Keefe Bruyette & Woods analyst Chas Tyson, who follows Puerto Rico.

source: news.abs-cbn.com

Gawker Media founder files for personal bankruptcy

Gawker Media Chief Executive Nick Denton filed for personal bankruptcy protection on Monday, according to court documents that named his largest creditor as Hulk Hogan, a former professional wrestler who won a $140 million court judgment against the website over a sex tape.

Denton listed assets of $10 million to $50 million and liabilities of $100 million to $500 million in his Chapter 11 bankruptcy petition, filed in U.S. Bankruptcy Court for the Southern District of New York.

Gawker Media filed for bankruptcy in June after Hogan won the judgment in a Florida lawsuit. The wrestler had accused the site of violating his privacy by posting a sex tape featuring Hogan having sex with the wife of his then-best friend, the radio shock jock Bubba the Love Sponge Clem.

Silicon Valley billionaire Peter Thiel, an early backer and board member of Facebook, helped fund Hogan's lawsuit against Gawker and Denton. Thiel's involvement, which stemmed from his ire over Gawker's writings about him and his friends in Silicon Valley, raised alarm bells in U.S. media circles over the prospect of wealthy individuals using the courts to muzzle the press.

Reuters reported earlier that Denton would file for bankruptcy as soon as Monday.

source: www.abs-cbnnews.com

How to protect your lifestyle with the right insurance

(Editor's note: Life is full of uncertainties. While you can never really predict life’s twists and turns, you can at least prepare for them by thoughtful planning. For the month of September, we are running a series of articles on various protection basics to help you address your own need for greater insurance planning.)

MANILA - Life is full of surprises--some good, some unpleasant. Seemingly ordinary events can sometimes cause upheavals that can alter the course of our lives, if we are not prepared for these.

Just think of everyday events. One morning, you are driving your car on a quiet road, and as you make a turn, another vehicle hits you from out of nowhere. Your car is a total wreck, and you’ve broken your right arm. The driver of the other vehicle is hurt as well, and you blame each other for the accident. In the next few days, you are unable to report for work, where you are paid on a per day basis. This means you go without any income for the next two weeks. You use whatever you have left in your savings income, which isn’t much, to pay for treatment of your broken arm. Unfortunately, you don’t have enough left over to pay for therapy that the doctor says you need over the next six months.

Meanwhile, your wrecked car remains in your garage, a heap of junk that you cannot use since you do not have funds to pay for repairs.

Now think of how different things would turn out if you just had a form of protection for the events above. If you had disability insurance, you would have had income during those days you were unable to work. Medical insurance would have covered the treatment for your broken arm. Car insurance would have paid for the work to get your car back on the road.

Given the uncertainties of life, there is no question that you should invest in some form of insurance to protect your lifestyle. These products will help you maintain your lifestyle and financial wellbeing if anything serious should happen to you.

Here’s a run-down of what’s out in the market to cover your needs. Note that different companies will offer different versions and different names for each of these products to suit different customer needs:

Life cover – This will provide your family a fixed amount in the event of your demise.

Critical Illness- This can help provide financial security for you and your family if you are diagnosed with serious medical conditions.

Disability –This provides financial assistance if you should be disabled temporarily or permanently.

Auto – This covers losses resulting from accidents or the total loss of a car.

Fire – This covers loss or damage caused by fire on your property.

Mortgage redemption – This insurance ensures that your loan with a bank or financial institution is paid for if you should pass away or become disabled

Redundancy or Bankruptcy – This will cover your living expenses if you are made redundant or declared bankrupt.

Credit card insurance – This covers your credit card bill payments should you pass away.

Fraud insurance – This protects you against acts of fraud using your credit card

Here are some tips to guide you in getting the right insurance to protect your lifestyle.

· Think of what kind of protection you need. Examine your lifestyle to find out where you would need protection. Create scenarios in your mind. If you are the sole breadwinner of your family, you may wish to consider covering various areas of your life. Also be mindful that there are some forms of insurance that you may not need to pay for. If you are renting a house, for instance, then fire insurance is something that your landlord should pay for, not you.

· Make sure you get the right policy for your needs. There is a big assortment of plans available in the market, and it can get quite confusing. Look at what exactly the plan offers vis-à-vis your needs before making a purchase. Learn terminologies and don’t hesitate to ask questions to know if the policy you are looking at is suitable for your purposes.

· Purchase enough protection to cover your needs. It’s not enough to have protection. What matters is you have enough of it to cover your needs. A P50,000 fire insurance cover, for instance, won’t let you rebuild your house. Make it a habit to check regularly if you have enough protection, since your change needs periodically with the changes that happen in your life.

· Ensure that your plans are up to date. Some insurance plans cover only a specific period, so be mindful of when these would expire, so that you can make payments accordingly.

· Check out the insurance provider. Make sure you buy your policy from a financially stable and reputable insurance provider who will be there to help you in your time of need.

Ticking all these boxes will give you peace of mind and a secure financial future.

source: www.abs-cbnnews.com

Greece accepts reforms needed to get bailout

ATHENS - The Greek parliament passed sweeping austerity measures demanded by lenders to open talks on a new multibillion-euro bailout package to keep Greece in the euro, but dozens of hardliners in the ruling Syriza party deserted Prime Minister Alexis Tsipras.

The package was approved with 229 votes in the 300-seat chamber. There were 64 votes against it and six abstentions. But Tsipras required the support of pro-European opposition parties to push the measure through, leaving a question over the future of his government.

Tsipras said there was no alternative to the package, which he acknowledged would cause hardship, but he stood by the decision. "I am the last person to shirk this responsibility," he told parliament.

Government spokesman Gabriel Sakellaridis acknowledged the vote laid bare a split in Syriza, but he said the government's priority was to secure the bailout, suggesting that there would be no immediate move towards new elections.

In exchange for funding worth up to 86 billion euros ($94 billion), Greece has accepted reforms including significant pension adjustments, increases to value added taxes, an overhaul of its collective bargaining system, measures to liberalize its economy and tight limits on public spending.

It has also agreed to sequester 50 billion euros of public assets in a special privatization fund to act as collateral on the deal.

The measures were branded "social genocide" by the firebrand speaker of parliament Zoe Constantopoulou and there were violent clashes between protestors and police outside parliament as the debate went on before the vote.

Among the 38 Syriza rebels was former Finance Minister Yanis Varoufakis, who was sacked by Tsipras last week and who denounced the bailout deal as "a new Versailles Treaty" - the agreement that demanded unaffordable reparations from Germany after its defeat in World War One.

Energy Minister Panagiotis Lafazanis and Deputy Labor Minister Dimitris Stratoulis also voted against the package.

Amid speculation that both ministers could lose their jobs in a reshuffle, possibly as early as Thursday, Lafazanis said he remained loyal to the government but was ready to offer his resignation, joining Deputy Finance Minister Nadia Valavani, who stepped down earlier on Wednesday.

"We support Syriza in government and we support the Prime Minister. We don't support the bailout," he said after the vote.
Elected in January on an anti-austerity platform, Tsipras made an about-turn following grueling all-night negotiations in Brussels on Monday, giving in to lenders' demands for immediate reforms to prevent a chaotic exit from the single currency.

Speaking in parliament before the vote, Tsipras made clear he was supporting the package against his will but there was no alternative if Greece was to avoid financial collapse.

"I acknowledge the fiscal measures are harsh, that they won't benefit the Greek economy, but I'm forced to accept them," he said as he made a final appeal for support.

'A NEW VERSAILLES TREATY'

With Greek parliamentary approval secured, the way has been cleared for other national parliaments to approve the start of bailout talks and for the release of funding to allow Greek banks to re-open, more than two weeks after capital controls were imposed to prevent them from collapsing.

Eurozone finance ministers are due to hold a conference call on Thursday at 10 a.m. (0800 GMT) to discuss the vote.

With Greece facing an urgent deadline on July 20, when a 3.5 billion euro payment to the European Central Bank is due, EU officials raced to agree a bridge financing accord that would enable Athens to avoid defaulting on the loan.

Despite strong objections from Britain and the Czech Republic - EU countries that do not use the euro - a 7 billion euro loan is expected to be extended to Greece from the European Financial Stability Mechanism (EFSM), an EU-wide fund not intended for euro zone funding needs.

Given the hurdles facing the agreement, doubts have surfaced about how long it could hold together, with one senior European Union official saying it had a "20-, maybe 30-percent chance of success".

After its deepest crisis since World War Two, the Greek economy has lost more than a quarter of its output and more than one in four of its workforce is unemployed. It is unclear how it can sustain the burden of one of the most far-reaching austerity programs ever imposed on a euro zone country.

A study by the International Monetary Fund issued on Tuesday called for much more debt relief than Greece's euro zone creditors, particularly Germany, have been prepared to accept so far.

Berlin, which along with the other creditors knew about the IMF study before agreeing to new bailout talks, may wince at providing huge debt relief to a country it scarcely trusts to honor its promises.

But Germany insists on having the IMF in the negotiations to help keep Greece in line. It may countenance extending repayment periods for Greek debt but has said it will not accept a writedown, with the finance ministry insisting it could not accept "a debt haircut via the backdoor".

'EUROPE'S BANKRUPT CHILD'

The European Commission published its own assessment of Greece's debt burden on Wednesday that also offered the prospect of debt relief. While ruling out any write-offs, the Commission said debt reprofiling was possible, as long as Greece implemented the reforms to which it has agreed.

Washington has stepped up pressure for a deal between the euro zone and NATO member Greece. U.S. Treasury Secretary Jack Lew is making a short-notice trip to Frankfurt, Berlin and Paris this week to press for a quick agreement.

Although the bailout package is much tougher than the Greek people could have imagined when they resoundingly rejected a previous offer from the creditors in a referendum on July 5, most want to keep the euro.

With banks shut and the threat of a calamitous exit from the currency bloc hovering over the country if it cannot conclude a deal, many Greeks see the package as the lesser of two evils.

"We are Europe's bankrupt child and as a child, Europe has been supporting us for five years and told us what we needed to do to get out of this situation," said Yannis Theodosis, a 35-year-old civil engineer. "We did nothing and now we are paying the consequences."

Civil servants held a strike on Wednesday, as did pharmacists, whose industry would be opened up under the reform package, in demonstrations that passed peacefully until a small group threw petrol bombs at police, who responded with tear gas and flash bombs.

Calm later returned but nearby streets were empty and garbage bins were still burning. About 30 people were detained, according to a police source.

source: www.abs-cbnnews.com