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| Businesses Face a New Coronavirus Threat: Shrinking Access to Credit | Businesses Face a New Coronavirus Threat: Shrinking Access to Credit |
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| Jeffrey Albrecht, who owns three Holiday Inn hotels in southern Ohio, watched as $200,000 disappeared from his books in just three days as people began canceling bookings. | Jeffrey Albrecht, who owns three Holiday Inn hotels in southern Ohio, watched as $200,000 disappeared from his books in just three days as people began canceling bookings. |
| The banker handling his mortgages on the properties called. He wanted to know: How much more money could Mr. Albrecht lose before he would miss a loan payment? Mr. Albrecht assured him he could last at least four months. | The banker handling his mortgages on the properties called. He wanted to know: How much more money could Mr. Albrecht lose before he would miss a loan payment? Mr. Albrecht assured him he could last at least four months. |
| Others might be less fortunate. “If this goes on for very long, there will be much bloodletting in America’s small business community,” Mr. Albrecht said. | Others might be less fortunate. “If this goes on for very long, there will be much bloodletting in America’s small business community,” Mr. Albrecht said. |
| Companies of all sizes, from local businesses to blue-chip giants, have taken a big hit from the coronavirus pandemic which will gut companies’ profits and affect not only their ability to keep operations afloat, but also their ability to borrow money. | Companies of all sizes, from local businesses to blue-chip giants, have taken a big hit from the coronavirus pandemic which will gut companies’ profits and affect not only their ability to keep operations afloat, but also their ability to borrow money. |
| If companies are unable to tap credit to pay their rent, make payroll or finance other activities, it could force them to slash costs, lay off workers, pause investments and even declare bankruptcy. That, in turn, could worsen the recession that’s now widely expected and affect the financial markets — already stressed from stock-market plunges — where investors buy and sell the debt issued by companies, making it even harder for companies to borrow. | If companies are unable to tap credit to pay their rent, make payroll or finance other activities, it could force them to slash costs, lay off workers, pause investments and even declare bankruptcy. That, in turn, could worsen the recession that’s now widely expected and affect the financial markets — already stressed from stock-market plunges — where investors buy and sell the debt issued by companies, making it even harder for companies to borrow. |
| “The economy is coming to a half of a dead stop,” said Michael Greenberger, a professor at the University of Maryland Francis King Carey School of Law. Businesses are having trouble opening or getting customers to engage normally, said Mr. Greenberger, whose research focuses on financial stability. “All of these businesses are going to at some time have to re-up their loans, renew their loans, roll them over. With the decline in revenues the ability to borrow money is going to be very problematic.” | “The economy is coming to a half of a dead stop,” said Michael Greenberger, a professor at the University of Maryland Francis King Carey School of Law. Businesses are having trouble opening or getting customers to engage normally, said Mr. Greenberger, whose research focuses on financial stability. “All of these businesses are going to at some time have to re-up their loans, renew their loans, roll them over. With the decline in revenues the ability to borrow money is going to be very problematic.” |
| On Sunday, the Federal Reserve took the drastic step of slashing interest rates to nearly zero and enacted measures to keep credit pumping through the economy and prevent a wave of business defaults and closings. And in a letter to President Trump and congressional leaders on Monday, the United States Chamber of Commerce asked for sweeping changes to laws governing the Fed so that businesses with more than 500 employees could borrow directly from the Fed’s discount window, a lending facility that is open only to banks. | On Sunday, the Federal Reserve took the drastic step of slashing interest rates to nearly zero and enacted measures to keep credit pumping through the economy and prevent a wave of business defaults and closings. And in a letter to President Trump and congressional leaders on Monday, the United States Chamber of Commerce asked for sweeping changes to laws governing the Fed so that businesses with more than 500 employees could borrow directly from the Fed’s discount window, a lending facility that is open only to banks. |
| Such measures could ease a potential credit crunch for companies, which rely heavily on borrowing to function. Larger companies often issue bonds to investors or tap credit from banks to fund operations, refinance existing debt, build plants and even buy other companies. When the bonds are sold into the financial markets, credit rating agencies give them a letter grade, which signals their quality. Grades with As are the best. Bonds with B or C grades indicate a higher probability that investors will not recover their value, because the companies that issued them might stop making payments — but they provide better returns. | Such measures could ease a potential credit crunch for companies, which rely heavily on borrowing to function. Larger companies often issue bonds to investors or tap credit from banks to fund operations, refinance existing debt, build plants and even buy other companies. When the bonds are sold into the financial markets, credit rating agencies give them a letter grade, which signals their quality. Grades with As are the best. Bonds with B or C grades indicate a higher probability that investors will not recover their value, because the companies that issued them might stop making payments — but they provide better returns. |
| Interest rates have been so low in the past decade that even the shakiest companies have found buyers for their debt because investors were looking for higher returns. From 2009 until last year, corporate borrowing surged 60 percent, to $9.3 trillion, for companies in the United States, according to the credit rating agency S&P Global Ratings. As of May, nearly $3.8 trillion was in corporate bonds rated BBB, at the low end of what qualifies as “investment grade.” BBB-caliber bonds made up 17 percent of the global corporate debt market in 2001, but now constitute more than half, according to BlackRock. | Interest rates have been so low in the past decade that even the shakiest companies have found buyers for their debt because investors were looking for higher returns. From 2009 until last year, corporate borrowing surged 60 percent, to $9.3 trillion, for companies in the United States, according to the credit rating agency S&P Global Ratings. As of May, nearly $3.8 trillion was in corporate bonds rated BBB, at the low end of what qualifies as “investment grade.” BBB-caliber bonds made up 17 percent of the global corporate debt market in 2001, but now constitute more than half, according to BlackRock. |
| But the easy money for companies came with a downside. The dependence on debt created what has been described as an “unexploded bomb” — a precariously balanced powder keg that could be set off by the coronavirus outbreak. | But the easy money for companies came with a downside. The dependence on debt created what has been described as an “unexploded bomb” — a precariously balanced powder keg that could be set off by the coronavirus outbreak. |
| Nervous companies have begun drawing on lines of credit from banks, trying to create a buffer against the oncoming dry spell. Industries that rely on so-called consumer discretionary spending, such as travel, airlines and retail, as well as companies with international supply chains such as autos and electronic goods makers, are more likely to be squeezed by the slowdown in activity. | Nervous companies have begun drawing on lines of credit from banks, trying to create a buffer against the oncoming dry spell. Industries that rely on so-called consumer discretionary spending, such as travel, airlines and retail, as well as companies with international supply chains such as autos and electronic goods makers, are more likely to be squeezed by the slowdown in activity. |
| Hilton said earlier this month that it was drawing down a $1.75 billion revolving credit facility as a precautionary measure. Air France-KLM said on Friday that it tapped a similar $1.2 billion loan, giving it more than $6.1 billion of total buffer. Other companies vulnerable to plummeting tourism, such as the Walt Disney Co. and SeaWorld Parks & Entertainment, took similar steps. | Hilton said earlier this month that it was drawing down a $1.75 billion revolving credit facility as a precautionary measure. Air France-KLM said on Friday that it tapped a similar $1.2 billion loan, giving it more than $6.1 billion of total buffer. Other companies vulnerable to plummeting tourism, such as the Walt Disney Co. and SeaWorld Parks & Entertainment, took similar steps. |
| Oil and gas companies, already smarting from Saudi Arabia’s oil price cut earlier this month, are now grappling with lower demand as people and businesses scale back. Having borrowed heavily from regional banks to finance fracking and drilling, dozens of these companies now face possible bankruptcy. | Oil and gas companies, already smarting from Saudi Arabia’s oil price cut earlier this month, are now grappling with lower demand as people and businesses scale back. Having borrowed heavily from regional banks to finance fracking and drilling, dozens of these companies now face possible bankruptcy. |
| The intensifying demand for cash from companies — what Morgan Stanley analysts said last week had become “a full-blown liquidity scramble” — could strain the entire global financial system and also make it difficult for banks to manage their reserves. | The intensifying demand for cash from companies — what Morgan Stanley analysts said last week had become “a full-blown liquidity scramble” — could strain the entire global financial system and also make it difficult for banks to manage their reserves. |
| Updated June 24, 2020 | |
| Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. | |
| 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. | 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. |
| 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. | 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. |
| 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. | 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. |
| 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. | 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. |
| 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. | 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. |
| 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. | 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. |
| The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. | The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. |
| 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. | 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. |
| 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.) | 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.) |
| 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. | 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. |
| Companies are also putting their merger-and-acquisition plans on hold — in the first quarter, the number of deals announced in the United States fell by 10 percent, to 2,103, according to Refinitiv data. Deals often require billions of dollars in financing, and companies that can postpone such plans are doing so, including Xerox, which said it put its efforts to acquire HP on hold to focus on the pandemic. | Companies are also putting their merger-and-acquisition plans on hold — in the first quarter, the number of deals announced in the United States fell by 10 percent, to 2,103, according to Refinitiv data. Deals often require billions of dollars in financing, and companies that can postpone such plans are doing so, including Xerox, which said it put its efforts to acquire HP on hold to focus on the pandemic. |
| “Everyone is just trying to get by day to day at the moment,” said Krista Schwarz, an assistant professor of finance at the University of Pennsylvania’s Wharton business school. “Right now is not the time to grow the company — it’s the time to stay solvent.” | “Everyone is just trying to get by day to day at the moment,” said Krista Schwarz, an assistant professor of finance at the University of Pennsylvania’s Wharton business school. “Right now is not the time to grow the company — it’s the time to stay solvent.” |
| Investors who buy company bonds are asking for higher interest rates as compensation for the additional risk, which could put more stress on companies with already strained finances. For instance, companies are struggling to issue commercial paper — a popular form of short-term promissory note typically used to cover payroll, rent and other immediate payments — because the few skittish investors who aren’t steering entirely clear are demanding the highest premium in more than a decade. | Investors who buy company bonds are asking for higher interest rates as compensation for the additional risk, which could put more stress on companies with already strained finances. For instance, companies are struggling to issue commercial paper — a popular form of short-term promissory note typically used to cover payroll, rent and other immediate payments — because the few skittish investors who aren’t steering entirely clear are demanding the highest premium in more than a decade. |
| What’s more, the debt that is already circulating in the financial markets, including corporate bonds and packages of corporate loans, is looking less safe for investors to hold. Some big money managers like pension funds are obligated to keep risky products off their books but many are big buyers of company bonds, which in better times were considered safe and prudent investments. But with the changing environment, the credit ratings on such bonds are going down. | What’s more, the debt that is already circulating in the financial markets, including corporate bonds and packages of corporate loans, is looking less safe for investors to hold. Some big money managers like pension funds are obligated to keep risky products off their books but many are big buyers of company bonds, which in better times were considered safe and prudent investments. But with the changing environment, the credit ratings on such bonds are going down. |
| On Monday, S&P Global Ratings downgraded Exxon Mobil, the biggest American oil company, to ‘AA’ from ‘AA+’ citing lower oil and natural gas prices, weak demand for chemicals and low refining margins. A downgrade could make it harder for Exxon to borrow. | On Monday, S&P Global Ratings downgraded Exxon Mobil, the biggest American oil company, to ‘AA’ from ‘AA+’ citing lower oil and natural gas prices, weak demand for chemicals and low refining margins. A downgrade could make it harder for Exxon to borrow. |
| But it’s the smaller companies — which underpin the American economy and tend to lean more heavily on debt — that could be especially hurt by a run on credit. | But it’s the smaller companies — which underpin the American economy and tend to lean more heavily on debt — that could be especially hurt by a run on credit. |
| On Monday morning, after Ohio’s governor had shuttered schools, restaurants and bars across the state, Mr. Albrecht, the hotel owner, met with his 125 employees and vowed to keep them as busy as possible, even if traffic dwindles. | On Monday morning, after Ohio’s governor had shuttered schools, restaurants and bars across the state, Mr. Albrecht, the hotel owner, met with his 125 employees and vowed to keep them as busy as possible, even if traffic dwindles. |
| “Everything’s going to be O.K.,” he said. “We’re just going to have to ride it out.” | “Everything’s going to be O.K.,” he said. “We’re just going to have to ride it out.” |
| Jeanna Smialek contributed reporting from Washington, Michael de la Merced from London and Clifford Krauss from Houston. | Jeanna Smialek contributed reporting from Washington, Michael de la Merced from London and Clifford Krauss from Houston. |