The New York Times - USA (2020-08-07)

B4 N THE NEW YORK TIMES BUSINESSFRIDAY, AUGUST 7, 2020 K

Insurance companies don’t see
it that way. Most business inter-
ruption policies include highly
specific language stating that for a
claim to be paid out, there has to
be “direct physical damage” —
say, a flood that washes away a
building or a fire that burns down
inventory, forcing a business clo-
sure.
On top of that, after SARS swept
through Asia nearly two decades
ago and caused widespread eco-
nomic damage, many insurers be-
gan to write in language that ex-
cluded business interruption
caused by viral epidemics. For in-
stance, Mr. Gavrilides’s policy
states that the insurer “will not
pay for loss or damage caused by
or resulting from any virus, bac-
terium, illness or disease.”
Insurers say they aren’t being
stingy; they simply don’t have
enough capital to cover all coro-
navirus-related claims and would

suffer enormous losses if they had
to pay out.
The industry’s position hasn’t
deterred business owners. Some
plaintiffs are arguing that the pan-
demic calls for new interpreta-
tions of what “direct physical
damage” means for their busi-
ness. Others are highlighting the
spillover effects of closures on lo-
cal economies.
When the governor of Louisi-
ana banned gatherings of more
than 250 people in March, John W.
Houghtaling II, a New Orleans
lawyer and veteran of the insur-
ance wars that followed Hurri-
cane Katrina in 2005, didn’t wait
for his client’s insurance claim to
be denied before suing. Mr.
Houghtaling represents Oceana
Grill, a 500-seat restaurant that is

insured by an underwriting group with Lloyd’s of London, the insurance marketplace. “We have reason to believe that Lloyd’s took premiums without the intention of providing the indemnity paid for,” he said. The lawsuit seeks court affir- mation that the insurer must cover Oceana Grill’s lost revenue because the restaurant paid for a policy that covers risks from all pathogens except those introduced through “terrorism or ma- licious use.” It also argues that the coronavirus contaminates sur- faces that can be difficult to clean in New Orleans’s hot, muggy cli- mate, causing “real physical loss and damage.” The city’s mayor, LaToya Cantrell, cited the virus’s propensity to cause such property damage in an emergency procla- mation the day the lawsuit was filed. Lloyd’s has argued that Oceana Grill’s claims are premature and hypothetical. A spokesman de- clined to comment beyond the court filings. A hearing on whether to dismiss the lawsuit is scheduled for Aug. 20. Mr. Houghtaling, along with big-name restaurateurs such as Daniel Boulud, Thomas Keller, Wolfgang Puck and Jean-Georges Vongerichten, formed the Busi- ness Interruption Group in April to push the insurance industry to pay claims. To draw attention to the matter, the group has adver- tised on billboards in Times Square and is supporting legislation that would allow insurers that paid business-interruption claims, regardless of policy language to the contrary, to receive reimbursements from the federal government. But so far, it’s not looking good for the plaintiffs. On July 1, a county circuit judge threw out Mr. Gavrilides’s case, one of the first to be decided any- where. Judge Joyce Draganchuk, ruling from the bench in a Zoom hearing, said that for coverage, there had to be tangible damage, something “that alters the physical integrity of the property.” Both the Soup Spoon Cafe and the Bistro, another restaurant Mr. Gavrilides owns in Ingham County, Mich., were in mint condi- tion, so they didn’t qualify. The judge left little ambiguity, repeat- ing the basis of her decision sev- eral times, and said there was no point in filing an amended complaint. Mr. Gavrilides’s lawyer, Matthew J. Heos, said he has filed an appeal. In the meantime, Mr. Gavrilides, who pays an annual premium of $12,002 for his policy, is staying afloat with a loan from the federal government’s Pay- check Protection Program. Dozens of minor-league baseball teams have sued Philadelphia Indemnity Insurance Company and others, saying the cancella- tion of their season qualifies them for business-interruption payments. Minor-league teams nor- mally get their players from Major League Baseball, but none mate- rialized this year. Some lease their stadiums from the cities they play in, and, with no revenue, they can’t make their lease payments. That, in turn, could threaten mu- nicipal bond payments and even the urban renewal plans that rely on minor-league baseball in some places. A spokesman for Philadelphia Indemnity, Bill Procopio, said the company could not comment on pending litigation. The lawsuits are now pending in three federal courts. The N.B.A.’s Houston Rockets have sued Affiliated FM Insur- ance Company in a state court in Rhode Island, where the insurer’s parent, FM Global Group, is based. The N.B.A. cut short its season this year, but the Rockets were hit especially hard when Houston emerged as a Covid-19 hot spot. The Toyota Center,

where the Rockets play, is a co- plaintiff, having had to cancel ro- deos, concerts, a barbecue cook- off and other events as well as bas- ketball. The lawsuit said the loss of the arena was itself a form of “physical damage.” “The property has been im- paired,” it said. “The loss of func- tionality is no less physical than the impact of a property having lost its roof to a tornado or hurri- cane.” A spokesman for FM Global, Steven Zenofsky, said the company could not comment on the legal dispute, which remains pending. Many insurance executives ar- gue that pandemics are uninsur- able. At its most basic, insurance

involves the efficient pooling of risks, so that everybody in a pool pays premiums but only a few have claims. That way, the many who have no losses can subsidize the few who do. That principle can’t work in a sweeping pandemic shutdown, where virtually everybody has a loss. The American Property Casu- alty Insurance Association has es- timated that if insurers were required to cover all U.S. business interruption losses tied to the shutdowns, regardless of policy exclusions — something proposed by lawmakers in some states — it would cost $1 trillion a month. The insurance industry could buckle under the strain of having to pay for even a portion of that amount, said Sean Kevelighan of the Insurance Information Insti- tute, a nonprofit industry group. “Only the government has the ca- pacity to provide relief to businesses” in a pandemic, Mr. Keve-

lighan added. There are already proposals for federal involvement in future pandemics. Representative Carolyn B. Maloney, a Democrat of New York, has introduced legislation that would create a federal pandemic reinsurance program, mod- eled after the Terrorism Risk In- surance Act, which she sponsored after the terrorist attacks of 2001. Reinsurance is widely used by insurers to keep their exposure to risks from growing too large or concentrated; the insurers pay re- insurers to take over the payment of some of their expected claims. But losses from terrorism or pandemics are too big for existing reinsurance companies to take on, which is why Congress is consid- ering a federal version. Ms. Maloney’s bill would bar insurers from excluding viral epidemics from coverage. In future epidemics, they and the government would each pay a portion of the claims upfront. After that, the insurers would reimburse the government for its outlays over many years. Evan G. Greenberg, the chief executive of the insurance giant Chubb Limited, has put forward another proposal. His plan would divide the market into two seg- ments, one for small businesses and the other for medium-to-large businesses. Small businesses would get a simple program that would re- place a portion of each company’s payroll quickly. Buying coverage would be mandatory unless a company opted out in writing. For larger companies, the government would create a reinsurer, Pandemic Re. Insurance companies would write pandemic insurance, charging market-based premiums, then transferring most of the risk and the premiums to Pan- demic Re. “It’s a total free-market program,” Mr. Greenberg said. Com- panies could decide whether or not to participate. “But if you don’t,” he said, “don’t come to the government asking for a hand- out.”

After Virus Wallops

Businesses, Insurers

Land a Second Blow

FROM FIRST BUSINESS PAGE

Nick Gavrilides, owner of the Soup Spoon Cafe in Lansing, Mich.; the Houston Rockets; and the owner of the famed Boston watering hole Cheers hope to recover some costs from insurers.

RACHEL ELISE THOMAS FOR THE NEW YORK TIMES

THOMAS SHEA/USA TODAY SPORTS, VIA REUTERS

‘At first I thought,

OK, we’re toast,

this is it.’

Nick Gavrilides, owner of the Soup
Spoon Cafe in Lansing, Mich.

MATT STONE/ MEDIANEWS GROUP/BOSTON HERALD

DEBT Americans Put Less On Their Credit Cards Household debt fell in the second quarter as consumers stuck at home because of the coronavirus pandemic spent less on their credit cards, according to a new report from the Federal Reserve Bank of New York. The Fed’s findings, released Thursday, contribute to a growing body of evidence that suggests the government’s rescue programs and bill deferrals helped to keep many families from falling far behind financially during the early months of the pandemic. Total household debt decreased between April and June, falling by $34 billion, or 0.2 percent. It was the first decline since 2014 and the largest since 2013. Credit card bal- ances plummeted by $76 billion, the steepest drop on record. Mortgages were another story. Refinances and other origina- tions boomed after the Fed slashed interest rates to near- zero in March, reaching $846 billion, the highest volume since 2013. Debt delinquency rates dropped across credit categories. The New York Fed said that was “likely reflecting the impact of government stimulus programs and various forbearance options for troubled borrowers.” JEANNA SMIALEK

ENTERTAINMENT Animal Crossing Obsession Lifts Nintendo’s Profit It didn’t just seem like everyone spent their lockdown playing Ani- mal Crossing, they really were. Nintendo, the creator of the game for its Switch consoles, reported on Thursday a 541 percent increase in quarterly profit from the previous year. Behind that number were 10.6 million sales of Animal Crossing: New Horizons, pushing the Japa- nese gaming company’s net income to 106.5 billion yen, or $1 billion, and the company said “sales of this title continue to be strong with no loss of momentum.” Since it was released, there have been more than 22 million sales of the game, making it the most popular Animal Crossing game by a big margin. The only Nintendo Switch game that has ever sold more is Mario Kart 8 Deluxe. ESHE NELSON

MEDIA Gannett and Tribune See Subscriber Growth Gannett and Tribune Publishing, two of the last remaining publicly traded newspaper chains, both reported impressive subscription growth alongside plummeting advertising sales during the second quarter of this year, which was dominated by the coronavirus pandemic. Gannett — the largest newspaper chain in the country, publishing USA Today and more than 250 other dailies — saw a 31 percent increase in new digital subscrip- tions compared with the same quarter last year, it said Thursday morning. It has a total 927,000 digital subscribers. But as marketers responded to the coronavirus and the economic slowdown it prompted by pulling back on ad spending, Gannett suf- fered, with print advertising falling 45 percent and digital advertising dropping 27 percent. Gannett placed furloughs on most of its roughly 20,000 em- ployees in response to the virus and, along with the related dip in travel expenses, this led to $125 million in savings during the quarter. Though publicly traded and owned, Gannett is controlled under a deal that lasts through next year by a private equity firm, Fortress Investment Group, which is itself owned by the Japa- nese conglomerate SoftBank. Tribune Publishing, owner of The Chicago Tribune, The Balti- more Sun and roughly 20 other newspapers, posted similar re- sults. Digital subscribers rose 40 percent compared with the same quarter last year, to 419,000, while overall ad sales plunged 49 percent. The growth in subscribers “marks our highest single quarter of digital subscriber acquisi- tion since we launched our digital subscription product line many years ago,” said Terry Jimenez, the chief executive and president. “We are pleased that these new readers recognize the value in our product.” The company also reported a 24 percent decline in operating expenses, reflecting efforts to re- duce costs. Tribune Publishing journalists were offered buyouts at the beginning of the year, and once the pandemic arrived many were subject to furloughs or per- manent pay cuts. The hedge fund Alden Global Capital has a 32 percent stake in Tribune Publishing and three of seven board seats. MARC TRACY

Virus Briefing

VIRUS FALLOUT

DIGITAL REALTY TRUST, INC. NOTICE OF REDEMPTION TO THE HOLDERS OF 6.350% SERIES I CUMULATIVE REDEEMABLE PREFERRED STOCK CUSIP NUMBER 253868 863 August 7, 2020 Notice is hereby given that Digital Realty Trust, Inc. (the “Company”) will redeem on September 8, 2020 (the “Redemption Date”) 10,000,000 shares (the “Shares”) of its 6.350% Series I Cumulative Redeemable Preferred Stock (par value $0.01 per share) (the “Series I Preferred Stock”), such Shares constituting all of the outstanding shares of Series I Preferred Stock, at a redemption price of $25.00 per share, plus all accrued and unpaid dividends on such Shares up to but not including the Redemption Date, in an amount equal to $0.29545 per share, for a total payment of $25.29545 per share (the “Redemption Price”). This redemption is made at the option of the Company pursuant to Section 5 of the Articles Supplementary establishing and fixing the rights and preferences of the Series I Preferred Stock. Series I Preferred Stock held through the Depository Trust Company will be redeemed in accordance with the applicable procedures of the Depository Trust Company. Dividends on the Shares shall cease to accrue on the Redemption Date. On and after the Redemption Date, the only remaining rights of the holders of the Shares will be to receive payment of the Redemption Price. IN ORDER TO RECEIVE THE REDEMPTION PRICE, CERTIFICATES REPRESENTING THE SHARES CALLED FOR REDEMPTION MUST BE PRESENTED AND SURRENDERED FOR PAYMENT TO AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC (THE “REDEMPTION AGENT”) AT THE LOCATION LISTED BELOW, DURING THE REDEMPTION AGENT’S USUAL BUSINESS HOURS: By Mail or Overnight: American Stock Transfer & Trust Company, LLC Operations Center Attention: Reorganization Department 6201 15th Avenue Brooklyn, NY 11219 The method of delivery is at the option and risk of the holder; however, transmission by registered mail, properly insured, is suggested as a precaution against loss. On or before the Redemption Date, all funds necessary for payment of the Redemption Price will have been irrevocably set aside by the Company, separate and apart from other funds, in trust for the benefit of the holders of the Shares. Questions and requests for assistance may be directed to the Redemption Agent at (800) 937-5449. If your certificates have been either lost or destroyed, please notify the Redemption Agent promptly. You will then be instructed as to the steps you must take to receive payment.

Information to identify the case: Debtor: Grupo Aeroméxico, S.A.B. de C.V.,EIN: N/A United States Bankruptcy Court for the Southern District of NewYork Case Number: 20-11563 (SCC) Date case filed for chapter 11: 06/30/2020 Official Form 309F1 (For Corporations or Partnerships) Notice of Chapter 11BankruptcyCase 02/20 Forthedebtorlistedabove,acasehasbeenfiledunder chapter 11 of the Bankruptcy Code. An order for relief has been entered. This notice has important information about the case for creditors and debtors, including information about the meeting of creditors and deadlines. The filing of the case imposed an automatic stay against most collection activities. This means that creditors generally may not take action to collect debts from the debtor or the debtor’s property. For example, while the stay is in effect, creditors cannot sue, assert a deficiency, repossess property, or otherwise try to collect from the debtor. Creditors cannot demand repayment from the debtor by mail, phone, or otherwise. Creditors who violate the stay can be required to pay actual and punitive damages and attorney’s fees. Confirmation of a chapter 11 plan may result in a discharge of debt. A creditor who wants to have a particular debt excepted from discharge may be required to file a complaint in the bankruptcy clerk’s office within the deadline specified in this notice. (See line 11 below for more information.) To protect your rights, consult an attorney. All documents filed in the case may be inspected at the bankruptcy clerk’s office at the address listed below or through PACER (Public Access to Court Electronic Records atwww.pacer.gov). The staff of the bankruptcy clerk’s office cannot give legal advice. Do not file this notice with any proof of claim or other filing in the case.

Debtor’s full name:Grupo Aeroméxico, S.A.B. de C.V.

All other names used in the last 8 years:None

Address:Paseo de la Reforma 243 Piso 25 Mexico City, DF 06500
Mexico
Jointly Administered Cases
Debtor Taxpayer I.D.
Grupo Aeroméxico, S.A.B. de C.V. N/A
Aerovías de Mexico, S.A. de C.V. 65-0071171
Aerolitoral, S.A. de C.V. 98-0171109
Aerovías Empresa de Cargo,
S.A. de C.V.

98-1014098 4.Debtors’attorneyandclaimsagent:DAVISPOLK&WARDWELL LLP, 450 Lexington Avenue, New York, New York 10017, Telephone: (212) 450-4000, Facsimile: (212) 701-5800, Marshall S. Huebner, Timothy Graulich, James I. McClammy, Stephen D. Piraino (admitted pro hac vice) Debtors’ Claims and Noticing Agent: If you have questions aboutthisnotice,pleasecontactEpiqCorporateRestructuring, LLC, Contact phone: (855) 917-3578 (toll-free), (503) 520-4473 (international), Email: [email protected], Website: https://dm.epiq11.com/case/aeromexico

Bankruptcy clerk’s office:Clerk of the United States Bankruptcy
Court, One Bowling Green, New York, New York 10004. Hours open:
Monday – Friday, 8:30 AM – 5:00 PM (except Federal Holidays),
Contactphone:(212)668-2870.Documentsinthiscasemaybefiledat
this address.You may inspect all records filed in this case at this office
or online at http://www.pacer.gov.

Meeting of creditors:August 27, 2020 at 2:00 PM.In
accordance with the Notice of Section 341(a) Meeting of
Creditors, the section 341 meeting of creditors for the above-
captioned cases will be conducted by telephone conference.
All parties wishing to appear shall appear by phone at the
section 341 meeting at the Designated Meeting Time. At
least five (5) days prior to the Designated Meeting Time, the
Office of the United States Trustee will file with the court
instructions for the telephonic meeting of creditors.The
debtor’s representative must attend the meeting to be questioned
under oath. Creditors may attend, but are not required to do so. The
meeting may be continued or adjourned to a later date. If so, the date
will be on the court docket.

Proof of claim deadline: Deadline for filing proof of claim:
Notyetset.Ifadeadlineisset,thecourtwillsendyouanother
notice.
A proof of claim is a signed statement describing a creditor’s claim.
A proof of claim form may be obtained atwww.uscourts.gov or any
bankruptcy clerk’s office.
Yourclaimwillbeallowedintheamountscheduledunless:yourclaim
is designated asdisputed,contingent,orunliquidated; you file a proof
of claim in a different amount; or you receive another notice.
If your claim is not scheduled or if your claim is designated as
disputed,contingent,orunliquidated, you must file a proof of claim or
you might not be paid on your claim and you might be unable to vote
on a plan.You may file a proof of claim even if your claim isscheduled.
You may review the schedules at the bankruptcy clerk’s office or
online at http://www.pacer.gov.
Securedcreditorsretainrightsintheircollateralregardlessofwhether
they file a proof of claim. Filing a proof of claim submits a creditor to
the jurisdiction of the bankruptcy court, with consequences a lawyer
can explain. For example, a secured creditor who files a proof of claim
may surrender important nonmonetary rights, including the right to
a jury trial.

Exception to discharge deadline:If§523(c) applies to your
claim and you seek to have it excepted from discharge, you must
start a judicial proceeding by filing a complaint by the deadline stated
below.The bankruptcy clerk’s office must receive a complaint and any
required filing fee by the following deadline.Deadline for filing the
complaint:To be determined.

Creditors with a foreign address:If you are a creditor receiving
notice mailed to a foreign address, you may file a motion asking the
court to extend the deadlines in this notice. Consult an attorney
familiar with United States bankruptcy law if you have any questions
about your rights in this case.

Filing a Chapter 11 bankruptcy case:Chapter 11 allows
debtors to reorganize or liquidate according to a plan. A plan is not
effective unless the court confirms it. You may receive a copy of the
plan and a disclosure statement telling you about the plan, and
you may have the opportunity to vote on the plan. You will receive
notice of the date of the confirmation hearing, and you may object to
confirmationoftheplanandattendtheconfirmationhearing.Unlessa
trustee is serving, the debtor will remain in possession of the property
and may continue to operate its business.

Discharge of debts:Confirmation of a chapter 11 plan may
result in a discharge of debts, which may include all or part of your
debt. See 11 U.S.C.§1141(d). A discharge means that creditors may
never try to collect the debt from the debtor except as provided in
the plan. If you want to have a particular debt owed to you excepted
from the discharge and§523(c) applies to your claim, you must start
a judicial proceeding by filing a complaint and paying the filing fee in
the bankruptcyclerk’s office bythe deadline.

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Offices−Nassau/Suffolk 130

INVESTMENT PROPERTIES (600) Investment Properties Other Areas 605

The New York Times - USA (2020-08-07)

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