Bloomberg Businessweek - USA (2020-12-21)

◼ ECONOMICS Bloomberg Businessweek December 21, 2020

2019

$378b

practice.Butcompaniesarealsomakinglong-term

adjustments. Westinghouse ElectricCorp.,whose

headquarters campus accounts for about1 million

of the 4.5 million square feet of office spaceinButler

County, is reducing its footprint. It’sa movemany

companies across the U.S. are consideringand

one of the reasons Richard Barkham,CBRE’schief

economist, thinks the market for officespacewilllag

the broader recovery in 2021.

Thanks to government action, manymetricsof

economic pain, such as bankruptcies and evictions,

look better than they did before the pandemic. But

economists including CBRE’s Barkham say govern-

ment help is just holding back a tide that may be

unavoidable in the end—too many companies can’t

last for long in an environment of reduced demand.

This state of suspended animation applies as well

to corporate America, which has benefited from the

Federal Reserve’s dramatic cuts in interest rates and

moves to support credit markets. A Bloomberg News

analysis found that among 3,000 of the largest pub-

licly traded U.S. companies, 1 in 5 were not earning

enough to cover the cost of servicing their debt, ren-

dering them financial zombies. Collectively, those

companies—among them Delta Air Lines, Exxon

Mobil, and Macy’s—have taken on almost $1 trillion

in debt since the beginning of the pandemic.

Although the number of petitions filed at the U.S.

Bankruptcy Court’s Western Pennsylvania District

is down from last year, signs of how the crisis is

rippling through the local economy can be found

in its records. Ed’s Beans Inc., a coffee roaster in

Cranberry Township that owns the regional Crazy

Mocha cafe chain, filed for bankruptcy in October.

The company secured a $506,200 PPP loan in

early April, but it succumbed to the reality that

fewer people going to the office meant fewer cups

of coffee sold. It owed millions of dollars to cred-

itors, including almost $39,000 to a local bakery

renowned for its doughnuts. In November the com-

pany asked the court to allow it to stop paying rent

24

● A hideboundlabormovementprotectssalariedemployees

attheexpenseofthoseworkingparttimeoroncontracts

Japan’sUnionsSell

SomeWorkersShort

THE BOTTOM LINE In the corner of Pennsylvania where Night of

the Living Dead was filmed, businesses that managed to ride out

the pandemic with federal help are facing tough survival odds.

In a three-story apartment building in a residential

area of Japan’s capital, a tiny sticker on the door of

Room 203 announces the presence of the Women’s

Union Tokyo. The timeworn but tidy apartment is

filled with books and decorated with signs bear-

ing uplifting messages. One reads, “#With You”;

another, “No Longer Alone.” Inside, Keiko Tani

and Hiroko Nitta counsel women who’ve lost their

jobs during the pandemic. Demand for the pair’s

services is higher than ever.

Their clients are mostly part-timers and contract

while it looked for a buyer for the coffee chain. Just

seven of its 23 stores were open for business. But it

wasn’t willing to give up on the closed stores, leav-

ing those locations in their own undead state. “The

debtor submits that reopening the closed locations

at this time is not financially advantageous,” the

company’s lawyers wrote.

Barkham and other economists think that pattern

will be replicated on a wider scale next year. As the

economy comes back to life and government sup-

porteventuallyis withdrawn,oneeffectis likelyto

bea surgeinbankruptciesandevictions,theysay.

It’snotclearhowlongKriesswillbeableto

stayonhisfeetinthezombierecovery.Hesays

hehopestobringthemuseumbacknextyearin

theMonroevilleMall,whereinearlyNovemberhe

openedwhatfornowamountstolittlemorethan

a kiosksellingT-shirts.Kriessis alsoplanninga July

2021 festival.Butanyreturntohisambitiousgoals

fromthestartoftheyearseemsfaroff.Heneeds

zombietouriststoreturntoPittsburgh,andalsoto

beabletotraveltofanfestivalsandindustrycon-

ventions,whichaccountedfora significantportion

ofhisincome.“Iftheconventionsdon’tcomeback

for a while, it’s going to be a struggle,” Kriess says.

“If they do come back, and the vaccines work, then

we probably will go back to normal. But that’s still

to be seen.” �Shawn Donnan

160k

80

0

Here One Day, Gone the Next

U.S.businessesmarkedclosedon Yelp that were open on March 1

◼ Temporary ◼Permanent

4/19/20 8/31/20

DATA: YELP

2020*

$1.3t

▼ Debt owed by Russell

3000 companies that

don’t earn enough to

cover interest payments