- Spiralling debts and threats ‘to break your legs’: What Fagioli’s deposition tells us The Athletic
- Juventus expresses ‘full support’ for Nicolò Fagioli after midfielder banned for betting The Washington Post
- Nicolo Fagioli’s testimony reveals just how serious his gambling addiction had gotten Black & White & Read All Over
- Journalist blasts Fagioli for his social media outburst Juve FC
- Juventus, Fagioli furious with ‘rubbish’ newspapers: ‘I will speak soon’ Football Italia
- View Full Coverage on Google News
Tag Archives: debts
I’ll be 60, have $95,000 in cash and no debts — I think I can retire, but financial seminars ‘say otherwise’ – MarketWatch
- I’ll be 60, have $95,000 in cash and no debts — I think I can retire, but financial seminars ‘say otherwise’ MarketWatch
- Is $5 Million Enough to Retire at 60? Yahoo Finance
- I’m 61 and unemployed with no health insurance, and I pay $2,800 in rent. My $50,000 in savings will run out this year. What’s my next move? msnNOW
- ‘I’m not the only person in the U.S. with this problem’: I’m 61, unemployed, and live in a rental. My $50,000 in savings will run out this year. What’s my next move? MarketWatch
- ‘The s— is starting to hit the fan’: I’m 61 and unemployed with no health insurance, and I pay $2,800 in rent. My $50,000 in savings will run out this year. What’s my next move? msnNOW
- View Full Coverage on Google News
I’ll be 60, have $95000 in cash and no debts — I think I can retire, but financial seminars ‘say otherwise’ – MarketWatch
- I’ll be 60, have $95000 in cash and no debts — I think I can retire, but financial seminars ‘say otherwise’ MarketWatch
- Is $5 Million Enough to Retire at 60? Yahoo Finance
- I’m 61 and unemployed with no health insurance, and I pay $2,800 in rent. My $50,000 in savings will run out this year. What’s my next move? msnNOW
- ‘I’m not the only person in the U.S. with this problem’: I’m 61, unemployed, and live in a rental. My $50,000 in savings will run out this year. What’s my next move? MarketWatch
- ‘The s— is starting to hit the fan’: I’m 61 and unemployed with no health insurance, and I pay $2,800 in rent. My $50,000 in savings will run out this year. What’s my next move? msnNOW
- View Full Coverage on Google News
Cruel winter ahead for Wall Street as pandemic debts come due
A banker recently told me that CEOs “would have to do something pretty special to fall into bankruptcy” the last couple of years as government pumped massive liquidity into the market, on top of the pandemic handouts.
That’s now changing, possibly quickly, with the Fed raising interest rates and reducing the size of its balance sheet.
A cruel winter is likely for Wall Street as markets remain choppy and their biggest clients scale back. Traditional deal-making such as IPOs has dropped significantly. At every major investment house, management is quietly planning layoffs (and some, like Goldman Sachs, not so quietly).
One area of potential growth: Wall Street restructuring departments. They’re eyeing expansion to provide advice to companies so burdened by high debt load they need to sell stuff or “restructure” in Chapter 11 bankruptcy.
Recession looms
Sources tell me investment banking firm Morgan Stanley is weighing a big expansion of its restructuring team (Morgan Stanley wouldn’t deny the matter). Other banks are likely to follow because none of this is really rocket science.
If you think the Fed needs to raise rates by a lot (which, given the latest inflation number, it does) the economy will suffer. Recession looms. The likelihood is that some segments of corporate America loaded up on cheap debt and will need help avoiding bankruptcy — or navigating a way out of it. That becomes a big business for Wall Street.
The unwinding of the credit cycle to tighter lending standards is always pretty tough on corporate balance sheets, but it could be particularly brutal this time given the monetary policy experiment — and corporate debt binge — of the past two-plus years, bankers tell me.
Since the pandemic, even the most troubled companies had access to credit. So-called leveraged deal-making exploded. M&A often leaned heavily on borrowing because the Fed provided so much easy money the banks were virtually giving loans away.
What goes up ultimately comes down on Wall Street. The easy money of the early 2000s paved the way for the financial crisis of 2007-2008 with mortgage debt at the center of the deleveraging.
The easy money of the pandemic economy has led to similar risk-taking among companies and investors. An unwind is guaranteed even if it is still unclear if it will reach such cataclysmic levels.
Consider the $1.4 trillion-plus leveraged loan market, which comprises borrowings of the most indebted companies. Such debt has doubled in just seven years. More troubling, the biggest share of the market compromises loans to the riskiest credits. “Junk” credits now make up more than 28% of such loans, according to the data trackers at Morningstar.
You see where I’m going with this: As rates continue to spike, these borrowers will find it more difficult — maybe impossible — to refinance debt. Profit margins (if the companies are profitable) get squeezed as the economy slows. This Gordian knot translates into lower stock prices, layoffs, etc. Companies shed assets, and file for Chapter 11. Bondholders will be owners of chunks of corporate America because they have first lien on deteriorating assets, which means losses for major money managers and pensions.
In the middle of this mess will be the restructuring departments of the big banks dispensing advice and earning fees for their time.
The good news
Some caveats to the doom-and-gloom scenario. Restructurings are beginning to pick up (See Revlon and Bad Bath & Beyond) but they’re not dominating the headlines because default rates remain low. The St. Louis Fed’s index of all commercial bank loan delinquencies are well off the highs reached just after the banking crisis.
But bankers say the trouble looms when loan terms reach their end stages and so-called balloon principal payments come due. Those big numbers begin next year when more than $200 billion in leveraged loans will need refinancing, and will rise yearly by multiples until around $1 trillion is due in 2028, a banker tells me.
That’s a lot of debt to refinance in the face of tighter credit conditions. It’s a recipe for recession, but also for money to be made by Wall Street restructuring shops.
Inflation spiral
As bad as inflation is, there’s a good chance it’s going to get a lot worse. A serious nightmare scenario is starting to circulate among top Wall Street investors.
It began with BlackRock CEO Larry Fink’s grim assessment, explained in this column last week, that the Biden administration stoked significant inflation through reckless spending. It’s now nearly impossible for the Fed to engineer a “soft landing” of the economy with inflation at 8.3%.
Yet it could get worse. Global droughts and the continued war in Ukraine translate into declining crop yields and higher food prices. Gas prices might be coming down, but the administration appears intent on keeping them high by canceling drilling permits. As workers demand higher wages (and railroad workers got one last week by threatening a strike) Fed Chair Jerome Powell cranks up interest rates until the economy lands in a crash.
Dark stuff that some experts dispute, many of the same geniuses who said inflation was “transitory.”
Disney’s self-governing district, Reedy Creek, says Florida cannot dissolve it without paying off its debts
In a statement issued to its bondholders last Thursday, Reedy Creek pointed out that the 1967 law also includes a pledge from Florida to its bondholders. The law states that Florida “will not in any way impair the rights or remedies of the holders … until all such bonds together with interest thereon, and all costs and expenses in connection with any act or proceeding by or on behalf of such holders, are fully met and discharged.”
Due to that pledge, Reedy Creek said it expects to continue business as usual.
“In light of the State of Florida’s pledge to the District’s bondholders, Reedy Creek expects to explore its options while continuing its present operations, including levying and collecting its ad valorem taxes and collecting its utility revenues, paying debt service on its ad valorem tax bonds and utility revenue bonds, complying with its bond covenants and operating and maintaining its properties,” Reedy Creek said in a statement posted to the Municipal Securities Rulemaking Board.
.
The statement represents the first response from the Disney-run district since Florida Republicans moved to pass legislation that will dissolve the special purpose district on June 1, 2023. Gov. Ron DeSantis signed the legislation into law on Friday.
State officials took on the company’s self-governing status as a form of retaliation for Disney’s criticism of a law restricting discussion of LGBTQ issues in schools.
Disney has not made any direct public statements about the new law dissolving Reedy Creek. The law is just two pages long and avoids any discussion of details about how to unwind a half-century of infrastructure deals, nor does it lay out the next steps in the complicated process. Lawmakers in neighboring Orange and Osceola counties have expressed concerns that they will be stuck with paying off Reedy Creek’s debts and will have to significantly raise property taxes on residents.
“If we had to take over the first response — the public safety components for Reedy Creek — with no new revenue, that would be catastrophic for our budget here within Orange County,” Orange County Mayor Jerry L. Demings told reporters on April 21, before the official legislature vote that day. “It would put an undue burden on the rest of the taxpayers in Orange County to fill that gap.”
DeSantis has said Floridians will not see any tax increases due to the law and insisted that Disney will pay its “fair share” of taxes. He positioned the law dissolving Reedy Creek as “the first step in what’s going to be a process to make sure that Disney should not run its own government.”
How we got here
Disney, with 75,000 employees, is the largest single-site employer in Florida and is a key driver of the state’s vital tourism business. Yet its position on the law limiting LGBTQ discussion in schools earned it the ire of Republican officials.
The law, titled the “Parental Rights in Education” bill and labeled by critics as the “Don’t Say Gay” bill, prohibits schools from teaching children about sexual orientation or gender identity “in a manner that is not age-appropriate or developmentally appropriate.” The legislation also allows parents to bring lawsuits against a school district for potential violations.
The law’s vague language and the threat of parental lawsuits have raised fears that it will lead to discrimination against LGBTQ students and will have a chilling effect on classroom discussion. DeSantis’ spokesperson Christina Pushaw, however, said the legislation would protect kids from “groomers,” a slang term for pedophiles, and described those who oppose the law as “probably groomers.”
Disney CEO Bob Chapek initially declined to condemn the law but reversed course after facing employee criticism. A company spokesperson released a statement last month stating its goal is for the law to be repealed by the legislature or struck down in the courts.
“Florida’s HB 1557, also known as the ‘Don’t Say Gay’ bill, should never have passed and should never have been signed into law,” the statement said. The company said it was “dedicated to standing up for the rights and safety of LGBTQ+ members of the Disney family, as well as the LGBTQ+ community in Florida and across the country.”
Earlier last week, DeSantis challenged lawmakers to unravel the 55-year-old Reedy Creek Improvement Act as part of a special legislative session. The impact of that legislation — as well as its legality — remains unclear.
Most Medical Debts to Be Removed From Consumers’ Credit Reports
The biggest credit-reporting firms will strip tens of billions of dollars in medical debt from consumers’ credit reports, erasing a black mark that makes it harder for millions of Americans to borrow.
Equifax Inc.,
EFX 0.71%
Experian
EXPGY 1.72%
PLC and
TransUnion
TRU -0.99%
are making broad changes to how they report medical debt beginning this summer. The changes, which have been in the works for several months, will remove nearly 70% of medical debt in collections accounts from credit reports.
Beginning in July, the companies will remove medical debt that was paid after it was sent to collections. These debts can stick around on a consumer’s credit report for up to seven years, even if they are paid off. New unpaid medical debts won’t get added to credit reports for a full year after being sent to collections.
The firms are also planning to remove unpaid medical debts of less than $500 in the first half of next year. That threshold could rise, according to people familiar with the matter.
Medical debt is a huge burden for many Americans. Medical emergencies and unexpected diagnoses often result in giant bills that can easily overwhelm people who otherwise never miss a debt payment. The unpaid bills end up on credit reports, sometimes lowering consumers’ credit scores and hindering their ability to get affordable mortgages, car loans and other credit.
The Consumer Financial Protection Bureau estimates that some $88 billion in medical bills sits on 43 million credit reports. The three credit-reporting firms maintain reports on more than 200 million people in the U.S.
“This is an important step to support consumers in the wake of the Covid-19 pandemic,” the companies said in a joint statement. “These changes reflect our ongoing commitment to helping facilitate access to fair and affordable credit for all consumers.”
The firms are also trying to appease the Consumer Financial Protection Bureau, according to people familiar with the matter, which has made credit reporting a priority under director
Rohit Chopra.
The CFPB earlier in March said that it planned to hold credit-reporting firms accountable for not taking enough action against companies that report erroneous medical debts.
The agency has taken a hard line on the U.S. credit-reporting system, which plays a huge role in determining who gets credit and who doesn’t. Consumers have little control over what is added to their credit reports, which rely on information submitted by lenders, collections firms and others.
The CFPB is investigating how Equifax handles consumer disputes, the company said in a recent regulatory filing. Experian and TransUnion are also under investigation over their handling of disputes, according to people familiar with the matter.
“As the CFPB is our primary regulator, we have continual engagement with them on a variety of issues,” a TransUnion spokesman said. Experian didn’t respond to a request for comment on the investigation.
The CFPB has said its research indicates that medical debt is less predictive of a person’s ability to repay than other kinds of loans. Still, “medical debt collections on an individual’s credit report can impact their ability to buy or rent a home, raise the price they pay for a car or for insurance, and make it more difficult to find a job,” the agency said.
The main customers of credit-reporting firms are lenders, which use the information on credit reports to assess the likelihood that loan applicants will pay back their debts.
The credit-reporting firms have been speaking with banks to get their take on removing medical debts, according to people familiar with the matter. Some banks have said they worry less about removing smaller unpaid medical bills and those that are in collections for a shorter period, the people said.
Banks worry that removing certain debts can make some loan applicants look less risky than they actually are, which could result in unexpected defaults and losses. Yet banks are in the business of lending money, and they don’t want to turn away customers if they don’t have to.
Banks today draw on a wealth of bespoke data, including information drawn from customers’ bank accounts, to make lending decisions. They are relying less on traditional metrics, such as credit scores derived primarily from the information on peoples’ credit reports.
Unpaid medical bills were addressed in settlements the three firms reached with state attorneys general dating back to 2015. The companies are now required to wait about six months before adding medical debt to consumers’ credit reports, and they must remove debts that were paid by insurance companies.
The credit-reporting firms have removed a swath of negative information from collections firms in recent years, including unpaid library fines, traffic tickets and gym memberships. In 2017, the companies decided to begin removing tax-lien and civil-judgment data.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Intellivision asks fans for more money, reveals massive Amico debts
Enlarge / A massive document filed by Intellivision on Monday clarifies just how gloomy the company’s Amico console’s future appears to be.
The Intellivision Amico’s wild ride as a possible video game console may soon come to an end, according to financial disclosures tucked into the company’s most recent fundraising announcement.
On Monday, Intellivision Entertainment Inc. began its fourth round of public prelaunch fundraising in less than four years. The fundraising campaign, which aspires to raise $5 million, includes an SEC filing that contains page after page of “risk factors” for the company going forward. While such disclosures tend to include broad statements of potential risk factors to cover all foreseeable catastrophes, Intellivision’s filing goes into brutal specifics about the company’s current debt—and suggests a clear timeline for the game console’s potential dissolution.
In particular, the company tells investors that it has “generated no revenues” since its formation in 2018, and its handlers predict Intellivision can only operate until July of this year at its current zero-revenue pace before needing to drastically change course.
Raider of a lost Ark (deal)
Amico began life when video game musician Tommy Tallarico acquired the Intellivision brand name in 2018, which had previously been attached to an early 1980s console made by toy maker Mattel. This was followed by Tallarico announcing Amico as a brand-new home console concept, which would use proprietary gamepads with a touchscreen, a disc-style d-pad, and Wii-like motion sensing—along with pledges that all Amico games would have console-exclusive content.
Years later, the company would sail past multiple announced launch windows, including an initial October 10, 2020, release date. Tallarico has muddied the promotional waters with so many misstatements and contradictions that retro-friendly forum AtariAge shut down its Amico subsection in late 2021. Although we’re left with an unclear picture of what really caused all these delays, Monday’s financial disclosures give us some clues.
On the manufacturing front, Intellivision now admits that it currently cannot account for $1.35 million paid to Ark Electronics USA, a Chinese electronics manufacturing firm with a headquarters in California. Monday’s disclosure blames this on a “contract dispute” without clarifying further, but Intellivision indicates that the company may not be able to recover either the cash or any console-making components that Ark has already purchased. This follows a September 2020 announcement that Ark had been selected to “deliver” Amico hardware; the announcement did not indicate any exclusivity for Amico production, but Intellivision has yet to announce any other manufacturing partnerships.
Our previous attempts to understand the hardware inside every Amico console suggested a sheer material cost around $100 for the system’s default SKU. This includes the console itself (whose system-on-chip resembles budget phones that retailed for $100 in 2016) and a pair of included gamepads. Estimating exactly how many consoles were attached to a $1.35 million order is tricky without a better look at Ark’s Chinese manufacturing plants and wholesale order prices, but rough math on the numbers we have thus far suggests orders in the 12-15,000 console range. (Previous public statements from Intellivision suggest roughly 6,000 Amico console preorders were placed worldwide by the end of 2021.)
Ark Electronics did not immediately respond to phone calls and emails about Intellivision’s claims. Spot checks of Ark’s online presence reveal an internal presentation which claims the company manufactured “100 million pieces per year” for a variety of largely Chinese electronics firms. That figure, however, doesn’t clarify which devices and accessories counted toward that annual 100 million count.
$100 sunk cost per Amico sold until further notice
The documents vaguely describe $9.5 million spent on “R&D investment funding, including hardware and software development” as of October 31, 2021, but Intellivision’s statement doesn’t clarify how much of that amount was spent on console components, exclusive software deals, salaries, or other considerations. Intellivision’s current $5 million request includes an estimation that 16.5 percent of that amount, or $825,000, will be dedicated to “finish[ing] games already in process.” Meanwhile, 13 percent ($650,000) will go toward “deposit payments in support of hardware manufacturing.”
But the request, as connected to a StartEngine fundraising campaign, doesn’t clearly earmark any of its $5 million toward paying down the company’s considerable debts. How considerable? According to the company, “long-term debt” is up to $7.2 million and “short-term debt” has reached $1.2 million. Those numbers do not account for some dismal interest payment arrangements, and they stand in stark contrast to Intellivision’s reported $429,000 in cash and cash equivalents.
One of Intellivision’s more unusual loan arrangements comes from the $810,000 owed to angel investment advisor Sudesh Aggarwal, whose name is spelled in multiple ways in the SEC filing. The arrangement demands Intellivision pay Aggarwal $100 for every Amico console sold until his entire balance is paid back. (Amico consoles have been presold at a price of $249.99 via both Intellivision’s official website and third-party retailers, though Intellivision announced this week that the console’s price could reach a point as high as $349.99.) This loan arrangement includes an expectation that the balance would be paid in full by December 31, 2021, though it doesn’t clarify what penalties Intellivision may incur for failing to pay a single penny of that amount by the end of last year.
Ten percent annual interest is attached to over $800,000 of Intellivision’s loans that remain unpaid as of press time. This figure is in addition to $1.6 million in convertible notes that bear 5 percent annual interest. Many of the listed loans include options for debtors to convert each $1 of remaining debt to “two shares of common stock having an exercise price of $0.28 per share”—which assumes any of the debtors listed are interested in having their cash obligations converted into Intellivision stock.
“There may never be a fully operational Intellivision Amico”
The SEC disclosure includes many other eyebrow-raising statements about risk factors. Intellivision’s new admission that it has “limited experience in pricing and marketing our products” runs counter to statements in 2021 about its combined staff including savvy game industry veterans. Formerly, Intellivision had auspiciously claimed that ex-Xbox luminary J Allard had remained on board as “global managing director” through 2021, despite Allard announcing his departure from Intellivision in mid-2020. (Eventually, Intellivision offered an amended statement to the SEC on this matter.)
While Amico advertisements, including a new video as part of this week’s fundraising campaign, have used a Wii-like pitch of simple games and family-friendly fun as a selling point, Intellivision admits that “consumer preferences for games are usually cyclical and difficult to predict, and even the most successful content remains popular for only limited periods of time, unless refreshed with new content or otherwise enhanced.” Gaming fans familiar with Nintendo’s path from the megaton, simple-game Wii to the disappointing Wii U could indeed point at that Intellivision statement and ask how Amico’s Wii-like sales pitch could possibly correct Nintendo’s infamous sales example.
Intellivision now suggests that it will sell some Amico games as non-fungible tokens (NFTs), but the company has yet to clarify what technology stack or console interface will support such verification systems, and the “risk factor” section does not warn investors that recent NFT promotional efforts in the gaming industry have led to consumer backlash and boycotts. The document’s section on risk factors does clarify that “there may never be a fully operational Intellivision Amico” and that such a scenario would be due to “a change in business model” should Intellivision decide that a physical Amico console launch would “not be in the best interest of the Company and its stockholders/members/creditors.” (That would certainly offer Intellivision one way to avoid paying Aggarwal $100 per console sold, should that condition remain in effect.)
All of this leads to a pessimistic rating from Intellivision’s auditor. The company’s inability to create revenue of note while racking up losses and its failure to secure a “committed source of financing” as of press time lead the auditor to believe the Intellivision’s only path forward as of press time is outside financing and fundraising.
And Intellivision clarifies that its $5 million request via StartEngine is not enough to keep the company operating at its current trajectory. Intellivision plans to launch an additional investment round, also to the tune of $5 million, via a Regulation D model. Intellivision says a combined $10 million funding total would “fund the company for approximately 7 to 9 months.”
Mexico: Canadians killed at resort over international gang debts, police say | Mexico
The killing of two Canadians at a resort on Mexico’s Caribbean coast last week was motivated by debts between international gangs apparently dedicated to drug and weapons trafficking, according to a senior Mexican prosecutor.
“The investigations indicate that this attack was motivated by debts that arose from transnational illegal activities that the victims participated in,” said Oscar Montes, the chief prosecutor of the Quintana Roo state, on Tuesday. “The information [is] that they were involved in weapons and drug trafficking, among other crimes.”
The attack took place Friday at the Hotel Xcaret resort, south of Playa del Carmen.
Prosecutors had previously said both victims had criminal records in Canada, and one was a known felon with a long record related to robbery, drug and weapons offenses.
A Canadian woman was wounded in the attack and is being treated at a local hospital.
Montes said the attack had been planned for almost a month by a crime faction which he declined to name but said had not previously been known to operate in the area.
The attackers apparently had guest wrist bands to enter the resort.
Montes said a first group of assassins hired to kill the Canadians earlier in January abandoned the job because there was too much security. A second assassin flew in to the resort to carry out the killing.
Authorities said the two suspects arrested in the case so far were a professional kidnapper from Mexico City who coordinated the plot, and the hired killer.
Police also alleged that they had arrested a woman, who was apparently part of the group of 10 Canadians who were vacationing at the resort. Montes said the woman had allegedly met with the killers and may have been providing them information.
IQuintana Roo, which is visited by huge numbers of foreign tourists, has previously played host to numerous crime rings with international connections.
A Romanian gang has long operated in the state, using ATM machines to clone credit cards or make illegal withdrawals. And this week authorities arrested two Ukrainians for their alleged involvement in a fuel theft ring. Immigrant traffickers have long used Cancún as base for smuggling Cuban migrants.
Last week’s killings were the latest in a series of brazen acts of violence along Mexico’s resort-studded Mayan Riviera coast, the crown jewel of the country’s tourism industry.
In November, a shootout on the beach of Puerto Morelos left two suspected drug dealers dead. Authorities said there were about 15 gunmen from a gang that apparently disputed control of drug sales there.
In late October, farther south in the laidback destination of Tulum, two tourists – one a California travel blogger born in India and the other German – were killed in the apparent crossfire of rival drug dealers.
Student-Loan Processor Navient to Cancel $1.7 Billion of Debts
A former unit of student loan giant Sallie Mae said it would cancel $1.7 billion in private student debt for about 66,000 borrowers to resolve claims that it engaged in deceptive lending practices.
Navient Corp.
NAVI 0.37%
, a student loan servicer that split off from Sallie Mae in 2014, agreed to the sum in a settlement with 40 state attorneys general. The loans are private loans, so the losses will be covered by Navient’s investors rather than the federal government.
Nearly all the canceled loans originated at Sallie Mae from 2002 to 2010, at a time when student debt soared, on its way to becoming the second-highest form of household credit after mortgages. Sallie Mae was at the forefront of that boom, both as the biggest originator of private loans as well as the biggest lender under a federal program that guaranteed student loans.
The loans primarily went to borrowers with poor credit, and who attended schools with shaky records, including many for-profit schools, according to a website run by the settlement administrator. All of the loans forgiven in the agreement were in default.
“For too long, Navient contributed to the national student debt crisis by deceptively trapping thousands of students into more debt,” said New York Attorney General
Letitia James.
As part of the agreement, Navient continued to deny the claims or that the company has harmed any borrowers. “The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” said
Mark Heleen,
Navient’s chief legal officer.
Navient has faced numerous lawsuits in recent years that alleged the company engaged in unfair and deceptive conduct against borrowers, including steering those with federal loans toward plans that would allow them to stop making payments but in which interest continued to accrue, rather than toward plans in which monthly payments are tied to borrowers’ income.
Last March, a Seattle-area judge ruled that the company had broken a consumer protection law in a case brought by Washington’s attorney general.
“Navient repeatedly and deliberately put profits ahead of its borrowers—it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back and placed an unfair burden on people trying to improve their lives through education,” Pennsylvania Attorney General
Josh Shapiro
said.
The agreements resolve all six outstanding state lawsuits against Navient, the company said. As part of the settlement, the company will make a one-time payment of approximately $145 million to the states.
In addition to loan cancellation and some restitution for borrowers with private loans, Navient will pay $95 million to about 350,000 federal loan borrowers—or about $260 each—who were placed into certain types of forbearance programs that caused them to accumulate more debt rather than entering income-based repayment plans, the states said.
States will distribute restitution to borrowers within their jurisdictions. Massachusetts, for example, will receive more than $6 million, including $2.2 million in restitution for more than 8,300 federal loan borrowers, state Attorney General
Maura Healey
said.
Federal loan borrowers eligible for restitution will be notified by mail this spring, with checks going out in the middle of the year, according to the settlement administrator’s website. Private borrowers who qualify for discharge will be notified by July.
Private loans without federal backing make up less than 10% of the total $1.7 trillion student-loan industry. About 43 million people owe $1.6 trillion in federal student debt, Education Department data show. About 5.2 million of those federal borrowers are in default. Those borrowers, unless they also held private student loans, aren’t affected by Thursday’s settlement.
Navient recently announced its exit from federal student-loan processing. It had been one of the primary federal contractors, serving around six million borrowers. Its accounts were transferred to a new contractor,
Maximus,
whose role was approved by the Education Department.
The Education Department also has taken steps to forgive billions in debt held by disabled borrowers, as well as borrowers who went to institutions that federal regulators say practiced deceptive recruiting practices, such as ITT Technical Institute. The piecemeal moves have resulted in $11.5 billion in canceled debt for around 600,000 borrowers over President
Biden’s
first year in office. Student loan payments have been suspended by the government during the pandemic, with the latest extension now set to expire on May 1.
The Biden administration is in the midst of restructuring its student-loan processing system. In November it announced it was ending its relationship with private collection agencies that had been tasked with recovering payments from federal student-loan borrowers in default to improve collections and provide borrowers with more support.
The Consumer Financial Protection Bureau has been suing Navient since 2017 over allegations that it steered borrowers into postponing payments instead of entering lower-cost, income-driven repayment plans. The CFPB has said the practice cost borrowers $4 billion in interest expense. Navient has disputed the government’s claims.
—Melissa Korn contributed to this article.
Write to Gabriel T. Rubin at gabriel.rubin@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Barcelona debts soar to €1.35bn as president Joan Laporta calls out ‘lies’ of predecessor
Barcelona president Joan Laporta has revealed that the club’s debt now totals €1.35 billion — while defending his management from criticism by predecessor Jose Maria Bartomeu, describing an open letter published by Bartomeu last week as “full of lies.”
Laporta — who took over at Barca in March after winning elections which followed Bartomeu’s resignation in October 2020 — has had to deal with a series of off-the-pitch crises as the club has struggled with financial problems worsened by the coronavirus pandemic.
“As of March 21, 2021, the debt was €1.35bn,” Laporta said in a news conference on Monday.
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“Bartomeu was plugging holes in the short term and mortgaging the club in the long term. That leaves us a dramatic inheritance.
“To the initial debt of €617m you have to add €389m on players, €90m in litigation, €79m in advance television rights and €56m from the ‘Espai Barca’ project. In total, it’s €1.35bn.”
Lionel Messi joined Paris Saint-Germain last week in a move Laporta described as “sad, but necessary,” after Barca were unable to register a new contract for the forward within the club’s strict LaLiga imposed salary cap.
Only Gerard Pique’s acceptance of a last-minute pay cut allowed Barca to field new signings Memphis Depay and Eric Garcia in the league this weekend.
“We’re happy we resolved it with Pique and we’re hugely grateful,” Laporta said. “Some players are more than just players. Pique is a club man who loves Barca above all. He’s seen that we’re in a difficult situation and he’s done something that deserves praise.”
Pique — speaking after scoring the opening goal in Barca’s 4-2 win over Real Sociedad on Sunday — had said that fellow captains Sergio Busquets, Sergi Roberto and Jordi Alba were also willing to accept wage reductions.
“The negotiations are going well and they’re behaving extraordinarily,” Laporta said on Monday.
“I understand the players, they’ve already had a wage cut and now they’re being asked to make another effort, no-one likes that. … We’re trying to sort out the captains first, and then the rest of the squad.”
Laporta laid the blame for Barcelona’s wage bill — which he said had reached an unsustainable 103% of the club’s income — at the previous board of directors, led by Bartomeu.
“It isn’t true that the salaries rose to be able to compete with the ‘state clubs’ [referring to PSG and Manchester City] and the Premier League,” he said.
“They spent the €220m from the Neymar deal disproportionately and at light speed. That is when the salaries shot up. We’ll have to change the model and invest in [Barcelona’s academy] La Masia, making more proportionate investments with more sporting logic.”
Last week, Bartomeu wrote an open letter — published by Spanish news agency EFE — in which he defended his administration and criticised Laporta’s running of the club.
“I have read [the letter] carefully and it is full of lies,” Laporta said. “It is an effort to justify unjustifiable management. It is an exercise in desperation, that looks to take advantage of a moment of unrest among Barcelona fans.
“They say they are not responsible for the 2019-20 accounts, but they are responsible until March 17, 2021. The numbers are [Bartomeu’s] board’s responsibility. Nobody will escape from that.”
Barcelona have commissioned a “due diligence” audit to assess the club’s financial condition and management, which Laporta said was due to be completed next month.
“The due diligence process will be laid out in September and then we’ll establish where responsibility lies,” he said.
“Some issues like ‘Barcagate’ are already being looked at by the courts. … It is too soon to say. First we have to ascertain what liabilities there are. I can’t say if we will take legal action.”