For the second time in five years, San Antonio furniture maker KLN Steel Products Co. LLC has sought bankruptcy protection from creditors, the San Antonio Express-News reported today. KLN and its Dallas-based parent company, AGS Enterprises Inc., each filed emergency chapter 11 bankruptcy petitions on Wednesday in U.S. Bankruptcy Court in Dallas. AGS does business as Avteq Inc. KLN, which makes furniture for military barracks and universities, reported both assets and liabilities in the range of $1 million to $10 million. The filing comes as the company is defending itself against a whistleblower lawsuit alleging that it defrauded the federal government out of millions of dollars. The complaint was brought by a rival company, and KLN President Kelly O’Donnell previously has said that the allegations are untrue. Read more.
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A bankruptcy judge yesterday temporarily barred regulators from continuing litigation against ITT Educational Services Inc., questioning whether there is any point in calling the defunct school operator to account for alleged fraud, the Wall Street Journal reported today. “If you want to punish and deter ITT, you ought to be bringing criminal actions,” Judge James Carr said during a hearing in U.S. Bankruptcy Court in Indianapolis. The operator of the ITT Technical Institute chain of schools closed in September after federal authorities yanked its authority to run on taxpayer-backed student loans. At the time, the Securities and Exchange Commission, the Consumer Financial Protection Bureau and the state of New Mexico accused ITT Tech of defrauding students and investors in connection with its private-loan programs. Massachusetts also sued, accusing ITT Tech of misleading students with false graduation and job-placement statistics. The bankruptcy filing that followed started a process in which a judge must balance competing demands to a finite pool of cash and manpower. The judge said yesterday that the regulatory crackdown has to take a back seat to other bankruptcy business, at least until Dec. 21, when he will take up the question again. The SEC and CFPB wanted to steam ahead with the litigation as a demonstration to others in the for-profit education industry that bankruptcy won’t immunize companies involved in the alleged mistreatment of investors and consumers.
Three oil and gas companies reached deals with creditors to quickly slash hundreds of millions of dollars of debt in chapter 11 so that they will be ready when energy prices recover, the Wall Street Journal reported today. Houston-based oil-well servicer Key Energy Services Inc. yesterday filed for chapter 11 protection, and Basic Energy Services Inc. of Fort Worth, also an oil-well servicer, said it would do so by today. Meanwhile, oil and gas producer Stone Energy Corp. said that continuing negotiations has yielded a plan to file for chapter 11 protection by Dec. 9 to finalize a restructuring deal. To confront the aftershocks of the commodities rout, they are filing pre-packaged chapter 11 bankruptcies. John Penn, a Dallas-based restructuring partner at Perkins Coie LLP who isn’t involved in these cases, said that pre-packaged bankruptcies can be especially helpful to oil and gas servicers whose survival depends on reassuring customers that they will remain viable business partners. Companies that have recently taken advantage of the ability to file a prepackaged bankruptcy include Global Geophysical Services LLC, a seismic-data provider for the oil industry, which was in and out of chapter 11 protection in two months. Oil and gas producers Atlas Resource Partners LP and Halcón Resources Corp. filed prepackaged bankruptcies on July 27; Atlas emerged from chapter 11 on Sept. 1, and Halcón followed on Sept. 9. Key Energy’s restructuring plan proposes to cut its $1 billion in liabilities to about $250 million so the roughly 2,900-employee company can emerge from chapter 11 with a “manageable debt load.” Read more. (Subscription required.)
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