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A U.S. bankruptcy judge yesterday granted formal recognition to Takata Corp.’s Japanese court restructuring proceeding, a step forward for the company as it works to address massive damage claims tied to defective air-bag parts, WSJ Pro Bankruptcy reported. The auto-parts maker filed for court protection from creditors in the U.S. and in Japan in June after being swamped with litigation over air-bags that deployed with explosive, sometimes deadly, force. As of the bankruptcy filing, at least 16 deaths and more than 180 injuries were linked to the defect. Yesterday’s hearing in the U.S. Bankruptcy Court in Wilmington, Del., was a pivotal moment for the Japanese company, which is selling much of its business to appease creditors. A lot of the money from the $1.58 billion sale will be routed to the Japanese parent, and then to the U.S. Justice Department to pay $850 million owed on a settlement of a criminal case. That cash will go to car makers that have been footing the bill for the largest recall effort in U.S. automotive history.

Thirty-three nursing homes affiliated with Preferred Care Group, one of the largest U.S. nursing home chains, filed for chapter 11 protection due to multi-million dollar personal injury lawsuits in Kentucky and New Mexico, according to court filings, Reuters reported. Preferred Care Group is owned by Thomas Scott of Plano, Texas, according to the court filings. Scott also owns another company, Preferred Care Inc., which is the master lessee of some of the facilities and also filed for bankruptcy on Monday. The operators of the nursing homes said in a statement issued by Preferred Care Inc. that the bankruptcy filings will allow them to stay in business, pay employees and vendors and care for 2,900 residents while seeking to restructure. Preferred Care blamed the bankruptcies on 163 personal injury cases the company is defending, most of which have been lodged by the Wilkes & McHugh law firm of Tampa, Fla., according to court records. In its filing in the U.S. Bankruptcy Court in the Northern District of Texas, a $28 million judgment in favor of the family of a man who was injured in one of its nursing facilities in Kentucky was listed as its largest claimant. Read more. 

For more on hospital and health care insolvencies, be sure to pick up a copy of the ABI Health Care Insolvency Manual, Third Edition from the ABI Bookstore. 

A U.S. bankruptcy judge refused to allow a reorganization plan by Breitburn Energy Partners LP to proceed for a creditor vote for the time being, an unusual move for a large chapter 11 case, Reuters. Breitburn, a Los Angeles-based oil and gas explorer and producer, wants to exit bankruptcy by transferring prized assets in the Permian Basin to creditors over the objection of opponents who have called for an auction of reserves. Bankruptcy Judge Stuart Bernstein reviewed the disclosures in the plan at a hearing in Manhattan yesterday but delayed a decision until after a hearing next week. Disclosure statement hearings are normally a formality to clear the way for creditors to vote on a reorganization plan. By delaying a decision on the disclosures, Judge Bernstein indicated he may have qualms about Breitburn’s plan. The company has proposed giving holders of unsecured bonds the opportunity to buy their share of stock in a company to be created with the Permian assets, through a process known as a rights offering. The stock sale would be guaranteed or backstopped by a group of creditors led by the investment firms Elliott Management Corp and WL Ross & Co., founded by U.S. Commerce Secretary Wilbur Ross and now owned by Invesco Ltd. The bondholders guaranteeing the stock sale would receive the opportunity to buy at least 40 percent of the stock and would receive additional stock as a fee. Unsecured creditors and equity investors oppose the plan, which they argue undervalues the Permian assets. They have pressed the company to conduct an open auction which they say would generate a market-tested value of those reserves.

A bankruptcy lawyer alleges that more than 100 pieces of civil rights memorabilia, Motown and African-American history have disappeared and Rosa Parks’ lawyer should be jailed until the items are found, the Detroit News reported. The allegation emerged in the bankruptcy case of prominent Detroit attorney Gregory Reed, a case that features claims about mansions with secret rooms, crates crammed full of historical objects and missing artifacts. The list of missing items includes iron slave shackles, an early draft of a Parks book, a century-old book signed by educator Booker T. Washington and gold records awarded to Motown artists including The Marvelettes. Reed should be jailed until he reveals the location of the missing property and returns the items, a lawyer for bankruptcy trustee Kenneth Nathan wrote in a court filing. If the property was sold, Reed should relinquish the money, the lawyer argues. Reed also should be fined every day until he complies with court orders, according to the trustee’s legal team.

Creditors of bankrupt Takata Corp say that the parts maker owes them more than $30 billion after the automotive industry’s biggest recall over its faulty air bags — many times more than the company can repay, Reuters reported yesterday. In the biggest bankruptcy of a Japanese manufacturer, Takata sought court protection from creditors in June as costs and liabilities mounted from almost a decade of recalls and lawsuits. Its air bag inflators have been linked to at least 18 deaths and 180 injuries around the world because they can rupture and shoot metal fragments into vehicles. Takata’s creditors, including automakers such as Honda Motor Co., banks and bondholders, are seeking 3.77 trillion yen ($33.3 billion) from the supplier, mostly to cover recall costs, according to the filing outlining the company’s debt obligations, which hasn’t been made public. Takata had cash and securities worth just 78 billion yen at end-March - equivalent to just 2 percent of the sum creditors are seeking. It also had tangible assets such as buildings and machinery worth 93 billion yen, but much of these went to the company’s purchaser and the rest is needed to make replacement inflators to supply the recalls.

Officials in the Alaska Dispatch News bankruptcy case probed further into former owner Alice Rogoff’s finances at a Nov. 2 bankruptcy hearing now on a search for other assets to turn into cash for creditors, the Alaska Journal of Commerce reported yesterday. Progress on liquidating the assets not part of the $1 million sale of the ADN to the Binkley Co. has been slow due to the lack of assets to turn into cash, said attorney William Artus, who was hired to represent Nacole Jipping, the chapter 7 trustee in the case in charge of the liquidation. “The bankruptcy case doesn’t have any money or assets to turn into cash to pay creditors, but we are exploring some new areas,” Artus said after the 30-minute hearing. The hearing involved only questions between attorneys and Rogoff, as well as her former Chief Financial Officer Erin Austin. Another avenue, called the 2004 rule, will be pursued in December. That also allows a deeper look into Rogoff’s wealth and financial ledgers during her time as the owner of the company from April 2014 to September 2017.

A Medicare fraud lawsuit against skilled nursing home chain HCR Manorcare Inc. is heading to court this week without a key government witness, WSJ Pro Bankruptcy reported. Judge Claude Hilton of the U.S. District Court in Alexandria, Va., on Monday signed off on an order excluding a report and testimony from the Justice Department’s expert witness, Rebecca Clearwater. At ​a recent​ hearing, a magistrate judge ​said the government’s case relying on Clearwater’s testimony was resting on a “house of cards.” ​Magistrate Judge Theresa Buchanan concluded that Clearwater was untruthful about the existence of notes she failed to produce in time for key depositions or to include in her report supporting the government’s case. A trial is scheduled for Jan. 22, 2018.

A federal bankruptcy court judge yesterday approved a settlement that resolves a long-running series of contentious lawsuits over a failed Charlotte bus company. The agreement settles four lawsuits brought by trustee Elaine Rudisill, who has been charged with liquidating DesignLine after its 2013 bankruptcy filing. The litigation, first filed in 2015, ensnared a number of high-profile figures as defendants: retired Air Force Gen. Buster Glosson, former Charlotte Mayor Anthony Foxx and former North Carolina Gov. Jim Martin. As part of the global settlement first disclosed last month, the defendants in the suits will pay $8.25 million to the bankruptcy estate. That amount will be covered by directors’ and officers’ insurance except for $125,000 to be paid by defendant Jim Fadiman. The parties will also give up $9.1 million in unsecured claims they had made against the company.