%1

West Virginia's environmental regulator sued Alpha Natural Resources Inc.’s former management on allegations of fraud on Wednesday, saying that top executives should be held accountable for an unusual $100 million funding gap that has emerged just three months after the U.S. coal producer exited bankruptcy, Reuters reported yesterday. The lawsuit accused six senior executives including CEO Kevin Crutchfield of making misleading financial projections about Alpha so that its bankruptcy plan would get court approval. After the plan was approved in July, the executives joined the management team of Contura Energy Inc, which bought some of Alpha's most productive mines. "In knowingly making or allowing to be made, false and misleading projections to obtain confirmation of (Alpha's) chapter 11 plan, each of the named individual defendants committed a fraud upon this court," the West Virginia Department of Environmental Protection (DEP) said in the lawsuit.

Parting company with decisions from New York, the Third Circuit in Philadelphia reversed the lower courts in Delaware and ruled that so-called make-whole premiums must be paid to bondholders, at least when prepayment is voluntary in chapter 11 and the language of the indenture is not to the contrary, according to an analysis today in Rochelle’s Daily Wire. In a Nov. 17 decision in the wake of the reorganization of electric energy giant Energy Future Holdings Corp., the Third Circuit distinguished a Second Circuit decision and eviscerated a New York bankruptcy court opinion that favored large corporate debtors by holding that make-whole premiums are not owing if the debt was automatically accelerated by a bankruptcy filing. Immediately after the chapter 11 filing in Delaware, Energy Future refinanced the debt with court approval, leaving open the question of whether make-whole premiums were owing. Later, the bankruptcy court ruled that the premiums were not owing. The decisions by the bankruptcy court were upheld this year by a district judge in Delaware. Read more. 

Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail! 

Dozens of former writers and editors at Gawker will receive a legal shield designed to protect them from lawsuits arising from stories they wrote for the entertainment and gossip website in return for backing the company’s liquidation plan, the Wall Street Journal reported today. Gawker and its sister sites had been the focus of a series of damaging lawsuits over posts it had published. One of those stories, which featured a sex tape involving former professional wrestler Hulk Hogan, resulted in a $140 million judgment that ultimately forced the company into bankruptcy. The mechanics of the arrangement with former editorial workers are laid out in Gawker Media Group Inc.’s proposed chapter 11 plan to pay its creditors including Hulk Hogan, whose real name is Terry Bollea. The arrangement, according to the court-filed plan, would allow the team of legal professionals now overseeing the Gawker estate to resolve indemnification claims brought in the bankruptcy on behalf of 62 writers, editors, freelance contributors and former officers and move a step closer to winding down the company’s affairs and, ultimately, distributing assets to creditors.

Troubled hedge fund Platinum Partners is the focus of another investigation. Shareholders of Implant Sciences Corp., one of Platinum’s investments, is calling for the firm to open its books about its dealings with the company, which filed for bankruptcy last month, the Wall Street Journal reported today. Shareholders of Implant, a Massachusetts company that makes and sells high-tech detector systems and devices that trace amounts of explosives and drugs, said in a court filing on Tuesday that the company’s primary source of debt was a series of bonds issued to a family of funds managed by Platinum. Court papers show the bonds were allowed to be converted into equity interests. Implant is said to be a major position in Platinum funds. Shareholders are requesting documents from Platinum and its affiliated funds for a deeper look into Implant’s financial position, management and debt before the bankruptcy filing.

A federal bankruptcy judge has temporarily disallowed the state of Minnesota’s attempt to rescind mineral rights beneath Essar Steel Minnesota’s property in Nashwauk, Minn., the Minneapolis Star Tribune reported today. Gov. Mark Dayton (D) tried to take away mineral rights the state granted to Essar because the company failed to live up to its promises to build a taconite mining and processing facility in Nashwauk. “A judge in the federal bankruptcy court in Delaware today issued a ruling denying Minnesota’s request to remove mineral rights from Essar’s bankruptcy,” Minnesota Department of Natural Resources spokesman Chris Niskanen said Tuesday. The order is temporary, Niskanen explained. It gives Essar until February to prove to the judge that it can put together a financial plan that will let it finish the Nashwauk project while also paying off creditors.

Creditors helping Linn Energy LLC raise $530 million in fresh capital to fund its restructuring stand to collect more than $20 million in fees for their efforts, Wall Street Journal Pro Bankruptcy reported yesterday. Bankruptcy Judge David R. Jones on Monday signed off on a deal between the oil and gas explorer and the bondholders that have agreed to buy unsold shares in a future sale of $530 million in new stock in the restructured company. Linn previously said in court papers that the fees were necessary to secure the commitments from certain junior bondholders and unsecured bondholders to backstop the stock sales. The success of its restructuring and future viability would be jeopardized if this agreement fell apart, Linn warned. Linn sought chapter 11 protection in May, one of dozens of oil and gas explorers to turn to bankruptcy as commodities prices took a nosedive. Through its restructuring, the Houston company is hoping to cut more than $5.7 billion off a debt load that tops $8 billion. Read more. (Subscription required.) 

Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. Order your copy of ABI's revised and expanded When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy, Second Edition. 

A new legal dispute has stalled the final resolution of a bankruptcy case prompted by a sexual abuse case involving the Diocese of Gallup, lawyers say, the Associated Press reported yesterday. The dispute involves a new lawsuit filed by attorney Robert E. Pastor against the Sisters of the Blessed Sacrament, a religious order that founded St. Michael Indian School in Arizona. The suit claims a Navajo woman was sexually abused at the school by a Franciscan friar, <em>The Gallup Independent</em> reported. The Gallup Diocese, the Franciscans and St. Michael Mission Church have already reached a settlement agreement with another Navajo woman related to abuse. That settlement was part of the diocese’s bankruptcy case that was confirmed in June. As a result, the Diocese of Gallup, the Franciscans and St. Michael’s Church are protected parties and not named as defendants in Pastor’s lawsuit. 

The Roman Catholic Archdiocese of St. Paul and Minneapolis has offered to pay $132 million to settle hundreds of child sex abuse claims against its clergy under a revised bankruptcy reorganization plan filed in court on yesterday, Reuters reported. The archdiocese, one of 15 U.S. Catholic districts and religious orders driven to seek chapter 11 protection by the church's sex abuse scandal, said its plan would mark the second-largest such bankruptcy settlement of pedophile priest claims in America. The sum is more than double the $65 million previously offered by the archdiocese and rejected by plaintiffs. But lawyers representing the bulk of nearly 450 claims at stake in St. Paul-Minneapolis denounced the latest proposal as still far too small and accused church officials of trying to conceal their ability to pay much more. The San Diego diocese settled sex abuse claims in 2007 for a total of $198 million after filing for Chapter 11. The Los Angeles archdiocese, the nation's largest, reached a $660 million civil settlement the same year, though that was not part of a bankruptcy proceeding. Those agreements amounted to about $825,000 and $780,000 per victim, respectively, according to the watchdog website BishopAccountability.org. Spread evenly across the Twin Cities claims, each victim there stands to gain less than $300,000 under the archdiocese's amended plan, plaintiffs attorney Mike Finnegan said.