A bankruptcy judge yesterday ordered "Real Housewives of New Jersey" star Teresa Giudice and the trustee representing her creditors into mediation, putting to rest — for now — the trustee's calls to hold Giudice in contempt of court for allegedly failing to pony up financial records, NJ.com reported yesterday. But Giudice's lawyer Anthony Rainone disputes reports that the reality show star failed to turn over the requested records. The reality star's attorneys filed an objection to the trustee's subpoena, saying it was "served for no other reason than to harass Ms. Giudice." However, Rainone says that as a condition of mandatory mediation, Giudice will turn over "certain documents" to trustee John Sywilok. Sywilok is the lawyer who successfully sought to reopen Giudice's bankruptcy proceedings earlier this year in light of her potentially lucrative legal malpractice lawsuit against the attorney who represented her in her 2009 bankruptcy proceeding. Sywilok argued that any money Giudice could receive from the malpractice suit should go to her remaining creditors, even though Giudice and her husband Joe eventually withdrew their bankruptcy claim amid allegations they hid assets and income.
Jason Mudrick, the chief investment officer at Mudrick Capital Management LP, is sending distress signals about the firm’s holdings in unsecured debt of Lightstream Resources Ltd., Bloomberg News reported today. As things stand, those holdings would be almost wiped out by a rescue plan designed to cut debt by $904 million for the Canadian oil producer. The plan pits Mudrick’s $1.3 billion hedge fund against some of the world’s biggest distressed-debt investors at Apollo Global Management LLC and Blackstone Group LP’s GSO Capital, who he said negotiated the plan privately with management to get majority ownership. Holders have also disputed restructurings this year at Cliffs Natural Resources Inc., Vanguard Natural Resources LLC and Chesapeake Energy Corp. “Larger distressed-debt funds will likely continue to be in the driver’s seat when it comes to the negotiation of plans of arrangement that suit their interests, to the detriment of the often smaller, unsecured creditors,” said Kyle Kashuba, a partner focused on financial insolvency and corporate restructuring in the Calgary office of law firm Norton Rose Fulbright.
Teen clothing chain Aeropostale Inc. is preparing to sell all its assets and may bring claims against the private equity firm that it said drove it into bankruptcy, Bloomberg News reported yesterday. The New York-based company said in court papers on July 15 that “reorganization on a standalone basis is not feasible.” Instead, it will look for a “stalking horse” to make the lead bid at an auction next month and will pass the proceeds of any sale to creditors. The retailer also said it’s still reviewing 11,000 pages of documents and depositions of key individuals that senior lender Sycamore Partners produced during a bankruptcy probe and is evaluating whether to pursue claims against the private equity firm and affiliates. Aeropostale entered bankruptcy in May, saying that Sycamore used a supplier it controlled to trigger the filing. The retailer also says that the private equity firm controls its biggest secured lender, Aero Investors LLC, an agent to a $150 million term loan.
Baltimore architecture firm Development Design Group filed to reorganize its debts in a chapter 11 bankruptcy in federal court this week, citing lingering effects from the real estate downturn in 2008, the unexpected death of its CEO last year and disputes among shareholders, the Baltimore Sun reported on Saturday. Revenue has been falling at the firm, which was known in Baltimore for its international work, so DDG faces losses of nearly $500,000 through May this year, compared to profits of about $300,000 in 2015. The firm, which employs 40 people down from a height of 125, is also embroiled in internal disputes related to transfers and bonuses involving the late CEO Ahsin Rasheed and the firm's obligations to repurchase his shares, according to the filing.
When a federal judge approved Alpha Natural Resources’ bankruptcy exit plan two weeks ago, regulators, industry leaders and environmentalists breathed a collective sigh of relief, but while the plan will keep two large coal mines operating and set the stage for a stricter approach to self-bonding, the long-term outlook for Alpha is murkier, the Casper (Wyo.) Star Tribune reported today. Alpha was the first of three large coal companies operating in Wyoming to file for bankruptcy amid one of the most difficult years for coal in three decades. Arch Coal, which operates the Black Thunder Mine, and Peabody Energy, which runs the North Antelope Rochelle Mine, soon followed. But as the first company to reach a restructuring agreement with regulators and the courts, Alpha is expected to set a precedent for the other companies. Environmentalist hope Alpha’s plan will change the state’s approach to environmental bonding. State regulators want pragmatic deals that preserve Wyoming jobs. However, in a bearish market with hesitant lenders and federal oversight, widespread uncertainty remains about the viability of Alpha’s financial plan post-bankruptcy.
A federal judge on Friday dismissed a swathe of customer claims in the nationwide litigation over General Motors Co.’s deadly ignition switch defect that triggered the recall of millions of vehicles two years ago, Bloomberg News reported. Friday’s ruling by a Manhattan federal judge comes two days after an appeals court dealt GM a blow by reviving hundreds of related cases that had been blocked by the carmaker’s 2009 trip through bankruptcy court. GM’s shifting fortunes in the case come as the Detroit-based company prepares for a third test trial over the flaw, set to start in September. GM won the first two. U.S. District Judge Jesse Furman, who has been managing hundreds of consolidated cases and is overseeing a series of test trials, targeted one of the plaintiffs’ key claims — that customers deserve financial compensation due to the reduction in resale value of the vehicles caused by damage to GM’s reputation and brand. The lawyers have argued those claims are worth as much as $10 billion, though GM disputes that figure. "The court finds that that novel theory of damages is unsound in light of persuasive precedent interpreting consumer protection law," Furman said. Furman also rejected plaintiffs’ allegations under the Racketeer Influenced and Corrupt Organizations Act, saying the claims of a coverup “fail to allege the existence of an ‘enterprise’ within the meaning” of the statute. Read more.
Read ABI Editor-at-Large Bill Rochelle’s analysis of the Second Circuit’s decision on July 13.
Don’t miss the Great Debate at ABI’s Views from the Bench conference on Oct. 7, as Judge Robert Gerber (ret.) & Goodwin Procter's William Weintraub debate whether §363 sales lawfully be free and clear of successor-liability claims. Click here to register!
