%1

A federal judge has awarded the court-appointed trustee overseeing the liquidation of Thornburg Mortgage Inc. $45 million in his crisis-era lawsuit against Royal Bank of Canada, finding the bank shortchanged the mortgage lender when it seized and subsequently sold some of its assets, the Wall Street Journal reported on Saturday. U.S. District Judge George L. Russell III ruled on Wednesday in Baltimore that RBC Capital, the lender’s investment-banking arm, improperly sold the assets backing repurchase agreements the mortgage lender had used to fund its business. RBC seized the mortgage securities after Thornburg defaulted during the turmoil in the mortgage market in August 2007. In granting the Thornburg trustee’s motion for summary judgment, the judge said that RBC undervalued the seized mortgage-backed securities at issue by $26.3 million. With interest, Thornburg is owed $45 million in damages. Joel I. Sher, the bankruptcy trustee overseeing Thornburg’s liquidation, sued RBC Capital Markets in a breach-of-contract lawsuit over what he said were improper margin calls and the subsequent seizure and sale of $573 million in mortgage-backed securities Thornburg financed through RBC.

A Rhode Island Superior Court hearing today holds out the promise that information on how the 38 Studios loan debacle came about, as Judge Michael A. Silverstein will hear arguments on whether to release some documents long under seal in the case, the Providence Journal reported today. Those documents, possibly including depositions by former Governor Donald Carcieri and former House Speaker Gordon Fox, could go a long way toward answering the lingering questions about why state leaders decided to craft a $75-million loan guaranty in 2010 to draw the video game company from Maynard, Mass., to Providence. The company's failure in June 2012, after loan reserve funds were depleted, left state taxpayers to cover $89 million in principal and interest payments on bonds sold to fund the 38 Studios move.

The top executive at Ultimate Nutrition Inc., which makes protein powder for bodybuilders, says he destroyed millions of dollars of the shake supplement ingredients and other raw materials before putting the company into bankruptcy last year, the Wall Street Journal reported today. Executives at TD Bank N.A., which has been fighting the Connecticut company over a $13 million loan, don’t believe it. As a battle between the company and the bank escalated last fall, Chief Executive Brian Rubino says he went to Ultimate Nutrition’s warehouse and got rid of roughly 40 percent of company’s bank-monitored inventory because of its “unsaleability,” according to documents filed in U.S. Bankruptcy Court in Hartford. That move cost the company $3.8 million. Bank officials are calling for an investigation into what happened to the ingredients, speculating in recent court papers that they might have been “moved off site.” Perhaps the ingredients never existed in the first place but were used to “pump up” the company’s financial statements — a move that would have enabled Ultimate Nutrition to get access to a bigger loan, bank officials said.

Freedom Industries Inc., the company behind a chemical spill that contaminated the water supply of 300,000 West Virginians last year, will soon ask creditors to vote on its debt-payment plan after resolving an issue related to the cleanup, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Ronald Pearson on Wednesday signed off on the company's disclosure statement that will be sent to creditors along with other voting materials. All voting materials, including ballots, require bankruptcy court approval before being sent to creditors. Votes are due Sept. 28, with a final hearing on the plan scheduled to follow Oct. 2.

Baha Mar Ltd. has filed a plan outlining the way the $3.5 billion stalled resort project in the Bahamas hopes to restructure in chapter 11 ahead of a hearing today to dismiss its U.S. bankruptcy case, the Wall Street Journal reported today. The structure of the proposed plan swaps the ownership of Baha Mar for new financing, meaning whoever finances the project will end up owning the Bahamian resort, a key driver of the island nation’s economy. The plan also issues replacement debt to the resort’s current lender and unsecured creditors. So far, the project has been largely funded by China’s Export-Import Bank, which is already owed $2.4 billion. However, the new round of financing in Baha Mar’s proposal is theoretical at this point, with no lender or amount named in court documents. Baha Mar has estimated that it will require at least $300 million to complete the project, and previous negotiations included the Export-Import Bank of China and Baha Mar chairman Sarkis Izmirlian each putting forth a piece of the financing. Another proposal had the bank teaming up with the project’s contractor, China Construction America Inc., to fund the completion. No deal was reached during those negotiations.

A proposed multi-state settlement that could help consumers who bought RadioShack gift cards get their money back is awaiting bankruptcy court approval, according to the Pennsylvania Attorney General's Office, PennLive.com reported yesterday. The proposed settlement, which the office says is supported by attorneys general from at least five other states, would apply to consumers nationwide, and would not impose any minimum dollar threshold for consumer claims related to unredeemed gift cards. The settlement would give priority status to claims in RadioShack’s bankruptcy case related to gift cards purchased by consumers.

U.S. District Judge Shira A. Scheindlin yesterday said that Caesars Entertainment Corp. and a group of bondholders should prepare for a trial in a lawsuit over Caesars’ guarantees of billions of dollars of its operating unit’s debt, the Wall Street Journal reported today. Judge Scheindlin said that a dispute exists as to whether a series of asset-shuffling deals last year constituted an out-of-court debt reorganization that harmed the holders of more than $6 billion in bond debt issued by Caesars Entertainment Operating Co. Bondholder trustees BOKF NA and UMB Bank NA had asked the judge to rule on a discrete issue in the litigation: whether the alleged release of Caesars’ guarantees of its subsidiary’s debt violated the Trust Indenture Act of 1939, legislation created to protect bondholders. The bondholders had sought the ruling as part of their broader effort to force Caesars to honor the guarantees. Caesars disputes that it is on the hook and has warned that a ruling otherwise would likely cause it to follow the unit into chapter 11 protection.

Unsecured creditors have requested a bankruptcy court’s approval to begin a wide-ranging investigation into Sabine Oil & Gas Corp.’s merger with Forest Oil Corp. last year, a deal they have called “disastrous,” the Wall Street Journal reported today. The unsecured creditors’ committee said in court papers on Tuesday that the sheer size of the lawsuits that could stem from the investigation warrants “a prompt start and energetic prosecution.” The committee has sought the examination under rule 2004 of the Bankruptcy Code, which allows for investigations of issues that affect the administration of a bankruptcy case, including the debtor’s financial condition and operations.

Relativity Media LLC, the troubled maker of films including “The Fighter” and “Act of Valor,” will gain court permission to sell itself in an auction to begin with a $250 million bid by some of its pre-bankruptcy lenders, Bloomberg News reported yesterday. Bankruptcy Judge Michael Wiles said yesterday that he was preparing to approve the company’s sale request with some alterations. A court fight had pitted Ryan Kavanaugh’s film studio and senior debt holders against a more junior debt holder that had objected. Anchorage Capital Group LLC and Luxor Capital Group LP, both pre-existing lenders to Relativity through a senior term loan, are backing the $250 million offer.

Bankruptcy Judge Christopher Sontchi ruled Tuesday it was time to move towards an end in the 18-month-old Energy Future Holdings bankruptcy, the Dallas Morning News reported yesterday. A confirmation hearing has been scheduled for Nov. 3, potentially setting the stage for Texas’ largest power company to exit bankruptcy by spring 2016. The former TXU Corp. filed for chapter 11 protection last year, citing a decline in Texas’ wholesale power market and debts taken on in a $45 billion leveraged buyout led by private equity firms KKR & Co. and TPG in 2007. In court Tuesday, Energy Future’s attorney argued that they were continuing to work with opposing creditors groups but it was imperative to put negotiations on a fixed timetable.