%1

A federal judge has reversed the orders of a bankruptcy court that had allowed a troubled St. Petersburg, Fla., nursing home to continue receiving Medicare and Medicaid funds, the Tampa Tribune reported today. On appeal, the U.S. District Court in Tampa ruled the bankruptcy court did not have jurisdiction to prevent federal health officials from terminating Bayou Shores SNF, operating as Rehab Center of St. Petersburg, from Medicare. The St. Petersburg facility operated under Medicare and Medicaid agreements until the Florida Agency for Health Care Administration found conditions there constituted immediate jeopardy to patient health and safety, U.S. Attorney Lee Bentley said.

Paulson & Co. is among the creditors closing in on a deal intended to salvage a bankruptcy plan that Caesars Entertainment Corp. is pushing to restructure its insolvent operating unit, Bloomberg News reported yesterday. The hedge-fund firm controlled by billionaire John Paulson along with other junior debt holders of Caesars Entertainment Operating Co. including Canyon Partners and Soros Fund Management are discussing the plan with the casino company. The deal would extract better terms for the creditors than a previous version that has failed to gather enough support. Caesars has tried for months to line up enough senior creditors to win approval of a proposal to cut lower-ranking debt, allow the parent to retain a stake in the operating unit and halt related lawsuits against its private-equity owners, Apollo Global Management and TPG Capital Management. The company, the largest owner of casinos in the U.S., pushed its biggest subsidiary into bankruptcy in January to restructure $19.9 billion of borrowings.

The U.S. government has agreed to take no near-term legal action against 40,000 former students of the bankrupt Corinthian Colleges Inc. who have defaulted on federal loans, Reuters reported yesterday. Corinthian abruptly closed its remaining 28 schools in April and left 16,000 students without classes, becoming the largest failure in for-profit higher education. The company operated more than 120 campuses at its peak. The company filed for bankruptcy in May and soon after the U.S. Department of Education announced a plan under which tens of thousands of former Corinthian students could seek relief from their federal student loans. However, a lawyer for the government told a court hearing on June 30 that fewer than 5,000 students had applied. Under Thursday's agreement, the Department of Education will suspend judicial debt collection efforts for 120 days against former Corinthian students who are in default, according to Scott Gautier, a lawyer for an official committee of students in the Corinthian bankruptcy.

Bankruptcy Judge Ronald Pearson yesterday approved a West Virginia Department of Environmental Protection deal with Freedom Industries that sets aside $2.5 million to cover the costs of a yet-to-be-designed final cleanup plan for the site of the January 2014 chemical spill that contaminated drinking water supplies for hundreds of thousands of people across the Kanawha Valley and surrounding communities, the <em>Charleston Gazette</em> reported today. Judge Pearson entered a five-page order that approved the DEP-Freedom settlement, contingent upon the filing with the court of details of the hiring of a new consultant to handle remediation work at the company’s Etowah Terminal on the Elk River, just 1.5 miles upstream from West Virginia American Water’s regional drinking water intake. At the same time, officials have confirmed that Freedom chief restructuring officer Mark Welch’s plan to dispose of contaminated soil from the site at the Charleston city landfill has been approved by both DEP and by Waste Management Inc., which operates the landfill for the city.

Energy Future Holdings Corp., the biggest power company in Texas, won a ruling yesterday in a $431 million dispute with its noteholders that should bolster its plans for emerging from bankruptcy, Reuters reported yesterday. The ruling by Bankruptcy Judge Christopher Sontchi denied noteholders an avenue to collect a "make-whole" payment from a unit of Energy Future for redeeming securities early. Energy Future redeemed first-lien notes after it filed for bankruptcy in April 2014, and some noteholders sued for the make-whole payment. In his 39-page ruling, Judge Sontchi determined that the harm to noteholders in allowing them to pursue the make-whole payment did not outweigh the harm to Energy Future. He said a ruling in favor of the noteholders could have exposed the company to similar claims from other creditors and the cost could have run to approximately $900 million.

The Chinese construction company building the unfinished $3.5 billion Baha Mar resort in the Bahamas accused the developer of mismanaging the project's design and not securing adequate financing, Reuters reported yesterday. China Construction America (CCA) has been blamed for the delays that caused the Baha Mar project to file for bankruptcy protection late last month in a Delaware court. But CCA said that the developer of the project replaced the mega resort's principal architect after construction began and had more than 1,300 change orders for construction contractors. Developer Baha Mar Ltd is run by Sarkis Izmirlian, the son of an Armenian billionaire. Construction delays, funding squabbles, lagging inspections and faulty work at the Nassau resort have led to finger pointing among Izmirlian, CCA and China's export finance bank, which bankrolled most of the project with a $2.45 billion loan.

Lehman Brothers Holdings Inc. settled a multimillion-dollar derivatives dispute involving mutual-fund giant Putnam Investments, ending litigation over a series of swap agreements, Dow Jones Daily Bankruptcy Review reported today. Lehman said in a Monday bankruptcy court filing that a unit of U.S. Bancorp, the trustee for the Putnam swaps, would pay the failed investment bank an undisclosed sum to settle the matter. The dispute was over a series of swap agreements that defaulted when Lehman collapsed into bankruptcy nearly seven years ago.

Jon Corzine and other former MF Global Holdings Ltd officials have reached a $64.5 million settlement of litigation brought by investors seeking to hold them liable for the now-defunct futures brokerage's 2011 bankruptcy, Reuters reported yesterday. The all-cash settlement with Corzine, who was MF Global's chief executive and previously New Jersey's governor, and nine other defendants resolves the last major piece of litigation by MF Global stock, bond and convertible bond investors over the company's rapid descent into chapter 11. U.S. District Judge Victor Marrero yesterday granted preliminary approval of the settlement, which was disclosed earlier in the day. He scheduled a Nov. 20 hearing to consider final approval. The class action accord would boost the investors' recovery to $204.4 million, including $74.9 million from underwriters and $65 million from the auditor PricewaterhouseCoopers.

The U.S. Supreme Court has been asked to weigh in on a dispute over whether the Roman Catholic Archdiocese of Milwaukee may shield a $55 million cemetery maintenance trust from hundreds of alleged clergy sexual-abuse victims seeking compensation, the Wall Street Journal reported today. A lawyer for the cemetery trust said yesterday that the trust filed a petition asking the Supreme Court for a final ruling on the fate of the cemetery funds. The move aims to appeal a March ruling from the U.S. Court of Appeals for the Seventh Circuit that a trust created to maintain the Archdiocese of Milwaukee’s cemeteries isn’t subject to federal laws protecting religious freedoms. If the Seventh Circuit’s ruling stands, it could help more than 500 victims of alleged sexual abuse by the archdiocese’s clergy argue that the funds should be included in the compensation they will receive as part of the archdiocese’s long-running bankruptcy. Throughout the bankruptcy, the archdiocese has argued that being forced to compensate victims with funds designated for its cemeteries would violate federal laws protecting its free exercise of religion. Victims have argued those laws don’t apply and have accused the archdiocese of funneling money to the trust to keep it out of their reach.

For more on litigation trusts, be sure to pick up a copy of ABI’s A Practitioner's Guide to Liquidation and Litigation Trusts.

Primera Energy's embattled owner Brian Alfaro remained defiant during a bankruptcy court hearing where he was under oath when he fired back against lawyers asking questions about the company's finances, the San Antonio Business Journal reported today. Alfaro appeared for a "341 creditors meeting" before Jim Rose with the U.S. Bankruptcy Trustee's Office at San Antonio's federal courthouse yesterday. Alfaro filed for chapter 11 bankruptcy on June 3, which was one day after a state district court judge put his company into receivership and under the control of San Antonio attorney Lamont Jefferson. Bankruptcy court filings show that Primera Energy owes more than $7.2 million to at least 14 creditors ranging from the bank that financed its North San Antonio headquarters to companies that provided services out in the oil field. The filings show that the company claims that it has more than $14.2 million in assets.