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Lenders to struggling shoe chain Nine West have watched the company’s debt soar to more than 20 times earnings, and there’s little they can do about it. Unfortunately for them, that’s exactly what they signed up for, Bloomberg News reported today. Nine West’s debt is “covenant-lite,” meaning it carries minimal protections for lenders should the company falter and little obligation to explain if something goes wrong. There are no limits on how much debt the company can hold relative to its earnings, and the only required disclosures are annual and quarterly reports, according to S&P Global Ratings analysts. The absence of specific metrics to meet or tests to pass leaves creditors with virtually no power to force answers from their borrower or changes in its behavior. It’s an example — a warning, some analysts would say — of what creditors can expect as they trade away traditional debt protections for extra yield. With past covenant-lite deals like Nine West and Weight Watchers International Inc. now causing headaches for their lenders, credit analysts and investors say that they’re seeing similarly loose terms more frequently on new loans and bonds. Just 35 percent of new leveraged loans issued in 2016’s first half had traditional covenants that require regular financial check-ups, compared with 100 percent in 2010, according to Xtract Research, which analyzes debt packages. Read more. 

Don’t miss tomorrow’s ABI Workshop “Turnaround Lending 2016” for a market update for turnaround and restructuring lending. The program will also feature two panels, addressing a wide range of topics, including regulated and compliance issues impacting lenders. Register to attend in person or for a live web stream!

Apollo Global Management and TPG Capital will give up most of their stake in Caesars Entertainment to help it emerge from chapter 11 protection, the New York Times reported today. The complicated agreement, announced yesterday, settles a long-running battle between the private equity firms and a host of creditors. Under the terms of the deal, Apollo and TPG will hand over their $950 million stake in Caesars Entertainment’s parent company, which is publicly traded and not in bankruptcy protection. (They will retain a smaller stake in Caesars Entertainment through their holdings in another affiliate.) More senior creditors will also give up some of what they are owed. Over all, creditors will own 70 percent of Caesars when it emerges from chapter 11 protection. Shareholders in the still-public parent company will own 6 percent in the newly reorganized company.

TerraForm Power Inc., a yieldco founded and controlled by bankrupt clean-energy giant SunEdison Inc., agreed to settle a lawsuit filed by billionaire David Tepper’s Appaloosa Management LP, Bloomberg News reported today. As part of the settlement, TerraForm agreed to segregate its information technology systems from SunEdison and appoint an additional independent director to its board, it said yesterday. It also said it would grant TerraForm Chief Operating Officer Thomas Studebaker — or a successor in that role — responsibility for its “ordinary course commercial operations” subject to the authority of interim Chief Executive Officer Peter Blackmore. TerraForm, an owner of operating wind and solar farms, has failed to file its 2015 annual report, and has attributed the delays to SunEdison’s struggles. SunEdison, which attributed its own delayed report to “deficient information technology controls” from its reporting system, has provided the systems its yieldcos rely on to complete reports. In January, Appaloosa sued to block SunEdison’s planned $1.9 billion purchase of rooftop solar company Vivint Solar Inc. Under the deal, TerraForm would have bought Vivint assets. The Vivint deal collapsed in March, a little more than a month before SunEdison filed for bankruptcy.

The public trust operating Pushmataha Hospital in Antlers, Okla., filed for bankruptcy on Friday, noting the hospital will remain open as its leaders work to find a long-term solution, the Oklahoman reported yesterday. The Pushmataha County-City of Antlers Hospital Authority, a public trust operating the Pushmataha Hospital, filed the voluntary petition on Friday for chapter 9 bankruptcy in U.S. Bankruptcy Court for the Eastern District of Oklahoma. Pushmataha Hospital is one of multiple rural Oklahoma hospitals that have filed for bankruptcy over the past few years. In total, seven state rural hospitals have been involved in bankruptcy reorganizations since 2011.

Caesars Entertainment Corp. said today that its major creditors supported the proposed terms of a plan to push its main operating unit out of bankruptcy, making it "optimistic" of winning approval from other creditors, Reuters reported. Caesars offered a sweetened $5 billion settlement last week to hold-out creditors of its main operating unit, Caesars Entertainment Operating Co Inc (CEOC). In exchange, creditors would have to drop their allegations of fraud prior to the unit's bankruptcy in January 2015 with $18 billion of debt. Caesars said today that the parties were working on the support agreements and amending CEOC's current reorganization plan to adopt the proposed terms they had agreed on. Caesars and its private equity owners Apollo Global Management and TPG Capital Management offered junior creditors an increased recovery of 66 cents on the dollar, the casino operator said.

A move by a pair of mall owners to rescue distressed retailer Aéropostale Inc. shows how some landlords are getting more aggressive as they seek to stem a rising tide of vacancies and store closings, the Wall Street Journal reported today. Simon Property Group and General Growth Properties Inc. were part of a consortium that last week won an auction to purchase teen-apparel retailer Aéropostale, an unusual move in which shopping-center landlords stepped in to rescue a tenant to preserve the tenant’s business. The push to take over the struggling retailer comes at a time when changing shopping habits and the growth of e-commerce are eating into traditional retailers’ revenue and in some cases forcing store closures. That, in turn, is weighing on mall operators, forcing some to reconfigure their properties and add other attractions to bring in shoppers. Simon and General Growth saw value in keeping afloat Aéropostale, which had filed for chapter 11 protection in May and later faced the threat of liquidation. Aéropostale stores potentially generate more than $1 billion in global retail sales, of which more than $800 million is from the U.S., said General Growth Chief Executive Sandeep Mathrani in a news release. Simon counts 160 Aéropostale stores and General Growth has 77 in their respective tenant portfolios. Read more. (Subscription required.) 

Does bankruptcy still work for retail? Listen to the perspectives of bankruptcy judges and top practitioners at ABI’s Views from the Bench in Washington, D.C. on October 7. Register here.

Rocked by the fall in oil and gas prices, some energy-focused private-equity funds are pleading with their investors for more time and money, the Wall Street Journal reported today. EnerVest Ltd., a Houston-based investment firm that says that it operates more U.S. oil and gas wells than any other company, is asking investors in two of its funds to put up hundreds of millions of dollars to bolster the troubled funds or risk losing the billions they have already invested. First Reserve Corp., meanwhile, is negotiating with investors to extend the life of a $7.8 billion fund from 2006 to give it time for oil prices to rebound. The fund has lost more than a third of its original value, and investors are pushing First Reserve for a break on the management fees it charges them.

Most oil producers would welcome higher crude prices, after a two-year downturn has pushed more than 100 U.S. energy companies into bankruptcy, but for some distressed drillers, a rebound could actually make things worse, MSNBC.com reported on Friday. Throughout the rout in oil prices, senior lenders have largely been able to dictate the terms of energy bankruptcy proceedings as drillers' assets have fallen in value. But when oil prices rise, so does the value of a company's reserves. That in turn can prompt so-called junior creditors to challenge restructuring plans in a bid to get a bigger piece of what's left of the pie. High oil prices "embolden junior classes to fight harder, meaning possibly fewer agreements, and hence more need for a court process to resolve the issues," said Patrick Hughes, a Denver-based bankruptcy lawyer at Haynes and Boone. Last year, creditors recovered just 21 percent of the capital they lent to 15 bankrupt oil and gas exploration and production companies with at least $100 million in debt, Moody's Investors Service reported this month. That compares with a historical average recovery rate of nearly 59 percent. Read more. 

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