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Specialty chemical manufacturer Vertellus Specialties Inc. placed its U.S. operations under chapter 11 bankruptcy protection yesterday and said that its term loan lenders agreed to open the bidding at an auction for most of its business, Dow Jones Newswires reported. A court-supervised sale is the "most efficient means of creating a sustainable financial structure for our company," President and Chief Executive Richard Preziotti said in a release. The bankruptcy filing followed downgrades from ratings firms and a missed payment. Moody's cut Vertellus's credit rating in February, citing "significant earnings deterioration" in its agricultural section as well as a growing risk of environmental liabilities and increased competition from China. Vertellus has lined up $110 million in financing to maintain operations as usual while it goes through the sale process. The money is coming from existing lenders including Black Diamond Capital Management, BlackRock, BlueBay Asset Management, Brightwood Capital Advisors and TPG Special Situations Partners.

Takata Corp. has ruled out using bankruptcy as a way of mitigating liabilities from its record air-bag recalls and is instead seeking buyers that could take a controlling stake and carry the company through its crisis, Bloomberg News reported today. Lazard Ltd., Takata’s financial adviser, will meet manufacturers as well as financial firms with the aim to find buyers by the fall. Takata’s plan is to remain listed and maintain its core seat-belt, air bag and steering wheel businesses, while selling off non-core operations. Any Takata suitor will be betting it can still make a return even after resolving claims from automakers, which until now have shouldered the vast majority of the costs of replacing air bags tied to the auto industry’s unprecedented safety crisis. Recalls of the devices, which can deploy with too much force and spray metal and plastic at passengers, are expanding by as much as 40 million units in the U.S., after 13 fatalities worldwide.

A bankruptcy judge on Friday delivered a defeat to Netflix Inc., which has fought for the right to release two films produced by Relativity Media LLC on its streaming platform ahead of their expected theatrical release, the Wall Street Journal reported on Saturday. Bankruptcy Judge Michael Wiles issued an order forbidding Netflix to release the films, saying a premature debut of the movies could prove “devastating” for the Hollywood studio that he released from chapter 11 earlier this year. Relativity’s fragile reorganization plan is dependent upon the theatrical release of its most anticipated films: “Masterminds,” a comedy starring Zach Galifianakis and Kristen Wiig, and “The Disappointments Room,” a horror film starring Kate Beckinsale. “It is my responsibility to ensure the plan I approved is carried out,” the judge said in court Friday. Allowing Netflix to proceed “would threaten the bankruptcy process…with devastating consequences to the plan and distributions” to creditors.

Emerald Oil Inc. snagged a $73 million bid from affiliates of institutional investor Crestline Management LP and private-equity firm Sole Source Capital LLC, setting the floor ahead of a July auction, the Wall Street Journal reported on Saturday. Court papers show the company is asking Bankruptcy Judge Kevin Gross to sign off on the stalking horse, or lead, bidder so it can move forward with its sale timeline. If that timeline is approved, other bids for Emerald would be due by July 6. If needed, an auction would be held July 11. A hearing to approve the sale would take place on July 14. Emerald said in court papers that the sale of all of its oil and gas assets, including leases and mineral contracts mainly in North Dakota, will reap the best recovery for the company’s creditors. Court papers show that since filing for bankruptcy, Emerald heard from nine interested bidders, and by the end of the process received four bids before selecting Sole Source and Crestline as the lead bidder. Read more. (Subscription required.) 

Listen to a panel of experts drill down through the issues involved in an oil and gas bankruptcy at ABI's 23rd Annual Northeast Bankruptcy Conference on July 14-17 at the Omni Mount Washington Resort in Bretton Woods, N.H. Register here.

Hercules Offshore Inc. said that it planned to file for prepackaged chapter 11 protection, just six months after the rig contractor emerged from bankruptcy protection, Reuters reported on Friday. The company said that it had entered into a restructuring support agreement with some lenders, which will eventually allow it to place all its unsold assets into a wind-down vehicle until they can be sold. Hercules Offshore said that its international units would not be included in the bankruptcy filing, but would be a part of the sale process. Hercules first filed for chapter 11 protection in August 2015 and emerged from bankruptcy in November. Read more. 

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. 

As Congress heads toward its summer recess, Oaktree Capital Group LLC is urging lawmakers not to cut any back-room Washington, D.C., deals that help its opponents in a fight over Caesars Entertainment Corp. with billions of dollars at stake, Bloomberg News reported yesterday. Oaktree is expressing concern that Apollo Global Management LLC and TPG Capital Management — the private equity firms that own Caesars — will persuade lawmakers to slip a provision related to the Las Vegas-based casino operator into a broader bill, according to documents obtained by Bloomberg. Potential outlets could include Congress’s response to the Puerto Rico debt crisis or legislation to keep the Federal Aviation Administration in business ahead of a July deadline. “We understand that Caesars and its sponsors are now again asking Congress to approve the” provision, Oaktree Vice Chairman John Frank wrote in a May 18 letter to House Speaker Paul Ryan and Minority Leader Nancy Pelosi. Since no stand-alone legislation has been proposed, “we are left to assume its supporters hope, once again, to add the rider to a ‘must-pass’ bill,” he wrote. The dispute is centered on the Trust Indenture Act, a Depression-era law meant to protect the rights of bond investors. Caesars and its owners want new legislation to counter a court ruling they say distorts the act’s original intent and gives holdout bondholders too much power in restructuring talks. Read more.

Listen to an ABI podcast from December 2015 between ABI Resident Scholar Prof. Melissa Jacoby and Prof. Mark Roe of Harvard Law School talking about legislative action at the time on a proposed omnibus appropriations rider that would amend the Trust Indenture Act of 1939. The proposed language was not included after opposition by stakeholders and academics. 

Sabine Oil & Gas Corp. and Samson Resources Corp., energy producers with a combined debt of nearly $8 billion, are facing showdowns over plans to exit bankruptcy as junior creditors are demanding larger repayments, Reuters reported yesterday. Sabine and Samson were among the biggest bankruptcies in the energy sector last year, when energy prices began falling sharply. Both proposed to exit chapter 11 by swapping control of the company to their lenders in return for eliminating billions of dollars of debt. Both bankruptcy exit plans have run into objections from official committees of unsecured creditors. Sabine's creditors argued in court papers filed on Wednesday that the company improperly valued lenders' collateral, which led to a plan that is unfair to unsecured creditors. While Sabine has proposed giving unsecured creditors equity worth $6.8 million in a reorganized Sabine, the unsecured creditors argued they could be entitled to $268 million. The company's unsecured creditors are owed $1.4 billion. Samson's unsecured creditors made similar arguments in court papers filed on Tuesday in which they asked the U.S. Bankruptcy Court in Delaware to take the relatively rare step of ending the company's exclusive right to propose a plan of reorganization. The Samson committee proposed its own plan in which certain unsecured creditors would end up controlling the company through a debt-for-equity swap and a rights offering for shares in the reorganized company. Read more. 

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.

For additional insights and analysis on valuation topics, pick up a copy of ABI’s A Practical Guide to Bankruptcy Valuation. 

Takata Corp. hired investment bankers to seek a cash infusion and negotiate with automakers over the ballooning costs it faces for rupture-prone air bags linked to 11 deaths and more than 100 injuries worldwide, the Wall Street Journal reported today. Takata tapped Lazard Ltd. to help craft a restructuring plan to help it deal with what are expected to be billions of dollars in liabilities stemming from the faulty air bags, a steering committee for the Japanese company said yesterday. The company hopes to find a financial investor or automotive company to provide more cash, and reach a deal with car makers on sharing the costs of recalling nearly 70 million air bags in the U.S. alone.

Florida Modification Specialists LLC filed for chapter 11 protection on Monday in the U.S. Bankruptcy Court for the Middle District of Florida to reorganize its business, the Tampa Bay Business Journal reported today. The company’s largest creditor is the U.S. Internal Revenue Service for approximately $230,000 in unpaid federal taxes, according to the court filing. The second largest creditor is the city of Lakeland, Fla., which is owed a little over $200,000. Brentwood, Tenn.-based Matthews Aviation Consultant is third, with a claim estimated at more than $122,000. Founded in 2009, Florida Modification or FMS is located at Lakeland Linder Regional Airport and primarily customizes planes for corporate clients. FMS performs complete airframe upgrades, freighter conversions, maintenance on aviation electronic systems, installation of winglets, and aircraft appraisals.