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Fidelity Backs Energy Future’s Bankruptcy Plan

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Energy Future Holdings Corp. took a major step forward Thursday in its drive to exit bankruptcy, when mutual fund company Fidelity Management & Research agreed to back the Dallas energy company’s chapter 11 plan, the Wall Street Journal reported today. A major holder of Energy Future debt, Fidelity will join the group attempting to buy Energy Future’s Oncor electricity transmissions business, Thomas Lauria, lawyer for advocates of the plan said at a hearing in the U.S. Bankruptcy Court in Wilmington, Del. The sale of Oncor is the centerpiece of Energy Future’s restructuring strategy. Money from the Oncor deal will be used to pay off some creditors. The opportunity to invest in a cash-producing, stable element of the Texas power infrastructure in a deal led by Hunt Consolidated Inc. has appeased other creditors. As described by Lauria, Fidelity is getting a little bit of both: cash from the buyout and a chance to invest in Oncor. The about-face by Fidelity, a former critic of Energy Future’s chapter 11 plan, could speed the end of a complicated and expensive bankruptcy proceeding.

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Colt Reorganization Could Be Voted on By Next Week

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West Hartford, Conn.-based Colt Defense could see its bankruptcy reorganization plan voted on by creditors as early as next week, the Hartford Business Journal reported today. The financially troubled gunmaker received approval of its disclosure plan for its second amended plan of reorganization in federal bankruptcy court on Tuesday. The plan, according to a statement from Colt, reflects a consensus reached among its key stakeholders, including a consortium of secured lenders, Morgan Stanley, the official unsecured creditors’ committee appointed in Colt's bankruptcy case, Sciens Capital Management and the landlord at Colt's West Hartford facility.

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Canada’s Essar Steel Algoma to Seek Bankruptcy Protection

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Steel producer Essar Steel Algoma Inc. says that it will seek bankruptcy protection as it deals with a continued slump in the price of steel, The Canadian Press reported yesterday. The company has filed requests with Canadian and U.S. courts as it seeks to restructure its long-term debt, and has raised US$200 million from a group of investors led by Deutsche Bank to fund ongoing operations. Essar Steel Algoma is the second-largest steel producer in Canada and the largest employer in Sault Ste. Marie, Ont., with close to 3,000 employees. The company is a subsidiary of India-based global conglomerate Essar Steel. In 2013, Essar Steel Algoma won a battle against organized labour when the Ontario government approved a new rule that allowed it to lower its pension contributions, which the company said had become unsustainable.
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New Windsor Aquaponic Farm's Fish to Have Day in Court

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Nearly 60,000 fish swimming at a New Windsor, N.Y., aquaponic farm that went broke could be destined for woks in Chinatown, the Times Herald-Record reported yesterday. Michael Timmons, a biology and environmental engineering professor at Cornell University, said that he suggested to the local Cornell Cooperative Extension that Sterling Bank should “wholesale the fish live to the Chinese markets.” The bank has declined to discuss its plans as it seeks to recover money it loaned to Continental Organics, which is seeking to liquidate its assets in bankruptcy court. Sterling counts the fish and equipment associated with them as secured assets. Continental valued the fish at nearly $64,000 at maturity. The fate of the tilapia will likely be sealed today, when Chief Bankruptcy Judge Cecelia G. Morris hears Sterling’s request to be relieved of caring for them. Sterling is owed $1.9 million, according to court documents. Continental owes a total of $9.7 million against assets of $2.3 million.
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Some Molycorp Creditors Cry Foul over Company's Bankruptcy Plan

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Molycorp Inc.'s bondholders and unsecured creditors are in full revolt against the rare-earths company's version of a turnaround, challenging the company's right to stay in control of its chapter 11 bankruptcy, Dow Jones Newswires reported yesterday. In court filings, lawyers for bondholders and unsecured creditors claimed that Colorado-based Molycorp has capitulated to demands from Oaktree Capital Group and abandoned its duty to steer the best course out of bankruptcy. They want to open the door to reorganization plans that would compete with the one proposed by Molycorp. The company is mothballing its California production facility and is pinning its hopes on its rare-earths processing business. Bondholders say that a "frantic" two-month sale effort is not the best way to get the value out of the business, and they have moved to terminate the period during which only Molycorp can propose a chapter 11 plan. Creditors contend that Molycorp recently agreed to a chapter 11 plan that provides for full payment to Oaktree, $514 million. Bondholders have asked for a Nov. 16 hearing to challenge Molycorp's bid to hang on to exclusive control of its bankruptcy proceeding.
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Ruling Could Expose GM to Large Verdicts in Ignition Cases

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A bankruptcy judge has ruled that people suing General Motors over faulty ignition switches can seek punitive damages, The Associated Press reported yesterday. When GM emerged from its 2009 bankruptcy, it became known as “New GM” and was shielded from liabilities of the old company that was left behind. But Judge Robert E. Gerber ruled that employees and knowledge transferred from “Old GM” to the new company, therefore plaintiffs can seek punitive damages if they can show that New GM knew of the faulty switches but covered it up. The ruling has the potential to open GM to large jury verdicts, because the company has admitted knowing about the faulty switches for a decade or more but failed to recall the cars until February 2014. In a statement, GM said that the ruling was not a victory for those suing the company. Although the court ruled that New GM could be liable for punitive damages for claims based solely on its conduct, “plaintiffs to date have not established any such independent claims against New GM,” according to a statement by GM.
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Arch May File for Bankruptcy in ‘Near Term’ as Debt Mounts

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Arch Coal Inc. said that it may file for bankruptcy in the “near term” as the company’s cash flow can’t sustain its $5.1 billion in debt, Bloomberg reported yesterday. The company is in talks with creditors over a "significant restructuring" of its balance sheet, St. Louis-based Arch said in a filing Monday with the U.S. Securities and Exchange Commission. The company said that it may file for chapter 11 relief whether or not it strikes a deal with creditors. Arch, the second-largest U.S. coal producer by volume, has been running out of options since it terminated a debt-exchange offer last month that would have enabled it to cut its debt. Coal miners are reeling from the industry’s worst slump in decades as power plants use less of the fuel. Arch posted a third-quarter net loss that widened to $93.91 a share from $4.58 a year earlier. Adjusting for one-time items, the loss was $3.38, beating the $5.70 average of 10 analysts’ estimates compiled by Bloomberg.
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Bankruptcy Judge Confirms Milwaukee Archdiocese Reorganization Plan

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U.S. Bankruptcy Judge Susan V. Kelley confirmed the Archdiocese of Milwaukee’s reorganization plan, marking a milestone in the longest-running and most contentious of the 14 Catholic church bankruptcies filed since 2004, the Milwaukee Journal Sentinel reported today. The bankruptcy plan will pay about $21 million to survivors and set up a $500,000 fund for continued therapy. Another $8 million will pay legal fees and costs of other creditors and the archdiocese's attorneys, on top of about $12 million already paid out to those lawyers. On the other side of the deal, the archdiocese, its parishes, schools and other institutions are released from liability for future lawsuits that were, or could have been, part of the chapter 11 case. The bulk of the money comes from various insurers who bought back their policies for about $11 million in return for being released from liability for any sex abuse claims. A trust fund established to care for Catholic cemeteries is contributing another $16 million. The balance will come from various other archdiocesan- and parish-funded resources, including a continuing education fund for priests.
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Milwaukee Archdiocese to Seek Formal Approval of $21M Settlement

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A federal judge may approve a tentative bankruptcy settlement Monday between the Milwaukee Catholic Archdiocese and its creditors, including hundreds of clergy abuse victims, Wisconsin Public Radio reported today. The archdiocese announced the tentative $21 million settlement this August, after having reached the agreement with a committee of creditors through the help of a private mediator earlier in the summer. Peter Isely of the Survivors Network of Those Abused by Priests said that he worries important parts of the bankruptcy case may never be fully explored. "It is not going to restore or result in a kind of trust or restoration of the church's credibility concerning this issue," said Dolan. Current Milwaukee Archbishop Jerome Listecki said in August that the proposed settlement "turns the page on a terrible part of the church's history."
 
“Diocese and Religious Order Bankruptcies” will be a featured session at the Winter Leadership Conference, happening Dec. 3-5, 2015 at the Arizona Biltmore in Phoenix, Ariz. For more information and to register, click here.

 

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Hercules Offshore Could Emerge from Bankruptcy Protection Soon

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Hercules Offshore plans to emerge from chapter 11 protection today, becoming one of the first embattled oil and gas firm to restructure since the slump began, the Houston Chronicle reported today. The embattled shallow-water rig contractor worked for months with creditors to hammer out an agreement to convert most of its corporate debt into shares. Upon emergence, Hercules’ existing debt will be terminated, new shares will be issued and it will receive funding for a new $450 million term loan. Hercules lost $95.4 million, or 59 cents per diluted share, for the three-month period ending Sept. 30. That’s deeper than the loss of $88.6 million, or 55 cents per diluted share, the company posted the same time last year. Read more.

For more information and analysis of oil and gas bankruptcies, be sure to pick up a copy of ABI’s When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy. 

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