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As global economic turmoil pushes more companies to the brink of insolvency, competition is intensifying among distressed-debt investors to safeguard their investments by funding the businesses through bankruptcy, Bloomberg News reported yesterday. In recent months, some of the world’s savviest distressed investors — from Oaktree Capital Management LP to Silver Point Capital LP to Cerberus Capital Management LP — have competed to provide capital to help fund companies during their bankruptcy proceedings through restructuring financing or debtor-in-possession (DIP) loans. And they’re increasingly willing to go to financial extremes to get these deals done. Molycorp Inc. is the latest troubled company to have its creditors battling over DIP debt. Oaktree currently has the senior position in its bankruptcy proceeding with a loan paying 14 percent. But holders of the rare-earths miner’s first-lien bonds, led by JHL Capital Group LLC, are offering a new loan to replace Oaktree’s that would pay just 3 percent. They’re willing to accept such a cheap rate because, in return, they would gain more control of the company as it pursues an asset sale. Read more. 

Take an in-depth look at issues related to debtor-in-possession financing with ABI’s Debtor-in-Possession Financing: Funding a Chapter 11 Case. 

Arch Coal Inc. is huddling with creditors over ways to rework its $5.1 billion debt load, after an out-of-court restructuring effort fell through, the Wall Street Journal reported today. The nation’s second-largest coal producer has been trying to avoid a bankruptcy filing through a debt swap with bondholders. The company said yesterday that it is abandoning the effort after senior lenders blocked the swap and a New York court refused to intervene. Arch appealed the ruling by Justice Saliann Scarpulla of the New York State Supreme Court. However, Arch’s bond exchange offer expired this week and, rather than trying to extend the timeline, Arch accepted the hand it had been dealt by the courts and yesterday announced the exchange offer was off the table.

Oil and gas driller RAAM Global Energy Co. filed for bankruptcy protection, blaming natural gas prices that rapidly declined as executives dealt with an oil-field collapse in Texas in 2013 that damaged four wells, Dow Jones Daily Bankruptcy Review reported today. Lawyers who put RAAM Global into bankruptcy protection on Monday said that they are looking for buyers to take over the Houston-area company, which invested more than $1.5 billion in its oil and gas projects in recent decades. As of last month, the company projected that 8.57 billion barrels worth of oil and natural gas reserves are located in the underground pockets, located mostly in the Gulf of Mexico, where it can drill. Read more. (Subscription required.) 

Attending ABI’s Professional Development Program today in Chicago? Oil and gas industry bankruptcies will be the focus of one of the panel sessions. 

Looking for a good guide to navigate oil and gas bankruptcies? Pick up a copy of ABI’s When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy. 

Potential bidders for CEOC, a casino-operating unit of Caesars Entertainment would be wading into the middle of a costly and complicated bankruptcy, and they note that Caesars has left key assets — including a crucial piece of its big-data customer loyalty program — out of the package, according to a Reuters commentary yesterday. Analysts and some junior creditors have suggested that Caesars isn't serious about selling its CEOC operating unit and expressed doubt that the offering will attract any bidders. In court documents, the operating unit itself noted that the bidding process "may not result in any offers" and that if there is a successful bid "there is no guarantee that the transaction will close." One major factor behind buyers' skepticism about Caesars' proposed sale, designed to test CEOC's value under a plan to emerge from its $18 billion bankruptcy, is that the operating unit lacks clear control of its Total Rewards loyalty program, analysts and industry players said. The program manages sought-after information on its 45 million members' spending habits, and it instantly adds value to any casino brought into the program. Under a complex operating structure, CEOC owns Total Rewards. But a separate, non-bankrupt unit called Caesars Enterprise Services controls the licensing agreement that channels business between casinos putting that piece of the program out of reach of bidders for the casino operating unit. Read more. 

For further analysis of valuation in bankruptcy, be sure to pick up a copy of ABI’s A Practical Guide to Bankruptcy Valuation. 

Invention startup Quirky Inc. will need to change some of the terms of a $1.6 million bonus package for four top executives before a bankruptcy judge will sign off on it, but the company did obtain approval to sell the company's assets during an auction next month, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Martin Glenn said during a hearing on Friday that he would be willing to approve the first piece of the bonus plan, which pays out 33 percent, or roughly $430,000 of the $1.6 million package, to the executives for having secured a lead bidder. But Judge Glenn said that the second milestone, which provides 50 percent of the package if the executives line up a competing bidder, would result in a net loss to Quirky's bankruptcy estate cannot be approved. During the hearing, the judge explained that the executives would receive an additional $650,000 roughly in aggregate for lining up a bid that was only worth an additional $200,000 to the estate. Lawyers for Quirky said they would rework that threshold and present a new package for the judge's consideration by today.

Alpha Natural Resources is selling a collection of closed coal mines as it revamps its business in bankruptcy, the Wall Street Journal reported on Saturday. At least 16 idled mines in West Virginia, Kentucky, Tennessee and Illinois are being put up for sale in Alpha’s chapter 11 bankruptcy proceeding, which began in August. The company has set a Jan. 20, 2016, target date for bids and would like to seek a bankruptcy judge’s approval for sales by February, according to papers filed on Thursday in the U.S. Bankruptcy Court in Richmond, Va. One of the country’s largest coal producers, Bristol, Va.-based Alpha picked up a lot of debt in the 2011 acquisition of Massey Energy. It reported more than $7 billion in liabilities in its bankruptcy papers. The figure includes nearly $2 billion in secured debt and more than $2 billion in unsecured bond debt. Proposed sale procedures are scheduled for a hearing Nov. 5, court papers say.