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A bankruptcy judge agreed to take up a challenge by Brazos Electric Power Cooperative Inc. seeking to reduce the nearly $1.9 billion it was billed by Texas’ power-grid operator during a freak winter storm in February, sweeping aside opposition by state power regulators, WSJ Pro Bankruptcy reported. Bankruptcy Judge David Jones in Houston said that he would consider the dispute, which pits the largest power cooperative in the state against the grid operator, the Electric Reliability Council of Texas (ERCOT). The judge said at a hearing yesterday that bankruptcy court, not the state-court system, was the appropriate venue to decide how much Brazos owes. Lawyers representing Ercot’s regulator, the Public Utility Commission of Texas, had urged the judge not to hear the lawsuit. Brazos filed for bankruptcy in March after receiving billions of dollars in bills from ERCOT for a week in February when winter storm Uri knocked power plants offline and left millions of customers without electricity for days. The bills were that high because ERCOT’s electricity rates had risen to the maximum of $9,000 per megawatt hour during the storm, compared with an average of roughly $22 per megawatt hour last year.

Brazos Electric Power Cooperative Inc. yesterday largely defeated an effort by the Texas electric operator to dodge a lawsuit over a $2 billion energy bill stemming from the state's historic February storm that knocked out power for millions, Reuters reported. Bankruptcy Judge David Jones in Houston rejected arguments from the Electric Reliability Council of Texas (ERCOT) and Public Utilities Commission of Texas (PUCT) that the dispute should not be handled in bankruptcy court and that allowing it to continue would infringe upon the state’s sovereignty. ERCOT said in a response to a request for comment that it does not comment on pending litigation. Brazos, the largest and oldest electric co-op in Texas, filed for chapter 11 protection in March after it was hit with the massive bill. The bill for the seven days the storm lasted is nearly three times the co-op’s total power cost from 2020, which was $774 million, according to court papers. For several days during the storm, ERCOT set electricity prices at $9,000 per megawatt hour. In August, the co-op filed a complaint within its bankruptcy aiming to reject ERCOT's claim for the payment of the bill and substantially reduce the amount. It argues that the charges are constructively fraudulent and excessive. The Public Utilities Commission of Texas says Brazos is trying to re-price the market. Ruling in favor of the coop, Texas Assistant Attorney General Jason Binford argued at yesterday's hearing, could create a precedent that would lead to other electric providers seeking bankruptcy to offload their energy bills as well. Additionally, Binford said, Texas has a specific procedure for resolving this type of dispute. Handling the bill in bankruptcy court infringes upon the state’s sovereign immunity, he argued.

Derivatives Lehman Brothers purchased to guard against defaults on the subprime-mortgage bonds that fueled the 2008 crisis could deliver a big pay-out more than 10 years after the bank’s collapse, Bloomberg News reported. Lehman Brothers International Europe, or LBIE, a London-based subsidiary of the defunct bank, is taking bond-insurance firm Assured Guaranty Ltd. to court over decade-old claims that a swath of credit-default swaps it had bought were incorrectly settled in 2009. A trial to resolve the matter started in New York state court on Monday, with Justice Melissa Crane presiding over a virtual hearing. LBIE claims it’s owed more than $500 million because Assured failed to use market prices when it closed out a series of swaps, tallying them up instead through a method its lawyer said defied “the laws of financial physics” in court on Monday. Assured relied on stale data, flouted market norms and acted in bad faith when it settled the trades, Andrew J. Rossman of Quinn Emanuel Urquhart & Sullivan in New York said on behalf of LBIE. For its part, Assured says it followed the contracts to the letter when settling them, and the results show that it was actually Lehman on the hook — owing the bond insurer a $20.7 million termination fee after the bank folded. Rather than a head-spinning skirmish over obscure financial instruments, “at its core, it’s a simple contract dispute, and a simple case,” Lev Dassin of Cleary Gottlieb Steen & Hamilton said on behalf of Assured.

Only two companies in the world can pay their bills so reliably that they wield perfect credit ratings from both S&P and Moody’s. But one of them, Johnson & Johnson, just turned to bankruptcy court to deal with customers who argue the company’s products gave them cancer, Bloomberg News reported. The consumer products giant put a unit into bankruptcy on Thursday because it owes at least $2 billion to people who say they got sick from J&J baby powder tainted with asbestos. J&J is far from the usual user of chapter 11 protection. It’s got about $25 billion of cash and a $10 billion line of credit — easily enough to set up the proposed victims’ trust fund. Yet, J&J isn’t the first solvent company facing asbestos claims to take this route. At least three others — Georgia Pacific, Trane Technologies and Saint-Gobain Corp. — are all trying the same strategy. In a move known in legal circles as the “Texas Two-Step,” bankruptcy judges have allowed companies facing major litigation claims to scramble their corporate org charts and set up special units to house their asbestos liabilities using a business-friendly Texas law. A company first moves its corporate charter to Texas, then splits in two: one part holds its healthy assets and businesses, while the other has the asbestos claims.

Johnson & Johnson placed into bankruptcy its liabilities for tens of thousands of lawsuits linking talc-based products to cancer, betting the move will help drive a settlement of personal-injury claims that are expected to grow for decades to come, WSJ Pro Bankruptcy reported. J&J said yesterday that a corporate affiliate holding talc-related liabilities had filed for chapter 11 protection in the U.S. Bankruptcy Court in Charlotte, N.C., shifting the landscape of a yearslong legal fight over whether Johnson’s Baby Powder caused ovarian cancer, asbestos poisoning and other illnesses. The company has maintained that the powder, which it stopped selling last year, is safe and doesn’t contain asbestos. While J&J itself didn’t file for bankruptcy, it is the latest business to use chapter 11 as a mechanism to settle large numbers of lawsuits over defective products or other alleged harms and underscores the financial risks to the company from the litigation, which as of July totaled roughly 34,600 lawsuits. J&J’s defense costs have totaled nearly $1 billion in the last five years, and settlements and verdicts were another $3.5 billion, court papers show. The bankruptcy filing means J&J will now get a breathing spell from further trials, plus the chance to put both current and future talc claims behind it for good through a bankruptcy settlement. Yesterday’s filing also confirms the fears of personal-injury lawyers, who had voiced worries that J&J would put talc claims into chapter 11 to stop jury verdicts, protect assets and pressure plaintiffs to accept settlements.

Generic drugmaker Teligent Inc. filed for bankruptcy protection after the Food and Drug Administration flagged problems at the company’s manufacturing plant in Buena, N.J., that led to a recall and production halt, WSJ Pro Bankruptcy reported. The chapter 11 filing comes days after the resignations of Chief Executive Tim Sawyer and legal chief Philip Yachmetz. Teligent said Thursday that they had left the company, effective Oct. 8, without specifying a reason for their departures. Based in Iselin, N.J., the company filed for chapter 11 protection on Wednesday in the U.S. Bankruptcy Court in Wilmington, Del., with plans to sell its assets. Teligent received a warning letter from the FDA in November 2019 and worked to fix problems at the plant, but failed to get a green light from the regulator following an inspection in July and August, Chief Restructuring Officer Vladimir Kasparov said in a court filing. The company is still working to address issues raised by the FDA, he said. Mr. Kasparov said the company’s finances grew strained as it devoted resources to resolving issues raised in FDA inspections. The COVID-19 pandemic also reduced demand for Teligent’s prescription skin products as elective visits to doctors’ offices slowed, he said. Teligent was previously a contract manufacturer, producing goods for other businesses, but in 2010 it shifted to focus on making generic drugs, according to Mr. Kasparov. The company makes injectable and topical medicines, including those prescribed to treat conditions such as dermatitis, psoriasis and eczema. The company has lined up $12 million in fresh financing in the form of two bankruptcy loans from senior and junior lenders, while rolling up over $15 million in existing loans into the loan facility. Ares Capital Corp. will act as one of the agents on the bankruptcy loans, court records show.

The judge overseeing the bankruptcy case of Johnson & Johnson’s longtime talc supplier disqualified the decisive ballots cast in favor of a cancer-victim compensation plan, ruling that most of one law firm’s asbestos-injury clients had no basis to vote, WSJ Pro Bankruptcy reported. Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del., threw into doubt the chapter 11 plan put forth by the defunct supplier Imerys Talc America Inc., saying that more than 15,700 ballots cast in its favor by personal injury lawyer Thomas Bevan can’t be included in the vote totals. The judge’s decision affects a critical vote on the Imerys plan, which is designed to resolve its liability for thousands of lawsuits linking the talc it supplied for J&J baby powder products to ovarian cancer, asbestos poisoning and other ailments. Without yes votes from Mr. Bevan’s clients, the bankruptcy plan falls short of the three-quarters support from injury claimants needed to resolve current and future injury liabilities, as Imerys has proposed, according to the judge’s ruling. An Imerys spokeswoman said Wednesday it is evaluating the appropriate next steps “and will continue to work constructively with all parties to chart a path forward.” J&J, which also faces vast talc litigation, has been opposing the Imerys plan and had sought to disqualify votes submitted by Mr. Bevan’s firm and other plaintiffs’ lawyers who gave their support under what J&J alleged were suspicious circumstances. Wednesday’s ruling stated that Mr. Bevan did nothing to establish that his clients were ever exposed to allegedly dangerous talc products from Imerys that would give them an interest in the chapter 11 plan.