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When hedge-fund manager Dan Kamensky found out a prominent investment bank might challenge him for a piece of Neiman Marcus Group Ltd.’s crown-jewel asset, he set about eliminating his competition, a government inquiry found, the WSJ Pro Bankruptcy reported. Within 15 minutes of learning of the competing bid, he was pressuring the investment bank, Jefferies LLC, to stand down, according to Justice Department watchdogs who looked into his actions. “DO NOT SEND IN A BID,” he wrote in a chat message to an unnamed Jefferies employee, the government officials wrote in an investigative report submitted on Wednesday in Neiman’s chapter 11 proceedings. The report found “substantial evidence” that Kamensky, founder of Marble Ridge Capital LP, breached his fiduciary duties by using his pull with Jefferies to dissuade it from bidding for shares of MyTheresa, Neiman’s thriving e-commerce business. When Jefferies disclosed its conversations with Mr. Kamensky, he urged it to back up his preferred version of events that the episode was a misunderstanding, unaware the phone call was being taped, according to the report. The Justice Department’s Office of the U.S. Trustee, which monitors the nation’s bankruptcy courts, said the report is preliminary and Mr. Kamensky hasn’t had the chance to respond or rebut the conclusions. The report suggested a formal proceeding in open court to determine any next steps. Read more. 

Distressed investment firm Marble Ridge Capital LP plans to wind down its funds after a government report called into question the actions of its managing partner, Dan Kamensky, during the Neiman Marcus Group bankruptcy, the firm said yesterday, Reuters reported. “After much consideration, and in light of the operating environment, we have made the difficult decision to commence an orderly wind-down of the Marble Ridge funds,” the firm told clients in a letter seen by Reuters. “Marble Ridge will manage the liquidation in the best interests of our investors and with the objective of protecting and enhancing the value of the funds’ assets.” Kamensky admitted a “grave mistake” to the Department of Justice’s U.S. Trustee division, which oversees bankruptcies, in interfering with a potential bid for certain assets of the luxury retailer. Read more.

Lenders took aim at Valaris PLC’s $7.1 billion restructuring plan at the London-based offshore contractor’s debut chapter 11 hearing, WSJ Pro Bankruptcy reported. Representatives for Valaris’s revolving credit lender along with shareholders told Judge Marvin Isgur at a hearing yesterday in U.S. Bankruptcy Court in Houston that they planned to file objections to the company’s restructuring plan. Valaris, which filed for bankruptcy on Wednesday, says that the proposed restructuring agreement has the backing of about half of its bondholders. The plan would reduce its liabilities by more than 90 percent, leaving it with what it says would be one of the industry’s healthiest balance sheets. The offshore oil services contractor, which owns and operates a fleet of drilling rigs and ships, brought in more than $2 billion in revenue last year. It received approval yesterday for various routine motions, including permission to honor its customer contracts. The company said its contracts are expected to generate about $1.4 billion in revenue. It has about 60 rigs and operates in nearly every major offshore oil and gas market.

Pending approval from the U.S. Bankruptcy Court, Astria Health and the Washington State Nurses Association (WSNA) have settled a complaint over the closure of Regional hospital, the Yakima (Wash.) Herald reported. Earlier this year, WSNA filed a complaint against Astria Health, stating that it violated several state and federal laws when it closed Astria Regional Medical Center in Yakima in January. Astria filed for chapter 11 protection in May 2019. In April, Judge Whitman L. Holt agreed to proceed with part of the complaint related to whether Astria Health had violated the federal WARN Act by not abiding by the 60-day notice the law requires. The labor law requires employers with 100 or more employees to provide 60 days advance notice about plant closings and mass layoffs. Holt dismissed the part of the complaint where WSNA asserted that Astria violated the Washington State Payment and Collection Act and the Washington Wage Rebate Act by not quickly paying the nurses for paid time off. In the joint motion filed late last month, WSNA and Astria Health wrote that all parties agreed it was best to settle rather than go through a lengthy and costly process in court. Under the agreement, former Astria Regional Medical Center nurses represented by WSNA would receive a share of a settlement payment from Astria Health. The two parties declined to reveal the exact amount of the payment.

A bankruptcy judge in Alabama has shut down a bid by families of Sandy Hook school shooting victims for an official voice in the bankruptcy of weapons maker Remington Outdoor Co., WSJ Pro Bankruptcy reported. For years, Remington has been defending itself against a lawsuit over its marketing of the weapon used in that December 2012 shooting, but lawyers for the victims have said that the company’s bankruptcy could be the end of the road. A Remington-made Bushmaster Model XM15-E2S was used in the Sandy Hook school shooting, where 20 first-graders and six educators were killed in about 11 minutes. “It’s a story that is told over and over about what happened to the children at that school. My heart bleeds for them,” Judge Clifton Jessup said at a hearing yesterday in the U.S. Bankruptcy Court in Alabama. However, in bankruptcy court, the Sandy Hook victims merely have a claim, the judge said. He turned down their request for a committee to represent people who have been suing the weapons maker during its second bankruptcy, including many that just found out Remington had filed for chapter 11 protection. Until recently, the Sandy Hook plaintiffs “were the only ones who knew what was going on,” said Melissa Larsen, lawyer for the family of a 16-year-old allegedly killed as the result of a defective Remington-made weapon. The company filed for chapter 11 protection July 27, and none of the people who have been suing it made the list of creditors filed at the start of the case, Larsen noted. Other plaintiffs’ lawyers just received the notice of the bankruptcy, which could wipe out their lawsuits, as well as the one the Sandy Hook plaintiffs have been pursuing. Remington said cash was so tight, it had to return to bankruptcy, and it can’t afford to reorganize. The chapter 11 sale process allows Remington to sell its assets free and clear of claims, including the claims from families of nine people killed in the Sandy Hook shooting. Judge Jessup authorized Remington to move ahead with plans for an auction in September, over the protests of the Sandy Hook families.

Ohio's top lawyer has asked a federal court to temporarily halt payouts in a bankruptcy case involving the two nuclear plants caught up in a $60 million bribery and corruption probe, the Associated Press reported. In a filing on Monday, Republican Attorney General Dave Yost said that the arrests of then-Ohio House Speaker Larry Householder and four associates in an alleged pay-to-play scheme surrounding a bill that bailed out the Energy Harbor plants “raises concerns that the Debtor may not have entered into the bankruptcy with clean hands.” Energy Harbor is the former FirstEnergy Solutions, a one-time subsidiary of FirstEnergy Corp. The sub-company filed for chapter 11 bankruptcy in 2018, amid a mounting debt load exacerbated by the rise of competition from natural gas power in the East and Midwest. In a separate filing Monday, FirstEnergy made clear it is the government's “Company A,” accused of helping underwrite a Householder-led scheme to seize back power last year in the House and using it to force passage of the bailout bill, House Bill 6. “We are unable to predict the outcome, duration, scope, result or related costs of the investigation and related litigation and, therefore, any of these risks could impact us significantly beyond expectations," according to FirstEnergy's quarterly report. "Moreover, we are unable to predict the potential for any additional investigations, litigation or regulatory actions, any of which could exacerbate these risks or expose us to potential criminal or civil liabilities, sanctions or other remedial measures.” The federal criminal complaint refers to Energy Harbor as “Company A-1.” In a third related development, Ohio Consumers’ Counsel Bruce Weston and NOPEC, a northeast Ohio nonprofit energy aggregator, have asked the Ohio Supreme Court to reopen the regulatory decision certifying a new FirstEnergy subsidiary, FirstEnergy Advisors, as a power broker and aggregator. The subsidiary also uses the name Suvon.

U.S. states claimed they are owed $2.2 trillion to address harm from OxyContin maker Purdue Pharma LP’s alleged role in America’s opioid epidemic, accusing the drugmaker in new filings of pushing prescription painkillers on doctors and patients while playing down the risks of abuse and overdose, Reuters reported. In filings made as part of Purdue’s bankruptcy proceedings that were disclosed on Monday, the states said Purdue, backed by the wealthy Sackler family, contributed to a public health crisis that has claimed the lives of roughly 450,000 people since 1999 and caused strains on healthcare and criminal justice systems. The filings cited more than 200,000 deaths in the U.S. tied directly to prescription opioids between 1999 and 2016. In large states such as California and New York, claims alone totaled more than $192 billion and $165 billion, respectively. Forty-nine U.S. states, Washington, D.C. and various territories are making the claims. Oklahoma settled litigation with Purdue last year. Purdue filed for bankruptcy in 2019 under pressure from more than 2,600 lawsuits brought by cities, counties, states, Native American tribes, hospitals and others. The lawsuits said the company, and in some cases the Sacklers, used deceptive marketing and took other improper steps to flood communities with prescription opioids.

Citigroup Inc. sued Brigade Capital Management LP for the return of the hedge-fund manager’s share of nearly $900 million that the bank said it mistakenly paid to Revlon Inc. lenders, WSJ Pro Bankruptcy reported. Brigade “has unlawfully attempted to capitalize on the mistaken payment,” Citi said in the complaint, filed in New York federal court Monday. Brigade and other lenders have taken the position that they aren’t obligated to return the money, The Wall Street Journal reported Friday. Revlon has said that it didn’t pay the money itself. In the lawsuit, Citi said that the payment on a loan issued by Revlon in 2016 came from the bank’s own funds. Citi, in charge of collecting payments and communicating with the syndicate of lenders that provided the 2016 loan to Revlon, asked for a court order requiring Brigade to give up its share of the loan payment made last week, roughly $175 million.

A judge presiding over the longtime FirstEnergy subsidiary that is looking to become Energy Harbor put a hold on the final wave of millions of dollars in fees and expenses charged by outside law firms and consultants, the Columbus Dispatch reported. About 10 minutes before the judge handling Energy Harbor’s bankruptcy walked into his Akron courtroom on July 21, someone handed him a newspaper story about the FBI arresting Ohio House Speaker Larry Householder and others on racketeering charges that morning. Judge Alan Koschik had been poised that day to approve the final wave of millions of dollars in fees and expenses charged by outside law firms and consultants to help FirstEnergy Solutions break free of its parent company, FirstEnergy Corp., reorganize through its bankruptcy and emerge as Energy Harbor. But the news — that Householder and the others were accused of leading a $60 million corruption scheme to secure a $1 billion public bailout aimed largely at Energy Harbor’s two nuclear power plants — appears to have upended the judge’s plan, according to a transcript of court proceedings that day. After reading part of the newspaper article about Householder aloud and into the court record, Koschik put off making a decision about approving the final fees owed to 19 firms involved in the bankruptcy until he had more information about how at least one of them may have been involved in lobbying and other efforts to get House Bill 6 passed. Judge Koschik then set a new hearing, Aug. 18, to consider the fees. In the meantime, Judge Koschik said he would consult with the U.S. Attorney’s office in Cincinnati handling the corruption case to determine how best to proceed.

A group of lenders to Ascena Retail Group Inc., owner of the Ann Taylor and Lane Bryant clothing chains, is objecting to the company’s plan for a rescue financing package to see it through bankruptcy, Bloomberg News reported. The group is working with law firm King & Spalding as it resists a debt proposal put forward by another set of term loan holders, said the people, who asked not to be identified discussing a private matter. The objecting group includes Z Capital Credit Partners, Marathon Asset Management and Man GLG, the people said. It’s the latest in a series of creditor brawls that have broken out as the pandemic triggers a wave of bankruptcies. Rising corporate distress is pitting beleaguered companies, their sponsors and lenders against each other in fights many say are uglier, dirtier and more vicious than ever before. In the case of Ascena, the objection relates to the debtor-in-possession loan proposed as part of a restructuring support agreement when the company filed for bankruptcy in July. The RSA had the support of 68 percent of the term loan lenders and the DIP includes $150 million of new money, though creditors had to hold at least $20 million to be part of the group.