Luxury Dining Group, owner of the Fig & Olive chain of high-end restaurants with sites in New York, Washington, D.C., and Los Angeles, filed for bankruptcy protection, blaming employee lawsuits and the pandemic, Bloomberg News reported. Majority owner Guillaume Fonkenell will work with company managers to decide which of the nine restaurants are still viable and could eventually turn a profit, according to court papers filed in New York on Friday. The company faces lawsuits related to a Salmonella outbreak that hit its Washington, D.C., and Melrose Place locations. The chapter 11 cases “were precipitated by certain accumulated losses and a series of employment related litigations, with their situation exacerbated by the COVID-19 crisis, forcing each of the restaurants to temporarily close,” the company said in court papers. With time and continued funding from Fonkenell, Fig & Olive can reorganize successfully, Luxury Dining Group said. The company has laid off more than 700 workers and currently has only 34 employees.
A federal bankruptcy judge is giving the Buffalo (N.Y.) Diocese two months to sort out a tangled web of historical insurance coverage and determine how those policies might be affected by Child Victims Act lawsuits against the diocese and parishes, schools and other Catholic entities, the Buffalo News reported. A chapter 11 filing in February immediately stopped lawsuits in state courts against the diocese from advancing as it goes through a reorganization. That same protection does not apply to parishes, which are separately incorporated and not part of the bankruptcy. But the diocese in May asked Chief Judge Carl Bucki of the U.S. Bankruptcy Court in the Western District to shield parishes, schools and other entities that also have been named as defendants in Child Victims Act cases. Diocese lawyers argued that without the stay the diocese would be drawn into those cases, forcing it to incur more legal costs and potentially leading to the depletion of insurance coverage that could be used to reach an equitable global settlement with childhood abuse victims. Diocese attorneys initially asked for a long-term injunction prohibiting Child Victims Act plaintiffs from advancing their cases in state courts until after the bankruptcy case is dismissed. They later amended the request for a stay through December, saying they need the time to clarify what insurance policies apply as the diocese tries to negotiate a settlement. Several lawyers for plaintiffs in CVA cases objected to the diocese’s motion, and an attorney for the official committee of unsecured creditors, which consists of CVA plaintiffs, characterized the move as a “flagrant attempt to absolve” parishes and other sued Catholic organizations of any liability. Ilan D. Scharf, the committee’s lawyer, urged Bucki to consider a temporary stay of no more than 60 days. In a 13-page decision on Thursday, Bucki described the character and status of the diocese and parish insurance policies as “murky, jumbled, questionable and uncertain” and said the diocese had failed to prove that litigation against parishes would necessarily deplete the diocese’s assets. But Bucki also said he was “not dismissive” of the diocese’s argument that identifying insurance coverage from decades ago is “a monumental task.” “Still we must balance investigatory challenges against the rights of victims to achieve a reasonably prompt resolution of claims involving non-debtors,” he said.
Pacific Gas & Electric, California’s largest utility, emerged from bankruptcy on Wednesday and put $5.4 billion in cash and 22.19 percent of its stock into a trust for victims of wildfires caused by the utility’s equipment, the New York Times reported. The utility exits bankruptcy as a new company with a restructured board of directors and an interim chief executive officer, Bill Smith. The chief executive who led it for much of the last year, Bill Johnson, retired on Tuesday. PG&E sought bankruptcy protection in January 2019 after accumulating an estimated $30 billion in liability for fires started by its poorly maintained equipment. One of the blazes, the 2018 Camp Fire, killed scores of people and destroyed the town of Paradise. With its bankruptcy behind it, PG&E is hoping to recast its public image. It has pledged to state lawmakers and regulators that it will improve safety and compensate wildfire victims. To that end, the company paid most of the money it owes under a $13.5 billion settlement into a trust fund that will compensate the tens of thousands of people who lost homes and businesses in wildfires. The $13.5 billion will be evenly split in cash and company stock; PG&E will deposit the remaining cash into the fund in 2021 and 2022. A trust administrator will issue payments to victims and sell the stock over time.
Lawyers for men claiming they were sexually abused by Boy Scouts of America volunteers as children said they suspect some local councils of the youth organization are moving assets out of their reach, WSJ Pro Bankruptcy reported. The suspicion surfaced in a filing Tuesday in the bankruptcy court where the national Boy Scouts group sought protection from lawsuits related to decades of alleged sexual assaults. The bankruptcy has stopped hundreds of lawsuits blaming the national organization for failing to root out sexual predators from its ranks. An injunction extended the pause on litigation to the Boy Scouts’ many local councils, which operate troops scattered across the country and hold the bulk of the organization’s wealth. The local councils aren’t themselves bankrupt but are key players in the proceedings. The land and other property they hold could help fund a settlement with victims, but the councils say they are legally separate from the Boy Scouts and don’t share the national organization’s liability.
Women who have accused Harvey Weinstein of sexual assault or say they were harassed while working at his former film studio will be entitled to payments from a nearly $19 million fund being created to compensate them, months after the former Hollywood producer was convicted of sex crimes, the Wall Street Journal reported. Money for the fund is coming from insurance as part of a settlement resolving civil lawsuits including a proposed class action against Weinstein and a separate civil-rights suit brought by the New York attorney general’s office. That lawsuit accuses Weinstein Co.’s former executives and board members of failing to protect employees from a hostile work environment and its namesake chairman’s sexual misconduct. A New York jury in February found Weinstein guilty of first-degree criminal sexual act and third-degree rape charges, resulting in a 23-year prison sentence. He faces criminal prosecution on similar allegations in Los Angeles. The settlement deal must be approved by a U.S. bankruptcy judge in Wilmington, Del., where Weinstein Co. is being liquidated. The product of more than a year of on-and-off negotiations, the agreement also requires approval from a federal judge in New York, where the class-action lawsuit was filed.
Quorum Health Corp. won a bankruptcy judge’s approval to exit bankruptcy with its debt cut by $500 million, beating back a hedge-fund shareholder that said the hospital operator had deliberately undervalued itself, WSJ Pro Bankruptcy reported. Judge Karen Owens of the U.S. Bankruptcy Court in Wilmington, Del., indicated she would confirm the company’s chapter 11 exit strategy after holding a trial that centered around Quorum’s valuation and the federal coronavirus relief dollars it has received. Hedge fund Mudrick Capital Management LP, which owns a 15 percent stake in Quorum, argued that the company wasn’t justified in wiping out equity and handing control to bondholders, given its infusion of government aid. Mudrick also argued that the company acted in bad faith, saying that Quorum understated what it would get in federal grants, hid grants that it did get, and “consistently invented” amounts it could have to return to the government. By doing so, Mudrick said, Quorum was playing down its liquidity and depressing its value to leave shareholders out of the money. Under the chapter 11 plan, bondholders that include Davidson Kempner Capital Management LP and GoldenTree Asset Management LP are in line to take over the company when it leaves bankruptcy.
A plan to have Chatham Asset Management take ownership of bankrupt McClatchy Co. swiftly ran into obstacles as a government agency raised concerns that the newspaper chain’s dealings with the hedge fund disadvantaged its pensioners, Bloomberg News reported. The courtroom fight, part of bankruptcy proceedings that McClatchy kicked off last week, traces back to a series of debt deals Chatham arranged in 2018. They were seen by some in the market as a clever play — if they can withstand legal scrutiny. Chatham owned the vast majority of McClatchy’s unsecured bonds in 2018 when it helped provide a new loan for the newspaper chain to extinguish those old debts. While the deal gave McClatchy more time to repay its borrowings, it was a boon for the hedge fund because it was able to trade in bonds that had been on equal footing with pension claims and other creditors for new secured debt that allowed the fund to leap-frog them in the repayment line. On Friday, the U.S. agency responsible for insuring pension plans demanded a Manhattan bankruptcy court allow time to scrutinize the deals, saying that they raise “significant concerns of possible fraudulent transfer.” “We need an opportunity to investigate,” Kimberly E. Neureiter, an attorney for the government’s Pension Benefit Guaranty Corp., told the court. McClatchy’s bankruptcy plan calls for handing ownership of the company to Chatham in exchange for extinguishing some of its debt. It’s also seeking to terminate its pension and hand control to the PBGC, which would continue paying the company’s pensioners. But the agency objected to a proposal that may give the hedge fund broad legal protections for the past deals. Bankruptcy Judge Michael E. Wiles agreed, saying there was no reason, so early, to make it harder to challenge those transactions.
PG&E Corp. has raised about $5.5 billion from a share offering and sale of equity units as the biggest U.S. power provider by customers looks to emerge from chapter 11 bankruptcy next week, Reuters reported. The company sold just over 423 million shares at $9.50 apiece to raise about $4 billion, while a separate, previously announced equity units offering raised just under $1.20 billion, giving it net proceeds after costs of around $5.15 billion. The share offering was at a 2.4% discount to the stock’s Thursday close. The fund raising took place days after a U.S. bankruptcy court approved the company’s chapter 11 reorganization plan, taking it a step closer to exiting from bankruptcy. Earlier this month, PG&E had said that it would be raising $5.75 billion from public offerings.
PG&E Corp. launched two public equity offerings totaling $5.23 billion as it prepares to exit the biggest utility bankruptcy in U.S. history, Bloomberg News reported. The company plans to raise $4 billion from a common stock offering and $1.23 billion from a separate sale of equity units, according to a statement yesterday. The offerings are expected to price this week and close on or about July 1, at which point PG&E aims to exit chapter 11. PG&E has already raised more than $13 billion in the debt markets to finance its bankruptcy, which began after its equipment sparked deadly wildfires in Northern California and saddled it with $30 billion in liabilities. PG&E’s case is the rare exception to the general rule that shareholders typically get nothing in bankruptcy. That’s because the utility’s shareholders negotiated a plan to raise billions of dollars to help pay off wildfire victims. The deal dilutes current shareholders, but it lets them keep their stakes. The equity units PG&E is offering will consist of prepaid stock-purchase contracts and an undivided beneficial ownership interest in specified zero-coupon U.S. treasury strips. Goldman Sachs & Co. and JPMorgan Chase & Co. are joint lead book-running managers for the offerings. Barclays, Citigroup Inc. and BofA Securities are acting as joint book-running managers for both the common stock and the equity units offerings.
