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Disgruntled investors, including hedge fund Aurelius Capital Management, have ignited a fresh legal battle over Nine West Holdings Inc. — a year after the retailer exited bankruptcy with different owners, a new name and less debt, Bloomberg News reported. The lawsuit is the creditors’ second case involving the footwear chain after their investments suffered losses of more than 80 percent. They sued Sycamore Partners last year, a case that was settled after Sycamore paid them $120 million to drop claims that its 2014 buyout rendered Nine West insolvent while enriching shareholders by over $1 billion. The new lawsuit target: executives at Nine West and its then-parent, Jones Group Inc., who worked with Sycamore to complete the buyout and shared in the windfall. They aren’t covered by the settlement over previous claims. “These directors and officers closed their eyes to the fact that the 2014 transaction would leave NWHI insolvent, inadequately capitalized, and unable to pay its debts,” said the complaint, filed Feb. 13 in U.S. District Court in Los Angeles. Sycamore’s takeover “enriched everyone involved except the company and its creditors.” The suit was brought by the trustee for a group of unsecured Nine West creditors and demands the payments the defendants collected, plus interest. The creditor group held junior debt at Nine West at the time of its bankruptcy and recovered as little as 12 cents on the dollar. Meanwhile, Sycamore earned a 250 percent return on its equity investment of $108 million and more than doubled its money on the entire 2014 transaction, according to calculations included in the lawsuit.

The judge overseeing PG&E Corp.’s bankruptcy opened the door to reducing government agency claims against the troubled utility to $290 million, a fraction of the billions federal authorities say they are owed, the Wall Street Journal reported. The Federal Emergency Management Agency and the California Governor’s Office of Emergency Services are seeking $3.9 billion and $2.4 billion, respectively, from San Francisco-based PG&E for services provided in the aftermath of three deadly wildfires linked to the utility’s equipment. The agencies’ claims are an obstacle to PG&E’s bankruptcy exit proposal, which includes $47 billion worth of settlements with bondholders, insurers, municipalities and fire victims. PG&E lumped government agency claims together with people and businesses affected by the fires, asking them to share in a $13.5 billion compensation trust. The agencies aren’t happy being categorized in the same group as fire victims. The utility has said that the agencies are trying to take money away from fire victims, who want the agencies’ claims expunged. At a hearing in the U.S. Bankruptcy Court in San Francisco, Michael Tye, a Justice Department lawyer, argued that FEMA must be compensated for its rebuilding, housing and repair work after the wildfires because PG&E was negligent in its upkeep of the transmission lines that sparked the wildfires. He said that PG&E has benefited from FEMA payments to fire victims and should cover those costs. Matt Hine, a lawyer representing the California agency, acknowledged that its claim and FEMA’s overlap with each other. Most of the agency’s claims are for money it owes to FEMA for repair, rebuilding and other services. Hine said all but $290 million of California’s claim is really owed to FEMA. In response, Judge Dennis Montali repeatedly raised the possibility of disallowing FEMA’s claims and only compensating the state for the portion of its claim that doesn’t overlap with FEMA’s claim. He didn’t make a final decision on the matter at the hearing.

The Supreme Court on Monday threw out a court order to seize assets belonging to the Roman Catholic archdiocese of San Juan, Puerto Rico, to pay pension benefits for Catholic school teachers, the Associated Press reported. The justices said in an unsigned opinion that a Puerto Rico court lacked the authority to issue an order to seize $4.7 million of the archdiocese’s assets to cover the pension benefits. The Supreme Court ruling does not end the fight over the benefits, which arose amid the long-running recession that led Puerto Rico’s government to declare bankruptcy and Congress to create an oversight board to help the U.S. territory deal with more than $100 billion in debts and public pension obligations. In the midst of the crisis, active and retired employees of the Catholic schools sued over claims that the archdiocese had effectively eliminated pension benefits. The justices’ ruling Monday turned on a technical legal matter — the case was briefly in the federal court system and the local court seizure order was issued before the case was returned to Puerto Rico courts. The larger undecided issue in the case is whether the archdiocese has religious protections under the Constitution that would prevent a court from interfering with its internal operations. Read more. 

For further analysis of the decision, be sure to read Rochelle's Daily Wire. 

A bankruptcy judge gave a green light to Southland Royalty Co. to continue drawing on $70 million in chapter 11 financing that the oil-and-gas business needs to keep operating and to pay its bills, WSJ Pro Bankruptcy reported. Bankruptcy Judge Karen Owens in Wilmington, Del., yesterday approved Southland’s request at a hearing. The Fort Worth, Texas-based company filed for bankruptcy in January, becoming one of the latest energy companies to fall victim to a prolonged period of lower commodity prices weighing on shale drillers. The unsecured creditors' committee last week objected to the proposed financing, but heading into Wednesday’s hearing they had resolved their differences over the matter. The bankruptcy financing includes $35 million in new loans. The rest is a dollar-for-dollar rollup of pre-bankruptcy loans into the chapter 11 financing, a move that further improves the standing of those creditors. The unsecured creditors committee had complained that the financing package “aggressively” restricted its ability to investigate the secured lenders’ liens and claims. The committee had sought, among other things, at least $200,000 to investigate the interests of the secured lenders. Southland’s initial proposed budget offered only $50,000. The committee is now getting up to $100,000. The committee also objected that it wasn’t always getting the same periodic financial reports that the lender group was receiving. The revised financing package spells out that Southland will now provide the committee with, for example, a 13-week budget. Members of the unsecured creditors committee are Halliburton Energy Services Inc., F&S Trucking Inc., Taylor Construction Inc., Terry R. Pitt Construction Inc. and White River Royalties LLC.

Drugmaker Mallinckrodt PLC said on Tuesday that it reached a settlement worth more than $1.6 billion with 47 states and U.S. territories and lawyers representing thousands of local governments to settle liabilities stemming from the opioid addiction crisis, WSJ Pro Bankruptcy reported. Under the settlement proposal, state and local governments would receive $1.6 billion of payments, phased out over eight years, and warrants for a minority stake in the company. Mallinckrodt’s generics subsidiaries would file for chapter 11 to implement the proposed deal, though the Ireland-based parent will stay out of bankruptcy. If approved in bankruptcy court, the settlement would bring closure to Mallinckrodt’s share of thousands of lawsuits filed against the company by cities, counties and Native American tribes surrounding the public costs of opioid abuse. The settlement eliminates the possibility of a bankruptcy filing by Mallinckrodt itself, which had been a concern among market investors, J.P. Morgan Chase & Co. analyst Chris Schott said in a research note yesterday.

California power producer PG&E Corp said yesterday that it plans to raise up to $25.68 billion by selling securities, as it works its way out of the bankruptcy process, Reuters reported. The company is restructuring amid chapter 11 proceedings, while trying to bounce back from the negative publicity after its equipment in California was blamed for the deadly wildfires. PG&E needs to exit bankruptcy by June 30 to participate in a state-backed fund that would help power utilities cushion the hit from wildfires. 

Drugmaker Mallinckrodt PLC is finalizing a settlement proposal worth at least $1.6 billion that would place its U.S. generic-drug business into bankruptcy to address coming debt maturities and liabilities stemming from the opioid crisis, WSJ Pro Bankruptcy reported. The Ireland-based drugmaker is close to a proposed deal that includes a chapter 11 filing covering its U.S. generics business and a resolution of claims from hundreds of state and local governments stemming from the cost of combating opioid addiction. The settlement offers $1.6 billion to state and local governments over eight years and warrants to buy an equity stake in Mallinckrodt. The proposal, which would also require court approval, could be announced as soon as today. Mallinckrodt, one of the largest opioid makers in the U.S., previously acknowledged the risk of a bankruptcy over allegations it and other drugmakers misrepresented the health risks associated with the powerful painkillers they made.