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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. 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. Judge Michael E. Wiles agreed, saying that there was no reason, so early, to make it harder to challenge those transactions.

Sanchez Energy Corp. is seeking to stifle a push by the bankrupt energy producer’s creditors who want to pursue litigation on the company’s behalf, WSJ Pro Bankruptcy reported. Sanchez said in court papers that the committee was seeking “to hijack and control” the proposed challenges to the collateral claims, and said that its methods aren’t supported by the bankruptcy code or case law. “The creditors’ committee has not met and cannot meet its burden of proving that the debtors unjustifiably refused to pursue such claims,” Sanchez Energy said in a court filing in the U.S. Bankruptcy Court in Houston, adding that the company is actually pursuing the claims in the context of restructuring negotiations. Unsecured creditors want the right to attack collateral claims of higher-ranking creditors to four oil-and-gas leases owned by Sanchez, alleging that they could yield “hundreds of millions of dollars.” The leases are currently claimed by the Royal Bank of Canada, the collateral trustee for Sanchez’s senior secured bondholders. The junior creditors said that shortly before Sanchez filed for bankruptcy in September, the senior bondholders tried to get the oil-and-gas leases included in their collateral package by filing “corrections” documents in nine Texas counties. The leases are valued at more than $580 million based on Sanchez’s own records.

California power producer PG&E Corp. said yesterday that it was on track to exit chapter 11 protection by June 30 and that it plans to spend about $37 billion to $41 billion over the next five years to safeguard its equipment as it posted another quarterly loss on claims related to fires, Reuters reported. The company is restructuring amid chapter 11 proceedings, trying to bounce back from the negative publicity caused after its equipment in California was blamed for deadly, historic 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. But past wildfires took its toll on the company again, with it posting another fourth-quarter loss hurt by $5 billion in charges for third party claims for fires in 2015, 2017 and 2018. The company’s net loss narrowed to $3.6 billion, or $6.84 per share, in the fourth quarter ended Dec. 31, from $6.9 billion, or $13.24 per share, a year earlier. PG&E had filed for chapter 11 protection in January 2019, citing potential liabilities in excess of $30 billion from deadly wildfires in 2017 and 2018 linked to its equipment.

The Boy Scouts of America today filed for bankruptcy protection, as one of the country’s largest youth organizations tries to endure intensifying legal pressure over accusations of childhood sexual abuse going back decades, the Wall Street Journal reported. The chapter 11 filing covers the national Boy Scouts organization and automatically halts the hundreds of lawsuits it faces alleging sexual misconduct by employees or volunteers. The Boy Scouts are seeking to compensate claimants through bankruptcy proceedings while protecting 261 local scouting councils across the country and the billions of dollars in assets they hold. The bankruptcy filing marks a watershed moment in the 110-year history of the Boy Scouts, which for years have been embroiled in lawsuits blaming the organization for failing to screen out sexual predators. It said in court papers that its “ability to deliver its mission to future generations of scouts may be in peril” unless it can reach a broad settlement of hundreds of current and future sex-abuse claims. Laws passed in California, New York and other states have created temporary windows allowing for sex-abuse lawsuits to be filed regardless of when the alleged abuse occurred, exposing the Boys Scouts to an unprecedented level of potential liability. These laws took effect in more than a dozen states last year, opening the courthouse doors to more potential claimants. States including Florida, Ohio and Virginia are also considering passing similar legislation. In court papers, the Boy Scouts said the cost of defending and resolving sex-abuse claims “has become unsustainable,” totaling more than $150 million in settlements and legal fees since 2017. The Boy Scouts generated roughly $394 million in total gross revenue last year, according to court papers. There are roughly 275 pending lawsuits, and attorneys representing victims have supplied information on roughly 1,400 additional claims that haven’t been filed, roughly 90% of them alleging abuse more than 30 years ago, court papers said.

Law firms have no property interest in hourly billed client matters, the D.C. Court of Appeals ruled on Thursday, undercutting the “unfinished business” claims of bankrupt law firm Howrey, Law.com reported. While Howrey closed its doors in 2011, the unanimous ruling by a three-judge panel has major implications for law firms that have picked up groups of lawyers—and their clients—when other law firms failed or dissolved. The judge rejected the claims made by Allan Diamond, the managing partner of Diamond McCarthy who is the chapter 7 trustee overseeing the estate of Howrey, in a case that caught the attention of major national and international law firms and the American Bar Association. Diamond had argued that the estate was owed money from law firms including Jones Day, which hired 22 former Howrey partners who brought with them client matters that originated at Howrey. In an issue of first impression, the D.C. court found that this property interest rested with the clients. When partners move between firms, it’s up to the clients to decide whether to go with them, the court found. Agreeing to Diamond’s argument would not only affect how clients choose their representation, but how lawyers could move from firm to firm, the court added.

The judge overseeing Alta Mesa Resources Inc.’s bankruptcy approved the appointment of a mediator to help creditors resolve their differences over how to carve up proceeds from the company’s chapter 11 sale, WSJ Pro Bankruptcy reported. An official committee of unsecured creditors pushed for the appointment after mounting an attack on Wells Fargo Bank NA, the administrative agent for the bank loans of Alta Mesa and its energy storage and transportation unit Kingfisher Midstream LLC. Alta Mesa and Kingfisher are being sold together to a private-equity venture for $320 million, a sum that doesn’t cover their bank debt. The committee has accused Wells Fargo of stripping assets from Alta Mesa before its bankruptcy, then pulling the rug out by cutting the company’s borrowing capacity. The committee also is seeking to stop the bank from collecting an immediate distribution of $60 million in cash from Kingfisher. The less money Wells Fargo can collect as the top-ranking lender, the more is potentially available for unsecured creditors, which otherwise may recover little to nothing. Wells Fargo has said the committee’s claims are baseless and denied doing anything improper to push Alta Mesa into bankruptcy.

An $18 billion offer from three major drug wholesalers aimed at settling litigation over their alleged role in the opioid crisis fell through, after more than 20 state attorneys general rejected it in a letter to the companies’ law firms this week, the Wall Street Journal reported. The letter shows that the drug industry hasn’t won enough support from states to begin moving the sprawling litigation to a global resolution. At least 30 states have either sued the distributors or have been involved in talks to resolve claims. Whether they support the $18 billion offer or not, states said they continue to negotiate with the wholesalers to potentially strike some kind of deal. Many in the industry had hoped the offer would be a first step toward resolving the claims outside bankruptcy. In September, OxyContin maker Purdue Pharma LP filed for bankruptcy to help implement a settlement the company’s owners, the Sackler family, estimate to be worth at least $10 billion. The dissenting states want a larger total amount, or for the sum to be paid out sooner than the proposed 18 years, according to people familiar with the matter. Some states are targeting between $22 billion and $32 billion over fewer than 18 years.