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McKinsey & Co. and longtime adversary Jay Alix teed off a courtroom trial Wednesday over the disclosure of potential conflicts of interest, a core tenet of the nation’s bankruptcy system, WSJ Pro Bankruptcy reported. Alix, who founded rival corporate turnaround firm AlixPartners LLP, has accused McKinsey’s bankruptcy advisory unit of flouting disclosure laws, especially in how it disclosed information about the billions of dollars it invests on behalf of current and former employees. The trial, unfolding in the chapter 11 case of Westmoreland Coal Co. in U.S. Bankruptcy Court in Houston, is scheduled to last at least three days and to include hundreds of exhibits and potentially more than 20 witnesses. It marks the first time a judge has waded so deeply into Mr. Alix’s allegations. McKinsey, which has about $8 million in fees on the line in the Westmoreland case, has said the firm’s bankruptcy disclosures have always complied with the law. McKinsey lawyers said evidence presented at trial will prove it went above and beyond the law’s disclosure requirements and that it did everything possible to ferret out connections that could have been disqualifying. “We think there’s no there there,” Faith Gay, a lawyer for McKinsey, told the packed courtroom Wednesday. Both sides are deeply entrenched and have spent tens of millions of dollars on the litigation. McKinsey maintains the dispute is really about an anticompetitive campaign Alix launched to benefit his namesake firm. Alix says the law is straightforward — advisers in bankruptcy must disclose all connections that could give rise to a conflict of interest, leaving it to a judge to decide if any of those connections are disqualifying.

Federal environmental regulators have joined a parade of parties staking claims on the bankrupt Philadelphia Energy Solutions refining complex, whose sale and reorganization are in the final, frantic stages of negotiation before a scheduled confirmation hearing next week, the Philadelphia Inquirer reported. The U.S. Environmental Protection Agency on Tuesday filed a “protective objection” to assure that the reorganization plan contains language that adequately protects the government’s interests. Its filing is primarily aimed at preserving EPA’s claims for millions of dollars of unpaid renewable energy credits that it says PES owes the government. The plan that PES submitted to the court last month poses an “unacceptable risk” that the refinery’s obligations to pay for ethanol credits, known as Renewable Identification Numbers, or RINs, will go unpaid before the company’s assets are liquidated. About ten parties have so far submitted objections to the reorganization plan, complicating a final resolution. Many of the objections are efforts by parties to get priority over claimants when the refinery’s assets are divvied up. A confirmation hearing was pushed back to Feb. 12 before Bankruptcy Judge Kevin Gross in Wilmington, Del.

Creditors of EdgeMarc Energy Holdings LLC have been blaming Energy Transfer Partners LP for the failure of a Pennsylvania fracking project for months, according to newly public court papers, WSJ Pro Bankruptcy reported. Kept under seal while EdgeMarc tried to find a buyer for the fracking project, the documents filed in U.S. Bankruptcy Court in Wilmington, Del., came to light this week, under pressure from an affiliate of Goldman Sachs Group Inc. that holds a stake in EdgeMarc. The fracker filed for bankruptcy in May 2019, ruined by fallout from the September 2018 explosion of a portion of the Revolution pipeline, a conduit Energy Transfer was building to get EdgeMarc’s gas to market. The company, top lender KeyBank NA, Energy Transfer and the official creditors committee are due in court tomorrow to seek approval of a settlement that will end the bankruptcy infighting, in exchange for enough money to avoid having EdgeMarc’s chapter 11 case fall apart. Under the terms of the proposed settlement, KeyBank will take over the Pennsylvania fracking site and EdgeMarc will surrender its claims against Energy Transfer. Creditors are abandoning demands to sue, in exchange for cash to help cover their losses from the failed project, according to court papers.

The Aspen Club & Spa’s plan to emerge from chapter 11 bankruptcy by obtaining $140 million in exit financing is drawing opposition from the Colorado Bankers Association (CBA), which represents more than 95 percent of all banks in the state, the Aspen Times reported. In a filing made Jan. 24, the Bankers Association claimed a precedent will be set to the detriment of commercial lenders and borrowers if the bankruptcy court blesses the fitness club’s request for the funding to satisfy $26.8 million in mechanics’ liens and resume construction on its delayed redevelopment project. The Aspen Club & Spa’s legal team responded on Tuesday with its own brief claiming the CBA’s argument — which it made in the form of an amicus curiae, or friend-of-the-court brief — is unripe because it is based on conclusions the bankruptcy judge overseeing its case has yet to approve the exit loan proposal. The CBA’s brief, in the meantime, argued The Aspen Club’s reorganization plan will potentially damage creditors who have existing secured loans on its property at 1450 Ute Ave., while setting a precedent that could impact commercial lenders industry-wide.

PG&E Corp. won court approval of a settlement with bondholders that had threatened to derail its bankruptcy strategy, WSJ Pro Bankruptcy reported. The ruling yesterday from Judge Dennis Montali keeps the California utility on course to exit bankruptcy by the end of June, in time to qualify for a statewide fund designed to cushion utilities against the rising risk of wildfires. PG&E has reached settlements totaling $25.5 billion of damage claims stemming from wildfires that swept the state in 2017 and 2018 that were linked to its equipment. The settlement approved yesterday in the U.S. Bankruptcy Court in San Francisco concerns PG&E’s bond debt, which is in the hands of large investors including Elliott Management Corp. and Pacific Investment Management Co. Bondholders agreed to drop their competing chapter 11 plan, which would have slashed the value of existing shares of PG&E’s stock, and support PG&E’s plan, in return for improved treatment and the company’s agreement to pay $99 million worth of underwriting and professional fees. Shareholders will be able to hold on to their stock under PG&E’s chapter 11 plan, which still must survive rounds of voting and a review by the California Public Utilities Commission. California Gov. Gavin Newsom has asked PG&E for corporate governance changes that would improve its focus on safety and allow for enhanced state controls if dangerous conditions arise. PG&E has offered some concessions in its plan, including appointing new board members and strengthening its roster of safety executives.

U.S. Bankruptcy Judge Kevin Gross gave Forever 21 the go-ahead on a tentative plan to sell itself to its biggest landlords — a deal that suppliers say will leave them bearing the brunt of the losses, Bloomberg News reported. The stalking-horse bid would see Simon Property Group Inc., Brookfield Property Partners LP and Authentic Brands Group LLC pay $81 million in cash for the fast-fashion retailer and assume a chunk of its debts. Counting the assumed liabilities, which include letters of credit, costs to cure defaults and trade debts, the deal is worth $290 million, Tyler Cowan of Lazard Ltd. said during a hearing in Delaware Tuesday. Lazard is serving as the retailer’s investment banker. This would still leave more than $100 million of vendor claims unpaid, said Jeffrey Waxman of Morris James LLP, which represents a group of suppliers. When the retailer filed bankruptcy in September, it owed suppliers $347 million, according to a court filing by vendors. The proposed sale is the best currently available for Forever 21, though additional potential buyers are still looking at the company, Cowan said. The company has been in default of its bankruptcy loan since before the start of this year, he said.

A hearing to finalize Philadelphia Energy Solution’s bankruptcy plan and consummate a sale of the company’s refinery to a real estate developer was pushed back on Tuesday along with a deadline for objections to the deal, according to federal court filings, Reuters reported. The plan is now scheduled to go before the U.S. Bankruptcy Court for the District of Delaware to be finalized on Feb. 12 instead of Thursday. The deadline for objections was extended two days to Wednesday. No official reason was given for the rescheduling and PES did not immediately respond to requests for comment. PES last month entered into an agreement to sell its refinery, the largest and oldest on the East Coast, to Chicago-based Hilco Redevelopment Partners, which is expected to use the site largely for warehousing. Los Angeles developer, Industrial Realty Group, was selected as a backup buyer. Several groups, including the union that provided hundreds of workers to the plant, have objected to the bankruptcy plan, citing lacking information about how PES would settle all of its debts. The U.S. Trustee has also objected saying in a filing PES cannot release itself from its more than $1 billion in debts and other obligations under the plan because it will be liquidating its assets instead of restructuring or selling its business.

Bankruptcy Judge David Jones in Texas will hear arguments this week on whether McKinsey & Co.’s process for disclosing potential conflicts of interest followed the law in a major chapter 11 case, the Wall Street Journal reported. The trial is the culmination of a long-running dispute between the management consulting firm and Jay Alix, the founder of rival corporate turnaround firm AlixPartners LLP. Alix says that McKinsey has concealed serious conflicts of interest in its bankruptcy work. He has for years asked federal courts to punish McKinsey for what he says is a threat to the integrity and transparency of America’s bankruptcy system. McKinsey insists its conflicts disclosures practices go above and beyond what is legally required and says it is ready for the opportunity to clear its name. Opening arguments begin tomorrow at the U.S. Bankruptcy Court in Houston in a trial within the bankruptcy of Westmoreland Coal Co. The trial will focus on whether McKinsey was qualified to work as an adviser on Westmoreland’s $1.4 billion chapter 11 case, which the coal miner filed in 2018.