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PG&E Corp. has reached an accord with bondholders that smooths its path out of bankruptcy, but it has yet to win over California Gov. Gavin Newsom, who has threatened a state takeover of the embattled utility, WSJ Pro Bankruptcy reported. Hours before PG&E announced a settlement with investors owning most of its $17 billion bond debt, Newsom lashed out in a court filing that warned the utility it won’t get out of bankruptcy without major improvements to its turnaround plan. Years of deadly wildfires linked to its equipment drove PG&E into chapter 11 protection last year. Bankruptcy shielded PG&E from continued lawsuits seeking damages from the blazes, but the barrage of criticism from Mr. Newsom and others has continued. PG&E paid out billions of dollars in shareholder dividends while skimping on safety investments, critics say. Newsom, who is playing a key role in PG&E’s bankruptcy effort, wants the utility to agree to new leadership and has asked the company to incorporate a mechanism that will allow the state special powers if the utility starts slipping up on safety again.

While there was no single point of failure, undisciplined acquisitions, ad hoc and expensive compensation schemes, and financial mismanagement coalesced to bring the firm’s ruin, several former shareholders say. LeClairRyan’s demise — one of several firm failures in the last decade — is as much a story about a single firm as it is a warning to others in a softening economy, according to an ABA Journal report. Founded in 1988 by two former Hunton & Williams corporate lawyers, Gary LeClair and Dennis Ryan, LeClairRyan started as a regional business firm in Virginia. The firm initially focused on venture capital clients and got by on credit card advances. Throughout the 1990s, the firm grew slowly and was seen as a solid regional player. Then the dot-com bust came at the turn of the century, and things began to change. As former litigation shareholder at LeClairRyan John Fitzpatrick recalls, Gary LeClair began to shift strategy and wanted to run the firm like a corporation. The new corporate-like structure was top-heavy, expensive and populated with people not billing enough to justify their salaries. As economic tumult continued to increase behind the scenes, a public employment and gender discrimination lawsuit against the firm turned into a portentous preview of LeClairRyan’s pending collapse. In January 2016, firm shareholder Michele Burke Craddock filed a discrimination lawsuit in the U.S. District Court for the Eastern District of Virginia alleging LeClairRyan paid male shareholders more than her even though she generated far more billable hours. Hidden in the case’s documents was a revelation about the firm’s financial health. According to the arbitration decision, the firm admitted that it had to cut Craddock’s compensation because it couldn’t afford not to. Revealing that it had missed budget for the first time in its history in 2011 — and again in 2012, 2013 and 2014 — the firm cut many shareholders’ compensation, leading to departures. The decision noted that LeClairRyan “pointed to the untenable results of its automatic ‘raise culture’ years and the need to reconsider its practices.”

PG&E Corp. has struck a deal with financial firms that tried to take control of the company, but the outcome of its bankruptcy case still hinges on one key figure: Gov. Gavin Newsom, the San Francisco Chronicle reported. The parent company of Pacific Gas and Electric Co. said yesterday that it reached a settlement agreement with a group of bondholders, led by the hedge fund Elliott Management, to resolve a persistent and highly contentious bankruptcy dispute. In exchange for new debt that’s cheaper for PG&E, among other terms, bondholders have agreed to scrap a proposal that would give them a controlling stake in the company. PG&E said the deal would — if approved in court — save its customers about $1 billion. It’s a major milestone for PG&E, which is trying to maintain control over how its nearly yearlong bankruptcy case concludes. Yet further hurdles remain. Chief among them is Newsom, who yesterday renewed his threat to have the state take over PG&E. In court papers objecting to the financing PG&E wants to use to exit bankruptcy, Newsom’s attorneys said the company had “yet to make a single modification” that would address the “many deficiencies” with its plan to resolve the case. Read more. 

Some of the most widely discussed ways to prevent the massive fires and blackouts that plague California may also be the most expensive, a Bloomberg News analysis suggests. For instance, burying all 81,000 miles of PG&E Corp.’s electrical distribution lines so they won’t spark blazes during windstorms could cost more than $240 billion, the analysis found. That’s based on a PG&E estimate that moving existing lines underground costs $3 million per mile. A state takeover of the troubled utility would also likely have a hefty price. The book value of PG&E’s electricity assets — the amount they’d cost if new — is $62 billion, according to the analysis. The state would almost certainly negotiate a lower price to account for depreciation, but it would also have to assume PG&E’s liabilities. The analysis underscores the immense challenges California faces as it pushes to end deadly wildfires and the sweeping, deliberate blackouts intended to prevent them. PG&E, the state’s largest utility, filed for chapter 11 last January facing $30 billion in liabilities from the blazes, which have erupted with increasing frequency as climate change fuels hot, dry weather. Read more. 

Victims of longtime national team physician Larry Nassar moved to dismiss USA Gymnastics’ bankruptcy proceedings on Tuesday, a sign that the gymnasts and federation remain far apart in mediation talks to resolve legal claims stemming from sexual abuse by Nassar over a three-decade period, the Wall Street Journal reported. USA Gymnastics and the U.S. Olympic and Paralympic Committee have been sued by hundreds of women and girls who were treated by Nassar at his practice at Michigan State University, as well as dozens of gymnasts who competed for the U.S. Attorneys representing victims had been in mediation for more than two years in a bid to settle the suits, a tangled process that also encompassed attempts to resolve litigation between USA Gymnastics and its insurers, former national team coordinator Martha Karolyi, individual coaches, and the U.S. Olympic and Paralympic Committee, which oversees national governing bodies and athletes on the Olympic team. USA Gymnastics filed for bankruptcy in December 2018, which halted depositions and discovery in the lawsuits and disrupted formal efforts to revoke USA Gymnastics’ status as the sport’s official governing body by the USOPC. The measure had also opened the door for more people to file claims, and potentially be paid out in a more orderly manner under bankruptcy rules that allow troubled organizations to pool money from their assets. If the victims’ lawyers are successful in persuading the federal judge overseeing the proceedings in Indianapolis to drop the bankruptcy, the organization will once again confront the lawsuits filed in courts across the country and could also be exposed to new ones. Losing even one case could lead the organization to face an expensive judgment and the turnover of valuable property to pay for it, putting it in an even more dire financial state.

A deadline extension and an aggressive effort to track down victims have doubled the number of damage claims against Pacific Gas & Electric over California wildfires started by its equipment, the New York Times reported. A filing yesterday related to the giant utility’s bankruptcy case said that more than 80,000 people were now seeking to tap into a relief fund projected to total $13.5 billion. In his report, a court-appointed accountant charged with identifying and finding additional wildfire victims attributed the increased number of claims to, among other things, “grass-roots campaign efforts of the fire victims themselves.” Less than three weeks before the previous Oct. 31 deadline, the New York Times reported that about 31,500 victims had filed claims but that 70,000 others could lose out on benefits if they did not act quickly. Bankruptcy Judge Dennis Montali, who is presiding over the bankruptcy case, extended the deadline to Dec. 31. And U.S. District Court Judge James Donato, who is responsible for estimating how much PG&E owes wildfire victims, said: “It would be a heartbreaking shame if even 10 percent of the eligible victims don’t file claims for whatever reason. If we’re talking about 50 percent not filing, that’s — that’s intolerable.” Judge Donato suggested that “someone should be going door to door” to get victims to file claims.

Bankrupt Philadelphia Energy Solutions is expected to sell its fire-damaged refinery site to real estate developer Hilco Redevelopment Partners, Reuters reported. The agreement between PES and Hilco, a Chicago-based developer that specializes in redeveloping industrial properties, is expected to be announced soon.  Any sale would have to be approved by the U.S. Bankruptcy Court for the District of Delaware. A sale to Hilco would reduce the possibility that the more-than 1,300-acre (526-hectare) Philadelphia site would be resurrected as an oil refinery. Hilco, which has $2.5 billion of assets under management and has acquired 5,000 acres in North America, specializes in redeveloping obsolete industrial sites, according to its website. The 335,000 barrel-per-day refinery is the largest and oldest on the U.S. East Coast, but was shut after a fire and a series of explosions on June 21 last year that destroyed a key processing unit. PES filed for chapter 11 protection a month after the blaze and put the 150-year-old refining operation up for sale.

The judge overseeing Highland Capital Management LP’s chapter 11 case rejected a government bankruptcy watchdog’s bid for a chapter 11 trustee, satisfied that a recent governance reform would protect the interests of creditors, WSJ Pro Bankruptcy reported. Bankruptcy Judge Stacey G.C. Jernigan emphasized her view during a court hearing yesterday that a negotiated governance overhaul, which she approved earlier this month, was in the best interests of creditors. An official creditors committee, largely composed of investors who have spent years locked in court battles with Highland, supported the governance reform and urged the judge not to hand over control to a chapter 11 trustee. The governance deal creates an independent board of directors at Highland’s general partner, Strand Advisors Inc., that will assume managerial control from Highland co-founder James Dondero. However, the Office of the U.S. Trustee, a Justice Department bankruptcy monitor, had argued the arrangement was flawed and didn’t go far enough, in part because Dondero is the sole shareholder of Strand. Under the deal, the board assumed control of Highland’s management functions and Highland agreed that independent directors can’t be removed without permission from the creditor committee or the bankruptcy court, according to court papers.

The fate of the largest East Coast oil refinery is set to be decided on Friday in an auction that could determine whether the Philadelphia plant is restarted or used for a different purpose for the first time in over a century, Reuters reported. The refinery’s owner, Philadelphia Energy Solutions, is scheduled to reveal the winning bidder on Wednesday during a hearing at the U.S. Bankruptcy Court for the District of Delaware, which will need to approve the sale. PES filed for bankruptcy on July 21, a month after a fire and explosions destroyed a portion of its 335,000 barrel-per-day oil refinery complex. It wound down the roughly 150-year-old plant and laid off hundreds of workers over the following weeks. The PES site located less than three miles (5 km) from downtown Philadelphia has also attracted bids from several real estate developers. One of the groups proposed to model itself after the Philadelphia’s Navy Yard, which was turned into a campus for company headquarters, including clothing retailer Urban Outfitters, while operating a section for commercial shipping. Most of the bids from real estate developers involved keeping the site as an industrial operation.