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Just four years ago, many Sears Hometown stores were profitable, but now many are barely breaking even, the Wall Street Journal reported. Sears Hometown is a collection of smaller stores selling tools, appliances, and lawn and garden equipment. There are about 375 locations in mostly rural towns, and the majority of them are run by independent contractors. The Hometown stores had nearly $960 million in sales in its most recent fiscal year, which ended in February 2019. Both Sears Hometown and Sears are controlled by Edward Lampert, although the smaller stores weren’t part of the Sears bankruptcy in 2018. Originally part of Sears Holdings Corp., the division was spun off into a separate publicly traded company in 2012 called Sears Hometown and Outlet Stores Inc. Lampert, the former Sears chairman, chief executive and largest shareholder, became a majority investor in the chain as a result of the spinoff. The Hometown and Outlet chain continued to operate independently after Sears Holdings filed for bankruptcy protection in the fall of 2018. Lampert blocked an attempt by the spinoff’s board to liquidate the money-losing Hometown stores last spring, while he was in negotiations to buy full control of the chain. In a letter to the Hometown and Outlet board, Lampert argued that liquidating the Hometown stores would hurt Hometown owners and their families, as well as their employees and the communities that they serve. In October, Lampert paid $36 million for the 45 percent of Hometown that he didn’t already own. At the same time, Hometown agreed to sell assets including its Outlet business, which mostly sells used and discontinued goods, for about $133 million. Sears Hometown and Outlet investors have filed a lawsuit in Delaware Chancery Court that accuses Lampert of buying the company for an unfairly low price. Lampert has denied the allegations.

Insys Therapeutics Inc., the first drugmaker driven to bankruptcy by fallout from the opioid crisis, won court approval of a bankruptcy plan that pays less than a dime for each dollar it owes to the people, cities, states and tribes claiming damage from the drug epidemic, WSJ Pro Bankruptcy reported. Shareholders of the once-thriving company will be wiped out under the chapter 11 plan approved Thursday by Judge Kevin Gross in the U.S. Bankruptcy Court in Wilmington, Del. Insys filed for chapter 11 protection in June, after reaching a deal with the U.S. Justice Department and seeing a raft of its former leaders convicted on federal racketeering charges. In bankruptcy, the company sold the rights to its flagship opioid, a form of the fentanyl painkiller called Subsys, and other pharmaceutical assets. OxyContin maker Purdue Pharma LP filed for bankruptcy in September. It is in better financial shape than Insys, and Purdue’s owners, the Sackler family, have offered to contribute $3 billion to pay off creditors, including the same cities, states and tribes that sued Insys and others involved in the opioid crisis.

Bankruptcy Judge Dennis Montali said on Wednesday that PG&E Corp. needs to explain how it will keep a promise to pay fire victims $13.5 billion in the face of a demand from the Federal Emergency Management Agency for a cut of that money, Bloomberg News reported. Judge Montali is wading into a potential fight for cash between government agencies demanding compensation for their fire recovery efforts, and California residents who say PG&E caused the fires that killed their loved ones and burned their homes. “It should not go unnoticed that January 29, 2020 will mark exactly one year since these chapter 11 cases were filed,” Montali wrote in his memorandum. It’s a reminder, he said, that a crucial June 30 deadline is less than six months away. If a settlement and the company’s reorganization plan aren’t in place by then, PG&E won’t be eligible for a state insurance fund that would shield it from future catastrophic wildfire losses. The committee representing wildfire victims has pledged to back PG&E’s bankruptcy-exit proposal in return for $13.5 billion in cash and stock. But federal and state agencies including FEMA have filed billions of dollars worth of claims that may compete for that sum. Judge Montali ordered PG&E to detail the inner workings of two proposed trust funds designed to compensate victims. Those people need to understand how the company will honor its commitments to them while fulfilling two multibillion-dollar bankruptcy deals with creditors, and still comply with state law, Judge Montali said in a court filing.

A little-noticed tweak to PG&E Corp.’s chapter 11 plan could add millions of dollars to the payout for victims of the California wildfires that forced the utility into bankruptcy, WSJ Pro Bankruptcy reported. In December, PG&E as part of a revised plan to exit bankruptcy signed over to the fire victims its rights to sue outside contractors and consultants involved in the allegedly lax safety practices that fed the blazes. Generally overlooked in the glare of attention focused on the plan’s other changes — including a $5 billion increase in the amount of cash and stock allotted to fire victims — the transfer of the right to sue contractors and consultants has put companies including Davey Tree Expert Co. and McKinsey & Co. squarely in the crosshairs of lawyers for fire victims. Subpoenas were sent last week, as victims lawyers assess the odds of collecting from San Francisco-based PG&E’s contractors for fire damages. Davey Tree’s in-house lawyer, Erika Schoenberger, said in a statement that the company, which provided tree-trimming services for PG&E, denies any fault and will vigorously defend any claims it is to blame for the disastrous fires. Managing vegetation around power lines “is increasingly perilous given a multitude of external factors, including climate driven risks and PG&E’s bankruptcy, which results in contractors becoming targets for lawsuits,” Shoenberger said. Regulators have faulted PG&E for failing to inspect and maintain its equipment, which failed and sparked fires that spread through heavily forested areas. Read more. 

In related news, the hard-fought battle that’s kept the biggest utility bankruptcy in U.S. history dragging on for almost a year may finally be ending, Bloomberg News reported. PG&E Corp. is nearing a deal with a group of noteholders led by bond giant Pacific Investment Management Co. and activist investor Elliott Management Corp., who’ve repeatedly sought to derail the company’s $46 billion restructuring plan. The agreement would entitle them to a mix of equity and new debt in the California power giant if they scrap a rival proposal. A deal would turn some of PG&E’s most formidable adversaries into backers of its plan to emerge from bankruptcy and bring it one major step closer to getting a proposal approved by a state-imposed deadline of June 30. The San Francisco-based utility has spent months in court battling the creditors who’ve been offering to inject as much as $20 billion in cash into the company in exchange for virtually all its equity. That would leave California Governor Gavin Newsom as the last major obstacle for PG&E, which was forced into chapter 11 last year after its equipment was blamed for a series of catastrophic wildfires that saddled the company with $30 billion in liabilities. Newsom rejected PG&E’s latest plan and has been pushing the utility to include a provision that would allow the state to take it over should it fail to meet future safety standards. A deal hasn’t yet been struck, and the talks may still break off, the people familiar with the situation said. PG&E said in a statement that it’s been holding discussions with stakeholders on its reorganization and hopes “to make progress over the next week.” Read more. 

Suppliers that stocked the shelves during Sears Holdings Corp.’s bankruptcy are being forced to swallow losses and some employees won’t get severance they are owed, even as law firms are guaranteed full payment for their work on the retailer’s chapter 11 case, the Wall Street Journal reported. A year after the storied retailer sold its best stores and assets to ESL Investments Inc., the investment firm owned by former Sears Chief Executive Edward Lampert, the shell left behind in bankruptcy is struggling to pay its debts after racking up more than $200 million in bills from lawyers and advisers. White-shoe law firms Akin Gump Strauss Hauer & Feld LLP, which represents unsecured creditors, and Paul, Weiss, Rifkind, Wharton & Garrison LLP, which represents the independent committee of Sears’s board, have earned more than $50 million. Akin Gump has access to another $25 million set aside to cover the cost of pursuing a speculative lawsuit against Lampert, which is billed as a way to return more money to Sears creditors. Bankruptcy Judge Robert Drain, who approved Sears’s liquidation plan last year, pushed vendors to settle for a maximum of 33 cents on the dollar, with the potential to recoup more if a potential lawsuit against Lampert yields more money.

The majority shareholder of Tough Mudder, Will Dean, and its board of directors have consented to bankruptcy proceedings for the company, making a speedy sale to rival mass participation business Spartan more likely, Sportbusiness.com reported. A motion filed with the U.S. Bankruptcy Court of Delaware states that Tough Mudder’s board of directors will not oppose a petition for chapter 11 reorganisation of the company by its creditors and will not stand in the way of a sale to Spartan. On 7 January it emerged that the obstacle racing event organizer is the subject of chapter 11 proceedings in the U.S. after three companies — Valley Builders, Trademarc Associates and David Watkins Homes — filed a petition in the U.S. Bankruptcy Court of Delaware, claiming they are due a total of $854,558.40. The latest consent motion appears to end a standoff between Tough Mudder’s co-founders, Will Dean and Guy Livingstone, and the company’s largest lender Active Networks over the sale of the company. Dean and Livingstone were accused of “a game of brinkmanship” and of ignoring the best interests of these creditors in holding out for $44 million to sanction the sale to Spartan.

PG&E Corp. yesterday delayed a courtroom clash with bondholders in favor of continued talks, suggesting that peace is breaking out on a critical front in the utility’s bankruptcy, the Wall Street Journal reported. During a brief appearance in a San Francisco bankruptcy courtroom yesterday, PG&E lawyer Stephen Karotkin gave no details of a possible deal but said it was involved in “constructive negotiations” to resolve a payment dispute PG&E estimates could cost more than $5 billion. Bondholders put the figure at $5.8 billion. Karotkin called off scheduled arguments, hinting at a potential settlement that would quiet demands from creditors for extra payments from PG&E. The dispute concerns bondholders’ demand for compensation for PG&E’s early redemption of their debt. A settlement with bondholders that have been PG&E’s most strident opponents throughout the bankruptcy would speed the company’s exit from chapter 11. PG&E needs to be out of bankruptcy and through the regulatory process by June 30, if it wants to participate in a statewide fund designed to cushion California utilities against the risk of more wildfires. Read more. (Subscription required.) 

In related news, the Federal Emergency Management Agency is defending its push to collect $3.9 billion from PG&E Corp. for the relief it provided after the utility’s power lines sparked devastating wildfires in recent years, Bloomberg News reported. Wildfire victims have been fighting the payments to FEMA in court, saying the agency would be taking money from a $13.5 billion pot that bankrupt PG&E had agreed to set aside for them. The U.S. agency has an obligation to seek recovery for the costs of critical services, such as medical expenses and home repairs, that it provided in the aftermath of blazes in 2015, 2017 and 2018, said Bob Fenton, a regional administrator for FEMA. “We have no interest in reducing the funds PG&E owes to survivors,” Fenton said. “We are interested in holding PG&E responsible for the billions of dollars taxpayers provided to assist individuals and communities impacted by wildfires for which they accepted responsibility.” The dispute has pit the victims of catastrophic fires against the very agencies that helped rescue them from the wreckage. California’s emergency services office is supporting FEMA and is seeking an additional $300 million to compensate the state for its efforts. If California didn’t assist FEMA in pursuing reimbursement, the federal agency could try to seek recovery from the state’s coffers, Governor Gavin Newsom’s office said. Read more. 

Attorneys for bankrupt coal company Blackjewel LLC and its creditors are asking a federal judge to let them examine the finances of former CEO Jeff Hoops, alleging that he took millions of dollars for personal gain, according to court documents, the Associated Press reported. In documents filed on Friday in bankruptcy court, lawyers for West Virginia-based Blackjewel said the company was “woefully insolvent” by the time it filed for chapter 11 protection in July. “This level of insolvency and inevitable bankruptcy filings were the result of a years-long effort by Mr. Hoops to transfer tens of millions of dollars of the Debtors’ assets for his benefit and the benefit of his family and other Hoops-Related Entities,” the filing said. The bankruptcy filing followed by the loss off a crucial creditor shut down operations at Blackjewel’s 32 coal mines in Kentucky, Virginia, West Virginia, and Wyoming. At the time of its bankruptcy filing, Blackjewel owed about $146 million in unpaid taxes and also owed workers unpaid wages and retirement funding. The vast majority of former Blackjewel workers have not received the full compensation they were promised, according to investigations by Wyoming’s Labor Standards Office. Only 33 workers out of 506 owed money have filed a compensation claim with the state.

Victims of wildfires blamed on PG&E Corp.’s power lines and government agencies that provided them disaster relief are tussling over a payout from the bankrupt utility, Bloomberg News reported. PG&E reached a settlement with fire victims to pay a total of $13.5 billion for damages tied to catastrophic blazes. California’s emergency services office and the Federal Emergency Management Agency, known as FEMA, want more than $6 billion — payouts that victims’ attorneys said on Thursday would leave less money for those directly affected by the fires. Every dollar that FEMA and California’s agency receive “is one less dollar available to pay victims,” a committee representing fire victims said in filings to the judge overseeing PG&E’s bankruptcy. The dispute casts a shadow on the settlement PG&E reached with victims that won court approval just last month. The company had spent weeks cobbling together the deal, which is crucial to its efforts to come up with a viable restructuring plan and emerge from bankruptcy by a state-imposed deadline of June 30. FEMA said that it is required by federal law to pursue claims from third parties found responsible for creating disasters. “It is important that responsible parties are held accountable for causing the expenditure of taxpayer dollars,” the agency said in a statement.