%1

Lenders to Borden Dairy Co. slammed the milk producer for filing what they said was “a surprise and value-destructive bankruptcy” aimed at benefiting its private-equity backer Acon Investments, the Wall Street Journal reported. KKR & Co.’s credit arm in court papers yesterday said that Borden had “no economic justification” for its sudden decision to file chapter 11 protection after lengthy negotiations with creditors aimed at avoiding bankruptcy. Borden, a 163-year-old milk producer known for its spokes-cow Elsie, had “an almost fully-baked out-of-court restructuring solution” in hand but instead “recklessly” entered an “economically irrational” bankruptcy without identifying a financing source to keep the company running, according to the objection. KKR, a lender under a $175 million term loan, said it wasn’t given any notice about the filing or a sense of what Borden hoped to accomplish through chapter 11. KKR said the company’s strategy “seems to boil down to somehow using the bankruptcy process to negotiate a transaction that will be more advantageous to Acon,” which took a major stake in Borden in 2017. PNC Bank NA, another lender that said it is owed $94.6 million, also alleged in court papers that Borden filed for bankruptcy without advance notice or a chief restructuring officer, financial adviser or investment banker. Both lenders objected to Borden’s request to use available cash and securities to pay more than $56 million in claims to vendors, customers, utilities, employees, insurers and tax authorities. The company’s debts include $255.8 million in secured loans and a $33.2 million settlement with a pension fund.

An Alabama mall owner is suing Forever 21 Inc., saying that it lost millions of dollars leasing space to the retailer based on misleading sales targets, Bloomberg News reported. Forever 21 is accused of misrepresenting sales projections for a store it opened in Allied Development of Alabama’s Eastern Shore shopping mall, promising yearly revenue of at least $6 million but delivering only about $1.6 million its first year in business, according to court documents filed Nov. 22. In 2017, Allied Development struck a deal with Forever 21 that allowed the apparel retailer to peg its rent payment to its monthly gross sales. The store would turn over 5 percent of its monthly sales, as well as a bonus of 1 percent of yearly sales in excess of $7 million, according to the agreement. But the retailer used false information to back up projections it gave as part of the deal, according to the filing. Forever 21 based the projections on sales at its nearby store in Mobile, Alabama, which it said had generated $6 million in 2017, Allied Development said in the court filings. That store generated only $2 million in gross sales during 2017, according to the court documents.

The former 3M corporate campus in Austin, Texas has averted foreclosure after the entity that owns the property — and is controlled by Austin real estate investor Nate Paul — yesterday filed for chapter 11 bankruptcy protection, the Austin American-Statesman reported. That filing came shortly before the 156-acre property had been scheduled for a foreclosure auction. It was the sixth bankruptcy filing since November to stave off potential foreclosure on properties owned by entities controlled by Paul and his World Class Property Co. In August, agents from the FBI and U.S. Department of Treasury searched World Class’ downtown headquarters. Those agencies have declined to comment on the operation. The new bankruptcy filing came as the monthly foreclosure auction was underway on the steps of the Travis County Courthouse. The bankruptcy petition lists the estimated assets of Silicon Hills Campus at $100 million to $500 million and estimated liabilities at $50 million to $100 million.

Approach Resources Inc. paid seven current and former executives bonuses totaling about $3.7 million in the year before the fracking company filed for bankruptcy, according to an analysis of management payments the company disclosed in court papers, WSJ Pro Bankruptcy reported. The bulk of the financial awards the Fort Worth, Texas-based company doled out in the 12 months before filing for chapter 11 in November were in the form of retention bonuses to its four-person management team worth more than $2 million that includes a $900,000 retention bonus for Approach President and Chief Executive Officer Sergei Krylov, who was promoted to the position in April. Management also collected stock and performance bonuses as well as other financial awards, court papers say. The bonuses Approach paid are part of a larger compensation package to current and former executives in the year before bankruptcy totaling more than $9 million. The amount includes about $2.7 million in consulting fees for two former executives, salary, separation agreements, expense reimbursements and contributions to executives’ 401(k) accounts, according to papers the company filed last month in the U.S. Bankruptcy Court in Houston. Approach also paid more than $1 million in fees to current and former board members.

A group of MTE Holdings creditors want its Chief Executive Officer — real estate developer Mark Siffin — replaced by a court-appointed official amid accusations of fraud and mismanagement at the bankrupt oil driller, Bloomberg News reported. Three stakeholders in the chapter 11 case — Natixis SA, Riverstone Credit Management LLC and a group of drilling service providers — have asked Bankruptcy Judge Christopher Sontchi to appoint a trustee to replace Siffin during bankruptcy. Lawyers for Natixis criticized MTE’s operating subsidiary, MDC Energy LLC, in court papers for “a near complete lack of transparency” and “gross mismanagement,” while Riverstone alleged MTE leadership has “exhibited fraud, dishonesty, and incompetence.” The U.S. Trustee is also requesting a trustee in the MTE case, saying that “management have shown that they cannot be trusted” to carry out the fiduciary duties required in chapter 11. The groups have voiced concern about millions of dollars in cash allegedly transferred out of MDC in the months before its bankruptcy, including $8.5 million in consulting fees to Siffin, according to Riverstone’s court documents.

More than a year after the devastating Camp Fire, government agencies should not be trying to take money that has been put aside for thousands of victims burned out of house and home to rebuild, according to a San Francisco Chronicle editorial. Pacific Gas & Electric Company, the utility that’s been named responsible for igniting historically calamitous wildfires in 2017 and 2018, declared bankruptcy nearly a year ago. The process has been tumultuous, and one of the reasons why is the unusually large number of creditors seeking to be made whole in any company settlement. Instead, both state and federal government agencies have stepped forward with their hands out, pushing for claims that would total more than half the pot, according to the editorial. The Federal Emergency Management Agency (FEMA) is among the federal agencies demanding some $4 billion. California state agencies are also asking for more than $3 billion. All the agencies say they need the money to cover their expenses for firefighting and clean-up. PG&E agreed to pay $1 billion to 14 local governments to cover their wildfire damages. These claims are unrelated to that settlement. There is little doubt that these government agencies incurred major costs in the course of their duties to protect the public and clean up the terrible after-effects of wildfires. But there’s even less doubt that they should not be seeking to take money from the very victims they have been charged to protect.

Iconic telescope maker Meade Instruments filed for bankruptcy protection last month after a years-long legal battle with a competitor, Astronomy.com reported. On Nov. 26, a jury for the U.S. District Court for the Northern District of California found the company liable in an antitrust suit that Orion Telescopes & Binoculars filed against Meade and its parent company, Chinese-owned Ningbo Sunny Electronic Co. Orion is a California-based retailer that sells telescopes and related accessories. Its website sells telescopes under its own brand name, as well as products from Meade and other brands. Meade is one of the largest distributors and manufacturers of telescopes for amateur astronomers. In a legal complaint filed back in 2016, Orion accused Meade’s parent company of working with another major Chinese telescope manufacturer to fix prices and monopolize the American telescope market. The other company settled with Orion before the suit was filed and is not named in the complaint. After the jury’s verdict, a U.S. District Court judge on Dec. 5 ruled that Meade and Ningbo Sunny must pay damages to Orion. According to the jury’s verdict — linked to from Orion’s website — Meade owes the retailer at least $16.8 million. However, the amount owed could triple because of the Sherman Antitrust Act, bringing the total closer to $50 million. The text of Meade Instruments’ bankruptcy filing claims debts between $10 million and $50 million. 

Nearly 1,000 newly minted doctors who worked at Hahnemann University Hospital spent the holidays trying to keep their medical licenses from being tarnished or lost in the collapse of the historic Philadelphia medical teaching institution, WSJ Pro Bankruptcy reported. Less than two years after being acquired by private investors, Hahnemann is defunct and says that it can’t provide insurance to protect the doctors from malpractice lawsuits arising out of their work at the downtown Philadelphia hospital. After 150 years of service to the poor and indigent, to victims of gunshots and traffic accidents, Hahnemann filed for bankruptcy in June and shut down in the fall amid waves of street protests in which nurses and doctors stood shoulder to shoulder with community advocates. Residents whose career plans were shaken up by the bankruptcy have settled into new training slots, but aftershocks continue. The malpractice insurance Hahnemann provided runs out within weeks. After that, former Hahnemann residents who practice medicine without insurance are exposed to consequences ranging from red flags on their professional records to losing their licenses, under the laws of Pennsylvania and more than a dozen other states. The doctors are scrambling to scrape up thousands of dollars to buy insurance to cover their work at Hahnemann.

Glenrock, Wyo.-based firearms manufacturer Sharps Rifle Company has filed for chapter 11 bankruptcy after years of declining revenue and growing debts, according to documents filed Dec. 31, the Casper (Wyo.) Star Tribune reported. According to the documents, filed with the U.S. Bankruptcy Court for the District of Wyoming, the company owes more than $4 million in total, spread between nine different creditors. The debts range in amounts from less than $2,000 to nearly $2 million for services covering advertising to working capital to equipment. The debt also includes a $835,986 judgment levied by a Missouri court to be paid to a former owner of Sharps for fraud and intellectual property violations. The filings show the company struggling over the last few years. In 2017, Sharps brought in a little more than $1 million in gross revenue. In 2019, it took in only $578,000.

A California bankruptcy court has sided with electric utility PG&E Corp. in its fight with bondholders over the interest rate that it must pay on its debts while under bankruptcy court protection, the Wall Street Journal reported. Bankruptcy Judge Dennis Montali on Tuesday ruled that the bondholders are owed the federal rate of 2.59 percent, a decision expected to reduce the company’s interest burden by about $550 million when it exits bankruptcy. A committee of bondholders including Elliott Management Corp. and Pacific Investment Management Co. argued they were owed accrued interest at the original contract interest rate—as much as 6.05 percent on bonds due in 2034. Prices of the company’s 2034 bonds fell about 1.6 percent to 104.75 cents on the dollar after the decision, according to data from MarketAxess. Bondholders also contend that PG&E must pay them a premium if it retires debt they own early, or leave the bonds outstanding at the contract interest rate. Such an interpretation would make the 2034 bonds worth over 120 cents on the dollar and increase overall bondholder recoveries by about $1.5 billion. A hearing on the issue is scheduled for January.