Vendors who kept the shelves stocked for last year’s holidays during Sears Holding Corp.’s bankruptcy will finally get paid, the Wall Street Journal reported. Lawyers for Sears’s bankruptcy estate said on Wednesday in court fillings that they would distribute $21 million to vendors ranging from clothing company Levi Strauss & Co. to toy maker Hasbro Inc., starting today. The payout comes to about 33 cents on the dollar for about 270 vendors, court filings show. The vendors are taking a haircut despite supplying goods in the days leading up to Sears’s chapter 11 filing in October 2018. Sears sold off its best stores to Edward Lampert’s ESL Investments for $5.2 billion, and the estate filed a plan to distribute the proceeds to creditors and shut down.
A Virginia hotel operator has filed a $28 million claim in the LeClairRyan bankruptcy and is seeking relief from the automatic stay in the matter so it can continue a New Jersey state court malpractice action that it filed against the firm in May, American Lawyer reported. Petersburg Regency LLC argued in a federal court filing yesterday in Richmond, Va., that it makes no sense to litigate its claims, which stem from the firm’s handling of an insurance dispute arising from 2003′s Hurricane Isabel, outside of New Jersey. “The claims in the Petersburg lawsuit, including the malpractice claims, all arise under the laws of New Jersey,” the company said. “It would be a waste of this court’s time and the estate’s limited assets to have to litigate the claims asserted by the plaintiffs in the Petersburg Lawsuit. If anything, litigating the plaintiffs’ claims before this court may impose additional costs and expenses for all parties given that all relevant.” Petersburg Regency and Robert Harmon owned the Ramada Plaza hotel in Petersburg, Virginia, at the time of the hurricane, having purchased it for $1.8 million in 1998. They claim they retained LeClairRyan to assist with claims against insurer Selective Insurance Co. over damage from the storm. According to the May lawsuit, the team at the law firm not only botched an arbitration proceeding by failing to include all relevant claims, but it also improperly colluded with an individual who had funded Petersburg’s underlying suit. The New Jersey suit, filed in Essex Country by Keith McKenna, does not provide a figure for damages. But Petersburg filed a claim for $28 million in the LeClairRyan bankruptcy proceeding.
Bondholders and other creditors struggled to persuade a federal judge to force PG&E Corp. to pay them “hundreds of millions of dollars” more in interest than the bankrupt utility has proposed, Bloomberg News reported. Bankruptcy Judge Dennis Montali appeared to side with PG&E in a court hearing yesterday in which the company and the bondholders argued over what interest rate creditors should earn during the bankruptcy. Montali repeatedly asked creditor lawyers why a ruling by a federal appeals court in a similar case that forced investors to accept the so-called federal judgment rate doesn’t apply. “I realize we’re talking about a lot of money,” Montali said in dismissing a bondholder argument that a Texas court should set the legal precedent instead of a decision by the Ninth Circuit Court of Appeals in California. “They don’t like the Ninth Circuit in Texas. We have to periodically straighten them out.” Montali didn’t immediately rule on the request by bondholders and other creditors. California federal courts have long held that creditors can only collect the federal judgment rate of interest while a company is in bankruptcy. The bondholders want to collect the higher rates listed in their debt contracts. Texas federal courts have allowed the higher rates. PG&E filed bankruptcy in January in San Francisco. At the time, the federal judgment rate was 2.59 percent, which is what creditors would get paid while the company remains under court protection should Judge Montali side with PG&E. Read more.
In related news, an analysis by researchers at Georgia Tech found that sustained power outages caused by electric-wire failures in Northern California could double or even quadruple in years to come unless PG&E Corp. steps up its replacement of aging equipment, the Wall Street Journal reported. PG&E’s current rate of electric-line replacement falls far short of what’s needed to prevent a surge of failures due to the effects of aging, according to the researchers. The analysis suggests the current focus on upgrading distribution lines in areas of extreme fire risk fails to solve a more basic problem of age-related deterioration, especially in coastal areas where gear often ages faster. If electric-wire replacement continues at the rate currently proposed by the utility, PG&E customers should expect a doubling of sustained power outages in 15 years and a fourfold increase in 30 years, according to the analysis by the National Electric Testing, Research and Applications Center at Georgia Tech, which did the analysis for PG&E last year. Read more. (Subscription required.)
Philadelphia Energy Solutions, the operator of an urban oil refinery that in June released thousands of pounds of deadly chemicals into the air of one of the country’s largest cities, won bankruptcy court approval yesterday of a gap-filled outline of its restructuring proposal, WSJ Pro Bankruptcy reported. The chapter 11 plan papers approved yesterday by a bankruptcy judge don’t indicate what will become of Philadelphia Energy, how much it owes, or how much creditors can expect to receive. Federal bankruptcy watchdogs said those are basic data that creditors need before casting their votes. “The acid test of a disclosure statement is to tell the creditors what they are going to get and when they’re going to get it,” said David Buchbinder, a government lawyer representing U.S. Trustee Andrew Vara. Philadelphia Energy’s chapter 11 plan report, he said, is “not only inadequate, it’s worthless.” Philadelphia Energy has said that the operation doesn’t have the money to stay in bankruptcy long and needs to start wrapping things up before it knows whether it will find a buyer.
After months of wrangling, infighting and uncertainty, a controversial $47-million settlement was reached between Harvey Weinstein, his former film studio’s board and several women who have accused the disgraced movie mogul of sexual misconduct, according to attorneys involved in the negotiations, the Los Angeles Times reported. A U.S. Bankruptcy Court judge in Delaware still must formally approve a deal that would bring an end to one chapter of the scandal that rocked the entertainment industry, decimated the Weinstein Co. and propelled #MeToo into a global movement. The tentative settlement does not, however, resolve a separate criminal case against Weinstein in New York over multiple accusations of sexual assault. That criminal case will go to trial next month. Under terms of the deal, about $25 million will be allocated to the accusers, another $7.3 million to unsecured creditors and former Weinstein Co. employees, and about $12.2 million will be earmarked to pay legal fees of the studio’s directors and officers, according to a copy of the settlement term sheet.
Documents obtained by NPR shed new light on a bitter fight between defrauded student borrowers and U.S. Education Secretary Betsy DeVos. These borrowers — more than 200,000 of them — say some for-profit colleges lied to them about their job prospects and the transferability of credits. They argue that they were defrauded and that the Education Department should erase their federal student loan debt under a rule called "borrower defense." DeVos disagrees: She says most student borrowers still got value from these schools and deserve only partial relief from their federal loans. Now, internal Education Department memos obtained by NPR show that career staff in the department's Borrower Defense Unit came down firmly on the side of defrauded borrowers. The memos show this unit reviewed thousands of borrower complaints against now-defunct, for-profit colleges, including Corinthian Colleges and ITT Technical Institute. Just weeks before DeVos was sworn in as secretary, the unit recommended to the department's political leadership that these borrowers deserve no less than full relief from their student debts. Read more.
DeVos will be testifying before the House Education and Labor Committee at a hearing today at 9 a.m. EDT titled "Examining the Education Department’s Implementation of Borrower Defense." For more information, please click here.
Retail investors in Dean Foods Co. are fretting about what the company’s recent bankruptcy filing means for them, highlighting the uncertainty that accompanies partial ownership of a firm that goes bust, Bloomberg News reported. Individual shareholders have taken to emailing the federal court overseeing the bankruptcy, fuming about executives, inquiring about legal protection and seeking representation in the case. Dean Foods' shareholders are looking to the court to appoint an official equity-holder committee. Dean Foods, which is the largest U.S. milk processor, filed for bankruptcy in November amid falling demand for dairy products. The company has said it’s in talks to sell itself to milk cooperative giant Dairy Farmers of America, but the deal could face regulatory hurdles. The case is Southern Foods Group LLC, 19-36313, U.S. Bankruptcy Court for the Southern District of Texas (Houston).
The federal judge overseeing the bankruptcy of Sears Holdings Corp. appointed an examiner in the ongoing fight between the bankrupt estate of Sears and the ESL Investments Inc. unit that bought the company out of bankruptcy, according to a new court filing, Bloomberg News reported. Lawyers for the estate and the ESL subsidiary that bought the retailer, Transform Holdco LLC, haven’t been able to agree on three issues including the value of inventory the estate handed over to Transform when the sale closed. Michael Wyse, the managing director of Wyse Advisors LLC, will calculate final figures for the prepaid inventory shortfall, cash reconciliation and the specified receivables shortfall, according to the filing. Transform previously said the prepaid inventory shortfall was at least $72 million. Bankruptcy Judge Robert Drain ordered the estate and Transform to cooperate with Wyse and comply with any requests for documents or information. The two sides have been engaged in an ugly fight since shortly after the $5 billion sale was approved in February. The Sears estate sued ESL founder Eddie Lampert in April for allegedly transferring billions of dollars in company assets when the retailer was insolvent. Lampert sued the estate the following month for allegedly failing to deliver “hundreds of millions of dollars of assets” called for by the sales agreement.
The fate of PG&E Corp.’s $13.5 billion deal to resolve wildfire claims as part of its bankruptcy case lies most immediately in the hands of California Gov. Gavin Newsom (D), the San Francisco Chronicle reported. By Friday, Newsom must decide if the agreement with victims’ attorneys PG&E announced one week earlier complies with a new state wildfire law he championed, according to terms the company disclosed on Monday. If the governor approves it, the PG&E parent company and subsidiary Pacific Gas and Electric Co. will be on track to clear the most central hurdle in their bankruptcy, though complications could still arise. If Newsom doesn’t sign off, PG&E’s agreement will automatically terminate — unless the company can amend it to his liking. Newsom has not yet made a decision about whether the agreement complies with California Assembly Bill 1054, the state law he backed that creates a fund PG&E could tap to protect itself from future fire costs. In order to access the fund, PG&E has to resolve its bankruptcy by June 30.
