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Lawyers for Pacific Drilling SA, in bankruptcy for the second time in three years, and company lenders assured a federal judge on Monday that the offshore oil-and-gas drilling contractor’s latest trip to chapter 11 will be its last, WSJ Pro Bankruptcy reported. Pacific Drilling, which emerged from chapter 11 in late 2018, intends in its second time through bankruptcy to trim $1.1 billion in debt from its balance sheet and hand control of the business to senior lenders. Like many other energy companies, publicly traded Pacific Drilling blamed the filing on significant disruption to its operations caused by the coronavirus pandemic and low oil prices. Bankruptcy Judge David Jones of the U.S. Bankruptcy Court in Houston said he was “genuinely concerned” about whether the business would be adequately capitalized if the proposed restructuring is completed. Pacific Drilling’s lawyers said the company would be well capitalized after exiting chapter 11 with $132 million in cash on hand at that time, including a partial drawdown on an $80 million exit loan. The company has additional sources of liquidity available if that becomes necessary, the lawyers said. Judge Jones said he doesn’t want to oversee a chapter 11 case where a company has to make a return trip to bankruptcy court, referred to as a chapter 22. Lenders backing the proposal include Pimco LLC, Whitebox Advisors LLC, GoldenTree Asset Management LP and Hayfin Capital Management LLP, which together hold more than two-thirds of Pacific Drilling’s senior bonds and a portion of its junior bonds. The Luxembourg-based company owes about $750 million in senior bonds and about $326 million in junior bonds, court papers said. Under the restructuring plan, which must be approved in court, senior bondholders would recover 82 cents on the dollar and junior noteholders would recover 32 cents while unsecured creditors and shareholders would be wiped out.

The Mortgage Bankers Association said that the U.S. forbearance rate measuring the share of mortgages with suspended payments fell seven basis points to 5.83 percent last week, HousingWire.com reported. “With more borrowers exiting forbearance in the prior week, the share of loans in forbearance declined across all loan types. Almost half of forbearance exits to date have been from borrowers who remained current while in forbearance, or who were reinstated by paying back past-due amounts,” said Mike Fratantoni, MBA’s senior vice president and chief economist. The share of Fannie Mae and Freddie Mac loans in forbearance fell 6 basis points last week to 3.66 percent – marking the 21st week in a row the GSEs’ forbearance rate has dropped. Though the rate for Ginnie Mae loans, which include loans backed by the Federal Housing Administration, rose slightly the week prior, last week’s rate leveled off after falling 4 basis points to 8.13 percent. Last week’s drop was largely driven by the forbearance share of portfolio loans and private label securities (PLS) and independent mortgage bank (IMB) servicers both falling 8 basis points to 8.82 percent and 6.27 percent, respectively. 

A Joe Biden presidency could open the door to the first major revision in 15 years to the nation’s consumer bankruptcy laws, a critical financial backstop for Americans overwhelmed by debt, WSJ Pro Bankruptcy reported. Biden, the Democratic presidential candidate, has proposed changes that would make it easier for struggling borrowers to file for bankruptcy and reduce the cost of doing so, embracing Sen. Elizabeth Warren’s (D-Mass.) platform for rolling back amendments to the Bankruptcy Code he voted for when he was a senator in 2005. Overhauling the consumer bankruptcy system is one of the issues that catapulted Warren to the national stage in the 2000s, as one of the nation’s leading bankruptcy law experts and a professor at Harvard Law School. The Warren platform adopted by Mr. Biden would eliminate barriers that for decades have prevented people from having student loans forgiven in bankruptcy. Other changes would make it easier for homeowners to modify underwater mortgages in bankruptcy and bolster protections for renters to prevent evictions. Fewer people have filed for bankruptcy during the coronavirus pandemic as a combination of stimulus benefits and moratoriums on foreclosures and evictions have kept millions of people afloat. But experts say the number of bankruptcies is expected to eventually surge if unemployment remains high and coronavirus relief programs expire. In contrast to his Democratic rival, President Trump isn’t expected to push for changes to consumer bankruptcy law if he is re-elected. The amendments Mr. Biden supported in 2005 were backed by the credit-card industry and increased upfront costs to file bankruptcy. The extra expense and paperwork have prevented the most economically disadvantaged Americans from filing for bankruptcy, lawyers and professors say. Biden has said that regardless of his vote, the 2005 changes would have been passed by a Republican-controlled Congress and signed into law by then-President George W. Bush, and that by supporting the bill Biden was able to improve the legislation to prioritize protections for alimony and child-support payments.

The Small Business Administration is quietly rolling out an effort to scrutinize the largest businesses that took payroll support loans during the pandemic, demanding new details about their operations to justify the aid, Politico reported. The SBA last week began to circulate "loan necessity" questionnaires aimed at companies and nonprofits that took forgivable Paycheck Protection Program loans worth $2 million or more. The agency declined to comment on the forms and issued no public announcement beyond a brief Federal Register notice marking their release, but copies were obtained by Politico. The questions posed by the SBA have rattled banks, which issued the loans and would be responsible for delivering the questionnaires to the agency, as well as accountants for PPP borrowers. They say it's another "gotcha" moment in a program that has been subject to shifting rules and expectations since its hurried launch in April and could create major new complications for businesses that took advantage of the aid. The loans were originally designed to be forgiven if borrowers agreed to maintain payroll. The new questions for businesses in the nine-page questionnaire — which the SBA said borrowers must complete within 10 business days of receiving it — ask for details on quarterly revenue, capital expenditures, dividend payments and whether any employees earned more than $250,000.

J.C. Penney Co. cleared the way to sell itself out of bankruptcy to lenders and landlords, settling with a group of holdout creditors led by Aurelius Capital Management LP that wanted a bigger share of value from the restructuring, the Wall Street Journal reported. The settlements resolved objections to a planned restructuring under which the department store chain’s retail operations and most of its stores will be acquired by landlords Simon Property Group Inc. and Brookfield Property Partners LP for roughly $800 million. As part of the proposed deal, top lenders agreed to buy the remaining stores in return for forgiving $1 billion of Penney’s $5 billion in debt while leasing the locations to Simon and Brookfield. Other lenders including Aurelius had opposed the company’s proposed breakup, arguing it would funnel a disproportionate amount of value to a subset of participating lenders led by H/2 Capital Partners LLC. The settlement announced Monday brings “widespread consensus” to the bankruptcy case and positions Penney to complete the restructuring sale well ahead of the holiday shopping season, the company said in court papers. Simon and Brookfield beat out competition from private-equity firm Sycamore Partners Inc. and Saks Fifth Avenue owner Hudson’s Bay Co. to acquire Penney’s retail assets.

Pittsburgh-based GNC Holdings LLC announced that it completed its chapter 11 bankruptcy plan of reorganization and that it will begin to "wind-down the affairs of the remaining bankruptcy estates," pay allowed claims and resolve those in dispute, the Pittsburgh Business Times reported. On Oct. 7, GNC had a substantial amount of its assets acquired in a $770 million sale to Harbin Pharmaceutical Group Holding Co., its largest shareholder, which let GNC improve its financial standing following adjustments it made to its store footprint and restructuring plan. The company plans to continue providing "innovative wellness solutions to customers" and that the chapter 11 plan and sale to Harbin will allow the company to continue to expand.

Faced with the worst business interruption in living memory, the insurance giants have, by and large, refused to pay business-interruption claims, Bloomberg News reported. U.S. plaintiffs’ lawyers have filed more than 1,100 complaints against insurers, according to a tally by Tom Baker, a law professor at the University of Pennsylvania. Business owners from small restaurants to major retailers say that they could go bankrupt unless they’re paid. Insurance companies say the payouts could cripple them — one industry estimate looking at just U.S. small businesses with fewer than 100 employees places the total monthly cost of reimbursing their pandemic losses at between $52 billion and $223 billion. The dispute is also playing out in Congress and state legislatures, where bills have been introduced requiring insurers to pay for pandemic-related losses. “The word ‘unprecedented’ is probably overused in this, but I don’t think I have another word for it,” says Henry Daar, an executive vice president who oversees property claims for insurance broker Willis Towers Watson. “There have been huge insurable events in the past, with billions of dollars at issue. All of those involved situations that affected a discrete area and a discrete number of companies. This pandemic has affected everybody.” 

AMC Entertainment Holdings Inc.’s executives are focused on raising enough capital to keep the struggling theater chain afloat until summer, when they believe a COVID-19 vaccine and a backlog of blockbuster films will reverse its fortunes, Bloomberg News reported. The world’s largest cinema chain said yesterday that it has enough cash to last until early 2021, assuming attendance remains at its current, modest level. Chief Executive Officer Adam Aron said he’s talking with more than a dozen strategic investors about potential equity investments, as well as current lenders to shore up its liquidity until summer. “It all really comes down to one thing: We believe that we will need to raise more capital,” Aron said on a call with analysts after reporting a third-quarter loss of $905.8 million, or $8.41 a share. The Leawood, Kansas-based company said yesterday that its revenue tumbled to $119.5 million in the third quarter, plunging from almost $1.32 billion a year ago. While it has reopened 540 of its 600 locations in the U.S., they’re typically no more than 20 percent full and operating only on the weekends to save money.