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An auto-parts company founded by billionaire investor and U.S. Commerce Secretary Wilbur Ross is scrambling to refinance debt after selling off its best asset last year, WSJ Pro Bankruptcy reported. Luxembourg-based International Automotive Components Group, better known as the IAC Group, is scrambling to refinance a $300 million note coming due on June 1. The company is controlled by W.L. Ross, the private-equity firm founded by Ross. Ross stepped down as chairman of the company in 2014, and is no longer a shareholder, according to a person familiar with the matter. If IAC can’t persuade debt investors to extend the company’s debt, the risk that the company will enter a debt restructuring increases, according to a February Standard & Poor’s report. S&P Global Ratings also cut the company’s credit rating in February to CCC- citing the risk that the company may not be able to refinance its debt and weak liquidity. The company is in talks with its bondholders and outside investors to refinance the debt by the end of March.

A deal with the Environmental Protection Agency eased the path toward a bankruptcy exit for Philadelphia Energy Solutions but did little to ensure the future of the troubled oil refinery operating close to the heart of a major East Coast city, WSJ Pro Bankruptcy reported. Philadelphia Energy filed for bankruptcy protection Jan. 21, blaming the cost of compliance with renewable fuels standards for its financial distress. A settlement with the EPA earlier this month chops the refinery’s compliance obligations nearly in half, at least as to the liabilities that stack up before the oil refinery leaves chapter 11 protection. The EPA settlement aroused controversy, with renewable fuels advocates protesting that creating an exception for Philadelphia Energy sets a dangerous precedent. Other merchant refiners live with renewable fuel requirements and “in fact are doing pretty darn well,” said Bob Dinneen, chief executive of the Renewable Fuels Association, a trade group for the ethanol industry. Dinneen and other critics contend that renewable fuels standards did not drag Philadelphia Energy into bankruptcy, and relief from the standards won’t be enough to keep it from returning. Philadelphia Energy Chief Executive Gregory Gatta said that the EPA settlement puts the company on a “stable path” toward emerging from bankruptcy. However, he acknowledged, the EPA settlement is a short-term, one-time solution to a continuing compliance burden. “This is only a partial and temporary reprieve,” Gatta said. Read more.

In related news, the U.S. Justice Department said refiner Philadelphia Energy Solutions’ bankruptcy plan does not adequately protect creditors, the department said in a federal court filing that was made public yesterday, Reuters reported. The 44-page objection, filed on Tuesday by the DOJ comes just days before a pivotal Monday confirmation hearing in U.S. Bankruptcy Court in Delaware. The department said that the plan could leave a long list of unsecured creditors partially or completely unpaid even as they are prohibited from voting on the proposal. The plan also fails to detail how much unsecured creditors are owed and when they will get paid, it said. Read more. 

Toys ‘R’ Us said at a bankruptcy court hearing on Tuesday that it was working hard to maximize payments to suppliers and lenders, as it starts to shutter 735 big-box toy stores across the U.S., Reuters reported. More than 50 suppliers, including Barbie maker Mattel and Lego, have objected in some form to the proceedings by the storied toy retailer to liquidate its U.S. business, putting 30,000 jobs at risk. Toys ‘R’ Us had been trying to reorganize under U.S. Chapter 11 but last week said those efforts had failed and it was quickly running out of cash. It is also winding down its U.K business, but is looking for a buyer for operations in Canada, Europe and Asia. Some trade vendors are demanding the company return any unpaid inventory rather than selling it and using going out of business sales to pay secured lenders and bankruptcy lawyers, at their cost, court papers showed. “We’re making every effort to make sure (trade vendors) will be paid in full,” Lazard’s David Kurtz, who is advising Toys ‘R’ Us, testified at a hearing at U.S. Bankruptcy Court in Richmond, Virginia. Read more. 

One of the worst outcomes for a business owner is having a major customer file for bankruptcy and leave behind a large unpaid account receivable. ABI's Business Creditor’s Guide to Distressed Vendors, Debt Collection and Bankruptcy provides an insider’s look into the options available to help screen a business’s customers, plan for worst-case scenarios, and, if the situation does arrive, efficiently handle the fallout. 

Claire’s Stores Inc. entered bankruptcy Monday with a reorganization plan already blessed by private-equity owner Apollo Global Management and first-lien debt holder Elliott Management Corp., but at least one noteholder — Oaktree Capital Management LP — is already objecting to the proposed deal, WSJ Pro Bankruptcy reported. In a court filing and at the teen accessories retailer’s debut bankruptcy hearing Tuesday, Los Angeles-based debt investor Oaktree said holders of $240 million in second-lien notes were unfairly shut out of the negotiations, which could pave the way for first-lien creditors to take control of the company when it exits chapter 11. Oaktree owns 72 percent of the second-lien debt and said it will walk away with nothing in the proposed reorganization. Claire’s went private in 2007 in a $3.1 billion leveraged buyout led by Apollo. Apollo, which owns 98 percent of the equity and 28 percent of three different loans, is on board with the restructuring, which is aimed at cutting $1.9 billion in debt from the retailer’s balance sheet.

The judge in charge of the Weinstein Co. bankruptcy case, Judge Mary Walrath, is one of the country’s most experienced chapter 11 jurists, a legal hardliner and a potential nightmare for the board of the embattled movie studio, according to a WSJ Pro Bankruptcy commentary. Bankruptcy will offer no way out of legal trouble for Weinstein executives accused in multiple lawsuits of aiding the alleged sexual predations of studio co-founder Harvey Weinstein, if Judge Walrath’s track record is any indication. A nearly 20-year veteran of the U.S. Bankruptcy Court in Wilmington, Del., Judge Walrath is known for ruling quickly and decisively, often issuing decisions from the bench. She has been described by one lawyer who has practiced before her for years as a “classic district court judge.” The implication is that she’s not prone to wink at corporate foibles in the name of saving a business, according to the commentary. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The Weinstein Company’s bankruptcy filing will not protect ex-chairman Harvey Weinstein, who has been accused of sexual harassment and assault, an attorney for the studio told U.S. Bankruptcy Court Judge Mary Walrath yesterday, Reuters reported. “We are not here to protect Harvey Weinstein,” attorney Paul Zumbro said. “(The Weinstein Company) filing for bankruptcy relief in no way affects anyone’s ability to pursue civil or criminal claims against Harvey Weinstein.” Weinstein, who co-founded the company with his brother Bob and once was one of Hollywood’s most influential men, has been accused of sexual misconduct including rape by more than 70 women. He has denied having non-consensual sex with anyone. It has been unclear how his alleged victims would be treated in a potential bankruptcy filing. Read more.

Don't miss the "Restructuring a Firm After Discrimination or Sexual Harassment Claims" panel at the Annual Spring Meeting. Click here to register.

The collapse of Toys “R” Us Inc. is yet another blow for landlords, who now will have holes of suburban retail space up for grabs with few tenants would want them, according to a Bloomberg News analysis. The debt-laden toy chain, with more than 700 stores across the U.S., became one of the largest victims of the retail decline when it announced on Thursday that it would go out of business after a failed rescue effort. The liquidation could dump millions of square feet of real estate onto a market that’s already bloated with vacancies from retailer bankruptcies and store closures, a trend that’s been escalating as shoppers increasingly turn to the internet. Toys “R” Us has stores in all types of shopping properties — from standalone locations to community strip centers to large regional malls. Many centers are in the hands of publicly traded real estate investment trusts that lease space to the chain and may struggle with declining values for the properties. Some stores are owned by Toys “R” Us itself. How successful landlords will be in filling empty stores will depend on the quality of the properties and their locations, according to research by CoStar Group Inc. Toys “R” Us owns many of the stores in weaker areas, while GGP Inc., the second-biggest U.S. mall REIT, tends to have some of the best locations and would have the easiest time finding new tenants, according to CoStar. Somewhere in the middle are companies such as Simon Property Group Inc., GGP’s larger rival, and Kimco Realty Corp., the research firm said. Read more. 

Occupancy issues are at the heart of many significant retail cases, as detailed in the forthcoming ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available for pre-order at the ABI Store. 

The Commonwealth of Pennsylvania is voicing doubts about the turnaround plan of Philadelphia Energy Solutions, the troubled, private-equity-owned refinery operating near the heart of a major East Coast city, WSJ Pro Bankruptcy reported. In a Friday filing with the bankruptcy court reviewing Philadelphia Energy’s plan, state said that it has filed a tax claim against the company for $3.8 billion, an amount sufficient to upend the restructuring. The refinery operator, owned by Carlyle Group and Energy Transfer Partners, filed for chapter 11 protection Jan. 21, with a pre-packaged chapter 11 plan. It operates a complex within miles of Philadelphia’s downtown that converts crude oil into gasoline, jet fuel and other products. Long distressed, Philadelphia Energy resorted to chapter 11 protection to cement a debt-for-equity swap and to seek relief from regulatory obligations. The $3.8 billion figure for sales and use taxes came from an ongoing audit and isn’t final, according to Pennsylvania. “The Commonwealth believes, however, the final audit may produce a substantial liability which could impact the feasibility of the plan,” lawyers for Pennsylvania wrote.

U.S. film and TV studio The Weinstein Company, whose ex-Chairman Harvey Weinstein has been accused of sexual harassment and assault, said on Monday it filed for bankruptcy and was ending all non-disclosure agreements that may have silenced some women, Reuters reported. The Weinstein Company filed for bankruptcy in the Delaware court, listing $500 million to $1 billion in liabilities and $500 million to $1 billion in assets, and said that it struck a deal with an affiliate of private equity firm Lantern Capital Partners to acquire its assets. The bankruptcy comes after the studio spent months looking for a buyer or investor. The company inked a deal with an investor group led by former Obama administration official Maria Contreras-Sweet, but the group terminated its offer earlier this month after seeing that the company had more liabilities than previously disclosed. The Weinstein Company said in a statement it entered into a stalking-horse agreement with a Lantern Capital affiliate, that would purchase substantially all of the assets of the company. Read more. 

Don't miss the "Restructuring a Firm After Discrimination or Sexual Harassment Claims" panel at the Annual Spring Meeting. Click here to register.