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After being cleared of wrongdoing in a case by the U.S. Securities and Exchange Commission, New York financier Lynn Tilton faces new claims over how she ran her distressed companies in a lawsuit by three funds she once created and managed to raise money for her portfolio, Bloomberg News reported. Tilton’s Patriarch Partners LLC last year stepped down as manager for the "Zohar" funds — securities known as collateralized debt obligations that held bundled loans for the companies — over disputes with a unit of bond insurer MBIA Inc. and minority investors about her performance. Since then, Tilton has failed to tell the funds that she was holding as much as $45 million on behalf of the portfolio companies, even after 20 of them defaulted on their scheduled payments to the Zohar funds, their attorney Jonathan Pickhardt said yesterday in federal court in Manhattan.

Island Air employees have been told by a bankruptcy judge that there is no guarantee they will receive their final paychecks, the Associated Press reported. Bankruptcy Judge Robert Faris on Wednesday approved a motion to convert the bankruptcy case to a chapter 7 liquidation from a chapter 11 reorganization. Island Air ceased operations on Friday. The employees have not been paid for the work they did this month. CEO David Uchiyama said earlier this week that pay period encompasses about 10 days.

Synchronoss Technologies Inc. is fighting back against bondholders who say the company breached its borrowing agreements through the $1 billion sale of its Intralinks Holdings Inc. subsidiary, WSJ Pro Bankruptcy reported. The sale of Intralinks to private-equity firm Siris Capital Group LLC closed this week. But creditors holding a majority of Synchronoss bonds have argued in letters to the company that the deal moved “substantially all” of its assets out of their reach without the buyer assuming their debt. Intralinks specializes in financial technology for the capital markets, providing secure data rooms critical for acquisition deals, capital raises and other types of disclosures between companies and investors. The $226 million in convertible bonds recently changed hands at 92.5 cents on the dollar, according to FactSet. Synchronoss said it would use the proceeds from the Intralinks sale primarily to retire other loans. The convertible bonds mature in 2019.

A battle of “bankruptcy tourists” has erupted in New York court, with unclear consequences for global companies and their bondholders, Bloomberg News reported. Bankruptcy Judge Martin Glenn yesterday refused to issue a ruling on a request by Ocean Rig UDW Inc. to block a lawsuit in the Marshall Islands that it said threatens a $3.7 billion restructuring approved in Cayman Islands Courts. Judge Glenn said he would think about the “extraordinary” issues the case raised, possibly ruling later. "You want me to stop litigation in another sovereign country," Glenn said in court Thursday, adding that he had never seen such a request and that there was no clear precedent. If Highland wanted to try to recover Ocean Rig’s U.S. assets in U.S. court, then the issue would be in his jurisdiction, he said. Any decision in the case could have wider implications for what restructuring experts call "bankruptcy tourism." In the past, bankruptcy participants wrangled over the merits of Delaware versus New York courts, and sometimes drew criticism about "forum shopping" for a venue that favored their case. Now companies and creditors are engaged in international battles over where they can best win their debt wars. "This is the next phase of the restructuring business,” said William Brandt Jr., chief of a New York-based restructuring advisory firm Development Specialists."Bankruptcy tourism will come into the fore." Brandt cited his work as a trustee in the international case of China Fishery Group Ltd., where he regularly travels from Lima to Hong Kong. Another example, he said, is Oi SA, a Brazilian telecom company, in which Aurelius Capital Management is fighting a battle that involves jurisdiction of Dutch, U.S. and Brazilian law.

TechShop’s Pittsburgh location in Bakery Square has been battling financial strains since it reported monthly losses exceeding $30,000 in June, with members eventually joining together to create a new nonprofit to take the place of the co-working maker space. Now, the entire chain of TechShop locations will close, effective immediately, under chapter 7 bankruptcy liquidation, according to the company’s Pittsburgh landlord, the Pittsburgh Post-Gazette reported. In addition to the troubled Pittsburgh location, TechShop will close three locations in California — including the flagship location, which opened in Menlo Park, Calif. in 2006. The company will also shut its doors at one location each in Arizona, Michigan, Missouri, Texas, Washington, D.C. and a brand new facility in Brooklyn, New York.

Vitamin World Inc. has hired Gordon Brothers Retail Partners LLC to immediately start going-out-of-business sales at 124 stores in more than 30 states, WSJ Pro Bankruptcy reported today. The Holbrook, N.Y., retailer on Tuesday asked the U.S. Bankruptcy Court in Wilmington, Del., for permission to hire Gordon Brothers as its liquidation consultant and to approve a plan that would result in the closure of more than a third of its stores by the end of January, court documents show. When Vitamin World filed for chapter 11 bankruptcy in September, it had 334 stores and said at that time it had identified 51 stores it planned to close as part of its restructuring. Although it originally planned to reorganize its business, Vitamin World said in a court filing Tuesday that “unforeseen operational challenges and liquidity concerns” have caused it to now pursue a sale of “substantially all” of its assets. A hearing on the matter is scheduled for Nov. 21.

Toys ‘R’ Us, which filed for bankruptcy in September, is seeking court approval to pay $16 million in bonuses to its senior leadership, including Chief Executive David Brandon, WSJ Pro Bankruptcy reported. The company said in a bankruptcy court filing on Tuesday that it needs to pay the incentive bonuses to senior managers as the toy retailer gears up for its critical holiday season, where it generates 40 percent of its yearly net sales. “The stress on the debtors’ operations (and its senior management team) has been lasting and continues, as efforts continue to stabilize the world-wide enterprise and position the company to win during the all-important holiday season,” said the company’s lawyers at Kirkland & Ellis.

Rosa Parks’ lawyer avoided jail yesterday and received three more weeks to turn over a missing treasure trove of civil rights, Motown and African American objects, the Detroit News reported. Bankruptcy Judge Marci McIvor made the decision during a tense meeting with bankruptcy officials who accused Detroit lawyer Gregory Reed of failing to surrender historically significant assets as ordered in his long-running bankruptcy case. Judge McIvor wants lawyers for bankruptcy trustee Kenneth Nathan to determine the value of the approximately 135 missing items, which include Parks’ key to the city of Detroit, iron slave shackles, a first-edition autographed copy of educator Booker T. Washington’s 1901 autobiography “Up From Slavery” and gold records awarded to Motown stars. The judge is concerned about risings costs in the three-year-old bankruptcy case, which are eating into money available for creditors.

A U.S. bankruptcy judge yesterday granted formal recognition to Takata Corp.’s Japanese court restructuring proceeding, a step forward for the company as it works to address massive damage claims tied to defective air-bag parts, WSJ Pro Bankruptcy reported. The auto-parts maker filed for court protection from creditors in the U.S. and in Japan in June after being swamped with litigation over air-bags that deployed with explosive, sometimes deadly, force. As of the bankruptcy filing, at least 16 deaths and more than 180 injuries were linked to the defect. Yesterday’s hearing in the U.S. Bankruptcy Court in Wilmington, Del., was a pivotal moment for the Japanese company, which is selling much of its business to appease creditors. A lot of the money from the $1.58 billion sale will be routed to the Japanese parent, and then to the U.S. Justice Department to pay $850 million owed on a settlement of a criminal case. That cash will go to car makers that have been footing the bill for the largest recall effort in U.S. automotive history.

Thirty-three nursing homes affiliated with Preferred Care Group, one of the largest U.S. nursing home chains, filed for chapter 11 protection due to multi-million dollar personal injury lawsuits in Kentucky and New Mexico, according to court filings, Reuters reported. Preferred Care Group is owned by Thomas Scott of Plano, Texas, according to the court filings. Scott also owns another company, Preferred Care Inc., which is the master lessee of some of the facilities and also filed for bankruptcy on Monday. The operators of the nursing homes said in a statement issued by Preferred Care Inc. that the bankruptcy filings will allow them to stay in business, pay employees and vendors and care for 2,900 residents while seeking to restructure. Preferred Care blamed the bankruptcies on 163 personal injury cases the company is defending, most of which have been lodged by the Wilkes & McHugh law firm of Tampa, Fla., according to court records. In its filing in the U.S. Bankruptcy Court in the Northern District of Texas, a $28 million judgment in favor of the family of a man who was injured in one of its nursing facilities in Kentucky was listed as its largest claimant. Read more. 

For more on hospital and health care insolvencies, be sure to pick up a copy of the ABI Health Care Insolvency Manual, Third Edition from the ABI Bookstore.