PenAir, one of Alaska's largest regional air carriers with hubs here and in three other states, has filed for chapter 11 protection, the Alaska Dispatch News reported today. In a statement Monday, the company said the bankruptcy proceedings will not affect scheduled flights in Alaska or Boston. The company's hubs in Portland, Oregon, and Denver would begin the process of closing over the next 90 days. The documents show PenAir reporting a $6 million net loss for the 12 months that ended in March. Among the unsecured creditors: The state of Alaska, which is owed more than $1.4 million by PenAir, according to court documents.
Avaya Inc. said that a path has been cleared for the telecommunications company to exit chapter 11 protection in an agreement with its senior creditors and the government's pension insurer, Reuters reported. Avaya said that it had backing from holders of more than half of its $4.38 billion first-lien debt and a settlement with the Pension Benefit Guaranty Corp. (PBGC) to terminate its underfunded salaried employee pension plan. The agreements could cut more than $3 billion from the $6.3 billion in debt Avaya had when it entered bankruptcy in January. Avaya had faced challenges in trying to transition to software and services from a business centered on hardware, and failed to sell its call center business. Avaya also struggled with pension obligations. The PBGC has said Avaya's hourly workers plan was underfunded by $660 million and its salaried workers plan was underfunded by $1.24 billion. The Santa Clara, Calif.-based company will pay the PBGC $300 million and give it 7.5 percent of the stock in the reorganized Avaya in return for transferring obligations for the salaried plan to the PBGC, according to court documents.
Three days before a state deadline, Storm Cat Energy, a bankrupt coal bed methane company that owed Wyoming $10.8 million, received approval to unload hundreds of wells on another company for nearly nothing, the Casper (Wyo.) Star-Tribune reported today. Storm Cat went under after the price of natural gas plummeted. Large companies, seeing the writing on the wall for the market, stepped out of the coal bed methane game years ago. Smaller companies bought those wells and pits but were often financially weak, falling into bankruptcy as the price continued to decline. Since 2014, 4,681 wells have been left idle on state and private land. Using a tax on operators, Wyoming's Oil and Gas Conservation Commission has fewer than half of them.Wyoming could have seized Storm Cat's insufficient reclamation bonds. Its 2,432 idle wells would have become orphans, adding to a long list of such wells the state and federal agencies have to clean up.
U.S. Customs and Border Protection is seeking assurances from a judge that Rupari Food Services Inc.’s bankruptcy won’t shield the company from a $2.8 million penalty tied to its alleged illegal importation of Chinese crawfish meat, the Wall Street Journal reported on Saturday. In court papers filed on Thursday, acting U.S. Attorney David Weiss said Rupari, a one-time barbecue ribs specialist that has since liquidated most of its assets in chapter 11, should have to face a trial over the incident, which took place more than 15 years ago. According to prosecutors, between 1997 and 1998, Rupari imported frozen crawfish meat from Thailand that it knew had originated in China, avoiding a 201.63 percent tariff but committing a fraud in the process. In 2011, U.S. Customs and Border Protection filed a lawsuit against Rupari with the U.S. Court of International Trade, seeking to enforce a fine now pegged at $2.8 million.
The bankrupt Archdiocese of St. Paul and Minneapolis says that the latest reorganization plan proposed for the church by creditors would strip it of all assets required to pursue the church's mission, Minnesota Public Radio reported on Saturday. The archdiocese filed its objections to the creditors' plan on Friday and urged acceptance of its own $156 million settlement. The Twin Cities archdiocese filed for chapter 11 bankruptcy in January 2015, motivated by hundreds of claims of sex abuse against archdiocesan priests. The archdiocese says that to fulfill the creditors' demands, assets would include all cash and the cash value of property, including religious vestments and relics. Also included would be the church's financial stake as landlord in the Cathedral of St. Paul and two high schools.
Bankruptcy Judge Shelley C. Chapman has issued an opinion that provides an important reminder for employees throughout the United States who participate in deferred-compensation plans, according to a commentary by Prof. Stephen J. Lubben in the New York Times DealBook blog. The opinion is from the long-running Lehman Brothers bankruptcy, but it applies to employees of all sorts of companies, according to Lubben. In short, the tax benefits you get from a deferred-compensation plan are not “free,” and by deferring compensation, you are taking on the credit risk of your employer. In this case, the employees — in agreeing to the subordination provision — had agreed to be paid after all other general unsecured creditors had been paid in full. Judge Chapman acknowledged that seemed a bit unfair — in her words “expected compensation for years of dedicated service disappeared in an instant in September 2008.” Nevertheless, this was the basic trade-off that employees had made decades ago: better tax treatment, in exchange for more risk.
A major regional provider of orthotic and prosthetic devices has filed for chapter 11 protection, the company’s president and chief executive officer confirmed yesterday, the New Haven Register reported today. New England Orthotic and Prosthetic Systems sought protection in mid-July from its creditors under chapter 11. The company has 21 locations in Connecticut and three other states. David Mahler, president and chief executive officer of New England Orthotic and Prosthetic Systems, said that the company’s senior debt has been acquired by the owner of a Long Island, New York-based orthotic and prosthetic retailer that he did not identify. Mahler said that the individual who purchased the senior debt is expecting to merge his company with New England Orthotic and Prosthetic Systems by the end of the year.
The agency that owns the Westin hotel in Lombard, Ill., is restructuring its debt through a chapter 11 bankruptcy filing that will help it pay off $246.6 million owed to bond holders while continuing operations, the Chicago Sun-Times reported today. The bankruptcy filing comes with a $3 million commitment from the village of Lombard to pay back the portion of hotel bonds used to make water main improvements around the hotel site at 70 Yorktown Center before the 500-room facility opened in August 2007. Village officials say that making the payment will help stave off future downgrades to the village’s credit rating, which already has suffered several hits in the six years since Westin ownership began asking for financial help.
Energy businesses that are trying to exit bankruptcy are finding a savior in some of their own creditors, which have been scooping up newly issued stock from the companies at hefty discounts, Reuters reported today. More than a dozen so-called rights offerings have raised billions of dollars over the past 18 months, according to data compiled by Reuters, to help revitalize these energy companies in return for large fees and juicy investment returns. But those benefits have not been equally shared among all the creditors providing the cash. The deals are coming under increasing scrutiny by creditors and shareholders in some bankrupt companies over how to divvy the returns, and whether these companies should be looking for a different strategy altogether. Breitburn Energy Partners is a case in point. An official committee representing shareholders hopes to derail a $1 billion rights offering that the company is considering, which would be the biggest such offering in years. In these deals, a company sells newly issued stock — typically discounted around 20 percent to its estimated value — to its creditors, which are usually hedge funds that hold its bonds. The technique has proven lucrative for a select group of hedge funds such as Elliott Management that specialize in distressed investing. From January 2016 to June 2017, 17 of 56 bankrupt publicly-traded energy companies have sought to refinance through a rights offering, according to a Reuters review of court and regulatory filings. By comparison, in 2015, six of the 41 bankrupt publicly traded energy companies did so. Read more.
