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A bankruptcy judge rejected a sex-abuse compensation plan for the Diocese of Camden, N.J., saying that it would violate the rights of insurance companies on the hook for payment to abuse survivors, Bloomberg News reported. Judge Jerrold Poslusny said that he couldn’t release the Camden diocese from bankruptcy because its plan for compensating hundreds of sex-abuse victims would expose its insurers to paying potentially inflated or fraudulent claims. Camden’s failure to win court approval to exit bankruptcy after nearly three years highlights the growing discord among sex-abuse plaintiffs, insurers and religious organizations in a handful of recent chapter 11 cases stemming from childhood abuse. The Roman Catholic diocese, bankrupted by sex-abuse lawsuits, agreed last year to contribute more than $87 million to compensate over 360 abuse survivors on its way out of chapter 11. The reorganization plan left room for victims to pursue further compensation from insurance companies through litigation once the bankruptcy case ended. Judge Poslusny of the U.S. Bankruptcy Court in Camden took issue with several aspects of the Camden diocese’s proposed plan, including the appointment of a so-called neutral third party with the power to value each survivor’s sex-abuse claims. He also determined that abuse plaintiffs would have too much influence over the neutral administrator, potentially inflating the value of abuse claims and ultimately the amount of money the trust would pursue from insurance companies.

An increasing number of creditors are pushing back against a plan to cut the debt load of Puerto Rico’s bankrupt power utility by 75%, with investors and insurers accounting for $3.6 billion of the bonds set to vote against the proposal, a lawyer warned yesterday, Bloomberg News reported. Investors holding approximately $1.8 billion of Puerto Rico Electric Power Authority debt plan to join GoldenTree Asset Management, Syncora Guarantee and Assured Guaranty in opposing the restructuring plan submitted Friday to the court by a federally appointed financial oversight board, Thomas Lauria, a lawyer representing GoldenTree, said Wednesday during a court hearing before U.S. District Court Judge Laura Taylor Swain. Prepa, as the utility’s called, is seeking to restructure $8.3 billion after years of mismanagement and economic decline. The amount of bonds in opposition could increase to about 50% of the utility’s debt, Lauria said. “They intend to vote against the plan,” Lauria told Judge Swain. That $3.6 billion against the debt-cutting plan surpasses the creditor pool that’s in favor of it. That includes an ad hoc group of bondholders led by BlackRock Financial Management along with National Public Finance Guarantee. Swain plans to hold a confirmation hearing on that plan in March, she said Wednesday.

Trinity Regional Hospital Sachse borrowed $68 million just three years ago to build a new, state-of-the-art facility in a fast-growing area northeast of Dallas, Bloomberg News reported. Since opening its doors in November 2021, the hospital has encountered a litany of problems. On Tuesday, it filed for bankruptcy and is searching for a buyer. Trinity Regional’s plight, exacerbated by its own missteps, follows similar trouble for health-care facilities across the U.S., including a chapter 9 petition for a hospital district in California and the announced closure of a hospital in Eugene, Oregon, home of the state’s flagship research university. The health-care sector is still struggling with the effects of staff shortages and higher costs for wages and supplies that came after the COVID-19 pandemic prompted lockdowns and health crises in early 2020. But Trinity Regional’s own mishaps compounded its troubles from the start. Trinity Regional’s owners laid out the case for a new hospital in the bond offering: a fast-growing population, a site near a new highway, a fractured market with two recent hospital closures, a plan to expand into a 20-acre medical campus including doctors’ offices and an outpatient surgery center. The hospital would differentiate itself with a “lean” structure and a “culture of speed and quality in patient care,” with 30-minute limits for tasks such as reading radiology films. It would make “minimal” use of managed care and discounted services, the prospectus said, noting that 80% of the population in the area had commercial insurance.
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The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

A federal bankruptcy trustee has objected to plans by the University of Iowa to fast-track its planned $20 million purchase of Mercy Hospital-Iowa City, the Iowa Capital Dispatch reported. Faced with the possibility of involuntary receivership, Mercy filed for bankruptcy earlier this month and, at the same time, announced plans for its acquisition by the University of Iowa. The Iowa Board of Regents approved the plan, which stipulates that the university will submit an initial bid of no less than $20 million to acquire Mercy — although the final purchase price could be higher if there are competing bids. Now, however, the federal bankruptcy trustee is objecting to the speed and manner in which the proposed sale is being handled. U.S. Trustee Mary R. Jensen has formally objected to proposed orders approving the bidding procedures and authorizing the hospital to provide certain financial protections to the university as the stalking-horse bidder. In a filing with the court, Mercy’s bankruptcy trustee argues that adequate time has not been allotted for other prospective buyers to submit a bid by the Sept. 19 deadline, undermining efforts to obtain the highest purchase offer for the hospital. “That deadline does not appear to provide sufficient time for other interested bidders to conduct their due diligence and submit a competitive bid,” the trustee has told the court. The trustee also cites the current lack of any evidence of the hospital being marketed to potential buyers, which is a necessary step to justify a shortened timeframe for a sale. The trustee also argues the various protections given to the university as part of the deal could discourage competing bids. Plans for the proposed sale state that to be deemed “qualified,” a bid must be for no less than $21.3 million — an amount that’s equal to the university’s original $20 million bid amount, plus $100,000, plus a 4% breakup fee, plus $400,000 for the university’s expenses. Read more.

The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

Louisville-based Green District Salads has filed for chapter 11 bankruptcy protection, according to court documents, the Louisville Courier-Journal reported. Green District, led by Green District Franchisee Parent Inc., filed for chapter 11 protection with the U.S. Bankruptcy Court for the Western District of Kentucky Aug. 18, court records show. The fast-casual salad and sandwich-style restaurant operates at least eight locations in Louisville and the surrounding area, according to the restaurant's website. The company, represented by DelCotto Law Group PLLC., would be able to "restructure its creditor obligations to keep the business alive and pay back its debts over time" under chapter 11, according to the report. Opened by Jordan Doepke, Chris Furlow and Matt Petty, Green District's first store was opened in 2017 in St. Matthews. They have since added franchises in other states such as Indiana and Ohio. Lousiville-based investment company, The Castellan Group, was part of a private equity investment in the restaurant's expansion plans, according to previous Courier Journal reporting. The company planned a goal of $100 million in revenue from the restaurant by 2026.

Trinity Regional Hospital Sachse, a full-service hospital and emergency room near Dallas, filed for bankruptcy with plans to sell itself just two years after opening, Bloomberg News reported. The hospital’s parent entity listed assets of as much as $100 million and liabilities of as much as $500 million in its bankruptcy petition. The hospital is in default on nearly $70 million of municipal bonds issued in 2020, according to data compiled by Bloomberg. Hospitals — particularly those in rural areas — have suffered tremendously in recent years as they contend with higher labor costs and staffing shortages exacerbated by the pandemic. Meanwhile, rating downgrades have plagued the nonprofit medical sector as facilities continue to struggle. Trinity has been shopping itself prior to the bankruptcy filing and now that process will move into “high gear,” Nash said. The facility is brand new and boasts state-of-the-art equipment, he added. Read more.

The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

Oregon’s third-largest city is about to lose its only hospital as PeaceHealth announced last week its plan to shutter University District hospital because of underutilization, Bloomberg News reported. The hospital in Eugene, which is home to the University of Oregon, loses an average of $2 million a month, PeaceHealth, a nonprofit Catholic health system, said in a press release. The departure will leave roughly 23,000 college students without an emergency room in town. Diminishing patient volume puts a squeeze on operating margins, leaving hospitals across the nation unable to pay their bills. Fewer procedures were a factor in the decline in an index tracking the median calendar year-to-date operating margins for more than 1,300 US hospitals, according to a report by consulting firm Kaufman Hall. The index slid to 1.3% in July from 1.4% a month earlier. Should PeaceHealth receive regulatory approval, it will shutter the hospital’s 27 inpatient beds along with emergency and rehabilitation departments. It plans to shift other medical services to Sacred Heart Medical Center at RiverBend, a hospital it operates in Springfield about six miles away.

Genesis Global and its parent company, Digital Currency Group (DCG), have reached an in-principle agreement with Genesis' creditors to resolve claims brought during the crypto lender's bankruptcy, a court filing showed on Tuesday, Reuters reported. The plan could lead to a recovery of about 70%-90% in U.S. dollar equivalent for unsecured creditors and about 65%-90% recovery on an in-kind basis depending on the denomination of the digital assets, according to the filing in the U.S. bankruptcy court in the Southern District Of New York. The deal includes a payment of about $630 million in unsecured loans due in May 2023 and a $1.1 billion unsecured promissory note due in 2032, along with some other potential claims. "DCG is pleased to reach an agreement in principle with Genesis and the unsecured creditors' committee, which will provide a framework for a comprehensive resolution of the claims in the Genesis chapter 11 cases and a pathway to significant recovery for creditors," DCG said in a statement to Reuters. Genesis filed for bankruptcy in January owing at least $3.4 billion to creditors and reached an agreement in principle on a restructuring plan, supported by Digital Currency Group, and its primary creditors, including Gemini, in February.

TV Azteca SAB agreed to negotiate with U.S. bondholders owed $400 million after a U.S. judge warned the second biggest broadcaster in Mexico that it could be forced to participate in a bankruptcy case in New York, Bloomberg News reported. U.S. Bankruptcy Judge Lisa G. Beckerman told the company that it was obvious to her that TV Azteca had to restructure its debt, despite strong resistance from the company. TV Azteca opposes a U.S. bankruptcy and has used court rulings in Mexico to try to block bondholders from collecting on the defaulted bonds. “Your position that there should be no restructuring is not going over very well with me,” Beckerman told TV Azteca. “It is one thing to say that a restructuring should not take place in the United States and it’s another thing to say ‘I’m ducking restructuring.’” Judge Beckerman said that she would delay ruling on whether she should force the producer of some of the most-watched Spanish-language shows to participate in a bankruptcy case in New York brought by US bondholders. Instead, the two sides will try to hire a former federal judge to act as mediator for about 60 days. “It just sounds like it has to have a restructuring,” Beckerman said of the company. That could happen in or out of court, but either way “it means parties will have to recognize that it’s restructuring time.” Lawyers for TV Azteca and the bondholders were in federal court in Manhattan Tuesday for the end of a two-day trial over the company’s request to dismiss the bondholder’s effort to put the broadcaster into chapter 11 bankruptcy. TV Azteca argues that disgruntled creditors can’t force it into bankruptcy because the company doesn’t own or operate anything of substance in the U.S. And even if Beckerman later rules that TV Azteca must participate in the proposed chapter 11, company managers, who are based in Mexico, may refuse to cooperate, TV Azteca lawyer William Clareman told the judge.

Foxconn Technology Group lost a bid to kick Lordstown Motors Corp. out of bankruptcy, a win for the troubled electric vehicle maker as it attempts to find a new owner for its business, Bloomberg News reported. Judge Mary Walrath yesterday refused to dismiss Lordstown’s bankruptcy case. She rejected Foxconn’s claim that the struggling EV startup improperly sought chapter 11 protection to gain an unfair edge in a legal dispute between the companies over a deal to make Lordstown’s flagship Endurance trucks. Lordstown said that it was running low on cash before it filed bankruptcy in June and facing an exodus of employees and customers after Foxconn said it was prepared to exit a production partnership. Under the circumstances, Judge Walrath said Lordstown had a valid reason for filing bankruptcy and is now pursuing a reasonable strategy for repaying its creditors by attempting to sell the business. Thomas Lauria, a lawyer representing Lordstown, said the Ohio-based manufacturer is formulating a debt repayment plan and is hopeful that it will find buyers in chapter 11 for all or parts of its business. Potential buyers have until Sept. 8 to submit bids for the company’s assets, according to court documents.