%1

Sabine Oil & Gas Corp. and Samson Resources Corp., energy producers with a combined debt of nearly $8 billion, are facing showdowns over plans to exit bankruptcy as junior creditors are demanding larger repayments, Reuters reported yesterday. Sabine and Samson were among the biggest bankruptcies in the energy sector last year, when energy prices began falling sharply. Both proposed to exit chapter 11 by swapping control of the company to their lenders in return for eliminating billions of dollars of debt. Both bankruptcy exit plans have run into objections from official committees of unsecured creditors. Sabine's creditors argued in court papers filed on Wednesday that the company improperly valued lenders' collateral, which led to a plan that is unfair to unsecured creditors. While Sabine has proposed giving unsecured creditors equity worth $6.8 million in a reorganized Sabine, the unsecured creditors argued they could be entitled to $268 million. The company's unsecured creditors are owed $1.4 billion. Samson's unsecured creditors made similar arguments in court papers filed on Tuesday in which they asked the U.S. Bankruptcy Court in Delaware to take the relatively rare step of ending the company's exclusive right to propose a plan of reorganization. The Samson committee proposed its own plan in which certain unsecured creditors would end up controlling the company through a debt-for-equity swap and a rights offering for shares in the reorganized company. Read more. 

Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. Order your copy of ABI's revised and expanded When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy, Second Edition.

For additional insights and analysis on valuation topics, pick up a copy of ABI’s A Practical Guide to Bankruptcy Valuation. 

Florida Modification Specialists LLC filed for chapter 11 protection on Monday in the U.S. Bankruptcy Court for the Middle District of Florida to reorganize its business, the Tampa Bay Business Journal reported today. The company’s largest creditor is the U.S. Internal Revenue Service for approximately $230,000 in unpaid federal taxes, according to the court filing. The second largest creditor is the city of Lakeland, Fla., which is owed a little over $200,000. Brentwood, Tenn.-based Matthews Aviation Consultant is third, with a claim estimated at more than $122,000. Founded in 2009, Florida Modification or FMS is located at Lakeland Linder Regional Airport and primarily customizes planes for corporate clients. FMS performs complete airframe upgrades, freighter conversions, maintenance on aviation electronic systems, installation of winglets, and aircraft appraisals.

iHeartMedia Inc. won its fight against a group of senior lenders who were threatening to tip the media giant into bankruptcy unless the company rolled back a $500 million asset shift, Bloomberg News reported yesterday. A judge in San Antonio, Texas, ruled yesterday that iHeart was within its rights to transfer shares of its outdoor advertising unit beyond the creditors’ reach. The judge agreed with iHeart’s claim the move was designed to boost profitability by letting it buy back a chunk of its debt at a discount. “IHeart is not in default” and didn’t violate the terms of its loan covenants, Texas State Judge Cathleen Stryker said in the four-page ruling. She issued an order permanently blocking the dissident lenders, or anyone acting with or for them, from “issuing or threatening to issue” default notices or accelerating iHeart’s debt because of the stock reallocation. More than a dozen creditors, including multiple hedge funds, were poised to issue notices of default on at least 25 percent of the outstanding principal of four priority guarantee notes at the company, formerly known as Clear Channel Communications.

Sports Authority Holdings Inc.’s going-out-of-business sales will begin this week after a bankruptcy judge signed off on a deal with a trio of liquidators, the Wall Street Journal reported today. At a hearing yesterday, Bankruptcy Judge Mary Walrath authorized the liquidator group — made up of Hilco Merchant Resources LLC, Gordon Brothers Retail Partners LLC and Tiger Capital Group LLC — to quickly launch the sales. In exchange for the right to run the sales, the liquidators, who prevailed over another liquidator group in an auction held last week, will pay a guaranteed 101 percent of the value of the inventory, of which 88 percent will be paid in cash, Jeremy Graves, attorney for Sports Authority said in court yesterday. Tiger Capital and Gordon Brothers were previously engaged to run the going-out-of-business sales at 142 of the 450 stores early on in Sports Authority’s bankruptcy proceeding. The latest round of sales will begin Thursday, according to a news release from the liquidator group, and will cover the chain’s remaining stores, around which it originally had high hopes of reorganizing.

Aeropostale Inc. shareholder Aria Partners GP says claims against lender Sycamore Partners could be the best shot backers of the retailer have to make good their losses, the Wall Street Journal reported today. Sycamore and Aeropostale have been trading accusations over who is to blame for Aeropostale’s bankruptcy, a dispute that has dominated the chapter 11 case that began May 4. Swamped with hundreds of millions of dollars in debt, Aeropostale has said that it would trim down and survive chapter 11 bankruptcy, despite the market forces arrayed against it. Mall traffic is down, competition from faster fast-fashion rivals like H&M is up, and Aeropostale is struggling to pay store lease costs that run about $200 million annually. If a turnaround is out of the question, Aeropostale hopes to find a buyer for the apparel chain that, as of the end of January, numbered 811 stores. More than 150 of those outlets are slated for closure and more may follow.

Hundreds of clergy sexual abuse victims raised the stakes in their clash with the Catholic Church yesterday, with victims’ lawyers claiming that the Archdiocese of St. Paul and Minneapolis has worked for decades to keep some $1.7 billion in assets beyond their reach, the Wall Street Journal reported today. The Twin Cities archdiocese, home to more than 180 parishes and 825,000 parishioners, has been in bankruptcy for more than a year, facing liabilities stemming from about 450 people who say they were sexually abused by clergy members, often decades ago. A judge ordered victims, the archdiocese and its insurance carriers to mediation more than a year ago, but talks failed to produce a settlement. Now victims are looking to force the archdiocese to dip into assets — like parishes and charitable foundations stocked with cash — they say the archdiocese has shielded using a legal playbook more often associated with large, for-profit corporations. In court papers filed with the U.S. Bankruptcy Court in Minneapolis yesterday, the victims, who are seeking compensation from the archdiocese, said that its overall net worth, including property that is legally distinct but alleged to be controlled by the archdiocese, is about $1.7 billion. In bankruptcy court papers filed last year, the archdiocese estimated its total assets at about $45 million.

Hunt Consolidated Inc. has dropped its bid to salvage the $17 billion buyout of Oncor, but is trying to put together a new transaction for the electricity transmission business largely owned by Energy Future Holdings Corp., the Wall Street Journal reported today. Investors, including a large group of Energy Future creditors, walked away from the buyout after the Public Utility Commission of Texas put conditions on the approval of the transaction. Hunt was going to ask the Texas PUC to reconsider its rulings, which changed the economics of the deal. If regulators relented, the deal could be saved, Hunt’s lawyers had said. Instead, Hunt yesterday asked Texas regulators to drop the matter, on the grounds that the deal wouldn’t close. In the request for dismissal, Hunt lawyers said a new buyout transaction is in the works that would keep Oncor in the hands of Hunt, a Texas-owned company. “While we wanted to have a rehearing on the order, it is obvious now that, as written, the transaction will not close; So we believe that it is best to clean the decks and start over,” Hunt spokeswoman Jeanne Phillips said.

Caesars Entertainment Corp. has offered $4 billion in a new plan to help its casino operating unit emerge from chapter 11, a lawyer for the unit told a bankruptcy judge yesterday, Reuters reported. Under the new plan, creditors will receive a bigger payout than under an initial framework restructuring agreement, which included a contribution from the Caesars Entertainment parent worth $1.5 billion. The initial agreement was widely opposed by creditors of the bankrupt unit, who are owed a collective $18.4 billion. They alleged that the parent, Caesars Entertainment, stripped away many of the best casinos and resorts and put them beyond the reach of the operating unit's creditors, something the parent has denied. "In terms of recoveries to creditors, they are substantially improved down the line" under the new plan, lawyer David Seligman said yesterday in bankruptcy court on behalf of the Caesars unit. Under Wednesday's proposal, once Caesars Entertainment completes its previously announced merger with its affiliate, Caesars Acquisition Co., the combined company will issue $1 billion of convertible notes to the operating unit's creditors. Creditors will also receive up to 47.5 percent of the common stock in the post-merger Caesars Entertainment and cash, valuing the entire contribution from the parent at $4 billion.