Goldman Sachs Group Inc. auctioned off around $53 million of claims it held against a bankrupt Texas power cooperative as distressed debt traders bet the government will foot the bill for the state’s energy crisis, Bloomberg News reported. Goldman sold its claim on Brazos Electric Power Cooperative Inc. this week at 80 to 85 cents on the dollar, said the people, who asked not to be identified because details of the auction are private. The bank is one of Brazos’s largest unsecured creditors. It’s owed the money for interest rate swaps and other power derivatives contracts that its commodities trading unit J. Aron & Co. signed with Brazos before a winter storm in February upended the Texas power market, saddling the electricity provider with billions in liabilities it couldn’t repay.
Texas Attorney General Ken Paxton announced on Tuesday that over $29 million in unpaid electric bills charged during February's devastating winter storm will be forgiven, CBSNews.com reported. The relief is part of a bankruptcy plan by Griddy Energy, the Texas electricity provider accused of overcharging customers by thousands of dollars. Griddy filed for bankruptcy on Monday, making it the third Texas energy provider to file do so since the February storm that left millions of the state's residents without power amid subfreezing temperatures. At least 57 people died as a result of the storm, according to preliminary data released by the Texas Department of State Health Services on Monday. "My office sued Griddy Energy, under the Texas Deceptive Trade Practices Act, to hold them accountable for their escalation of last month's winter storm disaster by debiting enormous amounts from customer accounts as Texans struggled to survive the storm," Paxton said in response to Griddy's bankruptcy filing. Griddy's plan offers "releases to approximately 24,000 former customers who owe $29.1 million in unpaid electric bills," according to Paxton. He said his office is in ongoing negotiations with the provider "to attempt to address additional relief for those Griddy customers who have already paid their storm-related energy bills."
Student loan servicing company Navient Corp. is suing the government to challenge a finding that it overcharged the Department of Education by $22.3 million, Bloomberg News reported. The department on Jan. 15 ordered Navient Jan. 15 to return the money, based on a 2009 inspector general’s probe that found that the Student Loan Marketing Association, or Sallie Mae, improperly charged the government “special allowance payments” on federal loans for which it provided collection and other services. Navient, which was spun off from Sallie Mae in 2014, sued the Education Department in federal court in Alexandria, Va., on Tuesday, calling its order “arbitrary and capricious” in violation of the law covering federal agency actions. The company claims it followed government guidance that was later reversed. It is seeking a ruling blocking the order that it turn over the $22.3 million plus attorneys fees. The suits comes as Navient’s debt-collection unit has been under fire by advocates for borrowers who have filed lawsuits across the country arguing that some types of student debt can be canceled in bankruptcy proceedings like most other debts. Navient last month beat back an attempt by three borrowers to force its debt-collection unit into bankruptcy court. The case is Navient Solutions LLC v. Department of Education, 21-cv-00324, U.S. District Court, Eastern District of Virginia (Alexandria).
Local councils of the Boy Scouts of America have bargained for an extended reprieve from sexual abuse lawsuits in return for a promise to hand over key information to help fill in gaps in victims’ recollections of the harm they suffered, WSJ Pro Bankruptcy reported. Under a pact approved yesterday in the U.S. Bankruptcy Court in Wilmington, Del., lawsuits can be filed against the local councils that hold the bulk of the Boy Scouts wealth, but the litigation won’t progress until mid-July. The trade off is that survivors’ lawyers will receive detailed roster data needed to identify local councils and other organizations that chartered individual troops where the sexual abuse took place. In states like New York, New Jersey and North Carolina, lawmakers have suspended the statutes of limitations for lawsuits over sexual abuse claims that happened long ago, but the clock is ticking down on the window to sue institutions such as the local councils. The Boy Scouts’ national governing body filed for chapter 11 bankruptcy protection last year, automatically stopping sex-abuse lawsuits against it. Hundreds of local councils, which have their own governing boards and own the bulk of the organization’s wealth, didn’t themselves file for chapter 11 and could be targets of legal hostilities, but would be protected by the agreed-upon standstill. In bankruptcy, the youth group is trying to broker a broad settlement of more than 83,000 claims of sexual abuse that includes immunity for the local councils. Read more.
In related news, the judge overseeing the Boy Scouts of America’s bankruptcy has urged lawyers involved in the chapter 11 case to resolve the remaining roadblocks to the youth organization’s emergence from bankruptcy and compensation of sex abuse survivors as soon as possible, decrying the growing legal fees that the group has incurred. U.S. Bankruptcy Judge Laurie Selber Silverstein in Wilmington, Delaware made her comments during a remote hearing on Wednesday in which the Boy Scouts’ lawyers at White & Case reiterated the need for the organization to exit chapter 11 by the end of the summer because funds are running low. Jessica Lauria of White & Case told Silverstein that the Boy Scouts have racked up nearly $100 million in professional fees since the bankruptcy began in February 2020, a figure that will likely reach $150 million by August, Lauria said. Read more.
The third and last remaining commissioner of the Texas utilities regulator resigned under pressure on Tuesday after the release of comments to investors vowing to protect utility profits and dismissing financial hits from a cold snap on municipal power companies, Reuters reported. The resignation came soon after the disclosure of inflammatory comments by the Public Utility Commission Chair Arthur D’Andrea in a March 9 call with Bank of America utilities’ analysts. The call took place two days before he was to consider rescinding billions of dollars payment to utilities. His stance against repricing helped sink a proposal this week to cut $4.1 billion from charges in the final hours of a deadly February blackout. The regulator and state grid operator raised power prices to about 400 times the normal rate over five days. But they left the pricing in place for 32 hours after the emergency passed, spurring state officials to call for a partial repricing. On the March 9 call, D’Andrea told investors and analysts he had “tipped the scale as hard as I could” to prevent repricing and would keep “the weight of the commission” against it, according to a recording of the call published Tuesday by Texas Monthly magazine.
Insurance coverage of sex-abuse claims has emerged as a make-or-break issue in the Boy Scouts of America’s bid to survive its legal trouble, as victims’ attorneys and insurance carriers tangle over how much the youth group’s policies are worth, WSJ Pro Bankruptcy reported. Sex-abuse victims have spurned the Boy Scouts’ opening offer to settle the abuse claims, and insurance companies that sold policies to the youth organization are demanding further investigations into the more than 83,000 claims filed by men who allege they were assaulted as children. The insurers have objected to everything from the Boy Scouts’ choice of law firms to the bona fides of lawyers for victims in a bankruptcy proceeding that began last year. Based on the cash, property, artwork and other hard assets the Boy Scouts have offered to sign over, its settlement proposal would amount to $6,100 for every individual who stepped forward to claim he was a victim of childhood sexual abuse, according to the official committee representing victims. The Boy Scouts said the $6,100 average figure is misleading, as some claims will be worth more than others and, importantly, the number doesn’t include insurance, which would boost the value offered to victims. But victims, who will be asked to vote on the chapter 11 plan, don’t know how much compensation the insurance will yield.
Some state attorneys general and opioid addiction activists pushed back Tuesday against a settlement offer from OxyContin maker Purdue Pharma, saying it didn’t include enough money and goes too far in protecting the company and family members who own it from future liability, the Associated Press reported. A group of nearly half the state attorneys general said it was disappointed in the plan Purdue filed late Monday night in federal bankruptcy court and some said they would seek changes. The lukewarm reaction from them and others raised doubts about how soon the company could emerge from bankruptcy and begin to compensate victims. “We think it’s a step in the right direction, but we’ve got a long way to go,” said Joe Rice, one of the lead lawyers representing local governments that have sued Purdue and other companies over the toll of opioids. The $10 billion plan calls for turning the Connecticut-based pharmaceutical giant into a new company, with its profits going toward efforts to combat the opioid crisis. Members of the Sackler family who own Purdue would contribute about $4.3 billion.
Brilliant Energy LLC filed for bankruptcy in the Southern District of Texas, adding to a growing list of companies that have stumbled after power outages caused by a winter freeze in February, Bloomberg News reported. The electricity provider has estimated liabilities of $50 million to $100 million compared with assets of $10 million to $50 million, according to its chapter 7 filing yesterday. At their peak, the unprecedented outages left four million homes and businesses without heat, light and in some cases water as a rare and powerful winter storm gripped the region, causing as much as $129 billion in economic losses. Dozens of people died in the cold. Brilliant Energy is at least the fourth firm to seek bankruptcy protection in the wake of the Texas freeze, underscoring the crushing financial pressure the outages have put on power companies in the state. The market faces a more-than $3 billion shortfall as more than a dozen companies can’t pay their bills.
Griddy Energy LLC has one final deal for Texans before the power seller shuts down for good: if its 29,000 former customers agree not to sue, the company will cancel electric bills that were about 300 times normal amid last month’s winter storm, Bloomberg News reported. On its first day in bankruptcy court, Griddy lawyers outlined a plan to liquidate, settle with customers and, possibly, arrange lawsuits against those that the company blames for its collapse. U.S. Bankruptcy Judge Marvin Isgur called Griddy’s bankruptcy proposal “unique and really unprecedented.” Isgur, who has overseen some of the biggest corporate restructurings filed in recent years, pushed Griddy to ensure that customers understand how the bankruptcy case will affect their huge electric bills after first criticizing Griddy’s attempt to pay one of its lenders as the case goes forward. Customers face an average bill of about $1,100 because of the winter storm that sent power prices surging, Judge Isgur said. If Griddy wants to cancel those charges in exchange for customers dropping potential lawsuits, the company must clearly let people know that, Judge Isgur said. Griddy filed for bankruptcy on Monday, blaming its woes on the Electric Reliability Council of Texas, which runs the state’s power grid. During the storm, Ercot, as it is known, pushed up wholesale power prices dramatically under rules Texas lawmakers have adopted that deregulated much of the state’s electric industry over the course of several decades. Griddy was barred from the state’s power markets in late February after failing to make a payment.
The family that owns OxyContin maker Purdue Pharma LP agreed to pay roughly $4.28 billion — a larger sum than previously promised — to resolve lawsuits accusing it of helping to fuel the opioid epidemic, the Wall Street Journal reported. The payment from members of the Sackler family is part of a larger restructuring plan filed yesterday in U.S. Bankruptcy Court in White Plains, N.Y., that is intended to get Purdue out of chapter 11. The plan is a critical milestone in the Stamford, Conn.-based drugmaker’s bankruptcy and the culmination of months of negotiation between members of the Sackler family and states, personal-injury plaintiffs and other creditors. A group of around half of all U.S. states has repeatedly demanded more money from the Sackler family, a concession included in Monday’s plan. At the time of its September 2019 bankruptcy filing, the family had agreed to pay $3 billion with the promise of up to another $1.5 billion contingent on the sale of its international business. The new offer guarantees $4.28 billion, paid in installments over the next decade. A key piece of the restructuring plan, which includes another $1.5 billion in cash and expected proceeds from OxyContin sales, is ensuring that the money will largely be spent to help abate the nation’s opioid crisis, rather than going into the general coffers of state and local government creditors. Purdue’s chapter 11 plan must be approved by a bankruptcy judge and likely will be challenged in court by individuals who have suffered injuries from opioids and state attorneys general who have not signed onto the deal. A final resolution isn’t expected before the summer. “We’re going to keep fighting for the accountability that families all across this country deserve,” said Massachusetts Attorney General Maura Healey, who, along with 23 other attorneys general, voiced opposition to the plan yesterday and called for greater transparency and more money upfront from the Sacklers.
