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Texas leaders have held multiple talks with financial institutions as lawmakers weigh options for easing the liquidity crisis facing the state’s power market following last month’s energy crisis, Bloomberg News reported. “There are multiple options on the table,” said state Senator Kelly Hancock, who chairs the business and commerce committee which has held hearings on the matter. “We just want to make sure that there were no stones unturned.” The arctic blast that left millions in the dark and drove electricity prices to record highs has pushed many power providers to the brink of bankruptcy and stressed Texas’s electricity market. The Electric Reliability Council of Texas, which manages the grid, is grappling with a shortfall of more than $2.4 billion — $1.6 billion of which remains outstanding as more than a dozen companies have fallen behind on payments in the wake of the crisis. Moody’s Investors Service downgraded Ercot on Thursday and revised the grid operator’s credit outlook to “negative.” Lawmakers are now weighing what, if any, aid may be needed to shore up Ercot’s finances, and are trying to do so “on a compressed timeline,” Hancock said. “We are going to get this right and we are going to provide stability in the marketplace and I think we will see that come about soon.” Five companies have already defaulted and been terminated from the market, officials for the grid operator, known as Ercot, said during a board committee meeting Friday. More defaults are expected. One company, Brazos Electric Power Cooperative, has declared bankruptcy. If Ercot isn’t able to cover the shortfall, it will be split among all market participants. But under current rules, paying off the debt would take 50-80 years, officials said. Read more. 

In related news, the go-to lender for U.S. electric cooperatives has $4 billion in exposure to the Texas market, where last month’s deep freeze slammed the finances of several co-ops hit with astronomically high gas and electric prices during the state’s grid blackout, Reuters reported. The latest quarterly financial disclosure from the National Rural Utilities Cooperative Finance Corporation (CFC) shows the Texas market accounts for 15% of the lender’s $27.1 billion in outstanding loans. Dulles, Virginia-based CFC has not had any loan defaults in its electric utility loan portfolio since fiscal 2013. Numerous Texas electric co-ops are facing potential bankruptcy due to the massive bills incurred when power prices spiked during the Texas freeze that killed several dozen people and left millions without power for days. CFC, which is searching for a replacement of its long-time chief executive, will be put to the test in the coming weeks and months as Texas electric utilities and cooperatives sort out billions of dollars in unpaid charges from the collapse of the state’s main electric grid. On Monday, Brazos Electric Power Cooperative Inc, the biggest electric co-op in Texas, filed for bankruptcy protection in Houston, citing a disputed $1.8 billion debt to the state’s main grid operator. Read more. 

Remington Outdoor Company is facing objections from families of shooting victims, among others, to its proposed wind-down plan as it nears the conclusion of its chapter 11 case, Reuters reported. The gunmaker, represented by O’Melveny & Myers, will request approval of its plan at a remote hearing on March 8 before U.S. Bankruptcy Judge Clifton Jessup Jr. in Decatur, Alabama. The plan comes after last year’s sales of Remington’s various ammunition and firearm assets. The sales brought in about $157 million to Remington’s estate, which will be used to pay off creditors. In July, Remington filed its second bankruptcy in two years in the face of litigation with families of shooting victims and increased retailer restrictions on gun sales, with $253.7 million in funded debt. Before seeking bankruptcy protection, Remington had been defending itself against a lawsuit brought by families of victims of the 2012 Sandy Hook Elementary School shooting. The case was put on hold as a result of the bankruptcy. The Connecticut Supreme Court in March 2019 ruled the families could sue Remington for wrongfully marketing the Bushmaster AR-15 rifle used by the shooter, Adam Lanza, whom they say was motivated by the advertising to commit his crimes. The U.S. Supreme Court later declined to review the ruling. The company has denied liability for the shooting.

The Texas electricity market faces “insurmountable distress” as more gas and service bills come due, power industry officials said on Thursday at a hearing into financial fallout from the state’s February blackout, Reuters reported. High prices for emergency fuel and power saddled the companies that sell, transmit and generate electricity in the state with about $47 billion in storm-related costs. Those costs have led to one bankruptcy and put two retail providers out of business in the state. Consumers facing bills for broken water pipes and food losses will see higher prices as costs get passed down through rate increases or fewer choices in providers, officials said. Future spending on weather defenses and grid linkages could add billions of dollars to the recovery. San Antonio’s city-owned utility expects about $1 billion in extra costs. “The market is facing a financial crisis and it’s a very severe financial crisis,” Catherine Webking, executive director of an industry lobby group told state lawmakers at a hearing in Austin on Thursday. “You’ll see more and more financial distress that is insurmountable,” as bills for natural gas and financial collateral come due in coming weeks, she testified. Vistra Corp., one of the largest utilities in Texas, forecast that buying natural gas at high prices triggered by the storm and selling power at fixed-rate prices will cut its profit by between $900 million and $1.3 billion, Vistra senior vice president Bill Quinn testified.

Electricity retailers are asking Texas’s power regulator to suspend immediate collections on the massive bills arising from the state’s electricity outage, as energy market participants try to mitigate the threat to their financial health, WSJ Pro Bankruptcy reported. Electric retailer Just Energy Group Inc. on Wednesday filed a request to the Texas Public Utility Commission to suspend invoice collections by the state’s grid operator, one of several similar requests for relief by retail energy companies stemming from last month’s extreme winter freeze. The weather event knocked power plants offline, led to blackouts and caused a jump in energy prices in the Texas wholesale market, saddling many energy players with big bills to the Electric Reliability Council of Texas, the state’s grid operator. Already, the invoices have tipped the state’s largest electricity cooperative into bankruptcy and threatened the finances of cities, municipal power authorities, energy retailers, cooperatives and others including Just Energy. The company, based in Toronto, filed the request Wednesday to stop Ercot, which collects money from electric retailers to pay power plants, from issuing or settling invoices until questions raised by government authorities in Texas around the energy crisis “are investigated, addressed and resolved.” Just Energy has estimated its bills related to the weather event could reach $40 million. Read more.

In related news, Texas regulators voted to claw back some payments to power generators for services they never actually provided during the state’s massive blackouts last month, Bloomberg News reported. The move could save an estimated $80 million to $150 million, according to the independent market monitor for Texas’s grid, which recommended the change. The Public Utility Commission of Texas agreed yesterday to adopt the recommendation, saying retailers and others shouldn’t pay for so-called ancillary services to help smooth power flows on the grid if they weren’t delivered. It’s the first significant step by regulators to address the astronomical power bills accrued during the unprecedented cold blast that crippled the state’s grid. At peak, more than four million homes and businesses were without electricity, and power prices soared to record levels. The impact on individual companies is only starting to emerge. Texas’s power market is facing a $2.5 billion shortfall as retail electricity providers and others are squeezed by massive power bills in the wake of the crisis. Brazos Electric Power Cooperative, the largest power generation and transmission cooperative in the state, filed for bankruptcy after racking up an estimated $2.1 billion in charges. Griddy Energy LLC, the retailer whose customers were slammed with exorbitant electric bills, defaulted on its debt to the grid operator and has been banned from participating in the market. Read more.

The former owner of New York Sports Clubs and Lucille Roberts will forfeit a $250,000 bond to settle New York Attorney General Letitia James’ lawsuit over its billing practices during the coronavirus pandemic, Reuters reported. James had sued Town Sports International Holdings Inc in September, saying it kept charging membership dues, failed to issue promised credits, and refused to honor cancellation requests after the pandemic forced it to close its New York gyms last March. The settlement papers were filed in a New York state court in Manhattan on Wednesday. Town Sports did not admit liability. James had sued Town Sports in September, two weeks after the company filed for chapter 11 protection. A group of lenders led by private equity firm Tacit Capital later took control of many Town Sports assets in exchange for $80 million in debt. Town Sports is now winding down. James plans to provide restitution to gym members with the $250,000 bond, which Town Sports posted in 2015 under a state law to protect those members during a bankruptcy.

The Boy Scouts of America released a bankruptcy reorganization plan yesterday calling for local councils to contribute at least $300 million to a trust to settle tens of thousands of sex-abuse claims, the Washington Post reported. The long-awaited reorganization plan, filed as part of the Boy Scouts’ ongoing chapter 11 bankruptcy proceedings, begins to outline how the embattled organization aims to compensate the deluge of 85,000 potential victims who came forward last year with claims. But lawyers on behalf of both the victims and the group’s insurers say that they are unsatisfied with the plan. The Boy Scouts of America, which filed for bankruptcy in February 2020, had initially sought to shield its local councils from the bankruptcy process. But more recently, it became clear that any settlement was going to involve local council participation, and yesterday’s filing anticipates a $300 million contribution from some of the Boy Scouts’ 253 councils across the country. The plan did not state which councils would contribute to the fund, or how. To fund the settlement trust, the Boy Scouts of America will also contribute a collection of Norman Rockwell paintings, a warehouse facility in North Carolina, the rights to a Scouting University property in Texas, certain oil and gas interests in several states, and any unrestricted cash above a $75 million minimum.

A dispute between the Boy Scouts of America and childhood sex-abuse victims has put a cease-fire agreement at risk with the youth organization’s survival strategy on the line, WSJ Pro Bankruptcy reported. The Boy Scouts are asking a bankruptcy judge to force an extended standstill in legal hostilities by sex-abuse victims against the local councils that control the bulk of the group’s billions of dollars in wealth. The chances of a reorganization for the Boy Scouts hang in the balance, lawyers for the organization said in a court filing on Monday. The official committee that represents sex-abuse victims will fight the effort to force a legal peace, said James Stang, lead lawyer for the committee. “We intend to aggressively oppose the motion to extend the preliminary injunction,” Stang said. “We have significant questions, underlying factual questions that haven’t been answered.” The brewing trouble highlights a vulnerability in the Boy Scouts’ strategy of resolving tens of thousands of sex-abuse claims. Only at the national level does the organization enjoy chapter 11 protection from lawsuits accusing it of failing to protect children from sexual predators. More than 250 local councils aren’t in bankruptcy, meaning the estimated $3 billion of the wealth they control isn’t shielded by the automatic stay of chapter 11, which protects against collection efforts after a bankruptcy filing. New York, New Jersey, California and other states in recent years changed their statute-of-limitations laws to allow for individual lawsuits over childhood sexual abuse even if the alleged injuries happened decades ago. In February 2020, the prospect of an onslaught of litigation propelled the Boy Scouts into bankruptcy, where it faces a reckoning with an estimated 85,000 people who have made compensation claims for suffering sexual abuse.

The U.S. Department of Interior, Eagle Specialty Materials (ESM), and the attorneys in Blackjewel’s bankruptcy case on Feb. 19 released a settlement agreement for unpaid royalties on federal coal leases mined by Blackjewel, and its predecessor, Contura, at the Eagle Butte and Belle Ayr mines in Wyoming’s Powder River Basin, according to a commentary in the Wyoming Business Report. According to the legal filing, more than $32 million in royalties are unpaid at the Belle Ayr Mine and $27.8 million in royalties are unpaid at the Eagle Butte Mine, with hundreds of thousands owed in interest. Powder River Basin Resource Council decries the deal struck between the Department of the Interior and ESM, a company that was paid over $80 million to take over the Belle Ayr and Eagle Butte coal mines from Contura during the Blackjewel bankruptcy proceeding in October 2019. The settlement of approximately $61.5 million debt of unpaid royalties and interest for a few cents on the dollar and insecure interest-free future payments and royalties has cost Wyoming and American citizens tens of millions of dollars. Wyoming receives approximately half of all federal coal royalties, so loses half of these unpaid royalties. “This terribly one-sided settlement allows Belle Ayr and Eagle Butte to keep operating for now,” said Bob LeResche, a Resource Council Board member, “but it forgives tens of millions of dollars in royalties that should have been supporting Wyoming schools and other federal projects.” The settlement — made to allow Interior to transfer the coal leases from Blackjewel to ESM — collects only a small portion of the unpaid royalties. Additionally, ESM is already in lengthy payment plans for back taxes owed to the state and Campbell County. Meanwhile, the mines have been reducing production and suffer the same economic challenges other Powder River Basin coal mines are facing. Coal plant closures across the nation are reducing production, which puts any future payments at greater and greater risk.