The trustee in charge of Jeffrey Soffer's failed Fontainebleau Las Vegas casino project has struck a settlement that would put more than $83 million of directors and officers insurance money into creditors' pockets, Dow Jones Daily Bankruptcy Review reported today. In a filing with U.S. Bankruptcy Court in Miami, lawyers for chapter 7 trustee Soneet R. Kapila said that the settlement also removes $675 million in claims against the Fontainebleau estate.
Court hearings to determine if Energy Future Holdings Corp., Texas's biggest power company, can adopt a refinancing package that is key to its massive bankruptcy have been extended through July 11 from the original schedule to end yesterday, Reuters reported. "I'm worried about that amount of time being sufficient," Judge Christopher Sontchi said at the start of yesterday’s session. "We have a lot of witnesses," said Judge Sontchi, who scheduled time in court on Wednesday and July 10 and July 11. Judge Sontchi is being asked to approve a loan package of about $2 billion to refinance high-yielding debt at Energy Future's EFIH unit, which owns the profitable Oncor power transmission business.
The hourly fees earned on client matters that attorneys take with them when switching firms are not the "property" or the "unfinished business" of their old partnerships, the New York Court of Appeals ruled yesterday in a closely watched case involving the bankruptcies of Thelen and Coudert Brothers, the American Lawyer reported today. The unanimous court said finding that lawyers owe a continuing obligation to their old partnerships for work they do for clients after moving to new firms "does not comport with our profession's traditions and the commercial realities of the practice of law today." "A law firm does not own a client or an engagement, and is only entitled to be paid for services actually rendered," Judge Susan Phillips Read wrote for the 7-0 court. Attorneys in the two cases and others involving hourly billings in the wake of recent law firm bankruptcies said that the ruling brings clarity to what trustees can seek from former firm attorneys who have moved on to other firms. The court made one ruling in the two cases, (Matter of Thelen) Geron v. Seyfarth Shaw, 136, and Matter of Coudert Brothers, 137. The court's analysis of New York's 1919 Partnership Law and the "unfinished business" doctrine was prompted by certified questions from the U.S. Court of Appeals for the Second Circuit stemming from the Thelen and Coudert bankruptcies. Coudert dissolved in 2005 and Thelen in 2008.
Lawyers for James Merrill, the president and co-owner of TelexFree who is under house arrest awaiting trial on fraud charges, are requesting the release of more than $4 million from frozen bank accounts to fund his legal defense, Dow Jones Daily Bankruptcy Review reported today. Merrill and his partner, who authorities say fled to Brazil, stand accused of running a massive pyramid scheme and face criminal wire-fraud charges in Massachusetts, where their now-bankrupt company is based. In papers filed Tuesday with the U.S. District Court in Worcester, Mass., defense attorneys said that based on the magnitude of the alleged crime, the release of about $4.2 million held in four bank accounts is essential to Merrill's ability to fully defend himself.
LightSquared Inc., Philip Falcone’s wireless broadband company, agreed on tentative terms of a reorganization plan that would give majority ownership to JPMorgan Chase & Co. (JPM), Fortress Investment Group LLC and Cerberus Capital Management LP, Bloomberg News reported yesterday. Falcone’s Harbinger Capital Partners LLC would retain a small stake under the plan, which will work only if LightSquared exits bankruptcy by Sept. 30, Joshua Sussberg, a lawyer for a special LightSquared committee, told Bankruptcy Judge Shelley Chapman yesterday. The agreement was reached in mediation following a dispute with creditor Charles Ergen over how his $1 billion in debt would be treated. The plan would be financed with a $1.3 billion first-lien credit facility and the investment of $1.75 billion in new money, Sussberg told Chapman. Cerberus, Fortress and JPMorgan would end up with 74 percent of LightSquared’s new common equity and Harbinger would have 12.5 percent, Sussberg said.
Creditors of bankrupt Energy Future Holdings, Texas's biggest power company, urged a judge to slow its chapter 11 case and warned if a key refinancing proposal was approved it might block better deals from being considered, Reuters reported yesterday. In the past week, the company's majority stake in a powerlines business known as Oncor has sparked a flurry of activity comparable to a merger-type bidding war as creditors scramble to get their hands on the unit's steady cash flow. The company wants Bankruptcy Judge Christopher Sontchi to allow its EFIH unit, which owns Oncor, to borrow around $2 billion to fund a settlement that will redeem high-yield debt, saving $11 million a month in interest payments. The loan is backed by the company's unsecured bondholders. Creditors not involved in financing the DIP, or debtor-in-possession, loan have called it "unprecedented" because it will convert into a stake of about 60 percent of Energy Future when the company exits bankruptcy. The potential to gain control over the power company has sparked competing DIP loan proposals, including one with $1.6 billion of backing by NextEra Energy Inc, a Florida company that also has a large Texas presence.
Wireless venture LightSquared has reached a deal to end its chapter 11 bankruptcy, but its largest creditor, satellite operator Charles Ergen, is not on board and "wasted the parties' time," according to a report from the court-appointed mediator, Reuters reported on Friday. The mediator, Judge Robert Drain, said that he believed the plan would be confirmable by the bankruptcy court judge overseeing the case even without Ergen's support. Judge Drain's report, made in a court filing on Friday, did not give details on the deal. LightSquared, which is owned by Phil Falcone's Harbinger Capital Partners, had accused Ergen of using underhanded methods to acquire his controlling stake of its debt. The dispute was sent to mediation after Judge Shelley Chapman rejected a restructuring proposed by LightSquared that would have pushed Ergen's repayment behind other creditors.
Argentina is poised to miss a bond payment today, putting the country on the brink of its second default in 13 years, after a U.S. court blocked the cash from being distributed until the government settles with creditors from the previous debt debacle, Bloomberg News reported yesterday. The nation has a 30-day grace period after missing the $539 million debt payment to seek an accord with a group of defaulted bondholders led by billionaire Paul Singer’s NML Capital Ltd. and to prevent a default on its $28.7 billion of performing global dollar bonds. Both Argentina and NML have said that they’re open to talks. A decade-long battle between Argentina and holdout creditors from the country’s $95 billion default in 2001 is coming to a head. The U.S. Supreme Court on June 16 left intact a ruling requiring the country to pay about $1.5 billion to holders of defaulted debt at the same time it makes payments on restructured bonds. Argentina last week transferred funds to its bond trustee to pay the restructured notes, only to have U.S. District Court Judge Thomas Griesa order the payment sent back while the parties negotiate. http://www.bloomberg.com/news/print/2014-06-29/argentina-at-brink-of-de…
To learn more about the next steps for Argentina and sovereign debt restructuring, be sure to watch James Millstein’s June 20 presentation, which he made at ABI’s Cross-Border Symposium: http://news.abi.org/videos
A pair of Wall Street investment firms is challenging Puerto Rico's new law allowing some public agencies to restructure their debt, saying that it violates the U.S. Constitution, the Wall Street Journal reported today. Funds managed by Franklin Templeton Investments and OppenheimerFunds Inc. asked the U.S. District Court for the District of Puerto Rico to block the law, arguing that only Congress is allowed to create bankruptcy rules. The funds hold about $1.7 billion combined in debt from the Puerto Rico Electric Power Authority, which they say they believe will seek to restructure its debt under the act "imminently." Puerto Rico lawmakers last week approved legislation allowing some agencies such as the island's power, water and transportation authorities to restructure their debt. Those agencies have a combined $19.4 billion in bonds outstanding, according to estimates from Barclays PLC. The law doesn't apply to Puerto Rico's general-obligation or sales-tax bonds, which are backed by the island's taxing authority.
Energy Future Holdings rejected an unsolicited $2.3 billion restructuring plan by NextEra Energy Inc. that would have given the alternative energy group a large stake in Energy Future's power lines unit, according to court filings, Reuters reported yesterday. The proposal, which was revealed in court filings on Monday, was developed by NextEra and a group of investors that hold second-lien notes issued by Energy Future's EFIH unit, which in turn controls the Oncor power distribution business. Energy Future Intermediate Holding (EFIH) rejected the proposal in favor of a plan already advanced by a group of investors who hold the unit's unsecured bonds, according to court filings. Both proposals take the form of a loan to refinance EFIH's high-yielding second-lien notes, which would cut interest costs. Rather than repay the loan, when EFIH emerges from bankruptcy the financing would convert into an equity stake of a little more than 60 percent of the company.
