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Puerto Rico Seeks Proposals for Legal, Financial Advisers

Puerto Rico's new governor wasted no time seeking advisers to help the island restructure $70 billion in debt, requesting late on Tuesday that firms submit their qualifications as legal and financial advisers, Reuters reported yesterday. Governor Ricky Rossello, who was sworn in on Monday, had sharply criticized the financial policies of his predecessor, Alejandro García Padilla, during the 2016 campaign. García Padilla pushed for sharp reductions in debt payments to Puerto Rico's creditors and ordered several defaults during his term. Rossello, who favors U.S. statehood for the island, believes it should try to limit such cuts while imposing belt-tightening measures like consolidating public agencies. Firms have until Friday to submit their qualifications. Those that have represented Puerto Rico's creditors are not barred from vying for a contract. Read more

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage

Bonanza Creek Energy Files Pre-Packaged Chapter 11

Bonanza Creek Energy Inc. has filed petitions in U.S. Bankruptcy Court to pursue a pre-packaged reorganization, the Denver Business Journal reported today. Denver-based Bonanza Creek announced plans two weeks ago to file for chapter 11 protection. The company said yesterday that its pre-packaged plan is intended to de-leverage its transactions by equitizing about $867 million of its existing unsecured bond obligations. The company will also "substantially bolster its liquidity position through a $200 million rights offering for new equity, to be backstopped by certain unsecured noteholders," according to the filing. Also under the plan, the company's existing shareholders will receive 4.5 percent of the equity of a reorganized Bonanza Creek and three-year warrants to acquire up to 7.5 percent of equity. Read more

The featured keynote at ABI's 2017 Annual Spring Meeting will be Spencer Abraham, former U.S. Senator and former U.S. Secretary of Energy. Click here to register! 

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

Analysis: No One Questioned This Hedge Fund’s Madoff-Like Returns

In the years before Mark Nordlicht was arrested for what’s alleged to be one of the biggest investment frauds since Bernie Madoff’s, U.S. authorities had plenty of reasons to suspect something might have been fishy about his hedge fund, Platinum Partners, according to a Bloomberg News analysis yesterday. As far back as 2007, Bank of Montreal accused Nordlicht of helping a rogue trader, costing it more than $500 million. Three years later, when the Securities and Exchange Commission was investigating what it called a “scheme to profit from the imminent deaths of terminally ill patients,” the agency discovered that Platinum had funded the deals. And in 2011, a Florida lawyer who confessed to running a $1.2 billion Ponzi scheme testified that Nordlicht, his biggest funder, lied to help him lure new investors. And then there were the remarkable profits: 17 percent annually on average from 2003 through 2015, with no down years. The returns were almost as smooth as the fake gains that Madoff claimed year after year. But until Murray Huberfeld, who founded Platinum with Nordlicht, was caught up in a New York City municipal-corruption probe in June, no one at the fund had been charged with wrongdoing. Within weeks of Huberfeld’s arrest, federal agents raided Platinum’s midtown Manhattan office. On Dec. 19, Nordlicht and six others were arrested in what the government called a $1 billion fraud. Nordlicht and Huberfeld have pleaded not guilty, and Platinum’s main fund is being wound down after filing for bankruptcy. Read more

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case

Amazon and Forever 21 Said to Mull Bidding for American Apparel

Amazon.com Inc. and Forever 21 Inc. are considering making bids for bankrupt retailer American Apparel Inc., Bloomberg News reported yesterday. Authentic Brands Group LLC, which owns Aeropostale and Juicy Couture, is also mulling an offer. American Apparel filed for its second bankruptcy within a year in November with the intent to sell the company. Gildan Activewear Inc., a Canadian T-shirt and underwear maker, made an initial offer of $66 million for the brand and inventory but not any of the company’s stores.
 

Atlantic City Mayor Urges Icahn to Sell Ex-Taj Mahal Casino

Atlantic City's mayor is calling on billionaire investor Carl Icahn to sell the shuttered Trump Taj Mahal casino, saying his struggling city can't afford to let such a big piece of its Boardwalk lie vacant indefinitely, the Associated Press reported yesterday. Republican Don Guardian said yesterday that allowing the casino to stay vacant is "the worst of the worst" in terms of outcomes for the property, which Icahn closed Oct. 10 after a bruising strike by the city's main casino workers' union. Icahn replied he'd be happy to sell the casino to the mayor — if he ponied up the $300 million Icahn says he has lost on it. Guardian made the comments after his unofficial State of the City speech, in which he listed the numerous challenges facing his city, including a state takeover and hundreds of millions of dollars in debt. Asked for his response to Icahn's handling of the Taj Mahal, Guardian replied, "Sell it, make a profit and move on."

Analysis: 2016 Total Bankruptcy Filings Down 6 Percent from 2015

Due to a continued decline in personal bankruptcies, total bankruptcy filings for calendar year 2016 will likely approach 794,000, representing a 6 percent decrease from the 844,495 total filings in 2015, according to an analysis from ABI's Ed Flynn. Based on data from the Administrative Office of the U.S. Courts (AOUSC) for the first 9 months and PACER data for the final 3 months of the year, Flynn estimated the following filing totals:

- Chapter 7s: 488,000 (down nearly 9 percent from 2015)

- Chapter 13s: 297,000 (down 1-2 percent from 2015)

- Chapter 12s: 460 (increase of 13 percent from 2015)

- Chapter 11s: 7,300 (nearly the same as in 2014 and 2015)

Gathering data from New Generation Research, Flynn found that there were more than 35 chapter 11 cases with over $1 billion in assets filed in 2016 — the most since 2009. Nearly one-half of these very large cases were oil and gas or energy-related, according to Flynn. Leading filing locations for large chapter 11 cases in 2016 were:

- District of Delaware: 17

- Southern District of Texas: 8

- Southern District of New York : 7

- Eastern District of Missouri: 4

Flynn, who previously worked for more than 30 years for the Executive Office for U.S. Trustees and the AOUSC, is the "Bankruptcy by the Numbers" columnist in ABI Journal. Click here to read his current column, "A Closer Look at State Filing Trends," appearing in the January edition of the Journal

Full charts and analysis of the 2016 bankruptcy filings will be available later this week on the Statistics page of the ABI Newsroom

Delaware Bankruptcy Court Creates Vendor-Friendly Forum by Preserving Reclamation Rights in the Face of DIP Lenders’ Liens

By: Dean Katsionis

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Section 546(c) of the Bankruptcy Code preserves a vendor’s right to reclaim goods sold to an insolvent debtor within forty-five days of the debtor’s bankruptcy filing.[1] Courts have had to address whether a post-petition lender’s subsequently perfected security interest defeats the vendor’s reclamation rights when a post-petition loan is used to repay the debtor’s prepetition secured loan, which are generally subject to reclamation rights.[2] In In re Reichold Holdings US, Inc., the United States Bankruptcy Court for the District of Delaware overruled a liquidating trustee’s objection to a vendor’s reclamation claim, holding that the vendor’s reclamation rights arose before a post-petition DIP lender’s liens attached, and as such, those liens were subject to the prior reclamation rights of the vendor.[3]

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