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Oil Companies Reach Debt-Restructuring Deals

Three oil and gas companies reached deals with creditors to quickly slash hundreds of millions of dollars of debt in chapter 11 so that they will be ready when energy prices recover, the Wall Street Journal reported today. Houston-based oil-well servicer Key Energy Services Inc. yesterday filed for chapter 11 protection, and Basic Energy Services Inc. of Fort Worth, also an oil-well servicer, said it would do so by today. Meanwhile, oil and gas producer Stone Energy Corp. said that continuing negotiations has yielded a plan to file for chapter 11 protection by Dec. 9 to finalize a restructuring deal. To confront the aftershocks of the commodities rout, they are filing pre-packaged chapter 11 bankruptcies. John Penn, a Dallas-based restructuring partner at Perkins Coie LLP who isn’t involved in these cases, said that pre-packaged bankruptcies can be especially helpful to oil and gas servicers whose survival depends on reassuring customers that they will remain viable business partners. Companies that have recently taken advantage of the ability to file a prepackaged bankruptcy include Global Geophysical Services LLC, a seismic-data provider for the oil industry, which was in and out of chapter 11 protection in two months. Oil and gas producers Atlas Resource Partners LP and Halcón Resources Corp. filed prepackaged bankruptcies on July 27; Atlas emerged from chapter 11 on Sept. 1, and Halcón followed on Sept. 9. Key Energy’s restructuring plan proposes to cut its $1 billion in liabilities to about $250 million so the roughly 2,900-employee company can emerge from chapter 11 with a “manageable debt load.” Read more. (Subscription required.) 

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Cost Cuts, But No Tax Hikes in Atlantic City’s 5-Year Recovery Plan

Atlantic City, N.J.'s cash-strapped casino hub, will slash at least 100 jobs, or about 10 percent of its staff, but does not plan to raise taxes in a five-year fiscal recovery plan aimed at avoiding a state takeover, according to a presentation by city advisers yesterday. The gambling resort has lost more than two thirds of its property tax base since 2010 because of competition from casinos in neighboring states, which has led five of the city's 12 casinos to close since 2014, Reuters reported. The city also plans to sell a defunct airstrip to its water authority for $110 million to fill a budget hole and meet terms of a $73 million emergency loan issued by the state earlier this year. Under the recovery plan, Atlantic City will borrow to help pay off big tax appeal settlements that it owes to the MGM Resorts International-operated Borgata and other casinos, lawyers said at the city council hearing. Mayor Don Guardian said that the plan will be presented to state officials in Trenton today after the city council approved it yesterday. From there, the state has five days to accept the plan. If it does not pass muster, the state could take over city operations, a move that New Jersey Gov. Chris Christie has pushed for in the past.

TelexFree Founder James Merrill Pleads Guilty to Fraud Charges

James Merrill, who founded and then captained the meteoric rise of TelexFree LLC before it was shut down by federal authorities, has pleaded guilty to criminal fraud charges for his role in running a multibillion-dollar pyramid scheme, the Wall Street Journal reported today. Merrill pled guilty to one count of wire fraud conspiracy and eight counts of wire fraud in a deal that will limit his sentencing to no more than 10 years in prison, according to the U.S. attorney’s office in Boston. Court papers show that if he had been convicted at trial, he could have faced up to 20 years in prison. The plea agreement further calls for the former chief executive of TelexFree, a multi-level marketing company that sold telephone-service plans, to forfeit tens of millions of dollars in assets. The list of assets, which prosecutors say Merrill and his business partner collected as part of the scheme, includes cash, real estate, luxury cars and a yacht. Read more. (Subscription required.) 

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

Midstates Petroleum Stock Begins Trading Again after Emergence from Bankruptcy

Midstates Petroleum Inc.’s stock began trading yesterday on the New York Stock Exchange after the firm emerged from bankruptcy protection last week, Tulsa World reported today. The stock is being traded under the company’s previous ticker symbol, MPO. As with most bankruptcy reorganizations, Midstates’ previous common stock was canceled, and its $2 billion in debt was converted into equity in the newly organized company. The stock, which was delisted in February for falling below the exchange’s minimum-listing requirements, opened at $19 per share yesterday and closed at $22.65.

Credit Card Scammers Flock to Online Shopping

The rate of online card fraud is rising sharply as a growing number of purchases take place on the Internet while brick-and-mortar merchants race to lock down vulnerabilities in the checkout line, the Wall Street Journal reported today. This is prompting new steps to try to curb the threat: The credit card industry is expected to announce a plan to encourage online merchants to provide card issuers with more detailed customer information that could be used to catch fraudulent purchases. More than 7.5 percent of online merchants’ revenue is eaten up by the cost of actual fraud and costs that are associated with fraud-prevention tools, according to a survey to be released today by Javelin Strategy & Research, a consulting firm that specializes in the payments industry. Aite Group LLC, another consulting firm, estimated in May that so-called card-not-present fraud will rise to $4 billion this year from $3.2 billion in 2015. It expects that figure to jump to $7.2 billion in 2020.

FS-ISAC Establishes Big Bank Group to Tackle Systemic Risk

A cybersecurity information-sharing group for the financial services industry has moved forward with a plan to create an arm dedicated to combatting threats to the largest banks, American Banker reported today. The Financial Services Information Sharing and Analysis Center (FS-ISAC) announced the creation of the Financial Systemic Analysis and Resilience Center — a unit formed by the eight largest U.S. banks to coordinate research on systemic risk to the financial system. Composed of eight members — Bank of America, BNY Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo — the group will also coordinate with regulators, FS-ISAC said. Banking regulators last week pushed forward a new plan to impose higher cybersecurity standards on the largest banks and other entities that form the backbone of the financial sector.