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Analysis: Oil Price Rebound Could Create Headaches for Bankrupt Drillers

Most oil producers would welcome higher crude prices, after a two-year downturn has pushed more than 100 U.S. energy companies into bankruptcy, but for some distressed drillers, a rebound could actually make things worse, reported on Friday. Throughout the rout in oil prices, senior lenders have largely been able to dictate the terms of energy bankruptcy proceedings as drillers' assets have fallen in value. But when oil prices rise, so does the value of a company's reserves. That in turn can prompt so-called junior creditors to challenge restructuring plans in a bid to get a bigger piece of what's left of the pie. High oil prices "embolden junior classes to fight harder, meaning possibly fewer agreements, and hence more need for a court process to resolve the issues," said Patrick Hughes, a Denver-based bankruptcy lawyer at Haynes and Boone. Last year, creditors recovered just 21 percent of the capital they lent to 15 bankrupt oil and gas exploration and production companies with at least $100 million in debt, Moody's Investors Service reported this month. That compares with a historical average recovery rate of nearly 59 percent. Read more

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Facing Losses, Energy Firms Ask Investors for More Time, Money

Rocked by the fall in oil and gas prices, some energy-focused private-equity funds are pleading with their investors for more time and money, the Wall Street Journal reported today. EnerVest Ltd., a Houston-based investment firm that says that it operates more U.S. oil and gas wells than any other company, is asking investors in two of its funds to put up hundreds of millions of dollars to bolster the troubled funds or risk losing the billions they have already invested. First Reserve Corp., meanwhile, is negotiating with investors to extend the life of a $7.8 billion fund from 2006 to give it time for oil prices to rebound. The fund has lost more than a third of its original value, and investors are pushing First Reserve for a break on the management fees it charges them.

U.S. Judge Concerned With Speed of Hanjin Restructuring

A bankruptcy judge on Friday expressed concern that Hanjin Shipping Co.’s efforts to cobble together a restructuring plan may be moving too quickly for U.S. creditors, the Wall Street Journal reported on Saturday. The South Korean shipping company hopes to file a plan of reorganization with a Korean court by Dec. 23, court papers show, about four months after it sought protection there and in the U.S. “It’s very condensed,” Bankruptcy Judge John Sherwood said on Friday at a status hearing in the company’s U.S. bankruptcy proceeding. “I’m just concerned that U.S. creditors will be asleep at the wheel, because it’s a fast process.” Once Hanjin’s restructuring plan is on file, it will then be up to the South Korean court to decide whether to accept the plan or to let the company go under. Read more. (Subscription required.) 

In related news, failed South Korean container carrier Hanjin Shipping Co. Ltd. said on Friday that cargo owners were withholding up to $80 million in payments for completed shipments, complicating the company's ability to move stranded freight, Reuters reported. Hanjin lawyers said that many cargo owners had received their goods on credit but have yet to pay the shipping company. An attorney for Ashley Furniture Industries, a Wisconsin-based furniture maker, told Friday's hearing the company anticipated that costs related to Hanjin's failure would eventually exceed what it owed for past shipments. Like many retailers and other cargo owners, Ashley has been stuck paying to get its cargo from the dockside, even though Hanjin had been paid to deliver it to an inland destination. In addition, many retailers and other cargo owners have complained they have been stuck with empty Hanjin containers that ports have been unwilling to take back. Read more.

Caesars Talks Grind On in Bid for Deal to End Unit’s Bankruptcy

Caesars Entertainment Corp. is inching closer to a deal to finance the reorganization of its bankrupt operating unit and end two years of rancorous court battles that embroiled the casino giant and its controlling shareholders, Apollo Global Management LLC and TPG Capital, Bloomberg News reported on Saturday. Caesars Entertainment Operating Co.’s bondholders and lenders are hammering out the framework of a deal. Negotiations continued on Saturday after a Friday deadline passed without a final agreement. The parties must determine how to divide a $400 million payout called for in a new plan the casino operator offered two days ago to get holdout second-priority creditors on board with a restructuring. A proposal under discussion would require the operating unit’s most senior bondholders and lenders to give up $170 million of their original recoveries, while Caesars provides $200 million. The unit’s lower-ranking, second-lien bondholders, a group that includes David Tepper’s Appaloosa Management, would forgo the remaining $30 million.

New York Regulator Asks Caliber for Data on Handling of Distressed Mortgages

New York’s financial regulator wants information from Caliber Home Loans, one of the nation’s fastest-growing mortgage firms, about its handling of distressed mortgages and origination of mortgages to borrowers with checkered credit histories, the New York Times reported on Saturday. The request for documents is an indication the New York Department of Financial Services is ratcheting up an early stage investigation into Caliber, a wholly owned subsidiary of Lone Star Funds, a large private equity firm based in Dallas. The New York regulator made the request in a letter sent a week ago to Caliber. The regulator told Caliber that it was investigating multiple complaints from consumers in New York and wanted information related to the firm’s procedures for handling distressed mortgages and foreclosures. The regulator is also asking for information about mortgages Caliber has begun writing to borrowers who have filed for bankruptcy or been foreclosed on but are repairing their credit histories. Caliber is one of the few mortgage firms that has begun making so-called nonprime loans nearly a decade after the start of the housing bust.

Analysis: Millions in U.S. Climb Out of Poverty

Nearly 3.5 million Americans were able to advance above the poverty line last year, according to census data released this month, the New York Times reported today. “It all came together at the same time,” said Diane Swonk, an independent business economist in Chicago. “Lots of employment and wages gains, particularly in the lowest-paying end of the jobs spectrum, combined with minimum-wage increases that started to hit some very large population areas.” Overall, 2.9 million more jobs were created from 2014 to 2015, helping millions of unemployed people cross over into the ranks of regular wage earners. Many part-time workers increased the number of hours on the job. Wages, adjusted for inflation, climbed.