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Maxus Energy Defends Environmental Settlement with Parent

Maxus Energy Corp. is defending a $130 million settlement with its corporate parent over responsibility for the cleanup of New Jersey’s contaminated Passaic River, the Wall Street Journal reported today. Maxus was one of dozens of companies tagged with blame for discharging hazardous substances into the river decades ago. The company filed for bankruptcy in June after striking a bargain with owner YPF SA over its corporate parent’s alleged liability for the cleanup. Maxus’s deal with YPF, Argentina’s state-owned oil company, triggered a protest from Occidental Petroleum Corp.’s chemical subsidiary, known as OxyChem, which has been sparring with YPF for years over who should be on the hook for cleaning up the river. Lawyers for Maxus on Monday acknowledged the settlement “has engendered controversy” but maintained it was the best option “when compared to the risks of losing everything at trial and garnering no value for the debtors’ creditors.”

Analysis: Shareholders Are Winning a Seat at the Bankruptcy Table

Stock investors are lately demanding — and winning — the chance to fight for a recovery in bankruptcy, according to an analysis in today’s Wall Street Journal. In chapter 11 bankruptcy reorganizations, shareholders don’t get paid unless companies pay off all their debts, which typically means they don’t get paid. Rather than accept defeat, however, shareholders in energy, coal and other commodities-focused companies are fighting for a voice, and possibly a recovery, in some of the biggest bankruptcies that have been filed over the past couple of years. “Equity is just not as willing to walk away as they once were,” said DLA Piper restructuring lawyer Thomas Califano. In most of these cases, shareholders are wiped out as companies reorganize by giving equity to creditors or selling their assets at prices too low to cover their debts. “You just feel exploited when your life savings are about to be taken from you,” said Kristen Plaisance, who owns stock in bankrupt Texas oil and gas driller Energy XXI Ltd. Energy XXI’s shareholders allege in bankruptcy court filings that management wrongly marked down the value of the company before planning a restructuring that would hand control of the company to bondholders while letting current management keep their jobs and collect bonuses. In June, Bankruptcy Judge Marvin Isgur granted Energy XXI investors an official committee.

College Group Sues U.S., Saying It’s Target of Political Agenda

The Education Department has been increasing pressure on the multibillion-dollar career-training industry, responding to complaints that some for-profit colleges burden students with debt and leave them without promised skills and jobs. Pushing back, however, is the Center for Excellence in Higher Education, the New York Times reported today. The organization, which owns a chain of colleges, yesterday filed a lawsuit in federal court accusing education officials of pursuing a political agenda. The suit argues that the department is trying to put the colleges out of business by failing to classify them as nonprofit educational institutions, curbing their access to federal student aid dollars. Created in 2006 as a charity dedicated to promoting free-market principles throughout the higher education industry, the Center for Excellence bought several colleges, including Stevens-Henager, California College and CollegeAmerica, six years later from their founder, Carl B. Barney. Nearly all of the money for the $636 million purchase came from donations and loans made by Barney. In buying the for-profit chain, the Center for Excellence restructured itself as a tax-exempt, nonprofit educational corporation with Barney as chairman. The Internal Revenue Service approved the designation, but this month the Education Department refused to recognize the center’s nonprofit status for the purposes of receiving federal grants and loans, arguing that the deal was an effort to circumvent stricter government regulation.

Caesars Shielded From Billion-Dollar Bond Suits Until Oct. 5

Casino giant Caesars Entertainment Corp. has until at least Oct. 5 before it may have to face lawsuits that could force the company into bankruptcy alongside its operating unit, Bloomberg News reported yesterday. U.S. District Judge Robert W. Gettleman yesterday agreed to halt the lawsuits while the operating unit appeals a lower-court ruling that favored bondholders seeking to enforce more than $11 billion in claims. Caesars Entertainment Operating Co. (CEOC) which filed for chapter 11 protection in January 2015, will return to court on Oct. 5 to argue that the judge overseeing its bankruptcy erred when he lifted the lawsuit shield last week. Judge Gettleman said that he would probably decide at the October hearing whether to overturn the bankruptcy judge, but he warned CEOC that it faced an “uphill” fight. The temporary halt to the lawsuits means Caesars won’t immediately face potential losses in a group of cases that have been winding their way through courts in Delaware and New York for more than a year.

Fox & Hound, Champps Close 25 Locations

The owner of sports bar chains Fox & Hound and Champps closed 25 locations, even as the company received a lifeline that will enable it to operate long enough to be put up for sale, according to bankruptcy filings and the company, National Restaurant News reported yesterday. Kelly Investment Group, a private-equity firm out of California that specializes in restructurings, has emerged to keep the chains’ owner, Last Call Guarantor LLC, from being shut down. Fun Eats and Drinks LLC, a Kelly subsidiary, recently acquired the rights to $75 million in first lien debt that Last Call had owed to Antares Capital. Kelly Investment then agreed to provide $5.4 million in financing to enable the company to continue operating through an expected auction next month, according to the filings.

Report: CFPB Faster to Regulate Than Other Agencies

The Consumer Financial Protection Bureau (CFPB) pushes out rules more quickly than other federal agencies, according to a new report, The Hill reported today. The conservative American Action Forum found that the CFPB’s “pace of rulemaking is 3.5 times faster than that of other significant executive agencies.” The CFPB has finalized 49 rules since it was founded in July 2011, according to the report, which take an average of 197 days to complete each. This makes the CFPB’s rules more susceptible to mistakes, the report argued. The agency has issued corrections on 13 rules, which amounts to greater than a 25 percent error rate.

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