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Hercules Offshore to File for Bankruptcy a Second Time

Hercules Offshore Inc. said that it planned to file for prepackaged chapter 11 protection, just six months after the rig contractor emerged from bankruptcy protection, Reuters reported on Friday. The company said that it had entered into a restructuring support agreement with some lenders, which will eventually allow it to place all its unsold assets into a wind-down vehicle until they can be sold. Hercules Offshore said that its international units would not be included in the bankruptcy filing, but would be a part of the sale process. Hercules first filed for chapter 11 protection in August 2015 and emerged from bankruptcy in November. Read more

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Emerald Oil Snags $73 Million Bid Before July Auction

Emerald Oil Inc. snagged a $73 million bid from affiliates of institutional investor Crestline Management LP and private-equity firm Sole Source Capital LLC, setting the floor ahead of a July auction, the Wall Street Journal reported on Saturday. Court papers show the company is asking Bankruptcy Judge Kevin Gross to sign off on the stalking horse, or lead, bidder so it can move forward with its sale timeline. If that timeline is approved, other bids for Emerald would be due by July 6. If needed, an auction would be held July 11. A hearing to approve the sale would take place on July 14. Emerald said in court papers that the sale of all of its oil and gas assets, including leases and mineral contracts mainly in North Dakota, will reap the best recovery for the company’s creditors. Court papers show that since filing for bankruptcy, Emerald heard from nine interested bidders, and by the end of the process received four bids before selecting Sole Source and Crestline as the lead bidder. Read more. (Subscription required.) 

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Commentary: How to Save Puerto Rico

Three and a half million Americans live on an island that is in economic free-fall, and Congress still isn’t sure whether it will throw them a lifeline, according to a New York Times editorial today. A bipartisan bill to help Puerto Rico is expected to come to a vote soon in the House, and while it has flaws and it is facing opposition on many fronts, it offers the island its best chance of survival, according to the editorial. This is how urgent the situation is: Thousands of residents leave for the mainland every month to seek jobs and better public services, and the exodus will accelerate if nothing is done to change Puerto Rico’s trajectory. With its economy in decline for a decade, the island has accumulated huge debts that it cannot repay. It owes $72 billion to investors and about $46 billion to government pension funds. Two weeks ago, Republican and Democratic lawmakers in the House and the Obama administration reached a compromise on aiding Puerto Rico. The island desperately needs to restructure its debt, which is about 100 percent of its gross national product. Given its shrinking economy and population, Puerto Rico cannot possibly repay bondholders every dollar it owes them. The island’s government has cut spending and raised taxes, but that has only made the situation worse by depressing economic activity. Read more

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

Virgin Islands Balks at Puerto Rico Rescue Proposal

Congress’s plan to throw a lifeline to Puerto Rico is making waves in the U.S. Virgin Islands, Bloomberg News reported today. The measure that passed a House committee last week would allow for a federal control board to oversee the finances — and potentially restructure the debt — of any U.S. territory, even though Puerto Rico is the only one now asking for help. Virgin Islands Governor Kenneth Mapp and Rep. Stacey Plaskett have blasted the bill, warning that it may tarnish its standing with investors. That concern is already starting to materialize: Returns on its securities are trailing the $3.7 trillion municipal market for the first time since 2011. The Caribbean island, Puerto Rico’s closest American neighbor, has a sliver of the population — about 104,300 — and a fraction of the debt, with $2.4 billion across all issuers. But divvied up, that’s $23,000 of obligations per person, even more than Puerto Rico’s $20,000. The two Caribbean territories with a shared culture also have similar fiscal strains: declining populations, underfunded pensions, histories of borrowing to cover budget shortfalls and unemployment rates that are twice as high as the U.S. mainland’s. Virgin Islands leaders insist the government can and will pay what it owes, in part because of the way the bonds are structured.

Netflix Loses Bid to Release Relativity Films Ahead of Theaters

A bankruptcy judge on Friday delivered a defeat to Netflix Inc., which has fought for the right to release two films produced by Relativity Media LLC on its streaming platform ahead of their expected theatrical release, the Wall Street Journal reported on Saturday. Bankruptcy Judge Michael Wiles issued an order forbidding Netflix to release the films, saying a premature debut of the movies could prove “devastating” for the Hollywood studio that he released from chapter 11 earlier this year. Relativity’s fragile reorganization plan is dependent upon the theatrical release of its most anticipated films: “Masterminds,” a comedy starring Zach Galifianakis and Kristen Wiig, and “The Disappointments Room,” a horror film starring Kate Beckinsale. “It is my responsibility to ensure the plan I approved is carried out,” the judge said in court Friday. Allowing Netflix to proceed “would threaten the bankruptcy process…with devastating consequences to the plan and distributions” to creditors.

Analysis: Federal Insurance Fund Protecting Millions of Pensions Is Running Out of Cash

One of the nation’s largest multi-employer pension funds said that it is out of ideas for ways to save itself from an impending failure, the Washington Post reported today. After the Treasury Department rejected its Hail Mary proposal, which would have substantially cut benefits for some retirees, the Central States Pension Fund has little choice but to turn to a federal insurance program that is supposed to offer a lifeline to troubled pension funds. But there’s one major problem — that program is expected to run out of money, too. The Pension Benefit Guaranty Corp., which insures private pensions, is dealing with long-standing financial woes with the fund that protects multi-employer pension plans. The program, which some experts say wasn’t really intended to be used, was set up more than four decades ago to serve as a backstop for private-sector pension plans. But it has been relied on more than expected by large plans on unsteady financial footing. The fund’s deterioration could pose a threat to the 10 million people in multi-employer plans who could soon be left without a safety net for their pensions. Although most of those workers and retirees are in plans that are financially healthy, about 1.5 million people — including the Central States members — are in plans that are projected to run out of cash over the next 20 years. In the past few weeks, lawmakers, Central States officials and consumer advocates have called for a legislative solution that would shore up fragile pensions and the struggling insurance fund. Previous efforts to bolster the insurance program have failed, or so far fallen short. For instance, a 2014 law that made it possible for multi-employer pension plans to cut benefits for retirees was meant to alleviate the burden on the PBGC. But now that the Treasury Department has rejected the Central States proposal, which was the first test under the law, the insurance agency is back where it started. Read more

The Central State Pension Fund and the overall crisis in private and public pensions was the topic of discussion on the April “Eye on Bankruptcy” program. Click here to watch.