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Puerto Rico Government Pushing Forbearance Deal in Creditor Talks

Lawyers for Puerto Rico's government are drafting a forbearance agreement that could allow the U.S. territory to avoid invoking bankruptcy protections in the short-term, Reuters reported on Friday. Puerto Rico and its creditors wrapped up roughly a week's worth of mediated talks in New York, aimed at striking a deal to restructure much of the $70 billion in debt the island cannot pay. It remains unclear if creditors would support such an offer to extend talks past a May 1 deadline to reach an agreement. After that date, Puerto Rico could face lawsuits from creditors or seek a court-sanctioned restructuring process akin to U.S. bankruptcy, a provision of the 2016 rescue law known as PROMESA. Read more.

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

Trump Targets Dodd-Frank Rules Designed to Wall Off Risky Banks

President Trump, who has vowed to dismantle the landmark Dodd-Frank financial reform law, took aim at two of its pillars on Friday, the Los Angeles Times reported on Saturday. During an appearance at the Treasury Department, Trump signed two presidential memos ordering six-month reviews of the 2010 law’s authority for regulators to designate large firms as a risk to the financial system and to try to shut them down with minimal collateral damage if they’re on the verge of failing, the White House said. Although the regulations were designed to end the problem of too-big-to-fail banks, Republicans have complained they do the opposite because the government would still step in rather than let a firm fall into bankruptcy. “These regulations enshrine too-big-to-fail and encourage risky behavior,” Trump said. Trump also signed an executive order directing Treasury Secretary Steven T. Mnuchin to review significant changes to the tax code since the start of 2016 to determine whether they “impose an undue financial burden on American taxpayers,” “add undue complexity” or “exceed statutory authority,” the White House said.

House Financial Services Committee Hearing on Wednesday to Examine "Financial CHOICE Act of 2017"

The House Financial Services Committee will hold a hearing on Wednesday to examine the latest draft of the "Financial CHOICE Act of 2017.” The hearing, titled “A Legislative Proposal to Create Hope and Opportunity for Investors, Consumers, and Entrepreneurs,” will be examining the discussion the latest draft of the legislation sponsored by House Financial Services Committee Chairman Jeb Hensarling (R-Texas). Click here to view the witness list for the hearing. 

Click here to view the discussion draft of the "Financial CHOICE Act of 2017.” 

Judge Approves Republic Airways Reorganization Plan

A federal bankruptcy judge has approved Republic Airways Holdings Inc.’s plan of reorganization, clearing the way for the company to emerge from chapter 11 as a privately held company by the end of April, the Indianapolis Business Journal reported on Friday. The Indianapolis-based company, which flies commuter routes for larger airlines, slid into bankruptcy in February 2016. It was driven to distress by the national pilot shortage, which left it unable to fly some of its routes, and by onerous contract terms with its big-airline partners, American, Delta and United. Republic had filed its reorganization plan in November. But it drew a number of objections, which took months to work through. Judge Sean Lane granted final approval on Thursday. In the reorganization, Republic is canceling its publicly traded stock. The new owners will be creditors, which will receive new common stock in exchange for their claims.

Utah’s Formerly Fastest-Growing Company Files for Bankruptcy after Federal Raid

High-flying Alliance Health of South Jordan has filed for bankruptcy in the aftermath of a raid by federal agents seeking evidence of possible fraud related to the sale of products to government health plans, the Salt Lake Tribune reported on Saturday. CEO Jeffrey Smith resigned April 14 after the bankruptcy filing in Texas earlier this month, company spokesman Brian Watkins said in an email, which noted its board of directors was now overseeing operations as it seeks to reorganize and emerge from bankruptcy. The filing came after Zions Bank closed the company's line of credit in the wake of the Feb. 23 federal raid, said bankruptcy attorney Elizabeth Green. The U.S. attorney's office for Utah declined to comment on the investigation. But a previous search warrant application filed in federal court said the case involves "a scheme to defraud health care benefit programs, resulting in payments for mail-order diabetic test strips under false and fraudulent pretenses."

FirstEnergy Awaits Judgment That May Hasten Bankruptcy

As FirstEnergy Corp., one of the largest electric utility companies in the U.S., is barreling toward a verdict on what to do about its money-losing power plant subsidiaries, a dispute with a couple of railroads may force the company’s hand, the Pittsburgh Post-Gazette reported today. A decision in one of several contract dispute cases nagging at the Ohio-based energy company is expected by Tuesday. It involves FirstEnergy’s claim that environmental regulations forced the company to close several coal-fired power plants in Ohio that were due to receive coal on CSX and BNSF railroads. Those regulations, the company said, constituted an event so unforeseen and out of its control that it should be excused from its obligations under the rail contracts. That will be up to an arbitrator to decide. If the decision doesn’t go FirstEnergy’s way, there will be a hearing on just how much the energy company owes the railroads for breaking off contracts that were supposed to last through 2025. The amount of damages — to be determined by sometime in July — could be the deciding factor in FirstEnergy’s bankruptcy calculations.