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Regulators Propose Huge Overhaul of Debt-Collection Industry

The Consumer Financial Protection Bureau (CFPB) has proposed a massive overhaul of the multibillion dollar debt-collection industry, which would restrict collectors from calling numerous times a day, require them to have more documentation on what's owed and give people more ability to dispute their bills, the Associated Press reported today. It would be the biggest overhaul of the debt-collection industry since Congress passed the Fair Debt Collections Practices Act. Regulators estimate roughly 70 million Americans are contacted by debt collectors each year. Like payday loans and so-called binding arbitration agreements — two parts of the U.S. financial system that the CFPB has proposed regulating more tightly — the new proposals are likely to be resisted strongly by the industry and its allies in Washington. Under the proposed rules, debt collectors would first have to more substantially prove a debt is valid before starting collection. The agency will hold a hearing today in Sacramento, Calif., to discuss the proposed rules. Once formal rules are written, likely later this year, the public will have 90 days to comment before they go into effect.

Peabody Seeks Leniency on Cleanup During Bankruptcy

The operator of the world’s largest coal mine wants to maintain its right to self-bond in Wyoming during its bankruptcy, the Casper (Wyo.) Star-Tribune reported yesterday. Peabody Energy Corp. has filed a motion that would allow a deal with Wyoming’s Department of Environmental Quality, effectively placing a hold on state enforcement of the coal company’s cleanup liabilities. The deal grants Wyoming priority on $127 million of the company’s $726 million cleanup costs. It is good only for the duration of the bankruptcy. Peabody argued in its motion that it cannot emerge from bankruptcy as a viable company if it is required to replace all $726.8 million in unsecured cleanup costs with third-party bonds during bankruptcy. If forced to do so, the cost would dent its available cash to such a degree as to make the business inoperable post-bankruptcy. Liquidity is an important predictor of these compromised companies’ ability to survive in a coal market that is hostile at best. However, environmentalists are wary of the deal. They have until Aug. 10 to object to the agreement.

Atlas Resource Partners Files for Chapter 11

Atlas Resource Partners LP has filed for chapter 11 after negotiating a plan to slash some $900 million in debt off its books, The Wall Street Journal reported yesterday. Although the restructuring will substantially reduce the oil and gas producer’s debt, its status as a partnership could leave its investors with a hefty tax bill. Under the pre-negotiated plan, the company’s unit holders will receive no recovery and their ownership stakes will be canceled. These investors could also face a tax bill for the debt that Atlas cancels in chapter 11. Atlas’s proposed restructuring plan is a debt-for-equity swap with senior bondholders, 80 percent of which have formally signed on to the deal. Atlas’s current revolving loan would be repaid through the liquidation of its hedge positions, and a new $410 million facility would be provided when Atlas exits bankruptcy. The holders of $250 million in junior loan debt would receive the remaining 10 percent equity in exchange for an interest-rate reduction. Upon completion of the deal, Atlas’s tax status will change to a traditional corporation and its name will be changed to Titan Energy.

Judge Moves to End Sabine Oil's Bitter Bankruptcy

A bankruptcy judge said that she would approve Sabine Oil & Gas Corp.’s reorganization plan, which would clear the way for the Texas energy producer to exit chapter 11 after a year-long battle with its creditors, Reuters reported yesterday. Bankruptcy Judge Shelley Chapman said that she would approve the plan and was working on an opinion that would explain her reasoning. Sabine's plan cuts the company's debt to $350 million from $2.8 billion, with its lenders ending up with almost all of the company's stock when Sabine emerges from bankruptcy. Unsecured creditors of the Houston-based company will get a sliver of the company's stock and warrants, amounting to pennies on the dollar for the $1.4 billion they say they were owed. The case has been unusually contentious, with Sabine and its lenders squaring off against the official committee of unsecured creditors. Sabine's reorganization plan was premised on settling disagreements with its lenders that turned on the question of the value of the lenders' collateral. The creditors’ committee said that Sabine would have been better off litigating against its lenders rather than settling.

Halcon Resources Files for Bankruptcy

Oil and gas explorer Halcon Resources Corp. has filed for bankruptcy as part of a restructuring agreement reached with key lenders in May, Bloomberg reported yesterday. The agreement would eliminate $1.8 billion in debt and $222 million in preferred stock, the Houston-based company said at the time. On June 10, Halcon said a majority of holders had accepted the restructuring, which will be implemented through chapter 11. The filing listed $3.12 billion in debt and $2.85 billion in assets. Halcon focuses on onshore oil assets in the U.S. and averaged 41,087 barrels of oil or equivalent a day in 2015. Around 79 percent of its production was oil, 10 percent was natural gas liquids and the rest was natural gas, the company said. The case is <em>In re Halcon Resources Corp.</em>, 16-11724, U.S. Bankruptcy Court, District of Delaware.

Moody's: Atlantic City Likely to Default Monday Without Loan

Atlantic City is likely to default on $3.4 million worth of debt — and become more likely to go bankrupt — if a loan promised by the state isn't received by Monday, the Associated Press reported yesterday. Moody's Investors Service issued a report saying that the nearly broke city is likely to default on a debt service payment if it doesn't get a $74 million loan the state agreed to in May. Negotiations on the terms of the loan are continuing. The loan was part of a temporary agreement reached between the state and the city to allow it to get its finances in order by November. If that doesn't happen, the state is poised to seize control of the city's finances and major decision-making power. The city's finances have crumbled as its main employer, the casino industry, has contracted. Four of the city's 12 casinos went out of business in 2014, and surviving casinos have successfully challenged their tax assessments, blowing large holes in the city budget.
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