Analysis: Eyeing Upswing, More U.S. Oilfield Service Firms Restructure

Struggling U.S. oilfield service providers are preparing for an expected oil-price recovery in an unexpected way: filing for bankruptcy, Reuters reported today. Companies that drill wells, haul water and provide other services to energy exploration firms have been waiting out a slump in oil prices by idling machinery, laying off workers and extending deadlines for repaying debts. Now they are turning to chapter 11 protection to shed debt and raise cash so they can spend and invest again. Without bankruptcy, many small and medium-sized service companies risk missing out on any upturn that could follow President-Elect Donald Trump's pro-drilling agenda or OPEC's plan to cut oil production for the first time in eight years, restructuring advisors said. Through the end of October, about 70 mostly private energy service companies have filed for chapter 11 this year, up from 39 in all of 2015, according to Haynes and Boone, a law firm that specializes in energy restructuring. From June through October, nine companies with at least $100 million in debt filed for chapter 11, with a total of $9 billion in liabilities, according to Haynes and Boone. That exceeded the total for the prior 18 months, which came to $8.2 billion in debt from seven filings with at least $100 million in debt. In all, energy services companies have restructured about $18.7 billion through bankruptcy.


Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. Order your copy of ABI’s revised and expanded When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy, Second Edition.

U.S. Battle with For-Profit Colleges Flares over Sale of Giant School

The U.S. Department of Education slapped a set of tough conditions on a $1.1 billion private-equity bid for the company that owns the University of Phoenix, the nation’s largest school, after years of trying to rein in the for-profit college industry, Bloomberg News reported today. The university's owner, Apollo Education Group, won preliminary government approval yesterday for a group of Wall Street investors, including Apollo Global Management LLC (no relation), to buy it. But the conditions of the approval, which the prospective owners must meet for the school to continue receiving federal student aid, are so exacting that they have a legal right to walk away from the agreement, deal documents show. For example, they must arrange for a $385.6 million letter of credit and, in a serious obstacle to profitability, are barred from expanding the school's enrollment. Michael Frola, an Education Department official, said in a letter to the university's president that declining enrollment, government investigations, and the prospective buyers' lack of experience in running a college heighten the risk that the school would abruptly shut down and leave taxpayers holding the bag. Proprietary schools have been the object of widespread complaints by consumer advocacy organizations and state attorneys general that they engage in misleading marketing practices to enroll students, only to saddle them with taxpayer-backed debt they're unable to repay.

Now available in the ABI Bookstore: Pick up your copy of the updated and revised Graduating with Debt: Student Loans under the Bankruptcy Code, Second Edition!

California May Make It Harder to Secretly Bankroll Someone Else’s Lawsuit

In recent years, litigation funding has become a multibillion-dollar industry as investors have quietly fronted the costs of civil suits in exchange for a piece of any eventual monetary awards, according to a Bloomberg Businessweek report on Friday. Federal judges in California may be about to deal the business a serious blow. The rules committee of the U.S. District Court in San Francisco in June proposed that any party to a lawsuit filed in the jurisdiction would have to disclose any financial support from third-party sources known as litigation funders. The next step is for the full court to consider the question. Billionaire investor Peter Thiel recently turned the practice into a tool of revenge this year, surreptitiously paying for pro wrestler Hulk Hogan’s privacy suit against the website Gawker, which published a Hogan sex tape. The case went to trial and ended with a $140 million jury verdict that pushed the site into bankruptcy. Thiel subsequently said he got involved because of a 2007 Gawker story outing him as gay. The U.S. Chamber of Commerce, which has called litigation funding a grave threat to the civil justice system, and other pro-business advocates contend that letting judges, lawyers and parties know who’s footing the bill will help avoid hidden conflicts of interest or frivolous suits. Disclosure will “aid in the identification of potential ethical issues and thereby protect the integrity of the judicial process,” the chamber’s Institute for Legal Reform said in 2014.

 

Latest ABI Podcast Examines Research Looking at Implicit or Explicit Bias in the Bankruptcy System

ABI Executive Director Sam Gerdano talks with Prof. Robert M. Lawless of the University of Illinois College of Law, a co-author of the 2012 study titled "Race, Attorney Influence and Bankruptcy Chapter Choice," about the findings of racially disparate uses of chapter 13 bankruptcy. Prof. Lawless presented an update of the study's findings in October at the 2016 National Conference of Bankruptcy Judges Annual Meeting, revealing that race continues to be a factor in chapter choice for debtors, sometimes to their financial detriment, in certain parts of the country.

 

Watch ABI’s Bill Rochelle Recap of Yesterday’s Oral Argument in Jevic!

ABI Editor-at-Large Bill Rochelle provides a recap of the oral argument yesterday before the Supreme Court in Czyzewski v. Jevic Holding Corp. Click here to watch. 

To read his special edition of Rochelle’s Daily Wire focused on the oral argument, please click here. 

For a full transcript of yesterday’s oral argument in Jevic, please click here.

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