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Puerto Rico Bond Insurer Urges Board to Seek Utility Receiver

MBIA Inc.’s National Public Finance Guarantee is urging Puerto Rico’s federal board to consider putting a receiver in charge of the island’s bankrupt power utility after the electricity provider lost two chief executive officers last week amid an uproar over their salaries, Bloomberg News reported. The Puerto Rico Electric Power Authority needs politically independent leadership, lawyers for the bond insurer wrote to the federal board in a letter dated July 17. Management at Prepa, as the utility’s known, fell into disarray last week as its chief executive officer resigned after four months on the job and his replacement quit one day after the agency announced his appointment. National is seeking to work with the federal board to install independent management that will work on the utility’s debt restructuring and overhaul the authority. Read more. 

In related news, dysfunction at Puerto Rico’s bankrupt electric utility prompted a Congressional oversight committee yesterday to invite the U.S. commonwealth’s governor to testify at a special hearing scheduled for next week, Reuters reported. The U.S. House of Representatives’ Committee on Natural Resources, which has oversight of U.S. territories, requested Governor Ricardo Rosselló or a member of his administration to appear at the July 25 hearing to discuss de-politicizing the Puerto Rico Electric Power Authority (PREPA) and a “credible plan” for its transformation. The committee on Wednesday called for the hearing in the wake of a leadership crisis at the utility that began last week. PREPA is in the process of trying to restructure itself while also restoring and upgrading the island’s electric grid. Read more. 

Disclosure Advocate Seeks to Reopen Coal Miner’s Bankruptcy

Corporate-turnaround specialist Jay Alix asked a bankruptcy judge to consider reopening coal miner Alpha Natural Resources’ chapter 11 case, citing “gravely troubling and disqualifying disclosure violations” by McKinsey & Co., the Wall Street Journal reported. In court papers filed Wednesday with the U.S. Bankruptcy Court in Richmond, Va., lawyers for Alix said that McKinsey, which worked as an adviser to Alpha during its bankruptcy, concealed an investment in the company and profited by some $50 million as a result. The revelation that McKinsey had a financial interest in the outcome of Alpha’s bankruptcy warrants reopening the case and revisiting whether the firm failed to properly disclose potential conflicts of interest, according to Alix. The request is the latest salvo in a growing legal battle between Alix and the consultancy, which accuses Alix of trying to sully a competitor to the turnaround business he founded decades ago.

Philips Complains About ‘Quid Pro Quo’ Payments in Gibson Bankruptcy

Electronics company Koninklijke Philips NV, which says it is owed $57 million by Gibson Brands Inc., has lodged several objections to the bankrupt guitar maker’s proposed reorganization plan, saying, among other things, that many unsecured creditors will get almost nothing while existing owners will receive millions, WSJ Pro Bankruptcy reported. The Netherlands-based company, in a filing on Wednesday in U.S. Bankruptcy Court in Wilmington, Del., also said Gibson has done a poor job of marketing its assets during its chapter 11 proceedings and that a document that the company filed last week in bankruptcy court gave misleading recovery figures for higher-ranking creditors. Gibson filed for bankruptcy in May. The company, founded in 1894, blamed much of its recent financial struggle on its Hong Kong-based Gibson Innovations Ltd. division, which sells Philips-branded consumer electronics such as headphones and speakers. Gibson said its musical-instruments business “has performed well.”

Houston Emergency Center Files Ch. 11, to Sell Assets

Houston-based Neighbors Legacy Holdings Inc. and 48 other related entities filed for chapter 11 bankruptcy protection late last week, the Houston Business Journal reported. Additionally, the company has already lined up a buyer for its Houston-area emergency centers, according to court documents. Neighbors noted that it filed for chapter 11 to “expedite the sale of its Houston and non-Houston operations.” The company operates as Neighbors Health, which includes Neighbors Physician Group, Neighbors Emergency Center and Neighbors Practice Management. The list of debtors includes individual locations of NEC and Neighbors Physicians Group as well as some other entities. Most of the entities listed assets between $1 million and $10 million, though 13 listed smaller ranges and two listed assets between $10 million and $50 million. Similarly, most of the entities listed debts between $1 million and $10 million, but 12 listed smaller ranges and only one listed debts between $10 million and $50 million.

Commentary: After Westinghouse, Georgia Nuclear Plants Face Uncertain Future

The collapse of Westinghouse Electric Co. could yet do more damage to the flagging U.S. nuclear industry if consumer advocates get their way, according to a WSJ Pro Bankruptcy commentary. Southern Co., which held a 46 percent stake in a nuclear-expansion project in Georgia, was one particularly upset customer. When Westinghouse folded, Southern’s unit Georgia Power Co. was on the brink of pulling the plug on the Vogtle nuclear project, which had been beset by years of construction delays and cost overruns. The owners of a similar Westinghouse-backed nuclear expansion in South Carolina cancelled construction after the bankruptcy and are now battling regulators and politicians over who should pay back the billions of dollars that were invested. But Southern and its co-owners are pressing on in Georgia at the Vogtle site, determined to complete two additional Westinghouse-designed reactors that would be the first new nuclear units in the U.S. since the 1970s. Georgia Power, backed by Southern, took over project-management responsibilities from Westinghouse and convinced the Georgia Public Service Commission that finishing construction made sense for the ratepayers who would foot the bill.

Trump's CFPB Nominee Defends Record in Senate Hearing

President Donald Trump’s choice to lead the U.S. consumer watchdog survived aggressive questioning by lawmakers yesterday and looked on track to secure a confirmation vote that could come as soon as this month, Reuters reported. There were heated exchanges in the Senate as Democratic lawmakers grilled Kathy Kraninger, a government official, on her role in the administration’s “zero tolerance” immigration policy and questioned whether she had relevant experience to lead the Consumer Financial Protection Bureau (CFPB). Kraninger is a senior official at the White House’s Office of Management and Budget (OMB). She has extensive government managerial experience including at the Department of Homeland Security, which she helped set up, and at OMB where she manages the financial regulation portfolio, according to her biography. Democrats and even some conservative Republicans have said that Kraninger, who is not well known in Washington, lacks relevant consumer finance experience, meaning her confirmation rested heavily on her performance before the Senate Banking Committee. But Republican senators yesterday pointed to Kraninger’s strong government managerial experience, adding she would have the help of consumer finance experts at the bureau if confirmed. Kraninger fended off repeated attacks from Democratic Senators Elizabeth Warren and Brian Schatz, who pressed Kraninger several times to clarify her involvement in the immigration policy that resulted in the separation of more than 2,000 children from their parents. Kraninger said several times she had no role in setting or developing that policy, but added when pushed that she had attended meetings relating to its implementation. Democrats also pushed Kraninger on her familiarity with consumer law, including the Military Lending Act, payday lending, credit card laws and discriminatory lending issues, with Senator Catherine Cortez Masto also forcing Kraninger to say she had no direct experience investigating or bringing legal actions against financial firms.
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