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U.S. Judge Refuses to Dismiss Lawsuit over Puerto Rico Pension Law

A lawsuit filed by Puerto Rico’s financial oversight board over a new pension and healthcare funding law will move forward after a federal judge yesterday denied the U.S. commonwealth’s motion to dismiss the case, Reuters reported. The litigation, which marked the latest skirmish in an ongoing battle between the board and the government over spending priorities, targets a law that transfers hundreds of millions of dollars in municipal pension and healthcare costs to the bankrupt Puerto Rico government. U.S. District Court Judge Laura Taylor Swain rejected arguments by the island’s government that the lawsuit cites faulty claims based on the 2016 federal PROMESA Act, which created the board and a bankruptcy-like process to restructure about $120 billion of Puerto Rico’s debt and pension obligations. Swain, who is hearing the island’s bankruptcy cases, ordered the lawsuit to proceed. A fiscal 2020 budget passed by Puerto Rico lawmakers included funding for local pensions and health insurance costs to aid cash-strapped municipalities despite warnings from the board that so-called Law 29, which enabled the move, is inconsistent with its fiscal plan. The board’s lawsuit seeks to void the law, contending it would impair the PROMESA Act by diverting hundreds of millions of dollars Puerto Rico’s government could otherwise use to spur economic growth.

Helicopter Company Bristow at Odds With Shareholders as Bankruptcy Plan Put to Vote

Bristow Group Inc. will put its reorganization plan to a creditor vote while the transportation provider remains at odds with equity investors who say more than $850 million in company value seems to have evaporated during its bankruptcy, WSJ Pro Bankruptcy reported. The company, which sought protection from creditors in May, received conditional approval Wednesday of the disclosure statement outlining its restructuring strategy, allowing Bristow to move forward with the voting process. A group of equity holders opposed the document’s approval. The shareholders said that they would receive nothing in the reorganization even though Bristow’s year-end balance sheet filed with the Securities and Exchange Commission showed $877 million in value for existing equity. The disclosure statement provides no “credible explanation as to the cataclysmic evaporation” of equity value, the group said in a court filing Monday. Bristow, the equity owners said, is assuming “that over $850 million of value simply evaporated within six months of filing for chapter 11.”

Judge Will Wait to Sign Off on FirstEnergy Solutions Bankruptcy Emergence

The confirmation of FirstEnergy Solutions’ bankruptcy plan has been put on hold until the company reaches a deal with two unions on labor agreements or wins court approval to reject the contracts, the Akron (Ohio) Beacon Journal reported. Bankruptcy Judge Alan Koschik said in court in Akron on Wednesday that he was putting off confirmation of the plan until the labor agreements are addressed. He scheduled a Sept. 10 status conference. The judge stressed he was not denying confirmation of the plan. Wednesday marked the second day of a hearing to confirm whether FirstEnergy Solutions, the unregulated power generation arm of Akron-based electric utility FirstEnergy Corp., has met all required bankruptcy code elements. FirstEnergy Solutions is seeking to emerge from chapter 11 protection as an independent unregulated power generation company, separate from its parent FirstEnergy Corp. The company said in a statement that it “remains focused on confirming the plan to exit bankruptcy by the end of 2019.”

Lynn Tilton to Face New York Court Fight With Investor

Turnaround executive Lynn Tilton is headed toward trial in New York this fall, after failing to block a long-running lawsuit from an early investor in her Zohar funds, investment vehicles meant to make loans to distressed companies, WSJ Pro Bankruptcy reported. German bank Norddeutsche Landesbank Girozentrale, or Nord, the investor, sued Tilton in 2015, around the time that the U.S. Securities and Exchange Commission filed civil fraud charges against her. Tilton beat the SEC’s case, but, in a ruling this week, Judge Joel Cohen of the New York Supreme Court said that the win against the agency on the civil fraud charges won’t protect her from Nord’s lawsuit. “This Court previously determined that the SEC proceedings were ‘primarily concerned with whether Tilton misled investors about the fees they owed by making the Zohar Funds appear more valuable than they actually were,’ and ‘did not necessarily reach the issue of whether Defendants misrepresented the purpose, operation and management of the Zohar Funds,’ as alleged here,” Judge Cohen wrote.

Empire Brewery to Reorganize in Bankruptcy, Remain Open

Facing more than $10 million in debts, Empire Farm Brewery in Cazenovia, N.Y., has filed for chapter 11 protection seeking to sell much of its property and assets in order to reorganize and stay open, Syracuse.com reported. The $6 million brewery and tasting room remains open for business as usual. The brewery opened in the summer of 2016 as a spinoff of the Empire Brewing Co. in downtown Syracuse’s Armory Square. The two businesses are separate, so the bankruptcy filing does not affect the brewpub. As part of the reorganization plan, Empire Farm Brewery has entered an agreement to sell many of its assets, including its tasting room, to Wisconsin-based Burnett Dairy Cooperative for $3.25 million. A filing on the reorganization says Burnett Dairy will purchase “substantially all of the brewery’s assets.” Empire recently sold all of its intellectual property rights — including its name, logos and trademarks — to the Harris Beach law firm in Syracuse, which handles the brewery’s affairs. That sale satisfied at least $50,000 in unpaid debts the brewery had with the law firm.

Judge Refuses to End Standard Amusements' Bankruptcy, Keeps Playland Contract in Place for Now

A judge has refused to dismiss Standard Amusements' bankruptcy case, including its lawsuit seeking to block Westchester, N.Y., from ending the company's contract to run Playland amusement park, the Rockland/Westchester Journal News reported. Bankruptcy Judge Robert Drain ruled that the contract would remain in effect while the bankruptcy case continues. The contract to run Playland was reached in 2016 with then-County Executive Rob Astorino and Standard was scheduled to begin managing the park this November. But when George Latimer took office last year, he railed against the deal, setting in motion what eventually was the county's decision in late April to end the contract. The following month, Standard filed for bankruptcy and in June filed the lawsuit seeking to enforce the contract. Each side contends that the other has breached the contract, with the county maintaining that the $9 million Standard Amusements has invested so far in Playland was mostly for things not authorized in the deal. Standard's lawyer, John Rapisardi, hailed Wednesday's ruling, saying that it would give the company a chance to continue with the contract. He said that the company maintains that it has not default on the contract, but that even if it had, the bankruptcy case gives it the opportunity to cure any breaches. County Attorney John Nonna declined to address the judge's decision not to dismiss the bankruptcy case, insisting that it was not a ruling on the underlying contract dispute.

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