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David’s Bridal Emerges from Chapter 11 Bankruptcy

David's Bridal, one of the largest wedding dress retailers nationally, announced on Friday that it had emerged from chapter 11 protection poised for long-term growth, the Houston Chronicle reported. The Pennsylvania company, which filed for bankruptcy protection in November, said that it successfully completed its financial restructuring without closing any of its 300 stores. David's Bridal, which started as a small bridal shop in Florida, has struggled to compete in recent years as millennials are marrying later and some opt for less traditional wedding attire as more casual ceremonies have come en vogue. The company said it planned to lure back customers by offering more affordable dresses in a wider assortment of sizes, both in-store and online. The retailer also said it would host special events with top wedding experts at its stores nationwide to help brides plan their weddings.

Sears and Its Creditors Can Sue Lampert, ESL Over Past Deals

Sears Holdings Corp. and its creditors can sue billionaire Edward Lampert and his hedge fund ESL Investments Inc. over a series of deals carried out under his leadership that creditors say stripped the best assets out of the company and contributed to its demise, WSJ Pro Bankruptcy reported. Sears’s deal to sell most of its assets to ESL Investments, reached on Wednesday, makes room for lawsuits over various prebankruptcy deals, including the spinoff of the Lands’ End clothing business and of some of Sears’s most valuable real estate into a new company called Seritage Growth Properties , according to documents filed by the hedge fund on Friday. Sears reached the sale deal in a multiday auction that concluded on Wednesday, with the company saying Thursday ESL’s $5.2 billion offer to retain control of Sears and keep about 400 stores open was declared the winner. The alternative was a liquidation of the entire chain. At a hearing on Friday in the U.S. Bankruptcy Court in White Plains, N.Y., Judge Robert Drain said that the terms of Sears’s deal include “aspects of the transaction that preserve claims against ESL.”

PBGC Steps in to Oversee Sears' Two Pension Plans

The Pension Benefit Guaranty Corp. (PBGC) said that it is taking steps to assume responsibility for bankrupt retailer Sears Holdings Corp.’s two pension plans, covering about 90,000 people, Reuters reported. The agency said that it is stepping in to oversee the retirement benefits of employees and retirees at Sears, Roebuck and Co and Kmart Corp as it is clear that Sears' continuation of the plans is no longer possible. Sears Holdings, which filed for bankruptcy in October, said on Thursday that Chairman Eddie Lampert won an auction to buy the once iconic U.S. retailer after presenting an improved offer of $5.2 billion. The PBGC estimates Sears’ pension plans are underfunded by $1.4 billion, leaving them 64 percent funded. The agency said that it is seeking to end plans as of Jan. 31 and added it would become responsible for the pension plans when Sears agrees or a court orders plan termination.

Puerto Rico’s $18 Billion Bond Restructuring Nears Completion

Puerto Rico’s federal supervisors are making a final push to write down $18 billion in sales-tax bonds under a settlement that would mark their largest renegotiation yet of the U.S. territory’s crushing debts, the Wall Street Journal reported. The restructuring proposal covers the revenue bonds known as Cofina s, which make up roughly 40 percent of Puerto Rico’s core government debt. First issued in 2007, the Cofina bonds are backed by sales taxes that provided investors a secure source of repayment and lowered Puerto Rico’s borrowing costs. Sales-tax revenue has never fallen short of paying off the Cofina bonds. But a decade of economic contraction has pushed Puerto Rico’s authorities to seek concessions from those bondholders to avoid further cutbacks in public services. The settlement pending before U.S. District Judge Laura Taylor Swain would eliminate $6 billion in Cofina debt and release to Puerto Rico roughly half of the future sales-tax revenue currently earmarked for bondholders. Read more. (Subscription required.) 

In related news, Puerto Rico took an important step toward privatizing its bankrupt public power monopoly and bringing in new investment to help modernize the utility and reverse the island’s economic decline, the Wall Street Journal reported. The government announced on Thursday the selection of four bidders seeking to take over Puerto Rico Electric Power Authority’s transmission and distribution system: Duke Energy Corp., Exelon Corp., PSEG Services Corp. and a consortium of ATCO Ltd., IEM Inc. and Quanta Services Inc. “Under a public-private partnership, we will be developing a system that responds to the real needs of our people, providing stability, reliability and efficiency to our island’s energy system,” said Omar Marrero, executive director of the Puerto Rico Public-Private Partnerships Authority. The government will now solicit proposals from the companies and expects to name a winner in the third quarter of this year. Read more. (Subscription required.) 

Orianna Doubled Down on Bankruptcy Plan—And Won

After months of waging a legal war with its landlord, Orianna Health Systems, once the operator of more than 40 nursing homes, won final court approval of its chapter 11 plan last week. Now, lawyers for the nursing home operator say that its extremely litigious bankruptcy case could help provide similarly situated companies with a road map when their options for leaving bankruptcy suddenly dry up, WSJ Pro Bankruptcy reported. The fate of Orianna’s chapter 11 plan hinged largely on Rule 3019 of the Bankruptcy Code. The rule allows for modifications of a chapter 11 plan before confirmation, so long as a judge finds the modifications don’t adversely affect creditors. Without out it, bankrupt companies could have to resolicit votes from creditors every time they make small, technical changes to a plan, which are common in large chapter 11 cases. “This has always been there, but I think it’s been a little used and little understood part of the bankruptcy code,” said Thomas Califano, a lawyer for Orianna. Orianna sought chapter 11 protection in March, citing “numerous financial challenges” that have affected the broader health-care sector, including rising medical costs and falling reimbursement payments from government insurance programs.

Edison Looks to Shift the Blame for California Mudslides

Edison International said much of the damage from the mudslides that swept through the coastal town of Montecito last year was the result of poorly designed and maintained debris basins for which local governments are responsible, Bloomberg News reported. The parent company and its Southern California Edison Co. utility filed a cross-complaint Friday against the City and the County of Santa Barbara, among other public entities, saying that a substantial part of liability for the damages should be shifted to government entities responsible for the inadequate infrastructure. Edison is blamed for the mudslides because the company’s equipment may have ignited the wildfires that led to them. “With this cross-complaint we seek to ensure that there is a comprehensive review of the role many parties may have played in the large and tragic losses suffered by the community during the Montecito mudslides,” Edison said in a statement.
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