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Bankruptcy Headlines

Judge Rips PG&E for Poor Safety Record Leading to Wildfires

A federal judge sharply criticized PG&E at a hearing in San Francisco on Wednesday, saying that the utility had fallen "far behind" in complying with its wildfire mitigation plan, NBCBayArea.com reported. U.S. District Judge William Alsup spoke during a hearing on whether he should order PG&E to hire and train its own crew of tree trimmers in addition to using contractors to remove trees that could spark fires by falling on electrical lines. The judge is also considering a second possible order that would restrict bonuses for supervisors until PG&E complies with the plan. Judge Alsup took both issues under submission and will rule at a later date after receiving more information from PG&E. Any orders issued by the judge would be new conditions of its probation from criminal pipeline safety convictions stemming from the fatal explosion of a natural gas pipeline in San Bruno in 2010. PG&E attorney Kevin Orsini argued it is more efficient for PG&E to work with professional contractors. He said the number of contract tree trimmers working in PG&E's 70,000-square-mile service territory grew from about 1,400 at the beginning of 2019 to 5,437 at the end of the year.
 
In related news, California Governor Gavin Newsom (D) has said that he wants the option to take over bankrupt PG&E Corp. if the utility gets into trouble again. Now, the state has laid out a roadmap for how that could happen, Bloomberg News reported. As part of proposed changes to PG&E’s reorganization plan, California Public Utilities Commission President Marybel Batjer suggested a process Tuesday through which the state could revoke PG&E’s operating license if the utility commits serious safety violations and doesn’t adequately address them. Newsom said on Wednesday that he supports the commission’s proposal for additional oversight of PG&E. Batjer proposed a series of escalating enforcement actions for PG&E that would be triggered by specific events, some of which would rely on operational and safety targets. The process would allow for additional state oversight of the utility based on the severity of violations. Those could include the appointment of a chief restructuring officer, the placement of the company under receivership or the ultimate penalty of revoking the utility’s license. Read more.

Pizza Hut Operator NPC Considers Options Including Bankruptcy

NPC International Inc. is exploring restructuring options including a bankruptcy filing as the company saddled with $1 billion of debt struggles amid relentless restaurant competition, Bloomberg News reported. The largest franchisee of Pizza Hut restaurants in the U.S. started negotiating with its lenders after months of declining sales caused a cash crunch. The company aims to keep the restructuring out of court, but is weighing the possibility of a filing with a pre-negotiated plan in place. The operator of about 1,600 restaurants, including Pizza Hut and Wendy’s brands, recently defaulted on about $800 million of debt after it chose to skip loan payments. NPC then entered into a forbearance agreement with lenders to allow time to consider debt restructuring options. NPC, backed by private investment firm Eldridge Industries LLC, is working with restructuring advisers at law firm Weil Gotshal & Manges as well as investment bank Greenhill & Co. and operational advisor AlixPartners LLP. NPC's loans fall to record lows amid restructuring talks. The discussions are ongoing, and NPC is still exploring options that could restructure the company’s balance sheet out of court and keep it from filing for bankruptcy. Should NPC opt for bankruptcy, the court filing would be used, in part, to help the retailer renegotiate leases with landlords.

Healthcare Network Hygea Files for Bankruptcy

Miami-based Hygea Holdings, which owns physician practices, pharmacies and diagnostic facilities, filed for chapter 11 bankruptcy Feb. 19, Becker's Hospital Review reported. Hygea and 32 affiliates entered bankruptcy with roughly $200 million in debt. Under a proposed restructuring agreement, Hygea would give secured lender Bridging Finance all of the equity in the reorganized company, according to Bloomberg Law. Hygea CEO Keith Collins said the company landed in bankruptcy due to its "aggressive growth strategy," which resulted in the acquisition of underperforming physician practices, according to Law360, which cited court documents. With roughly $327,000 of negative cash flow per week, Hygea is operating at a loss.
 
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Frontier’s Union Calls for 80 Percent Debt Equitization to Fix Business

Frontier Communications Corp.’s largest union called for the struggling telecom company to adopt a restructuring plan that would free up funds for operations by converting most of its unsecured debt into stock, Bloomberg News reported. The Communication Workers of America, which has about 8,500 Frontier employees across 18 states, said 80 percent of the company’s nearly $12 billion of unsecured debt should be swapped for equity. Such a restructuring would produce “billions of dollars” to fund improvements that the company desperately needs to make in its phone and broadband network, according to CWA analyst Randy Barber. The union understands an equitization of that size has been under discussion with creditors, Barber said. Converting the unsecured debt to shares would mean overwhelming dilution for current shareholders of Frontier, whose market value has shrunk to about $63 million. Frontier has already asked creditors to help craft a restructuring that would likely include filing for bankruptcy by the middle of next month, Bloomberg previously reported.

NPA Emerges from Chapter 11 Proceedings

The Natural Products Association (NPA), which had filed for bankruptcy protection in August 2019, announced on Wednesday that it will exit chapter 11 bankruptcy effective immediately, WholeFoodsMagazine.com reported. NPA explained that a judge granted its filing to dismiss the case after just over six months of court proceedings. “Now that this is settled, we can more efficiently focus on our strengths — delivering the best advocacy, insights, and information at the best value to the industry and the millions of natural products consumers across the country," said NPA President and CEO Daniel Fabricant, Ph.D. "Going forward, we will be intensely focused on enhancing our offerings, driving disciplined and results-oriented operations and building an integrated and educational experience.”

Wells Fargo Is Said to Be Near Settlements Over Sales Practices

Wells Fargo is preparing to settle with federal prosecutors and the Securities and Exchange Commission over the widespread abuse of customers in its banking, auto lending and mortgage businesses, the New York Times reported. The settlements could be announced as soon as today, though the size of the penalties could not immediately be determined. Wells Fargo has set aside $3.1 billion to pay legal costs related to the sales practice matters. Federal prosecutors have also been investigating people connected to the bank, but it was unclear if any criminal charges would be brought against any individuals. The settlements would be the latest in a series of government penalties against the bank and its former leaders. Just last month, former Wells Fargo executives who presided over the abusive sales practices — including a former chief executive, John G. Stumpf — were subjected to the largest fines ever assessed by bank regulators. The scandal erupted in 2016 when Wells Fargo revealed that it had opened millions of bank accounts in customers’ names without their knowledge while charging other customers unnecessary fees for auto and home loans. It also admitted to selling some customers unwanted insurance products.
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