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Bankruptcy Headlines

Bankruptcy Watchdog Seeks Ouster of IPS Management

The government’s bankruptcy watchdog wants an outside trustee to take over day-to-day operations of IPS Worldwide LLC, saying management’s inability to explain the whereabouts of tens of millions of dollars of customers’ money smacks of incompetence or worse, WSJ Pro Bankruptcy reported. U.S. Trustee Daniel McDermott on Thursday asked the U.S. Bankruptcy Court in Orlando, Fla., to appoint a chapter 11 trustee to oversee the freight-payments provider, whose case has drawn attention to the criminal past of its former chief financial officer. McDermott earlier successfully argued that an examiner be named to conduct an investigation into the company’s January bankruptcy filing. The initial report by examiner Maria Yip said that although IPS is a viable business, the company’s leadership lacked “sufficient knowledge to lead day-to-day operations effectively.” William Davies founded IPS in 1998 and is the company’s majority owner while, until recently, serving as its president. According to the U.S. trustee’s court filing on Thursday, Davies, at a meeting of creditors, said he resigned from the company on March 7. Davies said that he doesn’t know why some customers’ bank accounts were commingled and others segregated, or what caused shortfalls of tens of millions of dollars.

iHeartMedia Considers IPO, Direct Listing as Bankruptcy Exit Nears

U.S. radio broadcaster iHeartMedia Inc. is considering paths to return to the public markets as it nears an end to bankruptcy court oversight, Bloomberg News reported. IHeart may pursue an initial public offering or direct listing on a U.S. exchange, the company said on Friday. As part of its reorganization plan, the San Antonio-based company is required to “use reasonable best efforts” to list its Class A common stock after it emerges from bankruptcy. IHeart in January won court approval for a plan to cut about $10 billion of debt, which would allow it to emerge from the bankruptcy it filed for in March last year. It had previously attracted interest from Liberty Media Corp., which had said that it may acquire a 40 percent stake in the business, but ultimately withdrew. The radio operator collapsed into bankruptcy after a 2008 leveraged buyout overloaded the company with debt that topped $20 billion.

S&P Paints Grim Picture for PG&E Suppliers

S&P Global Ratings analysts said that renewable energy suppliers that depend on PG&E Corp. are still being paid in full after the California utility’s bankruptcy but aren’t likely to climb out of junk territory anytime soon, WSJ Pro Bankruptcy reported. Green-energy producers are vulnerable to more potential downgrades as the impact on their finances from PG&E’s bankruptcy restructuring comes into focus, S&P analysts said on Friday. Several power suppliers that rely on PG&E for most or all of their revenues have already been downgraded, reflecting fears the utility may use bankruptcy law to cancel or renegotiate billions of dollars in energy purchase deals. PG&E hasn’t yet signaled which supply agreements it wants to keep and which to discard. The utility likely “will not make an immediate decision,” meaning years of potential uncertainty for some projects, said S&P analyst Anne Selting. Read more.

In related news, a major battery storage project that would help California replace three of its natural gas power plants may need to be scrapped as a result of PG&E Corp’s bankruptcy, Reuters reported. Californian electricity and gas supplier PG&E filed for bankruptcy protection in January, in anticipation of significant expected liabilities from wildfires in the state. The bankruptcy poses a threat to California’s climate change ambitions by putting in limbo dozens of large solar, wind, and other clean energy projects PG&E has contracted with other companies. Because PG&E can reject contracts in bankruptcy, energy developer esVolta LP said in papers filed with the U.S. Bankruptcy Court in San Francisco on Wednesday that it feared it would not be able to line up financing for its 75 megawatt Hummingbird battery storage project. “Hummingbird’s position is becoming untenable,” esVolta said in the filing, noting PG&E had said it was not in a position to make a decision on whether to keep or reject its contract for using the planned battery-storage facility. Read more. 

Judge Derails FES Plan to Exit Bankruptcy While Lawmakers Consider Bail-Out Bills

An effort by FirstEnergy Solutions to coordinate a publicly-funded bailout of its nuclear plants with its emergence from bankruptcy has hit a snag — Bankruptcy Judge Alan Koschik. After presiding over a full day of arguments, the judge this week refused to approve a complicated disclosure statement the company must send to its creditors who will then have the right to approve or reject the company’s plan to reorganize itself, after which the court will still have the final say. FES’ reorganization plan calls for major creditors to own the company. Unsecured creditors would get cash, but only a fraction of what they are owed. But creditors won’t be able to vote on the plan until the court is satisfied with the company’s disclosure statement. Judge Koschik also refused to approve an accelerated schedule proposed by FES that would have allowed a vote on the reorganization plan by creditors in April and a hearing on the vote in May.

Investors Keep Puerto Rico Bonds After First Chapter of Restructuring

Investors are hanging on to bonds issued as part of Puerto Rico’s massive restructuring effort, a sign of confidence in the fiscally troubled island’s prospects, the Wall Street Journal reported. Prices have edged higher for $12 billion in new debt backed by sales taxes that Puerto Rico issued several weeks ago. The bonds, known by their Spanish acronym as Cofinas, were issued to investors including hedge funds as part of the U.S. territory’s financial restructuring, marking the first settlement in ongoing negotiations to fix its broken finances. Though the bonds’ prices have pared some of their earlier gains, one slice of newly issued sales tax bonds recently traded with an average price of about $95.44, up from $93.00 last month, according to Refinitiv’s Municipal Market Data.

Payday Lenders Get Unexpected Reprieve from CFPB Rule

A federal judge delivered another victory to payday lenders by leaving in place a stay on the compliance date for the Consumer Financial Protection Bureau’s 2017 payday lending rule, American Banker reported. That rule, drafted under former CFPB Director Richard Cordray, had two key components: new underwriting requirements for high-cost, small-dollar lenders, and limits on how often a lender can attempt debiting payments from a borrower's bank account. The CFPB under Trump-appointed Director Kathleen Kraninger already proposed eliminating the underwriting portion. But in a surprising development, U.S. District Judge Lee Yeakel's ruling that a stay of the Aug. 19 deadline will remain in effect means the payment provision will continue to be delayed as well. Yeakel, who did not indicate when he would lift the stay, is presiding over an industry lawsuit in Texas seeking to kill the rule. Once the Trump administration took control of the CFPB, the bureau sided with the plaintiffs in the case and announced its intent to reopen the rule and propose changes. The judge issued the stay in November to give the agency time to formulate a proposal.
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