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Analysis: The Public Student Loan Forgiveness Rescue Hasn’t Gone Well So Far

The program that public servants can use to have their federal student loans forgiven is such a quagmire for borrowers that Congress had to set up a relief program for the relief program. So far, it’s not performing much better, according to a New York Times analysis. It has been nearly five months since the Department of Education released instructions for a $350 million pot of money that some public servants can use if they received bad information about the loan forgiveness program and ended up in the wrong type of repayment plan. Tens of thousands of people have applied for the relief program. But so far, most have been rejected, and as of late last month, none among the few thousand who remain in the running have seen their debt balances go to zero. In response to an inquiry led by Senator Tim Kaine (D-Va.), the department disclosed last week that 28,207 people had submitted requests as of Sept. 28 and that it had found 21,672 ineligible almost immediately. It then culled “approximately” half of the remaining 6,535 for other reasons. That leaves just over 3,000 applications still under consideration.

Randles’s Take: October Brings Two New Coal Miner Bankruptcies

One coal mining company sells thermal coal to utilities. The other sells coal used in steelmaking. But, despite their different business models, both found their way to bankruptcy court in the past two weeks, according to a WSJ Pro Bankruptcy analysis. Westmoreland Coal Co. and Mission Coal Co. filed for chapter 11 protection on Oct. 9 and Oct. 14, respectively, and both are represented by the law firm Kirkland & Ellis LLP. Their trip to bankruptcy court comes more than two years after several coal mining companies, loaded with debt, passed through chapter 11 in 2015 and 2016, following a drop in coal prices. Though prices have recovered, the latest bankruptcies show that challenges to some coal mining companies remain. The chapter 11 filings also underscore how operational problems coal producers face can be exacerbated by too much debt, said Mark Levin, a managing director and senior analyst at Seaport Global Securities LLC.

Lampert, Sears Creditors Gird for Battle Over Recent Asset Sales

Creditors are sifting through the smoking ruins of Sears Holdings Corp.’s bankruptcy to question whether any of Eddie Lampert’s deals involving the bankrupt retailer were improper, Bloomberg News reported. Lampert, a billionaire who controls nearly half of Sears stock, has had interests on both sides of significant transactions the past few years. He remains the retailer’s chairman after resigning on Monday as chief executive officer, and he’s also chairman of the retailer’s spinoff, Seritage Growth Properties, which collects rent from 230 Sears and Kmart stores. Lampert and his hedge fund, ESL Investments Inc., have loaned Sears $2.66 billion in a dozen different ways. “Things may get contentious early on,” said Jeffrey Pierce, managing partner at Snow Park Capital Partners, a hedge fund that has had a short position on Sears stock. “There are many large payments being made out of Sears to entities Lampert has material economic interests in, such as Seritage.” ESL floated a plan last month to restructure the 125-year-old retailer and keep it out of bankruptcy, where it falls under a judge’s scrutiny. The plan was rejected by other creditors. Sears filed for chapter 11 on Monday with about $11 billion in liabilities and $7 billion in assets. It said it plans to shutter 142 stores. Read more

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

Nine West Creditors Committee Seeks Court Approval to Sue Sycamore Partners

Junior creditors say shoe, apparel and accessories seller Nine West Holdings Inc.’s bankruptcy exit strategy is unacceptable, and they need to take over legal claims against private-equity owner Sycamore Partners LP, WSJ Pro Bankruptcy reported. Court papers filed on Tuesday say that Nine West is in talks to settle damage claims against Sycamore on the cheap, allowing the private-equity firm to hang on to what creditors call “a massive financial windfall” it collected as part of an alleged asset-stripping scheme. A Sycamore spokesman yesterday declined comment on the allegations, which surfaced on Tuesday in a filing with the U.S. Bankruptcy Court in New York by the official committee representing Nine West’s unsecured creditors. A spokeswoman for Nine West could not immediately respond to the creditors’ request to pursue a lawsuit that the company has been trying to settle. Read more

In related news, Nine West Holdings Inc. yesterday filed an amended chapter 11 plan that will reduce its pre-bankruptcy debt obligations by more than $1 billion, Reuters reported. The plan is expected to provide $105 million cash recovery to stakeholders through the settlement of potential claims and causes of action against the company’s indirect equity owners, it said. Nine West, which owns brands such as Anne Klein and Gloria Vanderbilt, said it will also receive a three-year purchase commitment from Belk Inc. for an assortment of merchandise across the company’s businesses. Read more

ERP Iron Ore Assets Auctioned Off

The Minnesota and Indiana assets of bankrupt ERP Iron Ore were auctioned off Tuesday as the company entered purchase agreements with two bidders, the Duluth News Tribune reported. ERP selected Illinois-based PPL Acquisition Group, LLC’s $6.8 million bid for its Minnesota assets near Grand Rapids, according to documents filed in Minnesota Bankruptcy Court Wednesday evening. The sale is scheduled to close by Nov. 15. ERP selected a $15 million bid from Altos Hornos de Mexico, a Mexico-based steel manufacturer, for its Reynolds, Ind. pellet plant. A sale hearing for the assets is scheduled for Oct. 24. In July, ERP Iron Ore filed for chapter 11 bankruptcy and hours later owner Tom Clarke said that he would be scrapping the assets. With ERP, Clarke had been trying to revive the bankrupt Magnetation operations since purchasing it in January 2017. The company wanted to restart pellet productions soon after closing on the sale, but ERP was held back by two violation notices filed by the Environmental Protection Agency in 2016 against the Indiana plant, alleging the former Magnetation owners didn't have proper pollution control equipment in several areas of operation, and creditors owed millions by ERP tried to petition the company into bankruptcy.

Proposals for Puerto Rico Power Company Concessions Expected to be Revealed in 1st Quarter

In hearing held on Tuesday by the Puerto Rico House Committee on Economic Development, Planning, Telecommunications, Public-Private Partnerships and Energy, Christian Sobrino Vega, the executive director of the Fiscal Agency & Financial Advisory Authority (AAFAF by its Spanish acronym) said that the proposals for the transmission and distribution of the Electric Power Authority (PREPA) will be available in the first quarter of next year, Caribbean Business reported. In a written statement, Sobrino Vega said the island’s energy sector “is going through a process in which the variables change constantly,” including federal disaster recovery and mitigation funds, and future negotiations in the privatization of the public power corporation. Regarding the restructuring of the utility’s debt, Sobrino said it is “estimated that the terms of the preliminary agreement will achieve more than $3 billion in savings in debt service payments during the next 20 years.”