Category Archives: Bankruptcy

Leader of Bryan Cave’s bankruptcy group dies – Kansas City Business Journal

Posted: July 14, 2017 at 5:43 am

Leader of Bryan Cave's bankruptcy group dies
Kansas City Business Journal
Mark Stingley, a partner and the global head of Bryan Cave LLP's Bankruptcy, Restructuring & Creditors' Rights Client Service Group, died Sunday at age 65. Stingley, a 40-year veteran of the practice, joined Bryan Cave in 1995 as a partner in the ...

Leader of Bryan Cave's bankruptcy group dies - Kansas City Business Journal

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As Bronin Seeks Givebacks From Bondholders, Averting Bankruptcy … – Hartford Courant

Posted: at 5:43 am

It shouldn't come as a surprise that the two largest Wall Street debt rating agencies have now classified Hartford's bonds as junk.

Downgrades of that sort are exactly what we should expect when the mayor signals he's about to open talks with bondholders, asking them to accept less money. And he's not just signaling it, he's shouting it.

The problem is not the downgrades, it's what comes next an ugly process that doesn't usually lead investors to give back money when cities attempt it, several experts said Wednesday.

Still, Mayor Luke Bronin will give it the old college try. As he sees it, investors who hold more than $700 million in city bonds must be "part of the solution." The New York law firm he hired last week has a specialty in precisely that restructuring municipal debt.

Bronin's hiring of Greenberg Traurig to assess the city's options appears to have been a catalyst that led Standard & Poor's to lower Hartford's bond rating to BB, from BBB- late Tuesday, landing the city in the purgatory of credit quality known as "non-investment grade," or speculative.

In plain English, junk bonds.

Moody's Investors Service reached the same conclusion last fall, and both agencies still have Hartford on a negative watch for even more downgrades.

That means the city for all practical purposes can't borrow money these days. Bronin said he had no plans to do so anyway, but he could find himself in a nasty bind if state money doesn't come through by fall.

JENNA CARLESSO

The chart below shows a year-by-year breakdown of the citys debt service payments. There is a drop in fiscal year 2015 that reflects the citys move to restructure its debt, which pushed payments into the future. Those payments begin to rise significantly in fiscal years 2017 and 2018. The chart...

If these ratings had been in place two years ago, Hartford would not have been able to borrow $66 million to build Dunkin' Donuts Park for the Yard Goats, certainly not at the low rates the city paid. The stadium authority's bonds are rated even lower than general city bonds.

Other than more embarrassment, none of this is bad news for the city, at least not in the sense of a new blow. On the contrary, it reflects bad news we already knew because Bronin has been screaming it from the rooftops of every building in Hartford County: Without a combination of new state money, city spending cuts and union concessions, Hartford won't be able to pay its bills starting later this year.

Now, Bronin is adding bondholders to the list of people who have to give something back.

All of this could ultimately help Hartford homeowners, residents and businesses, if it leads to a stable city. It's more likely to lead to lower taxes than higher taxes if it results in a break in the $44 million in bond debt payments the city owes this year, rising to $75 million in four years.

And that's what has Wall Street nervous. Investors are real people, some of them middle-class holders of tax-free bond funds. If they don't chip in, Bronin will tell them, the city could end up in bankruptcy where no one wins.

The trouble is, extracting givebacks from bond investors is like herding cats, then asking those felines to agree to walk away from their food and go hungry a couple of days every week.

"When you have municipalities that reach out to their debt-holdersoftentimes what each party believes is fair and reasonable is very far apart," said Tim Heaney, senior portfolio manager for municipal bonds at Newfleet Asset Management in Hartford, an affiliate of Virtus Investment Partners with $12 billion under management.

"It's unlikely that bondholders are going to come to the table and say 'OK, we'll take a 25 percent haircut,'" said Heaney, who was speaking generally about bondholder talks, and whose company does not hold Hartford debt.

More likely: Everyone trudges into bankruptcy court if the only way to avoid it is a voluntary haircut by bondholders, Heaney and others said.

"The divide between what creditors would be willing to accept ... and what the municipality wants is often much too wide for any agreement to occur outside of the courts," Heaney said.

Consider that the list of bonds downgraded by S&P goes on for several pages, showing a total of 21 debt issues ranging from $6.5 million to $172 million, each with multiple tranches of maturity dates.

"Do you know how difficult it is to track the owners of bonds? I just don't know how they would do this," said one person familiar with municipal debt issues.

And if you could get everyone together, the person said, "How would you convince a bondholder to take a haircut if the unions aren't taking a haircut? Good luck with that ... You go into bankruptcy to have these discussions because then you have all the players at the table."

In or out of bankruptcy, Heaney said, "You need all sides of the table to come together."

That describes the challenge Bronin, city corporation counsel Howard Rifkin and Nancy Mitchell, the partner from Greenberg Traurig on the case, will face in the coming weeks. It explains why Bronin must extract concessions from the police and city hall unions, as he did from the firefighters.

"The absence of a state budget ... increases the urgency and the severity of what we face," Bronin said.

Even if Gov. Dannel P. Malloy and lawmakers come up with $40 million or $50 million in new money for Hartford, Bronin said Wednesday, "We will still have to have conversations with our bondholders ... There has to be some debt restructuring because our objective is not just to buy a year or two."

Mitchell is co-chairwoman of a restructuring practice at Greenberg Traurig that has worked on both sides of many public bond restructuring deals outside of bankruptcy, Bronin said. "They have extensive experience in bondholder negotiations."

So the team is assembled. The challenge of averting bankruptcy is steep. And with a possible default looming as soon as this year, the starting bell has rung.

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As Bronin Seeks Givebacks From Bondholders, Averting Bankruptcy ... - Hartford Courant

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Dressless brides in Texas are freaking out about Alfred Angelo’s sudden bankruptcy – Chron.com

Posted: at 5:43 am

By Fernando Ramirez, Chron.com / Houston Chronicle

Wedding panic

Brides across the nation are concerned about bridal shop Alfred Angelo's sudden bankruptcy.

Click through to seewedding trends happening in 2017.

@Tina_Braz: Was standing in my future wedding dress, tears in my eyes, saying yes, when I was told #AlfredAngelo has shut down & I can't order the dress

Wedding panic

Brides across the nation are concerned about bridal shop Alfred Angelo's sudden bankruptcy.

Click through to seewedding trends happening in 2017.

@Tina_Braz: Was standing in my future wedding

@DanielSurman: So @AlfredAngelo is declaring bankruptcy. In crappy fashion, they told employees this morning and close doors tomorrow.

@xtinedanielle: We want & deserve answers, @AlfredAngelo!! Refunds or dresses! How do you just completely IGNORE your paid customers?! @AAngeloCustCare

@xtinedanielle: One store location did answer the phone. Sales rep said "we're all basically screwed" & gave me Attorney's office to contact. #alfredangelo

@cslade93: @AAngeloCustCare WHAT IS GOING ON. I AM A MONTH AWAY FROM MY WEDDING&STILL NEED 1 MORE BM DRESS. SOMEONE NEEDS TO GET IN TOUCH WITH ME NOW!

@jao5053: @AlfredAngelo seriously your closing and half my bridal party doesn't have their dresses. #banruptcy fml

The brides show-off the latest in Whataburger swag. Tenenbaum Jewelers, Abrahams Oriental Rugs, and Mitchell Gold + Bob Williams furnishings shown throughout.

Bridal fashion Tuesday, June 6, 2017 in Houston.

Kirstin Drenon, Mari Trevino, and Kimberly Falgout. Tenenbaum Jewelers, Abrahams Oriental Rugs, and Mitchell Gold + Bob Williams furnishings shown throughout.

Mari Trevino models a Marchesa gown from Joan Pillow Bridal Salon. Tenenbaum Jewelers, Abrahams Oriental Rugs, and Mitchell Gold + Bob Williams furnishings shown throughout.

Kimberly Falgout models a Pronovias gown from Mia Bridal. Tenenbaum Jewelers, Abrahams Oriental Rugs, and Mitchell Gold + Bob Williams furnishings shown throughout.

Kirstin Drenon models a Vera Wang gown from Casa de Novia Bridal Couture. Tenenbaum Jewelers, Abrahams Oriental Rugs, and Mitchell Gold + Bob Williams furnishings shown throughout.

Kirstin Drenon, Mari Trevino, and Kimberly Falgout. Tenenbaum Jewelers, Abrahams Oriental Rugs, and Mitchell Gold + Bob Williams furnishings shown throughout.

Kimberly Falgout models a Pronovias gown from Casa de Novia Bridal Couture and an H-E-B flower crown. Tenenbaum Jewelers, Abrahams Oriental Rugs, and Mitchell Gold + Bob Williams furnishings shown throughout.

Whataburger WhatAWedding swag

Wedding Cakes by Tammy Allen cupcakes

Bulgari "Diva Dreams" emerald necklace

Tote ($70) and Bali tassel ($30) COLORES by Wed to White

"Jeans Mrs." Edie Parker clutch ($1,125) at Tootsies

Bride's Cake and Groom's Cake Ice Cream by Blue Bell Ice Cream

Conservatory at the Bryan Museum

Eberjey "Kiss the Bride" bralet ($69) at Top Drawer Lingerie

Eberjey "Kiss the Bride" ruffle thong ($36) at Top Drawer Lingerie

Rose gold wedding band ($495) Robbins Brothers

Floral archway by Richard Flowers

Wool tuxedo ($639) at Suit Supply

"Butterfly Garden" Versace setting at Kuhl-Linscomb

Vinglace cooler (from $79.95) at Bering's

Nudistsong Sandal ($398) at Stuart Weitzman

Limited-edition Yeti cooler ($299) at Kuhl-Linscomb

Dressless brides in Texas are freaking out about Alfred Angelo's sudden bankruptcy

Houston's fourAlfred Angelo bridal shops may soon be shutting down.

Dozens of locations around the nation have abruptly closed their doors amid reports of bankruptcy.

Hundreds of brides expecting orders from Alfred Angelo's 62 nationwide stores took to Twitter, voicing concerns about whether they would get their dresses from pending orders.

SMOOTH: Houston man proposes to girlfriend by creating romantic music video

Story continues below...

Many have pointed outAlfred Angelo's corporate silence or lack of official statement. According to the Palm Beach Post, employees were seen leaving the business's corporate headquarters "en masse" carrying personal belongings.

One Texas bride told theSan Antonio Express-News that an Alfred Angelo manager called to inform her that she needed to pick up her dress by the end of the night. Another bride told the paper that one location told her "we're all basically screwed."

SCOT-FREE: Houston man arrested for freeway proposal off probation

As of Thursday night,Alfred Angelo has not released a public statement concerning their reported, abrupt bankruptcy.

Click through above to see the wedding trends of 2017.

Dressless brides in Texas are freaking out about Alfred Angelo's sudden bankruptcy - Chron.com

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Oil woes are still spilling into bankruptcy courts – Houston Chronicle

Posted: at 5:43 am

The number of Texas companies seeking to restructure their debt and reorganize under Chapter 11 of the U.S. Bankruptcy Code hit a record high during the first six months of 2017. So did the number of bankruptcy filings in Houston.

Bankruptcy data show that 649 businesses sought protection in Texas federal courts from creditors and lenders during the first half of 2017 - a 44 percent increase over the same period a year ago and 12 percent more than in 2009 when bankruptcies peaked during the Great Recession, according to new research conducted by Androvett Legal Media.

Federal bankruptcy courts in the Southern District of Texas, which includes Houston, saw a surge of new filings by small and midsized oil and gas service companies, pipeline owners and businesses involved in offshore drilling operations, including Azure Midstream, GenOn Energy, Vanguard Natural Resources and Allpoints Oilfield Services.

As a result, 314 companies filed for bankruptcy during the first six months of this year in the Southern District - a jump of 58 percent from 2016, which was the previous high, according to the Androvett data.

"A lot of these companies in the oil and gas sector took on a lot of debt when commodity prices were $80 to $100, and then they struggled to stay afloat when the price dropped during the past three years," says Jackson Walker bankruptcy partner Matt Cavenaugh in Houston.

To read this article in one of Houston's most-spoken languages, click on the button below.

"But now with prices mostly stabilized, these companies don't want to be caught over-leveraged because many of their competitors went through Chapter 11 during the past two years and are now leaner and meaner without all that debt," says Cavenaugh, whose law firm represented Houston-based Linn Energy and Oklahoma-based Midstates Petroleum in their restructurings.

Bankruptcy data show that companies in the health care and energy sectors comprise more than half of all the Chapter 11 restructurings filed in Texas so far this year and nearly two-thirds of all business bankruptcy filed in the Southern District.

"Many of these companies thought they saw light at the end of the tunnel when it came to oil prices, but the revenues just have not been there," says Thompson & Knight bankruptcy partner Randy Williams in Houston. "They are filing for bankruptcy now (because) they have exhausted all their other options."

Court records show that there also has been a significant increase in bankruptcy filings by retailers and restaurant chains, including Luke's Locker, Ben Hogan Golf Equipment Co., Joe's Crab Shack and Texas Land and Cattle.

Legal experts say the statistics can be somewhat deceiving because scores of the businesses that filed for bankruptcy this year in Dallas and Houston are related corporate entities whose cases likely will be consolidated by the courts.

"A handful of cases spawned several other filings," Williams says.

For example, Singapore-based offshore drilling engineering firm Emas Chiyoda Subsea filed for bankruptcy in Houston on Feb. 27. The same day, 14 of its affiliated companies also sought Chapter 11 protection.

Many oil and gas industry businesses knew they needed to file for bankruptcy in 2016 because of their crushing debt load, but they held off until oil prices climbed into the $40 to $50 range because it would give the companies more options in their efforts to restructure, says Jeremy Fielding, a bankruptcy litigator at Lynn Pinker Cox & Hurst in Dallas.

"Companies are in a much better position if they are cash-flow positive headed into bankruptcy, because then the whole issue is dealing with the crushing debt and not restructuring the entire operation," Fielding says. "If companies are losing money and have unbearable debt going into a bankruptcy, then the companies are at the total mercy of the banks and lenders.

"I think that is a big part of what we are seeing today," he says.

For a longer version of this article, please visit TexasLawbook.net.

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Oil woes are still spilling into bankruptcy courts - Houston Chronicle

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First Test of India’s New Bankruptcy Law Offers Cautionary Tale – New York Times

Posted: at 5:43 am

That system left India's Debt Recovery Tribunals vastly overstretched, with court buildings strewn with ever-rising pillars of dusty files, gumming up the flow of credit in the economy and discouraging new investment.

The World Bank estimated it took 4.3 years on average in India to resolve insolvency under the old laws, more than twice as long as in China. And average recoveries were just 25.7 cents on the dollar, one of the worst among similar sized economies.

The new regime aims to significantly boost recoveries and put a firm timeline around case resolution in the hope that this will help clean-up bank balance sheets and spur lending.

India's central bank, the Reserve Bank of India has already told banks to push 12 of the largest defaulters into insolvency, but experts worry the framework is largely untested and hampered by a shortage of experienced bankruptcy professionals.

"I completely understand why they want resolution for large defaulters quickly because the balance sheets have to be cleaned up," said Ashish Chhawchharia, a partner at accounting and consulting firm Grant Thornton. "You cannot really push too hard, however, because if things go wrong people will start losing faith in the new code."

FLOOD OF CASES

Defaulters identified by the RBI are already being taken to the National Company Law Tribunal (NCLT), the forum now empowered to rule on these cases. Only a few dozen cases have been taken on by the NCLT so far, but a deluge could be in the offing.

"We estimate at least 20,000 to 25,000 bankruptcy cases will come to the NCLT, if not more," said Nikhil Shah, a managing director at restructuring experts Alvarez & Marsal. "And at that point it would get crushed under the workload."

The new law mandates a 180-day deadline to resolve cases, but the Innoventive case, in which creditors are seeking to recover about $200 million, has already faced multiple delays.

Innoventive initially sought to block the matter under a six-decade old state law, and launched appeals in the High Court and an appellate tribunal, while creditors were divided on the terms of an interim financing deal, according to two sources close to the case.

The company could appeal all the way to the Supreme Court, forcing lenders to seek an extension and jeopardising the resolution deadline, the sources said.

Chandu Chavan, the main backer of Innoventive, could not be reached for comments despite repeated attempts.

With loan syndicates in India typically comprising a dozen or more state-run and private banks, forging agreement between creditors is not easy.

For Innoventive, it was harder to get the 21 lenders in the room to agree on an interim financing package for the firm to operate during the insolvency process than to find a party willing to actually provide the funds, one of the sources said.

Bankers often lack authority to take decisions on writedowns and have to revert to their boards for approval, causing further delays, the source added.

VALUE EROSION

Under the new system lenders are mandated to initiate liquidation proceedings if a case cannot be resolved within the 180-day deadline, with a 90-day extension granted only in exceptional circumstances.

Such an outcome could result not only in job losses at companies that were still going concerns, but also steep losses for banks that have to sell assets piecemeal.

"We've already been in touch with all possible suitors," said one senior banker, describing the situation lenders often found themselves in when they tried to offload assets from liquidated firms. "It's not like you have a lot people waiting for these assets."

Despite these concerns, M.S. Sahoo, chairman of the Insolvency and Bankruptcy Board of India, the government body set up to supervise the new code, said he was confident buyers would emerge under the new system.

"Nothing develops in a vacuum." said Sahoo. "Only when something is available will the market develop."

The NCLT would not be hit with a tsunami of cases, he added, as only large defaults will be handed to it.

Those involved in cases are also concerned by the lack of experienced insolvency resolution professionals - a domain in its infancy in India and dominated by mom-and-pop firms.

Dinkar Venkatasubramanian, a partner at EY, says a lack of professional indemnity insurance for insolvency professionals was a major deterrent for big accounting firms to take up the task.

"The risk is significant," he said. "There exists litigation and reputational risk and the indemnity for IPs in the code is very generic."

(Additional reporting by Aditya Kalra; Editing by Alex Richardson)

First Test of India's New Bankruptcy Law Offers Cautionary Tale - New York Times

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UES Retailer Peter Elliot’s Madison Avenue Shop Heads Into Bankruptcy – Commercial Observer

Posted: at 5:43 am

The owner of the Upper East Side Peter Elliot specialty shopswhichThe New York Timeshas called a temple of navy blazers and sherbet-colored sweaters,has filed a bankruptcy petition for his store at 1071 Madison Avenue, home to Peter Elliot Women, court documents indicate.

On July 7, Peter Elliot owner EliotRabin filed for Chapter 11 bankruptcy in the Southern District of New York for the store on Madison Avenue between East 80th and East 81st Streets, under company name Women by Peter Elliott, Ltd. He put his estimated number of creditors at over 50, with liabilities exceeding $1 million. The largest sum owed is $115,400 to family clothing stores business Belvest USA on East 57th Street. (According toNew York Magazine, Peter Elliot Women has done trunk shoes for Belvest.)

In addition to the 1071 Madison Avenue store, Rabin has shops at 1034A Lexington Avenue, home to Peter Elliot Blue Woman, and 996 Lexington Avenue, home to Peter Elliot Blue and Peter Elliot Blue Boys.

Rabins attorney, Lawrence Morrison of Morrison Tenenbaum, didnt respond to requests for comment. Rabin didnt respond to inquiries seeking comment, although someone who identified themselves as an accountant for Peter Elliotdenied there was a bankruptcy filing.

This isnt the first bankruptcy filing for Rabin this year. On April 27, he filed a Chapter 13 bankruptcy petition, but that was dismissed on June 6, court records indicate.

Adam D. Stein-Sapir of Pioneer Funding Group, which specializes in analyzing and investing in bankruptcy cases, and who is not involved in the case, speculated that three factors contributed to the filing: one, distraction and expenses caused by lawsuits, two, the difficult retail environment and three, operating stores in high-rent areas.

RFR Holdings, led by Aby Rosen, sued Rabin in 2015 for $1.3 million over space he leased for Peter Elliot Blue at the landlords 150 East 72nd Street at Lexington Avenue. RFR declined to comment via a spokeswoman, but the representative noted Rabin is not a tenant in the building.

Rosen bought the 4,000-square-foot ground-floor space and 900-square-foot basement space in February 2014 for $19.9 million and gave Rabin a 15-year lease.Former landlord Harry Macklowe sued Rabin that May forover $100,000for allegedly not paying four months of rent in the space, according toThe New York Postat the time.Rabin then filed a summons with notice charging that Macklowes workmen caused his store in excess of$600,000in damages, court documents indicate, but he never filed an actual suit. Macklowe couldnt be reached for comment, according to a spokeswoman.

The court ruled in Macklowes favor last August in terms of liability, and said Rabins counterclaim must be dismissed. A trial with respect to the damages is pending.

Retail bankruptcy filings have been cropping up at a fast clip as of late. More than 300 retailers have filed for bankruptcy so far this year, according to data from BankruptcyData.com cited by CNN Money last month, representing a31 percent uptick year-over-year. The bulk of this years filings have been for mom-and-pop-type retail operators.

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UES Retailer Peter Elliot's Madison Avenue Shop Heads Into Bankruptcy - Commercial Observer

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Why Texas business bankruptcy filings have hit record levels – Dallas Business Journal

Posted: at 5:43 am

Dallas Business Journal

Why Texas business bankruptcy filings have hit record levels
Dallas Business Journal
The number of Texas companies seeking to restructure their debt and reorganize under Chapter 11 of the U.S. Bankruptcy Code hit a record high during the first six months of 2017. So did the number of business bankruptcies filed in Dallas and Fort Worth.

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Why Texas business bankruptcy filings have hit record levels - Dallas Business Journal

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Essar Bankruptcy: One Year Later – Mesabi Daily News

Posted: July 9, 2017 at 12:43 pm

One year has passed since a once-promising $1.9 billion taconite plant in Nashwauk folded into one of the most expensive and potentially-devastating bankruptcies on the Iron Range.

On July 8, 2016, the state of Minnesota notified Essar Steel Minnesota that it planned to terminate the companys state-owned mineral leases at 12:01 p.m. that day. But Essar effectively took a poison pill, filing for bankruptcy about a half hour before the termination would go into effect, further delaying the project and shrouding Range businesses and contractors in financial uncertainty.

In the time that has passed, the Nashwauk project underwent a mild rebranding effort under the name Mesabi Metallics, Essars ownership successor, and developed a reorganization plan to emerge from bankruptcy as Chippewa Capital Partners, led by billionaire Tom Clarke.

But optimism toward the project remains circumspect from Minnesota leaders. Clarke has no history in iron or taconite mining, and the states preferred choice to manage the project Cliffs Natural Resources announced plans to open a similar plant in Toledo, Ohio three days after Chippewa earned court approval to lead the Nashwauk effort.

Still, the project has a path forward if Chippewa can secure needed financing for the half-built plant, which stands to be the first new taconite operation in Minnesota in 40 years.

We have no reason to believe they wont be successful, said Minnesota Gov. Mark Dayton in a phone interview Friday. Well monitor closely, but we have every reason to be optimistic. They said in court that they were going to do this, and that goes beyond any kind of assurance that Essar provided before.

Officials from Essar and Mesabi Metallics did not return requests for comments and interviews for this story. Clarke, who a spokesperson said is traveling outside the country, could be not be reached for comment.

When Essar Steel Minnesota broke ground on the former Butler Taconite site in 2008, it was the darling of the Iron Range. The state, Itasca County and the Iron Range Resources and Rehabilitation Board invested dutifully into the endeavor, which was to host a steelmaking facility and taconite plant.

On the often-cyclical Range, Essar was slated to generate more than 700 construction jobs and 350 permanent jobs, when the national economy was itself headed into a downward spiral.

Stops and stalls eventually peppered the project, which in 2010 scrapped the steelmaking facility. At the time, the company was paying the state about $194,000 per year on the mineral leases, a payment plan that began in 2004.

But seven years in and the project had virtually gone nowhere.

By the end of 2015, Dayton was demanding the company pay back $65.9 million in infrastructure grants to Itasca County. Essar was missing payments to contractors and vendors on the Range, and company officials were seeking more financing from the parent company, Essar Global, to keep it afloat.

After a missed $10 million payment in 2016, despite assurances from the India-based company, Dayton moved to pull the plug.

We kept getting assurances from Essar that they were turning things around, Dayton said. Those discussions went on for virtually a year leading up to July of last year they led us on the way they led on a lot of people.

He added that the state stuck with Essar so many times because it was the only real option at the time, noting the company had the leases and ownership of the property in Nashwauk.

Dayton stopped short of saying the state should have terminated the leases sooner, calling the July notice the responsible and honorable thing to do, and slamming Essars decision to file for bankruptcy rather than relinquish the mineral leases.

Hindsight is perfect, Dayton said. Thats typical of the way they operated we just had a string of broken promises.

Gov. Mark Dayton talks about the state's role in trying to demand payment for venders from the now-bankrupt Essar Steel Minnesota project in Nashwauk during a public meeting Tuesday at Cloverdale Township Hall. (Mark Sauer/Mesabi Daily News)

Days after Essars filing, Dayton was joined at a table in Nashwauk by Congressman Rick Nolan, members of the Iron Range Delegation and most importantly Lourenco Goncalves, chairman, president and CEO of Cliffs Natural Resources. The intent of the public meeting was the state announcing its intent to hand Essars mineral leases over to Cliffs, the now-preferred company to take over operations of the project.

Cliffs had a tenuous history with Essar to that point.

Goncalves and Essar CEO Madhu Vuppuluri traded numerous barbs over time about taconite projects and contracts. Cliffs was skeptical of a potential competitor coming online, but by the time Essar was forced into bankruptcy, it had lost its lengthy pellet agreement with ArcelorMittal to Cliffs.

With the state behind him, Goncalves focused in on the project for Minnesotas first direct-reduced/hot-briquetted iron facility. It was meant to be the next step for the taconite industry on the Range and a pathway to the auto industry in Detroit, the industry current pellets do not reach.

They have two choices: Help me build an iron plant, or sell it for scrap, Goncalves said at the August press conference. Either way, Im going to get it.

The rivalry between Essar and Cliffs managed to spill into the bankruptcy proceedings.

Five days after the press conference, lawyers for Essar asked the court to allow an investigation into Cliffs. Essar claimed Goncalves interfered with its ArcelorMittal contract and colluded with the state for the mineral leases. U.S. Bankruptcy Judge Brendan Shannon eventually allowed an inquiry into communications between the state and Cliffs.

For much of the next year, Goncalves remained vocal about his desire to open a new Cliffs operation on the Iron Range, where his former competitor failed.

But as support for Cliffs wavered, the rhetoric ramped up.

Range lawmakers excluding Sen. Tom Bakk, DFL-Cook wrote a letter to DNR Commissioner Tom Landwehr backing the debtor in possession, Mesabi Metallics. They were happy with the plan Mesabi was putting forward, but the act signaled a change in tide from July, when the delegation helped promote the Cleveland-based company.

Goncalves, calling out legislators, warned Minnesota that a Cliffs-run HBI plant was the states to lose.

Dayton said he called Goncalves immediately after the Chippewa bid was accepted and said the CEO expressed disappointment in the outcome, but noted the relationship was on good terms.

He expressed a desire to undertake the project, but the only bid before the judge was the Clarke group, Dayton said. It really wasnt an option.

When Essar reported its liabilities in August, the number was astounding: $1.1 billion owed to creditors, compared to about $200 million in claimed assets. The filing also confirmed the grim outlook for its vendors: $74 million owed to contractors locally and out of state.

More than 300 creditors ranging from overseas banks to local businesses to employees owed bonuses and vacation pay made claims against the company. A list of local vendors read like a whos who of Range businesses, some teetering on the brink of insolvency without payment from Essar.

The state also joined in, launching an effort to pry the mineral leases from the company. By moving into bankruptcy, Essar was able to protect the leases under its Chapter 11 filing, despite attempts by Minnesota to convince a judge otherwise.

The judge denied the lease extraction in November, giving Essar an extension until February, and further delaying what the state felt was an open-shut case.

It was a much more lengthy process than I would have wished, Dayton reflected. It is what it is. Its frustrating, the amount the delays.

A $35 million bridge loan in the early part of the bankruptcy removed Essar Steel Minnesota from ownership of the Nashwauk project. The new owners, SPL Advisors LLC, replaced Vuppuluri as CEO with Matthew Stock, and removed Essar members from the board of directors.

This is a very, very important development for us, said Mitch Brunfelt, assistant general counsel and director of government and public relations for the company, in August when the action took place.

The company became known as Mesabi Metallics in December, and it had a mountain to climb to please the court: Work out a payment plan for contractors, and find about $800 million to finish the project, then estimated at nearly $2.6 billion to complete.

It started by suing Essar Global for $1.1 billion, claiming the parent company siphoned off money meant to help build the Nashwauk plant, instead putting it toward operations elsewhere around the world. The suit named Vuppuluri, which according to the filing, had direct knowledge of the parent companys use of funds for non-project-related purposes.

A month later, Mesabi Metallics released its reorganization plan that the state DNR referred to as a moon shot.

In March, the court allowed Mesabi Metallics to renew labor agreements through the Iron Range Building and Construction Trades for future construction work on the project, and the United Steelworkers for potential plant employees.

Still, efforts by Mesabi Metallics to secure the critical state mineral leases were blocked by Dayton and the DNR.

In this October 2015, photo, steel supports stretch into the distance on a half-completed building at the bankrupt Essar site in Nashwauk. Bankruptcy filings show the company is in debt more than $1.1 billion to creditors. It claimed $208 million in assets, and reportedly owes local contractors and vendors $74 million $49 million to local businesses.

When bidding opened on the project in April, the usual suspects were there. SPL made its bid, and Cliffs came in with a surprising $75 million cash offer, one the Mesabi Metallics team dismissed immediately.

But the real surprise was that a new bidder entered the fray: Chippewa Capital Partners.

Led by Clarke, the billionaire coal mine owner, Chippewa became the favorite and, eventually, the court approved owner of the former Essar/Mesabi Metallics operation.

It just seems to me that the United States needs to have a reliable, consistent source of iron, Clarke said in April after acquiring the site. And it just seems like Nashwauk is the perfect place to build one.

Chippewa plans to open the Ranges first hot-briquetted iron (HBI) at the ore-rich Nashwauk location, a key piece in the groups plan to jumpstart the project back into existence. The company says it will begin construction by September, finish work by the end of 2019 and ship at least 3 million tons of taconite in 2020.

Dayton and the state Executive Council voted 3-1 in June to transfer the coveted mineral leases to Chippewa, with conditions:

By Aug. 31, the group needs to show the state it has the money needed to reopen a mine and construct the iron-producing facility.

Thats about $625 million. If it fails, the state closes on the leases and collects $4 million through the DNR.

Dayton said Friday he was cautiously optimistic about Chippewa, adding that he spoke with Virginia Gov. Terry McAuliffe about Clarke, and received positive feedback about the businessman.

He is a new investor in this industry, and that always raises a question mark, Dayton said. They dont have a proven track record in the steel and taconite industry, but they have a very successful business track record in other sectors.

The states plan with Chippewa now is to wait until Aug. 31 and hope Clarkes Chippewa team is successful. Thats the best course of action, Dayton said, because the company hasnt given the state a reason to doubt them.

Clarke, the lead investor in ERP Iron Ore, closed on purchasing the former Magnetation operations in 2016. He announced plans to reopen Plant 4 in Grand Rapids and a pellet plant in Reynolds, Ind.

Earlier this week, as part of the Chippewa reorganization, Mesabi Metallics laid off about 25 of its 50 workers in preparation for the ownership change. Chippewa plans to use a contractor to complete construction and share some functions with ERP.

Dayton added if the first deadline isnt met, the state will quickly huddle up to formulate a response plan.

Whether that includes Cliffs is unknown, but for now the governor said the quickest path to opening operations and getting people back to work is through Chippewa.

I dont see any reason at this point to predict or prepare for something that theres no basis for right now, he continued. Were focused on success.

Essar Bankruptcy: One Year Later - Mesabi Daily News

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In America’s Richest State, the Capital Flirts With Bankruptcy … – Bloomberg

Posted: July 8, 2017 at 9:41 pm

The hedge-fund enclave of Greenwich, on the Connecticut Gold Coast, is about 100 miles and a world away from the state capital.

But the fiscal crisis in Hartford, the historic center of the American insurance industry, is fast becoming more representative than mansions or yachts of the wealthiest state in the U.S. The city is edging closer than ever to the breaking point, waiting for the financially troubled state government to step in.

It may seem crazy that a place as rich as the Nutmeg State, which counts among its residents hedge-funds masters like Ray Dalio and Steven A. Cohen and legions of Wall Street bankers, could be in such fiscal trouble. Last year, the per-capita income there was $71,033, the highest in the nation, according to the U.S. Bureau of Economic Analysis.

For all that, state-worker pensions have been underfunded for decades. Tax increases aimed at closing deficits have put a strain on an economy struggling from the loss of high-paying finance jobs, leaving it among the few that still havent recovered from the recession. The hedge fund industry fell on hard times, with about 1,060 shuttering globally last year. UBS Group AG abandoned the worlds largest trading floor in Stamford after the financial crisis, and the Royal Bank of Scotland downsized its office there. Pension, debt and health-care costs just kept growing.

Theres a limit to how much you can tax and theres a limit to how much you can cut before you damage the viability and attractiveness of the city,Mayor Luke Bronin said in May. Right now, from a fiscal standpoint, you have a capital city fighting with its hands behind its back."

Like many other local governments across the country, Hartford -- city of Mark Twain and the young John Pierpont Morgan -- has been grappling with budget problems for years. On the same day that Illinois lawmakers finally scraped together a long-overdue budget, Hartford hired the law firm Greenberg Traurig LLP to evaluate its options, which include bankruptcy. It would be the first prominent U.S. municipality to seek protection from its creditors since Detroit did so in 2013.

As for Connecticut, it faces a projected two-year deficit of $5 billion that lawmakers havent figured out how to close, even though the new fiscal year began on July 1.

In Hartford, the woes have been piling up for a while. Like Puerto Rico, which filed a record-setting bankruptcy in May, or even Greece, the city came to the edge in the usual way: slowly, then suddenly. The population declined 23 percent between 1960 and 2000 and has remained stagnant ever since. A third of its residents live in poverty, a higher share than in Baltimore or Newark. From 2010 to 2014, the metropolitan area saw the fifth-biggest decline in employers in the nation, according to the Economic Innovation Group, a Washington-based public policy organization.

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Hartfords tax base of about $4.1 billion is about two-thirds that of neighbor West Hartford, which has far fewer residents, because half of the property -- state buildings, hospitals, universities, non-profit agencies -- is tax-exempt. Hartford has the highest property tax rate in the state and faces a $50 million deficit, nearly 10 percent of its budget. The citys credit rating may be downgraded deeper into junk by Moodys Investors Service.

Uninsured Hartford bonds maturing in 2024 traded at yields of more than 6 percent in late June, compared with about 4.4 percent in January, as investors jitters mounted. The city has $672 million in debt, including $228 million of uninsured bonds, according to data compiled by Bloomberg. It also guarantees about $70 million in debt for a minor-league baseball stadium downtown.

Photographer: Andrew Harrer/Bloomberg

Governor Dannel Malloy and Republican and Democratic leaders in the legislature agree the bankruptcy of the states capital isnt another negative headline they need. General Electric Co. has decamped from Fairfield to Boston, and last week Aetna Inc. said it was moving its corporate headquarters from Hartford, where it has been since 1853, to New York.About 250 jobs are going with it, though thousands will stay in town.

The state needs a budget that supports Hartford, its residents and its employers, said Chris McClure, a spokesman for Malloy. In the absence of action by the General Assembly on a budget vote, its entirely appropriate that the city explore all its options and prepare for every contingency."

Greenberg Traurigs team will be led by Nancy Mitchell, a co-chair of the firms restructuring practice, the city said in a statement. When Hartford was soliciting proposals from firms that specialize in bankruptcy, Council President Thomas Clarke told the local newspaper that looking into court protection from creditors would only be a last ditch option.

They will be working with us to examine all options for putting the city of Hartford on a sustainable path," the mayor said in a statement. As we start a new fiscal year without a state budget and with significant uncertainty, we will have the advice and counsel of an experienced and highly respected restructuring firm."

In 2016, Bronin, a Democrat, took over a city that had been delaying its fiscal reckoning by pushing debt payments into the future, draining reserves and resorting to one-time measures, such as selling a parking garage, while its debt swelled by 52 percent from 2011 to 2015, according to Moodys figures.

Since taking office, hes cut 100 jobs and renegotiated leases and energy contracts. Bronins been less successful in getting concessions from unions: The citys fiscal 2017 budget assumed $16.5 million of concessions, the bulk of which havent materialized.

Hartford managed to strike a deal with its firefighters that saves about $4 million a year through 2020 by freezing pay increases, increasing pension contributions, lowering salaries for new hires and requiring employees to pay more for health care.

The city could renegotiate labor contracts and cut debt and pensions in bankruptcy, as a handful of cities have done since the recession. But it would need the governors consent to file for Chapter 9.

Bronin is lobbying for the state to fully fund a program that compensates local governments for revenue lost to tax-exempt properties, which alone would provide enough money to close next years deficit, and has joined with cities pushing to raise Connecticuts 6.35 percent sales tax to 6.99 percent to provide more aid.

He also persuaded Hartford Financial Services Group Inc., Travelers Cos. and Aetna to pledge $50 million to the city over five years as part of a comprehensive and sustainable solution for Hartford."

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In America's Richest State, the Capital Flirts With Bankruptcy ... - Bloomberg

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True Religion files for bankruptcy – CNNMoney

Posted: at 9:41 pm

The designer jeans maker filed for bankruptcy protection on Wednesday, asking for a chance to reinvent itself as it grapples with hundreds of millions of dollars worth of debt and declining sales, according to court documents.

According to court documents, the company had $534.7 million worth of liabilities on its books, but only $243.3 million in assets.

There is some good news. True Religion said in a press release that the company has already secured a deal with its creditors to reduce its debt load by $350 million. In exchange, the company's biggest creditors will receive large ownership stakes in the company.

Related: Retail train wreck continues as sales plunge at Macy's, Kohl's

True Religion will stay afloat throughout the Chapter 11 bankruptcy proceedings, the company says, and it expects it will take three or four months for the court to approve its restructuring plan.

In order to improve its outlook, the company plans to "close or consolidate underperforming store locations, and renegotiate lease terms" in order to save money.

Another cornerstone of the restructuring plan is to "invest in growing our digital footprint," CEO John Ermatinger said in a statement.

True Religion is not the first retailer to be upended by the rise of e-commerce.

Traditional department stores and other brick-and-mortar outlets have struggled as digital giants like Amazon (AMZN, Tech30) have soared.

Related: Retail bloodbath continues as bankruptcy filings pile up

So far this year, Amazon's stock hit a new record high, while more than 300 other storefront retailers have filed for bankruptcy and the industry has seen tens of thousands of layoffs.

True Religion entered the fashion scene before online apparel sales were common. The company was founded in Los Angeles in 2002 and rose to popularity as designer jeans became a pop culture phenomenon. The True Religion brand was splayed across fashion magazines and sprinkled into the lyrics of hip-hop music.

But today, True Religion's popularity has petered out, and the company's sales have been in decline for years, according to court documents.

True Religion's chief financial officer, Dalibor Snyder, wrote in court papers that the company has worked to "aggressively cut costs," by closing stores and issuing layoffs in an effort to mitigate losses. But those measures weren't enough.

Bankruptcy protection and restructuring was the next step. Snyder says if the plan is successful, True Religion will reduce its debt load by 72%.

CNNMoney (New York) First published July 5, 2017: 12:57 PM ET

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True Religion files for bankruptcy - CNNMoney

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Category Archives: Bankruptcy

Leader of Bryan Cave’s bankruptcy group dies – Kansas City Business Journal

As Bronin Seeks Givebacks From Bondholders, Averting Bankruptcy … – Hartford Courant

Dressless brides in Texas are freaking out about Alfred Angelo’s sudden bankruptcy – Chron.com

Oil woes are still spilling into bankruptcy courts – Houston Chronicle

First Test of India’s New Bankruptcy Law Offers Cautionary Tale – New York Times

UES Retailer Peter Elliot’s Madison Avenue Shop Heads Into Bankruptcy – Commercial Observer

Why Texas business bankruptcy filings have hit record levels – Dallas Business Journal

Essar Bankruptcy: One Year Later – Mesabi Daily News

In America’s Richest State, the Capital Flirts With Bankruptcy … – Bloomberg

True Religion files for bankruptcy – CNNMoney

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