The Week In Bankruptcy: Eyes On The New Normal

By Vince Sullivan
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Law360 (June 5, 2020, 6:58 PM EDT) -- The COVID-19 outbreak's effects on numerous industries continued over the last week as companies succumbed to the economic pressures of the pandemic.

Others that entered bankruptcy earlier this year have had mixed success moving through the Chapter 11 process, with sales and plan confirmation moving forward for some but sinking for others.

Retail

Modell's Sporting Goods, which filed for Chapter 11 in New Jersey in March, just days before being forced to close all of its stores due to COVID-19 restrictions, received court permission to extend a pause of its bankruptcy case until June 15. The company originally sought to pause its proceedings in March and said the continued closure of businesses and looting at some of its stores during recent civil unrest have made it difficult to continue liquidation sales.

Retail icon J.C. Penney Cotapped into half of its $450 million debtor-in-possession financing Thursday after a Texas judge overruled objections from unsecured creditors. The company filed for bankruptcy in mid-May after it, too, was forced to close its retail operations in response to the coronavirus.

Discount retailer Fred's Inc. confirmed its Chapter 11 plan June 1 after completing a series of sales that brought about $75 million into the estate. Unsecured creditors are projected to receive minimal distributions under the plan. The company filed for bankruptcy protection in September.

Apparel retailer New York & Co. said in federal regulatory filings Wednesday that the COVID-19 closures would likely push it into bankruptcy in the near future, even as it moves to reopen a number of its stores. Already saddled with a $164.4 million deficit before the pandemic, parent company RTW Retailwinds Inc. said the closures left it without revenue from its 387 stores and that it had "substantial doubt" it would be able to continue as a going concern.

Puerto Rico

The U.S. Supreme Court upheld the appointment of the members of Puerto Rico's Financial Oversight and Management Board on June 1, finding that the board exercises only local authority over the commonwealth and does not represent the interest of the United States federal government. The decision overturned a First Circuit ruling that determined the appointment of the board members violated the constitution's Appointments Clause and required Senate approval.

Energy

The confirmation trial for California utility provider PG&E commenced at the end of May and continued last week, with significant opposition to the $59 billion reorganization plan. Triggered by a series of wildfires that exposed the company to billions of dollars in liability, the Chapter 11 case now sees survivors of those fires say that the plan is a "house of cards" and ask for an independent examiner to look into the plan voting process.

Texas and Oklahoma oil and gas driller Templar Energy hit Chapter 11 on June 1, saying depressed energy commodity prices caused by reduced demand from the COVID-19 outbreak and an ongoing pricing war among oil-producing countries pushed it into bankruptcy. The exploration firm came to court with a handful of interested buyers following a prepetition marketing process.

PES Holdings, which came into bankruptcy court in July 2019 after a catastrophic explosion and fire at the Philadelphia refinery it operated, got the nod from a Delaware judge Wednesday for a post-confirmation settlement with the U.S. Environmental Protection Agency. The deal caps the debtor's liability for environmentally friendly fuel refining obligations at $10 million, less than one-third of the $35 million claim originally lodged by the EPA.

Transportation and Entertainment

Car and truck part maker APC Automotive Technologies hit Chapter 11 on Wednesday after its efforts to improve a dire liquidity situation were stifled by COVID-19. It gained access to $30 million in debtor-in-possession financing at a first-day hearing.

Regional Alaskan air carrier Ravn Air Group dealt with serious scheduling issues last week, as a proposed Chapter 11 sale process and a parallel liquidation plan track clashed after a Delaware judge extended the sale timeline. The company's lenders refused to extend an additional $4 million in funding to cover added expenses and an outstanding receivable owed by the U.S. Postal Service. The airline hit Chapter 11 after its business was grounded in the midst of the pandemic.

Amusement ride operator Apex Parks got the OK from a Delaware judge Thursday for a $60 million sale of its assets to a secured lender through a credit bid and the assumption of liabilities. The company retreated into bankruptcy after its parks were shut down due to the pandemic.

Health Care and Life Sciences

Opioid maker Purdue Pharma successfully petitioned a New York bankruptcy judge to extend the deadline by which creditors have to file their claims. The 30-day extension request — to July 30 — was prompted by the COVID-19 outbreak and the difficulties it created for claimants. The company hit Chapter 11 in September to deal with billions in liability associated with the national opioid epidemic.

Valeritas Holdings Inc. obtained confirmation of its Chapter 11 filing Thursday following a $23 million sale of its diabetes drug technology. The company was one of the first to fall into bankruptcy in February when its Chinese factories were taken offline in the early days of the COVID-19 outbreak.

The LASIK Vision Institute filed for bankruptcy May 29 after the coronavirus led to a hold on almost all of its eye surgery procedures. The company said increased competition from other forms of corrective surgery had already hurt its bottom line. It received permission at a first-day hearing to tap $5.7 million of debtor-in-possession financing.

Other

LSC Communications, a commercial printing operation that filed for bankruptcy in April after a prolonged migration to digital advertising, was approved for a $100 million Chapter 11 loan and a $14 million employee bonus plan.

Libbey Glass Inc. hit Chapter 11 with the intent of restructuring $500 million of its debt after COVID-19 hurt the already struggling business. It got the nod to tap into a $160 million post-petition loan during a first-day hearing Tuesday.

--Editing by Kelly Duncan.

For a reprint of this article, please contact reprints@law360.com.

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