In mid-February, Winter Storm Uri brought frigid air across the US from the Pacific Northwest to the Gulf Coast.  Most notably, Winter Storm Uri passed through Texas, resulting in large snowfalls and reducing temperatures to historic levels.  In advance of the storm, plants and utilities responsible for providing vital electricity and natural gas to Texas residents sought to prepare for the extreme conditions—but then, diesel fuel began to gel, generators and turbines froze, and electricity became scarce—leaving many market participants and end-user consumers with astronomical bills for power.  Some entities have since disputed the bills, while others have even declared bankruptcy or indicated the need for future bankruptcy court protection.

Continue Reading Texas Utilities Continue to Deal With Aftermath of Winter Storm Uri: CPS Energy Sues the Electric Reliability Council of Texas Alleging One of the “Largest Illegal Wealth Transfers” in Texas History

In its recent decision in Matter of First River Energy, LLC,1 the Fifth Circuit resolved a priority dispute between lienholders regarding their competing claims to cash held by the debtor, First River Energy, LLC. The cash at issue was the proceeds of a pre-bankruptcy sale of crude oil that the debtor purchased from certain producers (located in Texas and in Oklahoma) and then sold on to certain downstream purchasers. Following the debtor’s filing, each of the producers asserted a first-priority lien on the cash proceeds, as did the administrative agent for certain of First River Energy’s secured lenders. The administrative agent subsequently filed an adversary proceeding seeking to confirm its first priority status (senior to the producers), based on its perfection by the filing of a first-in-time UCC-1 financing statement with the Delaware Secretary of State in 2015. The two issues before the Bankruptcy Court were what law applied to the priority dispute (as between Delaware, First River’s state of organization, or Texas or Oklahoma, the locations of the producers and the oil sold) and, based on such choice of law, the priority of the parties’ liens. The Bankruptcy Court ruled that Delaware law applied and found that, under Delaware law, the administrative agent’s lien had priority over the lien of the Texas producers, but that the administrative agent’s lien did not have priority over the Oklahoma producers’ lien. The Fifth Circuit took an interlocutory appeal of the decision.

Continue Reading Opinion of Interest – Matter of First River Energy: Some State-Specific Liens May be no More than “Amazing Disappearing Security Interests”

The Wall Street Journal reports that high demand for corporate debt has allowed even the riskiest of companies to refinance their debt at interest rates that have typically been reserved for only the safest types of debt. Since the beginning of the year through February 10, over $13 billion of new debt has been issued,

CNBC reports that slow rollout of the vaccines and more contagious strains of Covid-19 may threaten investor outlook that have been buoyed by optimism about a swift economic recovery.  A possible K-shaped recovery may see companies of certain type and size start to recover while leaving out low-income families, and companies in the airline, restaurant,

Bloomberg confirms that 2020 was the biggest year for large commercial bankruptcies since the Great Recession in 2009.  Led by the energy, retail, and consumer services sectors, 224 companies with liabilities exceeding $50 million filed Chapter 7 and 11 cases, far exceeding the number of large filings each year in the preceding decade. Bloomberg also

As reported in Yahoo Finance, the first trading day of 2021 was off to a rocky start in the U.S.  Despite progress on COVID vaccine distribution, markets reacted to the discovery of a highly transmissible strain of COVID in the US, which comes with a greater risk of lockdowns, along with uncertainty surrounding the

Bloomberg reports that Revlon Inc. was able to exchange approximately $236.5 million of its $343 million in outstanding bonds that were scheduled to mature in 2021 in a deal that the company said should eliminate the need for a chapter 11 bankruptcy filing in the near future. [Bloomberg; Nov. 11, 2020]

The Washington Post reports

BJ Services, a Texas-based provider of hydraulic fracturing (i.e., “fracking”) and cementing services for upstream oil and gas companies, filed for chapter 11 protection on July 20, 2020, in the US Bankruptcy Court for the Southern District of Texas, along with three of its affiliates.  Their chapter 11 filings were prompted by unsuccessful restructuring negotiations with one of their equity sponsors—CSL Capital Management—which would have provided a $75 million new money investment, including $30 million in the form of DIP financing, in exchange for the majority of the reorganized equity.  Citing commodity price volatility and an unmanageable capital structure, the debtors have been pursuing an orderly wind-down and confirmation of a chapter 11 liquidation plan, the cornerstone of which was a sale process for six asset packages:  (a) cementing business; (b) fracking business; (c) certain equipment related to the cementing business; (d) certain equipment related to the fracking business; (e) shared lab equipment; and (f) other miscellaneous equipment (e.g., tractors).

Continue Reading BJ Services, LLC, et al.: Not-So-Smooth Sailing for Credit Bidders

Research from the Brookings Institute finds that the COVID-19 pandemic’s impact on firm profits and revenues thus far is comparable to the worst quarter of the 2008-2009 financial crisis. The researchers further project that bankruptcy filings will increase by as much as 140 percent this year compared with last year. [Brookings; Sept. 23, 2020]

Bloomberg

Houston, TX-based oil services provider SAExploration Holdings Inc. has filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas, reports the Wall Street Journal. SAExploration reportedly owes $6.8 million on a unsecured loan it received through the Paycheck Protection Program of the CARES Act. [WSJ; Aug.