Category Archives: Bankruptcy

SAN BERNARDINO >> Almost five months after a U.S. Bankruptcy Court judge confirmed the citys bankruptcy exit plan, San Bernardino has settled all but two of the cases appealing that decision.

Theres no definite timeline for the appeals, but they could appear in court within a few months. After that, if both sides remain entrenched, appeals could last years, with attorneys in the case predicting a trip to the U.S. Supreme Court and a possible upheaval of the bankruptcy plan the city spent four years and $20 million crafting.

If the appeal is successful, it could upset the entire judgment, said attorney Gary Casselman, who is appealing the case. Theres risk for everyone. Thats why cases settle, because everyone looks over their shoulder at what could go wrong. But so far we havent settled.

Both attorneys cases stem from police lawsuits regarding use of force. Under the citys plan, their clients would receive 1 cent for every dollar a jury awards them.

And they also would be blocked from collecting any money from city employees a court might consider responsible for damages that occurred before the bankruptcy filing.

My client has had eight or nine surgeries and is at risk of losing her arm or at least elbow because of what happened, Casselman said. She might lose her house. And I think the city could afford much more, when their bankruptcy attorneys cost ($20 million).

Casselmans client, Rovinski Renter, alleges that in 2010 a San Bernardino police officer responded to a call of an unruly ex-tenant at Renters house. She told the officer in salty language to remove the tenant, and the officer allegedly grabbed Renter by the arm, breaking it. She was then handcuffed without medical care for 30 minutes, according to the lawsuit.

City Attorney Gary Saenz said he cant discuss the appeals because theyre ongoing litigation, and he cant yet give details of the two other appeals related to police use of force that were recently settled.

We have two appeals pending, he said. We still have, apart from the appeals, a number of claims were attempting to make settlements with those. Those that have not been settled will go through an ADR alternative dispute resolution process, which is essentially a mediation and an unbiased third party mediator will be selected. We havent laid out the specifics of that yet, but that will come shortly. Hopefully, well get a lot of the cases resolved through that process.

Advertisement

Saenz has previously said the city had to do what was best for city residents, and he agreed with Judge Meredith Jury that there was no legal reason civil rights creditors should be paid more than others who have lawsuits against the city.

The city shed $350 million in obligations during the bankruptcy, which it filed after discovering a $45 million deficit for the 2012-13 fiscal year.

But its not just about the citys plan to only pay 1 percent of what it owes, said attorney Donald Cook, whose claim concerns a pet dog shot by a police officer. Its that the plan takes what he says is the unprecedented step of blocking the city from suing the police officer responsible or the police chief.

The city filed for bankruptcy, Cook said. In bankruptcy, you wipe out the debts of debtors. But the police chief and (the officers) didnt file for bankruptcy. A bankruptcy court cant adjudicate my clients claim against them.

In other municipal bankruptcies which are rare courts have avoided ruling on whether creditors can collect debts from the individual employees named in claims.

In addition, the U.S. Supreme Court ruled in 2011 in a case springing from the dispute of Anna Nicole Smith and the son of her late husband that bankruptcy courts have limited powers because theyre created by Congress, rather than specifically created by the Constitution.

That means a district court should decide the issue, Cook said.

In court, the city has argued that allowing continued lawsuits against officers for pre-bankruptcy cases would lead to an exodus of officers in a city already struggling to fight its high crime.

And other cities, contemplating bankruptcy but worried about still being on the hook for judgments against their employees, will join legal enthusiasts in closely tracking the case, Cook predicted.

Thats the big issue, he said. I think it will get a lot of attention, whoevers reviewing it at the higher court level, because this is something that a lot of municipalities and counties are worried about.

Cooks clients, Hector Briones and Roseland Harding, allege that in 2009, San Bernardino police responding to a cellphone 911 call traced incorrectly to their address forced open a locked gate and opened a closed door to enter their home. Their dog then ran up in a friendly way, according to Cook and an officer fatally shot the dog, Mammas.

Both the cases being appealed and two others that were recently settled have been delayed since before the city filed for bankruptcy in 2012, waiting for the bankruptcy case to resolve.

Attorney Duane Folke said the prospect of continuing to wait longer potentially years led his client, Paul Triplett, to settle this month.

I would have liked to have seen it be a little bit more equitable for my client not just me as the attorney, obviously, my poor client was put into a coma for three days and had a number of bones broken and a lot of maladies that are the result of what happened to him, Folke said. There are no winners here, thats for certain. But hopefully everybody will be able to get a fresh start.

Excerpt from:

Why two attorneys are appealing San Bernardino's bankruptcy ... - San Bernardino County Sun

So a weird thing is that bankruptcy costs a lot of money to declare. The paperwork (of which theres a lot) costs about $340 to file, and legal representation for Chapter 7 costs $1,450 on average, according to lawyers.com.

Its something that one of the Brooklyn tech worlds youngest entrepreneurs noticed in one of his law classes at Harvard. Rohan Pavuluri got involved with a group making legal self-help packets for people. At some point, he thought it might make more sense to write some software that could automate the process and cut down on some of those legal fees.

He got a small grant from Harvard to work on the idea and began building it out. Last summer he was looking for somewhere to continue working on it.

I just cold emailed Blue Ridge Labs. I said, Im a student I have a little bit of funding,' Pavuluri explained by phone recently. Theres really no other space in the country that has a workspace for nonprofit technology products to my knowledge.All I was really asking from them was a free desk.

Upsolves Rohan Pavuluri. (Courtesy photo)

The social impact acceleratorended up giving Pavuluri $50,000 in grant money to keep working on his idea, which became known as Upsolve. He lived down the street, in the dorms of Long Island Universitys Brooklyn campus.

He got introduced to his now cofounder, Jonathan Petts, a bankruptcy lawyer whod been doing some pro bono work for destitute clients.The two ran into plenty of hurdles, theres no shortage of regulations in the legal world, and are still developing the product. So far, still in beta, theyve helped about 50 clients file in New York, and are bringing the program to legal aid clinics.

He describes his last year at Harvard as being a part-time student, working on Upsolve constantly and the phone with Petts every day, as well as thousands of messages on Slack.

It was kind of crazy that I could get anything done cause I just showed up in Brooklyn with a little funding and didnt really even know what bankruptcy was, Pavuluri said, describing Paul Grahams definition of schlep blindness perfectly. If I knew how hard it was going to be and how lucky I was going to need to be, I wouldnt have started it.

Last week, back at Harvard, Upsolve was one of three winners of the Presidents Innovation Challenge, which brought the team $75,000.

It is so inspiring to see what you are trying to accomplish, for young children, for people who have found themselves in financial distress, for women who need health care, for a whole range of different problems that weve seen addressed in these proposals, said Harvard President Drew Faust, in giving the award.

We beat all the MBAs, Pavuluri said, with a laugh.

So the plan now is to keep this thing going. Pavuluri said the team wants to expand to more states: California, Texas, Pennsylvania.

Id also like to think about other ways we can help people in severe consumer debt, he explained. There are people who are sued all the time for debt and I think we could help them. Also I dont want to be reliant on foundation funding for our whole life so itd be interested in looking at earned revenue or some other models, maybe government.

Tyler Woods is the lead reporter for Technical.ly Brooklyn. His work has previously appeared in the San Francisco Chronicle, the Houston Chronicle, CT Financial News and the New Canaan News. There's little he loves more than great tweets on Twitter.com.

Original post:

How this Harvard undergrad wound up in Brooklyn making a bankruptcy startup - Technical.ly Brooklyn

Bankruptcyadmin2017-02-06T20:59:32+00:00

There are many reasons that people consider filing for bankruptcy. The decision is not an easy one to make and can often be overwhelming, especially if you are facing a difficult situation such as creditor harassment, a pending garnishment, divorce or foreclosure.

One of the main purposes of bankruptcy law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts. By law all actions against a debtor must cease once bankruptcy documents are filed. Our bankruptcy and debt resolution attorneys are committed to providing reliable, confidential and personalized service. They will meet with you and carefully evaluate your financial situation to determine the best debt resolution whether it is Chapter 7, Chapter 13 bankruptcy, or debt negotiation.

Learn more about your options:

Before attempting to handle a bankruptcy yourself, consult with our experienced attorneys. With Bellah Perez as your bankruptcy representation, you can rest assured that you will have an experienced and compassionate attorney by your side every step of the way.

ByLaw School Transparency

Centrally located in beautiful downtown Glendale, AZ. We represent clients throughout the Phoenix area and across Arizona and just a short distance from Phoenix, Peoria, Surprise, Avondale and other valley cities. We look forward to giving you a fresh start!

Read more:

Bankruptcy Attorneys | Chapter 7 & 13 Bankruptcy | Debt ...

The News-Press

21st Century Oncology Files for Chapter 11 Bankruptcy - WSJ Wall Street Journal (subscription) 21st Century Oncology Inc., a cancer treatment giant, filed for bankruptcy Thursday after reaching an agreement with lenders and bondholders that would prune ... 21st Century Oncology seeks bankruptcy protection - The News-PressThe News-Press Besieged Fort Myers cancer care giant files for Chapter 11 bankruptcyWink News all 4 news articles »

Read more:

21st Century Oncology Files for Chapter 11 Bankruptcy - WSJ - Wall Street Journal (subscription)

The federal government is seeking an overhaul of corporate bankruptcy fees to help the court system pay for its oversight.

The U.S. Trustee Program that oversees bankruptcy administration is proposing adjustments to quarterly fees for the largest Chapter 11 debtors, a Department of Justice spokesman confirmed in an email. The new structure would switch most payments to percentage of disbursements instead of the current flat rate scheme and would significantly increase costs on the biggest-ticket cases.

The proposed fee structure would increase quarterly fees paid by Chapter 11 debtors with quarterly disbursements of at least $1 million to an amount equal to 1% of disbursements or $250,000, whichever is less. Beginning in 2021, the director would be permitted to adjust the fee once a year.

Quarterly fees are currently set at a fixed amount, with the highest a debtor can owe being $30,000 per quarter for those whose quarterly disbursements top $30 million. The adjustment under Trump that shifts to a percent-based scheme increases the limit of the amount owed to $250,000, eight times where it's at right now.

"Anyone that you've heard of who files for bankruptcy, this would trigger," said University of Michigan law professor John Pottow. "These big Chapter 11s, they're spending a million dollars just paying their lawyers right out of the gate."

Fees for past bankruptcies for companies such asKmart, now owned by Sears (SHLD) , United Airlines and Caesars Entertainmentlikely would have been affected.

The U.S. Trustee Program estimates the fee increase would result in $289 million in revenue in 2018, $150 million more than what it would be under the current system.

The DOJ spokesman said that cases with quarterly disbursements under $1 million are excluded from the proposed adjustment to ensure small businesses don't pay additional fees. "About 95% of debtors who voluntarily identify themselves in the bankruptcy system as meeting the Bankruptcy Code's definition of a small business have quarterly disbursements of under $1 million," he said.

"It seems to go a pretty good way of making sure it's not affecting small businesses and organizations," said Anthony Casey, a professor of law at the University of Chicago Law School and former associate at Wachtell, Lipton, Rosen & Katz.

Under the current structure, those paying disbursements of under $1 million are subject to quarterly fees that top out at $4,875.

"They're holding fees steady at the low end, and they're cutting off increases at the high end, and in between, they're increasing them," said Lynn LoPucki, UCLA law professor and founder of the UCLA-LoPucki Bankruptcy Research Database.

Companies would have to pay $25 million or more in quarterly disbursements in order to hit the $250,000 limit.

A sketch of the fee structure proposal was mentioned in the "skinny budget" blueprint rolled out by the Trump administration in March. It was not included the complete 2018 budget unveiled this week but is still in the works.

Experts say increased fees are unlikely to deter bankruptcy filings.

"In the world of taxes that change behaviors significantly, I don't think this would be one of them," Casey said. "I've never heard someone talking about these fees as a meaningful part of their calculation in thinking about bankruptcy."

Targeting disbursement fees is a politically safe move for a Trump administration that is facing its fair share of turmoil. There is no political affiliation it attacks or broad constituency it angers.

"There are people who will be unhappy about it, but it's not going to catch a lot of controversy," Casey said. "A large company in bankruptcy is not your most sympathetic group."

TheTrump administration is not alone in proposing such an idea. A similar payment scheme is also included in legislation recently passed by the House.

Of course, Trump is well familiar with the bankruptcy processhis companies have filed for Chapter 11 bankruptcy protection six times and may very well have been affected by this new scheme.

Read more from the original source:

DOJ Bankruptcy Fee Overhaul Would Hike Chapter 11 Costs - TheStreet.com

Avaya Bankruptcy: Hearing on Reorganization Plan Delayed While court due to address networking sale today, review of proposed reorganization plan postponed until late June.

While court due to address networking sale today, review of proposed reorganization plan postponed until late June.

Avaya is due in bankruptcy court today, May 25, as scheduled -- but the slated actions are not exactly what we expected a month ago.

The court today is set to review the Extreme Networks bid for Avaya networking business, and potentially approve the sale. With Avaya having received only this one bid, one would assume the court will award the data networking business to Extreme. One sticking point, however, could be an objection from Oracle, which opposes the sale due to the transfer of licenses. (A second company, Mentor Graphics, had also opposed the sale for the same reason, but that objection had been removed late last week.)

The other big event scheduled for May 25 had been a hearing for the formal presentation of management's reorganization plan to the court. This disclosure statement hearing was to start a clock to get votes for approving the plan by June 27, as I'd earlier written in the post, "Avaya Takes a Step, Not a Leap." The company has asked to move the disclosure statement hearing back to June 29 with the following statement:

"Avaya and our major stakeholders have jointly determined that a one-month adjournment of the disclosure statement hearing is in the best interest of all stakeholders as we continue working toward a consensual conclusion of the restructuring process. At the request of our major creditor groups, we have adjourned the hearing in order to continue productive discussions around the terms of Avaya's ultimate restructuring. We remain committed to completing the restructuring process as quickly as possible. We continue to anticipate emerging from chapter 11 as early as the summer of 2017."

The intent of the disclosure statement hearing is to have the bankruptcy court review Avaya's disclosures and authorize the company to start soliciting votes for the plan of reorganization. Assuming a month for finalization after a June 29 disclosure hearing, the earliest a vote on the plan could take place would be late July. Even if the Avaya reorganization plan is approved at that time, the company would not likely be able to exit the bankruptcy process until late September or October. Between plan approval and exit from bankruptcy come numerous process steps, potentially including securing new bond commitments.

The delay signals that Avaya bondholders, which as I noted in the above-mentioned article will be looking to maximize what they recover, are reticent to approve the management plan as it stands. According to documents filed with the SEC this week, as of May 16 Avaya has entered into separate confidentiality agreements with certain members of an ad hoc group consisting of some first and second lien creditors ("Ad Hoc Crossholder Group"). These may be the bondholders that have both first and second position bonds and may be proposing a different allocation of the cash and equity of the company than that in the Avaya management proposal. The negotiation between the creditors appears to be an issue; there seems to be two proposals on the table, and the goal is to negotiate a deal.

This allocation, along with the evaluation of the current and future value of the company and the general management oversight structure of the company post-reorganization, are challenges that have extended the time to reach an restructuring agreement with the creditors. As I wrote earlier and will repeat here, the outcome of the Avaya bankruptcy process is still a waiting game, now extended into at least August for a clear answer.

It remains to be seen if the creditors will accept the plan or force a more drastic set of asset sale actions. If the Avaya management team and the creditors cannot agree on a reorganization plan soon, the prospects of an intact exit will decrease significantly.

The rest is here:

Avaya Bankruptcy: Hearing on Reorganization Plan Delayed - No Jitter

By Tom Hals | WILMINGTON, Del.

WILMINGTON, Del. May 25 21st Century Oncology Holdings Inc, which bills itself as the world's largest operator of cancer treatment centers, filed for Chapter 11 bankruptcy on Thursday, citing changes in insurance reimbursement rates and uncertainty caused by political changes.

The Fort Myers, Florida-based company said the bankruptcy would not impact its 179 treatment centers with locations across 17 U.S. states and Latin America.

Paul Rundell, the interim chief executive officer, said in a statement the company entered bankruptcy with an agreement with lenders and bondholders that would reduce its debt by $500 million.

The company's lenders agreed to provide $75 million for working capital during its bankruptcy and a group of creditors agreed to invest $75 million into the reorganized business.

The new investment is being led by funds affiliated with Beach Point Capital Management, Governors Lane, JP Morgan Investment Management Inc, Oaktree Capital Management, Roystone Capital Management and HPS Investment Partners, according to a court filing.

Rundell blamed the bankruptcy on declining levels of revenue per treatment, the cost of complying with regulations regarding electronic records and the cost of litigation and legal settlements.

The company has paid around $55 million to settle allegations it billed government programs for services that were not medically necessary, according to Rundell's court filing. The company did not admit to wrongdoing as part of the settlements, Rundell said.

21st Century Oncology is also being investigated over a data breach involving 2.2 million patients.

"A changing political landscape has injected uncertainty into the health insurance market," Rundell said in a court filing.

U.S. President Donald Trump and his Republican allies have pledged to roll back the 2010 Affordable Care Act, known as Obamacare, which brought sweeping changes to the U.S. healthcare market. About 20 million Americans gained insurance under Obamacare.

21st Century Oncology was founded in 1983 by a group of physicians and was publicly traded as Radiation Therapy Services until it was acquired in 2008 by Vestar Capital Partners for around $1 billion.

It pulled plans to return to the stock market in 2014 and instead raised $325 million with an investment from the Canada Pension Plan Investment Board. (Reporting by Tom Hals in Wilmington, Delaware; editing by G Crosse)

May 26 The following are the top stories on the New York Times business pages. Reuters has not verified these stories and does not vouch for their accuracy.

May 26 The following are the top stories in the Wall Street Journal. Reuters has not verified these stories and does not vouch for their accuracy.

(Adds details on mutual funds and ETFs, analyst quote, table, byline) By Trevor Hunnicutt NEW YORK, May 25 U.S. fund investors offered a skeptical perspective on sky-high equity prices, yanking cash from U.S.-based stock funds for the fourth straight week, Lipper data showed on Thursday. The funds recorded $10.1 billion in withdrawals during the week that ended May 24, the second-largest outflows of the year, offering little support to an equity market that has nonethele

See more here:

Cancer treatment firm 21st Century Oncology files for bankruptcy - Reuters

Westinghouse Electric Co told a U.S. court on Tuesday the nuclear power company had reached a deal to borrow $800 million after allaying creditors' concerns that the money would be flowing to non-bankrupt affiliates overseas.

Westinghouse, a unit of Japan's Toshiba Corp (6502.T), filed for bankruptcy in March following billions of dollars in cost overruns at two nuclear power plants it designed and is constructing in Georgia and South Carolina.

An attorney for Westinghouse said in U.S. bankruptcy court in New York that cash from the loan would allow the company to complete its business plan by July 27 and move toward exiting bankruptcy.

The Pittsburgh-based company has also said it needs cash to shore up its profitable overseas businesses, which provide nuclear fuel and services and also decommission power plants. The company has said those affiliates add value to its bankrupt business.

Since Westinghouse filed for bankruptcy, its European affiliate lost access to a cash pool shared with the U.S. business, according to court records. That has threatened customer contracts, prompted one unidentified regulator to demand a $130 million letter of credit and led to financial institutions to move to end swap agreements, according to a court filing.

Westinghouse received court approval to borrow an initial $350 million from affiliates of Apollo Global Management (APO.N) in March.

U.S. Bankruptcy Judge Michael Wiles in Manhattan indicated on Tuesday he would allow Westinghouse to borrow the remaining $450 million that Apollo agreed to provide, but said he wanted to review the agreement that resolved creditors' concerns.

Westinghouse's lawyer said the company will share information with the official creditors' committee about its finances and give them an opportunity to object to the way Westinghouse is using the loan funds.

Westinghouse is expected to break its contracts for designing and constructing the Georgia and South Carolina nuclear plants, which have been beset by years of missteps.

A coalition of utilities led by Southern Co (S.N) owns the Plant Vogtle project in Georgia and the V.C. Summer project in South Carolina is majority-owned by SCANA Corp (SCG.N).

Toshiba's lawyer said at Tuesday's hearing the Japanese conglomerate is close to reaching an agreement with SCANA to cap Toshiba's liability, which should help ease Toshiba's financial stress while it tries to sell its coveted chip business.

Toshiba has reached a similar agreement for the Georgia project.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and Tom Brown)

Private equity firm Apollo Global Management LLC is in advanced talks to acquire U.S. job-hunting website CareerBuilder LLC after negotiations with another buyout firm ended unsuccessfully, according to people familiar with the matter.

HONG KONG/BEIJING Chinese state-owned Sinochem and ChemChina are in merger talks to create the world's biggest industrial chemicals firm, to be headed by Sinochem chief Ning Gaoning, four people with knowledge of the negotiations said.

AMSTERDAM PPG Industries remains interested in negotiating a "consensual" deal with Akzo Nobel , even as the Dutch rival paint maker resists its 26.3 billion euro ($29.5 billion) takeover offer, PPG's top executive said on Tuesday.

Go here to read the rest:

Westinghouse reaches deal for $800 million U.S. bankruptcy loan ... - Reuters

While serving in the U. S. Congress, I had the pleasure of working with the leadership of Puerto Rico and experiencing the Commonwealths rich and beautiful culture. Its future now hangs in the balance due to a financial crisis and the leadership of Puerto Rico has decided the most expedient way to confront the crisis is through Title III bankruptcy.

While I dont agree with this strategy, I understand it from a political standpoint: allowing a federal judge to make the difficult decisions that politicians would prefer to avoid.

Years of bad governance has led Puerto Rico to this point. Years of outspending its resources and borrowing billions of dollars from creditors.

Bankruptcy is a cop-out that not only absolves elected officials from making tough choices, but stretches out an already terrible situation and prevents Puerto Rico from having access to capital that is critical to its rebirth.

The creation in 2016 of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) was a bipartisan effort on the part of the U.S. Congress and the Obama administration to find a way out of this mess and develop a fiscal plan for the country that only allowed bankruptcy as a last resort, after all other options had failed.

Unfortunately for the Puerto Rican people, all other options did fail. And now the governments decision to file for bankruptcy will jeopardize the recovery of the Commonwealth.

By choosing to allow U.S. District Court Judge Laura Taylor Swain of the Southern District of New York to determine how to impose and manage the bankruptcy, Puerto Rico will stretch out the process, deny itself access to capital markets, and increase the possibility of numerous lawsuits by unhappy creditors.

The Puerto Rican people are witnessing an unemployment rate of over 12 percent, and over 45 percent of the people living in the island are living below the poverty line. Puerto Rico is also facing the critical issue that its pension programs are drying up. According to one news outlet, The three main retirement systems in Puerto Rico are expected to "deplete" all their assets between July and December [2017].

As an elected leader, it is difficult to see the people you represent suffer, but it is your responsibility to make the tough decisions and find a solution that will work.

Undeniably, the new governor of Puerto Rico, Ricardo Rossello, is facing an unprecedented budgetary and economic challenge. At $73 billion, the debt of Puerto Rico is the largest insolvency in U.S. history, far outstripping Detroits $18 billion restructuring in 2013. Due to a lack of funding, many critical government services across the island are at risk, including the health care system.

But this decision to file for Title III bankruptcy completely undermines the process designed by the U.S Congress, which was originally designed to resolve the situation out of the courts. And the reason for this is simple: by going to court, the debt crisis is stretched out over a long period of time which will only make everyones life on the island more difficult due to the uncertainty of the resolution.

The absence of clarity on how the bankruptcy will be restructured also makes investors nervous, and prevents capital from flowing into the island where it is so desperately needed.

Congress, the oversight board for PROMESA and the governor have all refused to make the hard decisions necessary to move the island forward. And on May 1, the day a freeze on litigation expired, several creditors filed lawsuits against the Commonwealth for the lack of good-faith negotiations. Two days later, Governor Rossello announced he would file for Title III protections.

If the governor wants to show real leadership, he should walk away from Title III and start serious negotiations with creditors and all parties. A comprehensive, fair and transparent restructuring plan will be difficult, but it will be better for the people of Puerto Rico and put the island on a faster path to recovery.

Title III is a cop-out that not only absolves elected officials from making tough choices, but stretches out an already terrible situation and prevents Puerto Rico from having access to capital that is critical to its rebirth.

As a Congressman, my advice and counsel was often sought by Americas Hispanic communities and leaders in Puerto Rico. It is my hope they will still listen.

Henry Bonilla represented Texas 23rd Congressional District from 1993 2007.

See the article here:

Puerto Rico's bankruptcy will only prolong its economic meltdown - Fox News

The federal board overseeing Puerto Rico's financial rehabilitation is enlarging the U.S. territory's court-supervised bankruptcy, placing its nearly depleted pension system and its transportation agency under court protection.

The Employees Retirement System, known as ERS, and the Highways and Transportation Authority, known as HTA, entered a debt-restructuring process that amounts to municipal bankruptcy Monday in the federal court in San Juan.

Those two systems are now under a federal debt-adjustment law known as Title III alongside the Puerto Rico government and its sales-tax bond issuer, known as Cofina. U.S. District Judge Laura Swain Taylor, who is presiding over the cases, held the first court hearing on the government's case last week.

"This is part of a court-supervised process within a framework that provides for an orderly restructuring of the debt of each entity and allows as much creditor consensus as possible," said a spokesman for Puerto Rico's fiscal agency.

The pension system's bankruptcy has implications for hundreds of thousands of government retirees and pensioners who are up against bondholders in the renegotiation of Puerto Rico's debts. So far, the oversight board has signaled it wanted more of the restructuring burden to fall on financial creditors compared with retirees, proposing a 10% cut in pension benefits while allocating less than a quarter of the debt service owed for the next 10 years.

Estimates vary as to the size of the gap between what the pension fund's assets and its promises to its beneficiaries, but Puerto Rico projects the unfunded liability at roughly $45 billion, the product of years of deficient funding by government employers. ERS also owes $3 billion to bondholders. The highway agency owes roughly $6.3 billion in debt, including $1.8 billion to Puerto Rico's insolvent industrial development bank, according to the oversight board.

Puerto Rico and its agencies owe roughly $73 billion in bond debt, dwarfing the roughly $9 billion owed by the city of Detroit when it entered what was previously the largest municipal bankruptcy in 2013.

The bankruptcy proceedings are the culmination of years of economic distress and heavy borrowing that has more recently pitted Wall Street creditors against local officials struggling for fiscal flexibility. Creditors are also battling each other for top priority.

Write to Andrew Scurria at Andrew.Scurria@wsj.com

Continue reading here:

More Puerto Rico agencies enter bankruptcy - MarketWatch