August 17, 2026 - American Efficient, Genesis Healthcare

This episode covers key developments in two major restructuring and bankruptcy cases:

A creditor in the American Efficient bankruptcy seeks appointment of a Chapter 11 trustee or independent examiner, citing federal regulatory findings that an affiliate allegedly sold nearly two gigawatts of “fake capacity” and received roughly $500 million in capacity payments. The motion also raises concerns over insider transactions, affiliate-provided DIP financing, and the absence of a creditors’ committee.

A Texas district court dismisses an appeal challenging Genesis Healthcare’s postpetition financing releases, holding that Section 364(e) prevents the court from disturbing provisions that were part of the lenders’ financing bargain when the underlying order was never stayed. The decision leaves the releases intact without deciding whether they were proper and weighs in on an unsettled question over the scope of appellate protections for bankruptcy financing orders.

💡 From allegations of energy-market misconduct and demands for independent oversight to appellate protections for DIP lenders, this episode examines how regulatory findings, insider relationships, and bankruptcy financing rules are shaping creditor rights in complex Chapter 11 cases.

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Welcome to Stretto's Restructuring Report, a podcast featuring notable stories curated by professionals and powered by Stretto Intelligence. Join us each week for the highlights, updates, and news impacting restructuring professionals. Want to go deeper than the headlines? Research Suite by Stretto lets you search across every jurisdiction in one place, with AI summaries cited directly to the docket so you can find, review, and understand the information that matters most. Try the Essential Plan free at researchsuite.stretto.com. A creditor in the American Efficient Bankruptcy has asked a North Carolina bankruptcy court to appoint a Chapter 11 trustee. PJM Interconnection and PJM Settlement filed the motion on August 11th, seeking appointment of a trustee under Section 1104A of the bankruptcy code, or, in the alternative, an examiner under Section 1104C. PJM is the regional transmission organization that operates wholesale electricity markets across all or parts of 13 states and the District of Columbia. American Efficient and its affiliates filed for Chapter 11 in the Western District of North Carolina on July 18th, and the cases are jointly administered. The motion relies on findings by the Federal Energy Regulatory Commission. On April 15th, the Commission determined that one of the debtors, Affirmed Energy, sold PJM, what the Commission called fake capacity, nearly 2 gigawatts per year, described in the motion as approximately the annual capacity of two nuclear reactors in exchange for roughly $500 million in capacity payments. According to the Commission, the company purchased sales data about energy efficient products sold by others, then collected capacity payments as though it had itself caused the qualifying reductions in demand. The commission also determined the company made multiple false statements and misrepresentations about its operations over a period of years. It ordered disgorgement of more than $407 million plus interest and imposed approximately $772 million in civil penalties. The debtors are contesting those proceedings in federal district court. The motion states that in 2024, the Commission approved a tariff amendment eliminating energy efficiency resources from PJM's capacity auctions, and that the DC Circuit affirmed. The debtors' 13-week budget, filed July 28th, projects no income during the budget period other than proceeds of the proposed debtor in possession financing. That financing would come from an affiliate called MIH. As described in the motion, it consists of an initial draw of up to $6.7 million, a delayed draw of up to $3.2 million, and a $1.6 million bridge financing roll-up, secured by liens on currently unencumbered assets and on the proceeds of avoidance claims. The debtors' schedules reflect more than $1.2 million in insider payments to MIH in the year before the petition date, over $600,000 in salary allocated to the debtor's managing director, and over $2.2 million paid to an affiliated staffing company for management services. The motion states that based on the bankruptcy administrator's notice to the 20 largest unsecured creditors, it appears no creditors committee will be formed in these cases. The financing motion, which has been continued twice, is set for hearing on August 21st. The trustee motion is set for August 26th. In other bankruptcy news, a Texas district court has dismissed an appeal challenging release provisions in a Genesis Healthcare financing order. Genesis Healthcare operates healthcare facilities across the country and filed for Chapter 11 in the Northern District of Texas in July 2025 with roughly $4 billion in assets and about 27,000 employees. On August 28th of last year, the bankruptcy court entered a final order authorizing the company to borrow up to $30 million in post-petition financing. The bankruptcy court found that the debtors needed the funding to avoid serious and irreparable harm, that more favorable loan terms were unavailable, and that the terms were negotiated in good faith and at arm's length. The order granted the lenders the full protection of Section 364E of the bankruptcy code in the event the order was reversed or modified on appeal. 60 tort claimants holding personal injury and wrongful death claims against Genesis and its affiliates appealed. They did not contest the validity of the credit or debt incurred or any priority or lien granted. They challenged release provisions covering claims Genesis held against lenders that had also lent to the company before the filing, and argued that the released parties were defined too broadly and included insiders of Genesis. Welltower OPLLC, one of the lenders, intervened as an appellee. On August 10th, the district court dismissed the appeal as moot under Section 364E. That provision states that reversal or modification of a financing authorization on appeal does not affect the validity of debt incurred or liens granted to an entity that extended credit in good faith unless the authorization was stayed pending appeal. The court described the scope of Section 364E as unsettled in the Fifth Circuit and identified two competing approaches elsewhere. The Ninth Circuit has read the provision to protect any requirement or obligation that was part of a post-petition creditors agreement to finance. The Eleventh Circuit has read it not to reach bankruptcy court actions that were not actually authorized by Section 364. The court concluded the Fifth Circuit would likely adopt the Ninth Circuit approach and applied it, along with the requirement that the challenge provision be part of the bargain for the post-petition loan. The court found the releases were part of that bargain. The lenders argued that no lender would agree to lend money only to have that money used to pursue claims against them, and the claimants did not contest that the releases were important to the financing agreement. The order was not stayed, and the claimants made no argument that the lenders failed to act in good faith. The court did not rule on whether the releases were proper. It held that Section 364E barred it from granting the requested relief. A final judgment was to follow. That's it for this week's restructuring report. For more case summaries, court updates, and bankruptcy insights, subscribe wherever you get your podcasts. And when you need the full story behind a case, Research Suite by Stretto gives you access to cases across all jurisdictions in a single search, with summaries cited straight to the source. Start free with the Essential Plan at researchsuite.stretto.com