Next Week in Bankruptcy

A federal judge will hear protests on Wednesday from bondholders who say the city of San Bernardino, Calif., shouldn’t leave bankruptcy protection without making a higher repayment offer on roughly $51 million worth of bonds.

The 213,000-resident city, which has been in bankruptcy for more than three years, needs approval from Judge Meredith Jury to put its reorganization plan into action. The plan would cut health-care benefits for thousands of retired city workers, freeing up money to fix roads, prepare city hall for earthquakes with $20 million in improvements and buy $33 million worth of new police vehicles, according to documents filed in U.S. Bankruptcy Court in Riverside, Calif.

The plan also calls for the city to save money by contracting out services currently provided by city workers to other agencies or private entities.

But under the same plan, a Luxembourg bank that extended bonds worth about $51 million—Erste Europaische Pfandbrief-und Kommunalkreditbank AG—would be paid about 1% of that debt. The bank purchased the San Bernardino bonds in 2005 to pay pensions.

The city stopped repaying the bonds once it filed for bankruptcy on Aug. 1, 2012, projecting to run out of money in less than two months. San Bernardino, which is located about 60 miles east of Los Angeles, has suffered from double-digit unemployment and lower tax revenue from fallen property values.

Bondholders have objected to the city’s spending and to the repayment plan, arguing the city should raise taxes instead. They have also criticized San Bernardino officials’ decision to continue making full payments into the pension fund run by California Public Employees’ Retirement System , also known as Calpers, which distributes that money to thousands of retired city workers.

Pension benefits of current retirees or the active workforce enjoy strong protections by states, but filing for bankruptcy protection gives a city or county the power to cut contracts.

On Monday, a bankruptcy judge in California could clear Internet music giant Pandora Media Inc. to take over struggling competitor Rdio Inc. with its purchase offer of $75 million in cash.

No better offers came in for the 140-worker company, which was founded in 2010, but the transaction still needs approval from Judge Dennis Montali.

The San Francisco company filed for bankruptcy protection on Nov. 16, saying its debts top $200 million. It had been racking up losses of around $2 million per month, thanks largely to the high “costs of retaining high caliber Silicon Valley engineering talent,” according to documents filed in the U.S. Bankruptcy Court in San Francisco.

Like Spotify and several other competitors, Rdio charges users $10 a month for unlimited access to tens of millions of songs. While many music companies believe that approach is key to their future, consumers have been slow to embrace it and some artists have complained that it doesn’t generate sufficient royalties. On top of that, deep-pocketed competitors including Apple Inc. and Alphabet Inc. have recently entered the market, challenging smaller outfits such as Rdio.

On Tuesday, a bankruptcy judge in Alabama could approve a deal between coal-miner Walter Energy Inc. and unsecured creditors while the company looks for buyers for some of its mining operations.

At a court hearing, Judge Tamara Mitchell is expected to go over the deal’s fine print, which would give unsecured creditors a 1% ownership stake in the company if its core mining operations are bought by lenders who’ve already made a purchase offer. Under that purchase offer, the lenders would forgive about $1.25 billion in debt.

Walter Energy filed for bankruptcy on July 15, roiled by energy markets that were thrown by an oversupply of natural gas unlocked by a new drilling technique called fracking. Oil prices fell below $40 a barrel earlier this month.

Walter Energy officials are looking for buyers to bid on some of the company’s mining operations at a Jan. 5 auction. The sale doesn’t include some mines in West Virginia.

-Peg Brickley, Hannah Karp and Jacqueline Palank contributed to this article.

Write to Katy Stech at [email protected]. Follow her on Twitter at @KatyStech