Next Week in Bankruptcy

On Monday in Manhattan, Sabine Oil & Gas Corp. and creditors it has fought for nearly a year in bankruptcy court will kick-off a seven-day showdown over the company’s multibillion-dollar restructuring plan.

During the hearing, which promises to be both lengthy and contentious, Sabine will face a group of creditors owed about $1.4 billion but slated to be repaid less than two cents on the dollar. Each side has agreed to limit itself to 24 hours of arguments and testimony spread out over at least seven days before U.S. Bankruptcy Court Judge Shelley Chapman.

Court papers filed earlier this week show Sabine and its creditors failed to reach any compromises during last-ditch settlement talks that could have resolved a long list of objections, appeals and other disputes that have taken center stage during the bankruptcy.

Sabine filed for chapter 11 protection last summer with a plan to restructure some $3 billion in debt. If approved, the restructuring proposal, which has already survived a number of hard-fought legal challenges from creditors, would wipe out more than $2.5 billion of that debt and leave the oil company with access to at least $200 million in cash. In exchange, top-ranking lenders would take control of about 93% of the equity in the reorganized business.

On Tuesday, KaloBios Pharmaceuticals Inc., the company once headed by Martin Shkreli, will ask a Delaware judge for a ticket out of bankruptcy.

Mr. Shkreli, who drew national attention for raising the price of a life-saving drug from $13.50 to $750 per pill, was arrested in December on securities-fraud charges related to his activities at another drug company and his role as a hedge-fund manager.

Mr. Shkreli denies the charges that led to his arrest, but the effect on KaloBios was immediate. The company removed him as chief executive and resorted to chapter 11 protection, telling Judge Laurie Selber Silverstein that it was taking measures to prevent him from interfering in the company’s affairs.

Last month, the company won preliminary approval of its bankruptcy-exit plan, which reins in Mr. Shkreli’s influence. The plan is designed to relaunch the development-stage drug company to pursue an opportunity that could mean big profits. Like other shareholders, Mr. Shkreli will see his stake in KaloBios diluted if the turnaround plan is ultimately approved and KaloBios exits bankruptcy as projected.

The company on Tuesday will also ask for the judge’s permission to reward the new leaders it credits for getting the company out from under the cloud left behind when Mr. Shkreli was arrested.  Under the proposal, new Chief Executive Cameron Durrant and two other members of the pharmaceutical company’s board would get a one-time payment in the form of equity —1.4% of the reorganized company’s equity plus another $700,000 worth of stock.

Lawyers for TransCare Corp. will gather Thursday in a Manhattan courtroom to fend off calls for an investigation into what caused ambulance operator to collapse into bankruptcy earlier this year.

The investment funds that once backed loans to the distressed companies in financier Lynn Tilton’s portfolio, including TransCare, have asked Judge Stuart Bernstein for help obtaining information about the  financial condition of the company and its past business dealings with Ms. Tilton’s private-equity firm, Patriarch Partners LLC.

The so-called Zohar funds have asked for access to a wide range of information including all communications between TransCare and Ms. Tilton, Patriarch and her other investment vehicles. The information dredged up in the investigation could be fodder for future lawsuits against both TransCare and its owners, the lawyers wrote.

Ms. Tilton once controlled the funds, which are designed to feed cash into her companies, but recently stepped down from that role, saying she will focus on managing the more than 70 companies in the Patriarch portfolio. The Securities and Exchange Commission has accused Ms. Tilton of hiding losses in the funds, allegations she denies.

The investigation proposed by the funds, known as a 2004 examination, gives creditors extensive power to investigate the affairs of troubled companies but is subject to bankruptcy-court approval.

TransCare and several affiliates abruptly filed for chapter 7 bankruptcy protection beginning in February, shuttering operations in New York, Pennsylvania and Maryland.

-Peg Brickley contributed to this article.

Write to Tom Corrigan at [email protected]. Follow him on Twitter at @TomCorriganWSJ