Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Thursday, May 26. Bondholders said Russia might have already defaulted on some of its foreign currency debt. A Nevada firearms training business filed for bankruptcy after a dispute with a financier over funding through an immigration investor program. A bankruptcy judge hesitated to keep Guo Wengui's chapter 11 case in court over concerns whether the Chinese businessman is able to pay legal fees.

Russia bondholders say debt default could already be here. Russia could already be in default on some of its foreign currency debts, according to bondholders that claim they are still owed a small interest payment that Moscow didn’t send to them earlier this spring.

A change in U.S. sanctions on Wednesday is expected to cut off Russia’s ability to stay current on its dollar-denominated sovereign debt, which it has managed to continue servicing since the invasion of Ukraine began.

Some investors, though, allege that Moscow has defaulted already by failing to pay about $1.9 million in interest and they have submitted notices of the possible default to bond custodian Euroclear earlier this month, according to records viewed by The Wall Street Journal.

• Treasury to Block U.S. Investors From Receiving Russian Debt Payments
• Russia Pays Bond Coupons Ahead of Likely U.S. Payment Block
• What to Know: Russia Sovereign Debt and Its Potential Default

Nevada gun training center files for bankruptcy after financing goes awry. Front Sight Firearms Training Institute has filed for bankruptcy protection to stave off foreclosure after a dispute over funding through an immigration investment program.

The Pahrump, Nev., business, which has more than 260,000 members, sought chapter 11 protection from creditors Tuesday in the U.S. Bankruptcy Court in Las Vegas, listing total debt of roughly $20 million.

Front Sight, founded in 1996 near Bakersfield, Calif., bought 550 acres roughly 45 minutes west of Las Vegas in 1998 and built what it said was among the world’s biggest private firearms-training facilities.

Judge worries about funding if Guo Wengui bankruptcy avoids dismissal. A Connecticut judge said Wednesday it is unclear how creditors would be able to continue funding the bankruptcy of businessman Guo Wengui if she refuses to dismiss his chapter 11 case.

Judge Julie Manning of the U.S. Bankruptcy Court in Bridgeport, Conn., said there is currently no funding lined up to pay a bankruptcy trustee to continue litigating the case and potentially recovering assets tied to Mr. Guo for the benefit of creditors if it is converted to a chapter 7 liquidation.

"I don't know how the chapter 7 trustee can carry out the duties that are required under the code," Judge Manning said.

Creditors—including a woman who has sued Mr. Guo for alleged sexual abuse—have sought to keep the case in bankruptcy court and bring in an independent trustee to potentially sell assets, including a 152-foot yacht, to repay creditors.

Mr. Guo, who has denied the abuse allegations, and top lender Pacific Alliance Asia Opportunity Fund LP are seeking to have the bankruptcy case dismissed. Judge Manning said she will rule in the next 15 days.  – Jonathan Randles

Brooklyn hotel owner justifies fund transfers, saying “money doesn’t have a barcode.” On a second day of the bankrupt Williamsburg Hotel trial on Wednesday, Michael Lichtenstein, one of the two owner-developers of the 147-room hotel in Brooklyn, N.Y., testified that the owners moved funds among affiliate entities to pay for expenses because “money doesn’t have a barcode.”

A $252,100 transfer of hotel occupancy taxes to an affiliate just days after the chapter 11 filing in February 2021 shouldn’t be an issue because the money has since been set aside in an escrow account with the intent of settling with the city of New York, he said.

The hotel has been disputing the city’s tax bills that didn’t account for taxes already paid by online travel agencies, he said. The hotel’s top lender wants a chapter 11 trustee to oversee the hotel operation, arguing the owner-developers can’t be trusted. – Akiko Matsuda

96 Wythe Acquisition, 10 a.m. ET: Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., continues to hear a motion for the appointment of a chapter 11 trustee filed by Benefit Street Partners against the Williamsburg Hotel.

All Year Holdings Ltd., 2 p.m. ET: Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York hears motions including granting super-priority claim status to administrative expense. The New York property developer in February placed into bankruptcy its 900-unit Denizen luxury apartment complex in the Brooklyn neighborhood of Bushwick, citing a decline in rental income during the pandemic. 

SEC proposes more disclosure requirements for ESG funds. Regulators proposed new disclosure and naming requirements for investment funds that tap into public angst regarding climate change or social justice, in an effort to address concerns about “greenwashing” by asset managers seeking higher fees.

The Securities and Exchange Commission voted Wednesday to issue two proposals that aim to give investors more information about mutual funds, exchange-traded funds and similar vehicles that take into account ESG—or environmental, social and corporate-governance—factors. One of the proposed rules, if adopted, would broaden the SEC’s rules governing fund names, while the other would increase disclosure requirements for funds with an ESG focus.

The financial industry is split—between asset managers and those who buy their products—on the need for more SEC oversight of ESG funds. The Investment Company Institute, which lobbies Washington on behalf of asset managers, said it planned to review the proposals with its members closely but had a number of concerns, including about costs that it said investors will ultimately bear.

Fed Minutes Show Urgency for Raising Rates to Tame High Inflation. Federal Reserve officials thought they would need to raise interest rates by a half percentage point at each of their next two meetings when they approved an increase at their meeting earlier this month.

Minutes from the Fed’s May 3-4 meeting, released Wednesday, also showed officials discussed the possibility they would raise interest rates to levels high enough to deliberately slow economic growth as the central bank races to combat high inflation.

This month’s half-point rate increase lifted the Fed’s benchmark rate to a range between 0.75% and 1%. Officials also unanimously approved a plan to begin shrinking the Fed’s $9 trillion portfolio on June 1 by allowing securities to mature without reinvesting their proceeds into new ones.

• U. S. inflation and economic growth are forecast to cool later this year and in 2023

More than 70 Sears stores to close across country. (Axios)

Goldman Sachs strategist says ‘inflation’ is now Googled more than Taylor Swift. (CNBC)

Tennis legend Boris Becker moved to prison for foreigners in sign he will be deported following his guilty verdict for hiding assets after bankruptcy. (The Guardian)

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