Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Wednesday, May 28. In today's briefing, Steward Health Care System is proposing to pay key vendors and tax authorities up to half of what they are owed for goods and services provided, even though such debts are legally required to be paid in full under the bankruptcy code. And PDD, the Chinese parent of Temu, reported a nearly 50% drop in first-quarter profit as new U.S. tariffs, the end of a duty exemption on low-value packages and growing challenges both at home and abroad hurt its business.

Steward Health Care System is proposing to settle its most essential bills to vendors and taxing authorities, offering them a maximum of half of what they are owed for goods and services provided during the hospital operator’s bankruptcy.

The company’s chapter 11 plan lays out how Steward would settle its highest-priority bills because it doesn’t have nearly enough funds to make the required full payment for goods and services provided during its bankruptcy proceedings.

While creditors typically only recover cents on the dollar on claims incurred before a chapter 11 filing, under the bankruptcy code they are required to be paid in full for goods and services they provide while companies are under court protection.

PDD Holdings, the Chinese parent of popular bargain online seller Temu, said its profit dropped nearly 50% in the first quarter, as a drastically different tariff environment in the U.S. added to challenges at home.

The company’s shares fell 14% in Nasdaq trading Tuesday.

With President Trump in the White House, PDD faced a major setback in its global ambitions, as Temu, whose ultracheap everyday items have been a hit with budget-conscious U.S. consumers, faced not just new U.S. tariffs but also the disappearance of a duty exemption for low-value packages from China.

Over the past few years, Shanghai-based PDD had been a bright spot among Chinese e-commerce companies with its low-cost products attracting bargain hunters in China and disrupting markets around the globe. But in recent quarters, economic slowdown and intensifying competition in China had started to hurt its outlook. Temu also started facing increasing pushback overseas, particularly in the U.S.

Millions of Americans had their student-loan payments put on pause during the pandemic. Now they are back on the hook again.

For borrowers, this means that every month, money that they presumably used to spend elsewhere is going to pay off debt instead. Many who aren’t paying are now considered delinquent or defaulted, a status that sinks credit scores. Around 5.6 million borrowers were marked newly delinquent on their student loans in the first three months of this year.

That will strain personal finances. At the same time, it creates fresh challenges for the broader economy.

Azul S.A. reached restructuring agreements with key financial stakeholders, part of which will include the Chapter 11 process in the U.S.

Shares in premarket trading on Wednesday were down 41% at 30 cents.

The Brazilian airline said the agreements include key stakeholders including its existing bondholders; its largest lessor, AerCap; and strategic partners, United Airlines and American Airlines.

Azul said the agreements are designed to position its business for the long-term with significant deleveraging and positive cash flow generation. The company is using the Chapter 11 process to implement the agreements, which include a commitment of about $1.6 billion in financing throughout the process, eliminating over $2 billion of debt and consideration of further equity financing of up to $950 million upon emergence.

Azul said it will continue flying and operating as normal while maintaining its commitments throughout this process.

"We have made a strategic decision to pursue a voluntary financial restructuring as a proactive move to optimize our capital structure— which was burdened by the Covid-19 pandemic, macroeconomic headwinds, and aviation supply chain issues," said Chief Executive John Rodgerson. — Denny Jacob

A federal judge on Tuesday struck down President Trump’s executive order against the law firm WilmerHale, adding to a drumbeat of decisions that have rebuffed the White House campaign against the legal industry as unconstitutional.

In a 73-page opinion, Judge Richard Leon of the U.S. District Court in Washington. D.C., said the order unconstitutionally infringed on freedoms that preserve an “independent bar willing to tackle unpopular cases, however daunting.”

“I have concluded that this Order must be struck down in its entirety as unconstitutional. Indeed, to rule otherwise would be unfaithful to the judgment and vision of the Founding Fathers!” added Leon, an appointee of former Republican President George W. Bush.

• Chinese developer Country Garden Holdings' efforts to win backing for a $14.1 billion offshore restructuring are running into resistance as key bank creditors say failure to accept some of their demands would be a “deal breaker.” (Bloomberg)

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