Welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Friday, Feb. 6. In today's briefing, the selloff in software stocks, driven by concerns over new AI coding tools, is now spreading to software-company bonds and loans—threatening to weigh down the broader corporate-debt market. And a bankruptcy judge approved PosiGen’s global settlement to clear creditor lawsuits and authorize an asset sale to lenders, including Brookfield Asset Management, to facilitate the transfer of its solar operations and customers and avoid lengthy litigation over allegedly double-pledged assets.

That expanding pain is worrying many on Wall Street, because software has come to assume an outsize presence in the corporate-debt market—the result of a wave of private-equity buyouts that stretched from the late 2010s through the early 2020s. A downturn in the sector has the potential to drag down other areas of the market, cooling what has been a humming credit engine.

PosiGen received bankruptcy court approval Thursday for a global settlement resolving multiple creditor lawsuits and authorizing the sale of assets to lenders, including Brookfield Asset Management, Akiko Matsuda reports.

Judge Christopher Lopez of the U.S. Bankruptcy Court in Houston approved the settlement over an objection from East West Bank, which holds tax credits purchased from a PosiGen entity.

The settlement facilitates a transfer of the national residential solar installer’s operations to third-party service providers and allows Brookfield to take ownership of PosiGen’s inventory and other assets. Roughly 40,000 PosiGen customers will be transferred to new servicing companies, Omnidian and SunStrong.

In approving the agreement, Judge Lopez said that stakeholders had agreed to “avoid what would have been undoubtedly multimillion dollar litigation” that could have lasted months, if not a year, to resolve disputes over allegedly double-pledged solar assets.

The Louisiana-based solar developer filed for bankruptcy in November amid broader industry struggles following the early rollback of solar tax credits during the Trump administration.

Creditors, including Legalist, sued PosiGen in bankruptcy court, alleging the company led the lender to provide a $25 million bridge loan by pledging the same solar assets to multiple lenders. In court filings, PosiGen acknowledged that the practice occurred prior to the bankruptcy. Legalist agreed to settle by splitting ownership of the disputed assets with Brookfield, which has invested roughly $600 million in PosiGen’s solar projects since 2023.

Connecticut Green Bank, which also sued PosiGen and Brookfield in Connecticut state court, joined the settlement at the last minute. Both Connecticut Green Bank and Legalist agreed to withdraw their lawsuits and requests for the appointment of a chapter 11 trustee.

Gary Eisenberg, counsel for East West Bank, argued that the settlement allows what he described as a “massive fraud with massive amounts of double selling of assets” to be “conveniently swept under the rug.”

A bankruptcy judge on Thursday approved the appointment of two trustees to oversee the chapter 11 cases of the U.S. arm of spirits maker Stoli Group, overruling objections from the Justice Department.

The approval authorized by Judge Scott Everett of the U.S. Bankruptcy Court in Dallas allows Stoli to remain in chapter 11 and pursue a restructuring rather than face liquidation.

Stoli’s top creditor, Fifth Third Bank, agreed to fund the chapter 11 cases if the court approved its request to appoint two separate chapter 11 trustees for Stoli and its affiliate, Kentucky Owl, arguing that the two companies have significantly different needs. The Stoli and Kentucky Owl cases are jointly administered.

Stoli and the official creditors’ committee initially asked the court to convert the cases to chapter 7 liquidation, citing a lack of funding. They later agreed to Fifth Third’s proposal, which allows Stoli to use the bank’s cash collateral to pay overdue professional fees, while providing the creditors’ committee with roughly $1.4 million in a carve-out fund.

The U.S. Trustee objected to the settlement, including the trustee appointments, arguing that the government holds the authority to appoint chapter 11 trustees and that the agreement could bind the trustees’ ability to properly manage the bankruptcy estates. Judge Everett said his ruling does not impede the U.S. Trustee’s appointment power.

–Akiko Matsuda

Peloton Chief Financial Officer Liz Coddington will join clean energy company Palmetto as its new finance chief.

Coddington will join Palmetto on March 30, the Charlotte, N.C.-based energy company said Thursday. She joined Peloton in 2022, and before that held senior-level finance positions at companies including Amazon Web Services—Amazon.com’s cloud computing arm—Walmart and Netflix.

Her departure from Peloton comes as the company is grappling with declining membership. The company on Thursday recorded lower second-quarter revenue and guided for further membership losses and revenue declines.

Wolfspeed reported lower revenue in the fiscal second quarter and projecting further declines into the third quarter.

The silicon carbide technology company on Wednesday posted a narrowed loss of $150.6 million, or $5.78 a share, compared with a loss of $372.2 million, or $2.88 a share a year earlier. Stripping out certain one-time items, Wolfspeed reported a loss of $6.11 a share. Revenue fell to $168.5 million, down from $180.5 million a year earlier.

The company had emerged from the Chapter 11 bankruptcy process in late September. It said it was able to maintain payments to vendors and operate business as usual during the process. Wolfspeed recorded a $1.1 billion gain in reorganization items during the quarter reflecting the company's fresh start accounting post bankruptcy, it said.

—Elias Schisgall

KKR executives downplay impact of AI disruption. A major acquisition did little to reassure KKR investors Thursday, as the private-markets firm’s shares continued to slide over worries that artificial intelligence may reduce the value of software investments.

With fears erupting that software companies will be disrupted by AI, investors in private asset managers are shooting first and asking questions later.

Private investment firms have piled into the software industry in recent years. At the end of last year, almost 9% of private-equity backed companies were in the software space, according to PitchBook tracking. The exposure is even more significant on the loan side: Within the private credit universe tracked by ratings firm KBRA, the firm classifies about 17% of borrowers as software companies, representing about 22% of the $1 trillion-plus debt exposure in that universe overall.

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