A corporate restructuring and bankruptcy BLOG

    A Miner Problem? Cineworld Rejection Rejection, No Equity in Celsius, Juul Getting Smoked, and Holiday Blues?

    What's News
    October 28, 2022

    Below is our initial take on recent bankruptcy-related developments:

    Bitcoin Miner Core Scientific’s Shares Plummet After Bankruptcy Warning | CoinDesk

    One of the world’s largest Bitcoin miners, Core Scientific Inc., has expressed concern that it may run out of money by year’s end and will seek bankruptcy protection if needed.

    S&K Take: Crypto calamity continues. Not sure what we are calling it now, but distress in the crypto space remains ongoing. The most recent name to surface as a potential debtor is Core Scientific, a significant mining entity. Core Scientific would join Compute North, another miner, in seeking bankruptcy protection. Miners have struggled with lower BTC/crypto prices sitting near their break even. Core Scientific has hired Weil and PJT according to reports, so this will be one to keep an eye on.

    Regal Owner Cineworld Bankruptcy Sparks Breach of Contract Suit from National CineMedia | The Hollywood Reporter

    Movie theater advertiser National CineMedia is suing Regal Cinemas for allegedly using the bankruptcy process to exploit exclusivity, non-competition, non-negotiation, and confidentiality rights.

    S&K Take: National CineMedia filed an adversary proceeding essentially seeking an injunction prohibiting rejection of its agreement with the Cineworld debtors. Their allegations appear to be that Cineworld has already breached the agreement, for which they also allege breach of contract claims. This will be interesting—Cineworld is seeking to reject the agreement, which would seem to be their right as a debtor. We all know that a rejection is a breach as of the petition date, so the breach claims seem redundant. It also seems like it will be tough to get a court to enjoin a debtor from rejecting a contract. We will take a closer look at this one to see what we are missing, but looks like NCM has an uphill battle here, and could be resigned to filing a massive damages claim.

    Celsius Stockholders Lose Bid for Official Bankruptcy Committee | Bloomberg

    A U.S. bankruptcy judge ruled against Celsius stockholders’ motion to form an official equity holder committee as the stockholders look to claim Celsius’ most valuable assets.

    S&K Take: The Celsius debtors staved off at least one more level of complexity in their cases for the time being. Judge Glenn decided that an equity committee was not required, noting that the prospective committee members were exceptionally well represented already. Given the huge gap between what customers are owed and what crypto Celsius has, it would be surprising if customers were not the fulcrum in the case.

    Juul Discusses Possible Bailout With Two of Its Biggest Investors | The Wall Street Journal

    Juul Labs Inc. is in preliminary discussions with two of its investors about a bailout that could help the e-cigarette maker avoid bankruptcy and cover the company’s operations.

    S&K Take: Juul has been besieged on all sides of late, facing litigation and an outright FDA ban. It looks like there could be a path to avoid bankruptcy if it can obtain financing, although it's unclear what the go-forward business would look like.

    Troubled Retailers Hunker Down for Holiday Stress Test | The Wall Street Journal

    Midsize retailers, including Bed Bath & Beyond, are securing additional capital in advance of what could be a shaky holiday season as sales have slowed and inventory piles up resulting from high-inflation and post-pandemic spending habits.

    S&K Take: Some big retail names have been in the bankruptcy news lately, although a few have seemingly lined up financing that could give them some additional runway. No matter what the situation is, the holiday season is going to prove critical to most. There are clearly issues piling up including inflation, the supply chain, and receding consumer sentiment. In the aggregate, these could be tough to overcome.

    The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

    November 18, 2022

    This Week In Crypto Contagion



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