Below is our initial take on recent bankruptcy-related developments:
5th Circuit rejects Serta Simmons' controversial 2020 debt deal | Reuters
The 5th U.S. Circuit Court of Appeals ruled Tuesday that mattress maker Serta Simmons did not treat its lenders equally in a controversial 2020 debt deal, warning that similar deals involving so-called “lender-on-lender violence” may be inappropriate.
S&K Take: Clearly the big news in the restructuring world over the holiday break, dropping before the ball on New Year’s Eve. The decision calls uptier transactions into serious question, and likely restricts the use of the “open market” exception to non pro rata purchases of existing loan obligations in LME transactions. The LME landscape, particularly in the SD Tex, has changed dramatically since Judge Jones issues the original Serta decision, granting summary judgment in favor of the majority lenders. After the scandal, Judge Isgur closely evaluated the Wesco LME over the course of a 30-day trial, ultimately concluding that he would reform the transaction. Judge Lopez also found that Invesco was prejudiced by the LME in Robertshaw, although that victory rang hollow, as Judge Lopez only granted Invesco an unsecured claim in the case for the breach. Now, the Fifth Circuit has eviscerated the previously favorable Judge Jones decision. While all of these decisions are limited to their facts (and were all very different factually) the tide seems to be turning. The Fifth Circuit also called equitable mootness into question through this decision, calling it a “judge-made, atextual doctrine of pseudo-abstention” and noting that “to the extent equitable mootness exists at all, we affirm it cannot be ‘a shield for sharp or unauthorized practices.’” Tell us how you really feel.
Party City and The Container Store add to a spike in retail bankruptcies in 2024 | Modern Retail
High-profile bankruptcies from Party City and The Container Store put a damper on the end of the year for the retail industry.
S&K Take: Good overview of the year in retail bankruptcies. The count was up to 51 “major” retail bankruptcies from 25 in 2023. While retail sales generally increased by 3.4% in 2024, performance across the industry was very “have” or “have-not.” The Walmarts and Amazons of the world did quite well, which crushed lesser competition that was more susceptible to macro issues—sub-industry downturns (LL Flooring struggled because of the decline in the housing market, for example), lower consumer spending or higher freight costs for example. Low-cost cross-border retailers like Temu and Shein also did not help matters. Most of this points to more of the same in 2025.
Celsius Network appeals $2B disparagement claim rejection against FTX | CryptoSlate
Celsius Network filed a notice of appeal on Dec. 31, contesting Judge John Dorsey’s decision to disallow the bankrupt crypto lender’s $2 billion disparagement claim against defunct crypto exchange FTX.
S&K Take: Judge Dorsey issued a decision on December 18 sustaining the FTX Debtors’ objection to the $444 million preference claim asserted by Celsius in the FTX bankruptcy, ruling that the preference claim did not relate back to a timey filed $2 billion disparagement claim and that there were no explanations or assertions of excusable neglect. Celsius has now appealed that ruling to the District Court of Delaware.
