A corporate restructuring and bankruptcy BLOG

    Bad Intentions, Demanding a Refund, Leaving the Station, The Lord(stown) Giveth, and Poor Choice

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    January 12, 2024

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

    Celsius files intent to claw back certain pre-bankruptcy withdrawals| CoinTelegraph

    On January 9, Celsius bankruptcy administrators notified creditors that account holders who took out more than $100,000 in the 90 days before the company announced bankruptcy on July 13, 2022, may be required to return them. Creditors who do not settle by the deadline of January 31, 2024, will have their withdrawal preference exposure addressed by administrators and could be sued to recover payments they obtained.

    S&K Take: Each of the crypto bankruptcies seems to be implementing a bespoke preference protocol depending on the applicable circumstances. The FTX plan, for example, proposes that plan administrators will only look at withdrawals that exceeded $250,000 and occurred within 10 days of the petition date. Celsius on the other hand is casting a wider net, using the full 90 day window and reviewing transactions over $100,000. The Celsius plan also provided for a settlement protocol, where creditors can settle their exposure for 27.5 cents on the dollar.

    US Supreme Court justices balk at $326 mln bankruptcy fee refund demand| Reuters

    On Tuesday, the U.S. Supreme Court listened to arguments in a case regarding an inconsistently applied increase in bankruptcy fees, with three justices seeming hesitant to make U.S. taxpayers pay a $326 million refund to debtors who paid increased rates. The argument stems from a 2017 law that raised the quarterly fees that big companies pay to fund the U.S. Department of Justice’s “bankruptcy watchdog,” the U.S. Trustee.

    S&K Take: The Supreme Court has been handing down decisions on bankruptcy issues like hotcakes recently, all while the bankruptcy bar eagerly awaits the fate of third party releases to be determined by Purdue. This issue is a bit more mundane but interesting nonetheless. Most of you will recall that the UST upped fees in the program in 2017. The UST, however, doesn’t exist in North Carolina and Alabama, meaning that debtors in those jurisdictions did not pay their fair share. The Supreme Court deemed that to be unconstitutional. Now the question is what to do about the excess fees that were paid. Certain folks want to see that repaid to debtors (and presumably, in most circumstances, passed on to creditors through the relevant plan), but the government disagrees (shocker, I know). According to the article, the Justices seem skeptical of a refund, and prefer that the government keep the money that they probably already pissed away utilized. If we do see a refund, plan administrators and liquidating trustees will have some work to do.  

    Audacy passes ‘First Day’ of bankruptcy as shareholders leave| Radio Ink

    Bankrupt U.S. radio company Audacy secured approval from the U.S. Bankruptcy Court for the Southern District of Texas for all of its requested first day relief. The Court authorized a $57 million financial package, including a $32 million debtor-in-possession term loan and an extension of existing accounts receivable financing facility from $75 million to $100 million.

    S&K Take: The Audacy case, which we previewed in these hallowed pages last week, filed as expected in the Southern District of Texas. Filing in that jurisdiction alone is notable given all of the acrimony surrounding the Freeman/Jones situation (which facilitated some interesting hearings this week, looking at you, 4e), but Houston is getting back on the board. The case itself appears to be relatively quiet, although, as we discuss below, that infrequently remains the case in bankruptcy. We will keep an eye (an ear?) on this case as it progresses.  

    SEC files $45 million claim against Lordstown Motors| WKBN

    The Securities and Exchange Commission (SEC) has filed a $45 million claim against Lordstown Motors, stating that it’s for “monetary remedies for violations of securities laws.” Lordstown Motors disputes the SEC’s claim and states in an SEC Form 8-K filing that it continues to work with the SEC and debtors and that any “recovery by the SEC will reduce recoveries to the company’s stockholders, if any.”

    S&K Take: The Lordstown giveth, and the SEC taketh away. The SEC is trying to wade into the unsecured claims pool in the Lordstown case, alleging securities law violations against the wannabe EV manufacturer. The last we had left this case, things were looking pretty rosy for at least a small equity recovery, with a significant amount of cash on hand and implicit promises from the debtor that GUCs would get paid in full. Welp, not so rosy anymore. As frequently happens in bankruptcy, new claimants crawl out of the woodwork with their hands out, in this case it’s the venerable securities and exchange commission. I imagine that this claim will be closely scrutinized and likely challenged, so equity holders shouldn’t rip up their tickets quite yet.  

    Shuttered California trucking company files for Chapter 7| Freight Waves

    Wise Choice Trans Corp., a California-based third-party logistics company, filed for bankruptcy liquidation in the U.S. Bankruptcy Court for the Northern District of California last Thursday. The company listed its assets and liabilities between $1 million and $10 million and stated that it has up to 49 creditors and that no funds will be available for unsecured creditors once it pays administrative fees.

    S&K Take: Yellow, this is not. It does not appear like there will be any sales aggregating $1.8 billion in proceeds in this case, but given all of the attention that the logistics space is getting in restructuring circles, this felt like one worth mentioning. The name of the company alone lends itself to a snarky title, so why not.  

    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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