Below is our initial take on recent bankruptcy-related developments:
Speculation is growing that Bed Bath & Beyond will soon file for bankruptcy, after its latest attempts at raising funds have not been successful. If the company is not able to raise enough by the April 26 cutoff date, it may mean it needs to file for Chapter 11 and liquidate its assets.
S&K Take: Ok, we are back at impending bankruptcy in the back-and-forth BBBY saga. Word is that the retailer needs to raise $300 million in equity financing by April 26 to stave off a filing, which seems unlikely given the stock price, and that bankruptcy professionals are under the hood prepping a filing. What that ultimately looks like is still a question, although everything in the press suggests a liquidation. Might be writing about the first day hearing in this space next week.
In a new filing this week, the U.S. government has agreed that substantive parts of the Voyager-BinanceUS deal may be allowed to move forward, before an appeal is confirmed. Certain, more contentious, elements of the deal would remain on hold.
S&K Take: The parties came to a sensible resolution here to deal with the government’s appeal of the Voyager sale. To recap, the government doesn’t want exculpations to get parties off the hook for prospective tax and securities violations. This deal basically allows the substantive portions of the sale, i.e. getting funds and crypto in the hands of Binance and former Voyager customers, while preserving the government’s rights to argue on the exculpation issue. It will be interesting to see how that plays out, but the good news is that customers don’t need to wait around for that to play out.
Late this week, a U.S. judge temporarily halted the majority of the lawsuits alleging Johnson & Johnson baby powder and other talc products have caused cancer, along with stopping any trials the company is conducting related to its recent settlement attempts. The decision comes as J&J requested to freeze cases as it works to reach a permanent settlement with current plaintiffs, also setting aside funds for future lawsuits.
S&K Take: LTL 2.0 got started in earnest, much the way that LTL 1.0 did. Judge Kaplan extended the stay to halt most talc products lawsuits, a decision he said he will revisit in May. The gorilla in the room is the impending motion to dismiss, which the plaintiffs’ lawyers which oppose the filing have already promised is coming. That will undoubtedly focus on Judge Ambro’s and the Third Circuit’s LTL 1.0 decision requiring “financial distress” for a filing. In the first go-round, LTL had a $60+billion parent guaranty, and the Third Circuit found that meant no financial distress. Now, that guaranty is limited to $8.9 billion, and the question will be whether this qualifies under the Third Circuit’s standards. Any decision will likely have a significant impact on bankruptcy cases nationwide, as parties seeking to challenge a bankruptcy filing will undoubtedly attack using the financial distress angle.
Boy Scouts of America will begin to compensate sexual abuse victims from a $2.4 billion trust after emerging from bankruptcy | CNN
This week, The Boy Scouts of America confirmed they will begin to distribute compensation owed to thousands of victims of sexual abuse, as part of the organization’s settlement with the victims. BSA will pay out $2.4B to the more than 82,000 victims. This move comes after the organization’s reorganization plan was approved and it completed the three-year restructuring process.
S&K Take: The Third Circuit denied a request from non-settling insurers for a stay of the Boy Scouts’ plan of reorganization, allowing the plan to go effective and for the wheels to start turning with respect to distributions to claimants. As we have reported, the settlement is massive, with $2.4 billion going to sexual abuse claimants, the biggest such distribution in US history. The case was a bitter battle that took years, but the result ultimately seems commendable.