Below is our initial take on recent bankruptcy-related developments:
After halting withdrawals in November, crypto lender BlockFi filed for bankruptcy this week citing “significant exposure” to FTX, becoming the latest domino to fall in the crypto industry.
Crypto brokerage Genesis is seeking to avoid bankruptcy after reports circled that creditors have consulted with major law firms in efforts to avoid a similar situation to FTX.
S&K Take: The BlockFi filing was the big news of the week in crypto, although rumors of an impending Genesis bankruptcy ran a close second. The BlockFi first day hearing was held on Tuesday, with the debtors taking a different approach than the majority of crypto cases to date, noting that any coins in BlockFi wallets were property of the relevant customers, and not the property of BlockFi. Obviously, that is a massive point of contention elsewhere, with litigation over that issue teed up for next week in the Celsisus case (something we will be watching closely). Otherwise, BlockFi has filed a standalone plan that contemplates either a sale process or what amounts to an equitization in favor of account holders. Genesis is another reported victim of FTX contagion, although the company is allegedly attempting to stay out of chapter 11. Remains to be seen if that is possible, although given what has happened to date in the crypto industry, it seems unlikely. Not much FTX news this week, although SBF did sit down for an hour-long interview with the NY Times and hop on Twitter spaces to answer some questions. Seems like an absurd move considering pending litigation and the threat of much, much more in the future. The content of the interview was really more of the same from SBF, who continues to play dumb with respect to the FTX-Alameda intercompany obligations and the disappearance of billions of customer dollars.
The Holiday Inn hotel in the Financial District of Manhattan, a 492-room hotel, filed for Chapter 11 bankruptcy this week, citing a need to renegotiate with creditors despite recovering from struggles brought on by the pandemic.
S&K Take: A few hospitality names have appeared on the radar this week, with a FiDi Holiday Inn filing to stave off a potential receivership and Urban Commons (on Washington Street in NYC) also seeking chapter 11 protection. The Holiday Inn case revolves around negotiations with its lender, while Urban Commons is a little more complicated. There were some governance concerns there (equity is held by Wu And Woods from Eagle Hospitality fame) which were addressed with the appointment of a CRO and an independent director. This is a space that seems like one ripe for more activity.
Reverse Mortgage Funding LLC, the home lender backed by Starwood Capital, has filed for Chapter 11 bankruptcy, becoming the latest company to suffer from rapid mortgage rate increases as the company listed at least $10 billion each in assets and liabilities.
S&K Take: This is a massive case as far as liabilities go, although at first blush it looks like a fairly straightforward liquidation is contemplated. Prepetition lender is going to fund the case with a DIP, so maybe not much acrimony here?