Below is our initial take on recent bankruptcy-related developments:
Bankrupt cryptocurrency lender Celsius Network LLC announced this week that it has chosen the proposal from Fahrenheit to exit bankruptcy. Fahrenheit, a consortium that includes VC firm Arrington Capital, will provide the capital, management group and technology to create and operate the new company (NewCo).
S&K Take: The Celsius auction has finally come to an end, with a consortium of crypto players winning the assets. Earn customers, who, per the Court’s decision, did not hold title to the crypto they placed on the Celsius platform, will get some crypto back in kind as well as equity in the Newco. On its face, it seems like a great result for those customers and there has been celebration in the Crypto Twitter streets. The auction was lengthy, primarily due to the complexity of the platform and the asset class and all of the complications that come with those nuances. We aren’t quite done yet, though, as the sale will need to close and the Debtors will need to implement a plan, which they have said they can do by the end of June.
Crypto Lender BlockFi Ordered by U.S. Court to Withdraw Communication on Unapproved Reorganization Plan | Coindesk
Bankrupt crypto lender BlockFi has withdrawn statements relating to an unauthorized wind-down plan published on May 13th. The estate was ordered to issue a “corrective letter” to clarify that their statements were posted prematurely and without court approval.
S&K Take: The BlockFi case has featured some real sparring between the Debtors and the UCC. It started with a plan exclusivity fight, which went the Debtors’ way (they usually do). This round, however, goes to the UCC. The UCC had filed a motion for an order “Remedying the Debtors’ Improper Plan Solicitation”. Obviously a bit of an unusual motion, the UCC alleged that the Debtors had gone on Twitter and posted FAQs and other information that was misleading with respect to the proposed plan, calling the statements “loud, ‘in your face,’ carnival barking.” Whatever side you’re on, you have to tip your cap to that turn of phrase. Anyway, the Court agreed with the UCC, had the Debtors take down the information and post a corrective letter drafted by the UCC. The parties are headed to mediation on the plan, which largely revolves around preserving claims against management related to BlockFi’s prepetition conduct. Feeling like we will have more to report on this one.
Plastiq, a B2B payments company filed for bankruptcy this week in a Delaware court. The company was last valued at $480 million in a now-canceled SPAC deal. Pending court approval, Priority Technology Holdings plans to acquire Plastiq out of bankruptcy.
S&K Take: Another failed de-SPAC for the win! This one is a little different at least. Instead of consummating a transaction that saw the vast majority of investors redeem, leaving the merged entity with little new cash, this one never got off of the ground. Without that working capital, the company became liquidity constrained, which was exacerbated when a subsequent acquisition failed. The Debtors enter the case with a stalking horse and intend to run a sale process.
Bankrupt Bitcoin miner, Core Scientific, expects to exit proceedings with an additional $46 million due to favorable conditions in the market.
S&K Take: Good news for Core Scientific stakeholders. What once looked like a complete disaster now looks like a successful restructuring. This is mainly due to the change in market conditions during the pendency of the case—energy costs went down, BTC prices went up—a boon for a crypto miner. The Debtors anticipate they can emerge by September. May want to keep that timeline short, lest market conditions blow back the other way!
Last week was the worst 48-hour stretch of bankruptcies in corporate America since 2008. With retail companies being the hardest hit in the current economic environment, those with weaker balance sheets may continue to feel the pain all the way into 2024.
S&K Take: More mainstream bankruptcy love! Everyone have a great holiday weekend!!!