Below is our initial take on recent bankruptcy-related developments:
Instant Brands, the parent company of many popular kitchen products, filed for Chapter 11 bankruptcy this week. Instant Brands produces Instant Pot, Pyrex and Corelle among other products. Despite seeing growth since the start of the pandemic, the company attributed tighter credit and higher interest rates as factors in the filing.
S&K Take: Everyone has an Instant Pot, right? What are we doing in bankruptcy? Debtors would tell you that it is lack of liquidity and higher interest rates. The case kicked off with an interesting DIP setup, with $132.5 million loan being used to paydown a $55 million obligation to its equity sponsor. Not something you see every day, although this relates to certain LCs posted to back the ABL. The Debtors assert that the payment frees up collateral to support the DIP, which was a requirement of the DIP lender. Overall, the company is filing bid procedures imminently, so let’s keep an eye on this one.
Former crypto lender Celsius has filed an updated bankruptcy plan, to incorporate the recent successful bid for assets by the Fahrenheit consortium. The plan must be agreed by the NY bankruptcy court, and sources comment that creditor pushback to the plan is anticipated.
S&K Take: Celsius updated its plan to incorporate the Fahrenheit bid (as detailed previously in these pages) and is looking towards a confirmation hearing in September. The plan is complicated but has broad support. That doesn’t mean there are no hurdles left―the plan provides preferred equity with a goose egg, and a trial on sub con and related issues to determine if that is appropriate will go forward in July. On top of that, loan customers are gearing up for a fight, mainly because the plan doesn’t include a return of their collateral. We have covered this one a lot, but we aren’t out of the woods quite yet.
After filing for bankruptcy in May, crypto exchange Bittrex is set to open for customer withdrawals this week. In a ruling by Delaware bankruptcy judge, Bittrex US allows its customers holding undisputed claim to withdrawal assets from the trading platform.
S&K Take: We walked through this one last week, with the DOJ objecting to the return of customer’s coinage and questioned what the intent of that was. Did we get the DOJ to back down? We may never know the answer, but they did. The DOJ will consent to the distributions while reserving rights on customer property issues and the like. Good to see customers coming out on top of this one.
Aearo Technologies, a subsidiary of 3M Co., is appealing the decision to dismiss its bankruptcy case. Last week, an Indiana bankruptcy judge had dismissed the case, determining that Aearo did not have a “valid reorganization purpose”.
S&K Take: The second body blow to the Texas Two-Step came out of Indianapolis, where the bankruptcy judge followed the Third Circuit in dismissing a 3M subsidiary’s bankruptcy case. The decision was largely based on the same rationale as the LTL decision―the debtor had parent funding and was not as distressed as the court would have liked. The Indy court also noted that the case did not have a valid reorganization purpose, i.e., this is not what bankruptcy was intended to do. As the article suggests, this decision has been appealed, so we will closely follow this fluid situation.
Online retailer Overstock.com plans to buy certain assets of retailer Bed Bath & Beyond, which recently filed for bankruptcy protection. BBB will continue to take other bids this week ahead of the Friday deadline, at which point it will undertake an auction to determine the winning bidder.
S&K Take: Sadly, the BBBY bankruptcy has not been pretty. The UCC cut a deal for a share of litigation proceeds, taking a share with secured creditors. The main reason for that is that the liquidation and sale of the IP (and buybuy Baby) isn’t looking like it will cover the secured debt. The ABL (about $80 million left) and the DIP should be paid off, but that leaves a big chunk of FILO debt that may not get covered. That is in addition to $1 billion in funded unsecured debt and trade of about half of that.