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

Yellow’s Shareholders Get Desired Ruling in Delaware Bankruptcy Court | Freight Waves

On Monday, a Delaware bankruptcy court granted Yellow Corp. a 90-day extension to exclusively administer its liquidation. The extension keeps other constituencies from proposing competing plans for unwinding the company. 

S&K Take: Seems like an appropriate time to revision Yellow, an old favorite of the blog. The Court just granted an exclusivity extension that was fiercely contested by the UCC, which doesn’t see eye-to-eye with the Debtors on case trajectory. The Debtors are gearing up for a trial on certain pension claims (about $7 billion worth), which, if they win, can provide a recovery to equity. The UCC thinks that the Debtors are tilting at windmills and should just suck it up and settle with the pension funds (and stop burning cash in the form of massive amounts of professional fees). Both sides accuse the other of conflicts—the UCC argues that the Debtors are controlled by MFN, their majority equity holder, and are thus shills for equity, while the Debtors point out that the pension funds are Committee members. Regardless, the UCC had an uphill battle on exclusivity and ultimately Judge Goldblatt granted the Debtors their 3-month extension. The Court will begin considering the pension claims on August 6, so we have that to look forward to.

FTX to Pay a Fraction of $24B IRS Claim | Bloomberg Law

The IRS will receive a $200-million claim in FTX's bankruptcy to be paid within 60 days of plan effectiveness as well as a $685 million subordinated claim, to be paid if funds are available.

FTX Asks for Litigation Stay | Reuters

The crypto platform requested that a U.S. judge halt class action complaints and other lawsuits that target company insiders and venture capital firms accused of being involved in its collapse, claiming it puts efforts to repay customers at risk. 

S&K Take: The FTX case continues to progress towards confirmation with some big revelations this week. First, the IRS fell into line, agreeing to a $200 million unsecured claim and a $685 million subordinated claim. This fills in another piece to the confirmation puzzle which was highlighted by the draft plan. On the other side of the equation, the Debtors are attempting to prevent third-party plaintiffs from pursuing litigation outside of the bankruptcy. The MDL plaintiffs had sued a number of executives and celebrities associated with the collapse. The Debtors argue that those are estate claims and should be pursued by the Debtors. In other news, certain creditors lobbed in objections to the disclosure statement. One interesting objection was lodged by a preference defendant, arguing that the plan allowed for arbitrary pursuit of preference claims (the Debtors have the ability to waive such claims under the plan, and there is no methodology regarding which they will pursue and which they won’t), which amounts to unfair discrimination of similarly situated creditors. Interesting discrimination argument, although that seems to be true of most plans (although claims excluded from releases are frequently better-defined). The Debtors do seem to have more leeway here.

Law Firm’s Bankruptcy Ouster Casts Shadow on Private-Equity Ties | WSJ

Last week, law firm Vinson & Elkins had its representation of Enviva denied, largely because Enviva’s largest shareholder, Riverstone, is a major private equity client of the firm.

S&K Take: Virginia is for lovers, but apparently not debtors. Huge news out of the Old Dominion. The Bankruptcy Court denied the retention of V&E based on their Riverstone relationship, essentially saying that their ties run too deep and the treatment of Riverstone in the case is too critical for the Court to overlook. This runs counter to a similar question decided in the Invitae case, where K&E was allowed to continue as counsel despite a relationship with the company’s equity sponsor. Frankly, it is par for the course that Debtors’ counsel has a relationship with the company’s sponsor, albeit unrelated to the cases themselves. The EDVa distinguished the Invitae decision by degrees, noting that the V&E/Riverstone relationship is larger and more significant than the relationship in the Invitae case. That will likely make for some interesting litigation around retention in the near future. V&E has asked the Court to reconsider and offered up some concessions in the form of ethical walls. One thing seems assured—outside of further discussion of this case, we won’t be talking about megacases in Virginia again any time soon.