A corporate restructuring and bankruptcy BLOG

    Not the Rite Stuff, Delusions of Evergrandeur, Withdrawal Symptoms, and FTX Frenzy

    What's News
    September 29, 2023

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

    Rite Aid, bracing for bankruptcy, will close hundreds of stores | SuperMarket News

    As it prepares to file for bankruptcy, Rite Aid is gearing up to close as many as 500 of its 2,100 stores. The Philadelphia-based retailer’s debt is nearly $3.3 billion and has become too much of a burden to bear as the retailer is also facing multiple opioid lawsuits.

    S&K Take: Rite Aid is another business that has been impacted by opioid claims and excessive debt. The company carries $3.3 billion in funded obligations and is operating at a massive loss. Bankruptcy is imminent, and these store closures are not surprising. We don’t know much about timing, although the arrow is pointing to soon. We will be watching to see what shape this filing takes—there are a couple of competing groups that have different opinions on how to proceed.  

    Crisis at Evergrande deepens as it misses another bond payment | CNN Business

    Bankrupt Chinese property developer, Evergrande Group, has missed another bond payment amounting to $547 million, increasing uncertainty over the future of company amidst the Chinese real estate crisis.

    Evergrande stock crashes again as fears of collapse grow | CNN Business

    After bankrupt Chinese property developer, Evergrande Group, warned that its offshore debt restructuring plan could possibly be in trouble due to a regulatory probe into its prime subsidiary in mainland China, shares of the company crashed once again on Wednesday because of increasing fears of potential liquidation of the company.

    S&K Take: We discussed Sunac and Evergrande last week. Seems like Evergrande’s position is deteriorating. It missed a bond payment (at least a subsidiary did) and the stock plummeted this week. There isn’t much positive news which would indicate that there is a chance to get to a deal, although we will see. A liquidation here is pretty ugly and would have larger implications for the Asian real property market.  

    Gemini Withdrew ‘Hundreds of Millions’ Before Genesis Collapse: Report | BeInCrypto

    OFive months before crypto company Gemini filed for bankruptcy by Genesis’, the lender for the Gemini Earn program, co-founders Cameron and Tyler Winklevoss secretly withdrew over $280 million held by their crypto company’s bank. The withdrawn funds from Genesis were used by Gemini to create a reserve to secure adequate liquidity for Gemini Earn customers to assist with “immediate redemptions.” 

    S&K Take: It came out this week that in August of 2022, three months ahead of the November asset freeze of Genesis, Gemini withdrew $282 million in crypto. There are reports that some are up in arms about the withdrawal, with those people largely thinking that the assets were personal assets of the Winklevi. Gemini issued a statement in rebuttal noting that those were Gemini customer assets held on the Genesis platform, and that it was simply risk management and should be applauded. This seems like much ado about nothing, although we will keep an eye on where this one goes.  

    FTX Bankruptcy Claims Soar in Value in Over-the-Counter Markets as Estate Recovers $7.3B | CoinDesk

    Bankrupt crypto lender FTX’s level of expected payouts for its creditors has more than tripled in 2023 in over-the-counter markets where investors trade bankruptcy claims. The presumed payout for creditor claims opposed to FTX has surged to its highest level since the bankruptcy filing in 2022, a mean of 37 cents on the dollar, up from over 10 cents at the beginning of 2023. 

    S&K Take: Not necessarily recent news, but FTX claims have drawn a lot of interest on the heels of a John Ray announcement that he had recovered $7.3 billion for the FTX estate. Claims are trading in the mid 30s in response to that recovery (they started in the 10s or lower early in the case), and also garnering a lot more interest. The article suggests that there is limited upside from there. There are a few other large claims (in the nine digits) against other crypto platforms, as well as a valuable investment in an AI company.  

    The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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