Below is our initial take on recent bankruptcy-related developments:
On Monday, 75-year-old hardware store brand True Value filed for bankruptcy and plans to sell its entire operations to rival company Do it Best, which had a $153 million stalking horse bid. True Value stated it will proceed with daily operations of its 4,500 independently operated locations throughout the Chapter 11 process.
S&K Take: Another big retailer hits the skids with True Value filing on Monday. The case looks like most other retail cases—a sale process that will likely fall short of satisfying the secured debt. Thankfully there is a well-known stalking horse in play in Do it Best. The Debtors blame the depressed housing market and finicky consumers for the downturn. The case does have some unique aspects, as the prepetition lender, PNC, which alleges that they are undersecured, objected to the use of its cash collateral citing the lack of adequate protection. That was ultimately resolved through a bridge agreement giving the Debtors access to cash collateral for two weeks while the parties try to sort it out. PNC’s main issue seemed to be that the original budget of $20-plus million in professional fees wouldn’t get it back to all square (the credit bid is $153 million and the debt is $238 million). Judge Owens admonished the parties that it would be a waste to be arguing over cash collateral in two weeks. Will see how this progresses.
Last Friday, electric vehicle startup Fisker received court approval of its bankruptcy liquidation plan from U.S. Bankruptcy Judge Thomas Horan, after last-minute negotiations to maintain the startup’s $46 million sale of its outstanding vehicle fleet inventory.
S&K Take: Two interesting points coming out of the Fisker confirmation. First, asset purchaser American Leasing had objected to the plan because its purchase apparently didn’t include certain IP necessary to run the vehicles that it had purchased (or at least some subset thereof). That’s an issue, although the parties agreed to resolve that with American paying $2.5 million to license the IP for 5 years. The second has a larger global implication, as Judge Horan approved opt-out releases for creditors that received a ballot and voting package but didn’t return anything. That was, according to the Judge, enough to indicate that the party consented. Judge Horan did, however, draw the line at parties that did not receive a voting package, in this case shareholders. The Judge found that those parties didn’t manifest consent, which seems to go to the FTX-ish amount of notice concept. So another interesting distinction in Delaware in the post-Purdue third-party release world. Hope you all are taking notes!
In the largest single child sexual abuse settlement with a Catholic archdiocese, the Catholic Archdiocese of Los Angeles will settle over 1,300 child sex abuse assertions, according to a preliminary agreement from Manly Stewart & Finaldi, the law firm representing the victims.
S&K Take: We covered the Rockville Center Diocese settlement recently, so thought this was noteworthy. In the RC case, the settlement was one of the few that exceeded the $350,000 range (per claimant), ending up at about $650,000. This settlement exceeds that at about $683,000, and perhaps indicates a new survivor-friendly trend in these cases, which have historically been very difficult.