Below is our initial take on recent bankruptcy-related developments:
Pro bull riding league files objection of Dr. Phil’s media bankruptcy saying it is owed $181 million | The Independent
The Professional Bull Riders—the largest bull-riding league in the world, which had pulled out of a four-year programming contract with McGraw’s Merit Street Media Network—filed an objection on Wednesday.
S&K Take: We haven’t covered the glorious mess that is the Merit Street Media case quite yet in these pages, so now seemed as good a time as any. Merit was a JV between Dr. Phil’s entertainment company (Peteski Productions) and Trinity Broadcasting, a Christian-based broadcasting network. Dr. Phil and Trinity owned 66.5% and 28.5% of Merit, respectively. The entity was formed in 2023 and launched its television and streaming network in April 2024. At some point Merit entered into a media rights agreement with Professional Bull Riders LLC (in a clear attempt to corner the lucrative Christian, Dr. Phil-watching Bull Riding market). And here we are in 2025. Merit (i.e., Dr. Phil) accuses Trinity of using the JV to enter into a series of self-interested transactions and layering debt onto the company for its own benefit. Merit filed on day 1 breach of contract claims related to those accusations, and is seeking to avoid perfection of $25 million in debt obligations. Trinity has in turn moved to dismiss the case as a “sham” filed solely for the personal enrichment of Dr. Phil. Dr. Phil ponied up the DIP (a respectable $13.4 million in new money), and Merit was seeking to use those funds to prosecute a section 363 sale. Judge Everett, in a somewhat unorthodox move, adjourned even interim consideration of the DIP, opting to consider the DIP, the bid procedures, summary judgment on the avoidance action, and the motion to dismiss all at the same time on August 19. As far as fun hearings go, that must be pretty high up there. I feel confident we will revisit this case in a few weeks.
GENIUS Act bankruptcy changes give holders top recovery priority | Bloomberg Law
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Signed into law on July 18, the legislation is considered a win for crypto, but its modifications to bankruptcy law have caused alarm among some restructuring professionals.
S&K Take: The GENIUS Act has been signed into law. At this point virtually every firm has done a breakdown on the ins and outs of the Act. In case you haven’t had time to read those yet, or want a more distilled version from the bankruptcy perspective, the bankruptcy-related provisions of the Act are worth a quick discussion. The Act deals with stablecoins. The basic idea is that a stablecoin issuer has to hold in reserve stable assets (cash, US treasuries, etc.) that can cover the value of all the stablecoins that it has issued. Essentially, we don’t want some issuer to suffer a run on the bank that leaves holders short, resulting in greater market disruption. In case the front-end requirements with respect to reserves, the capacity in which those reserves are held, where they are held, and who may issue stablecoins is not protection enough, the GENIUS Act includes bankruptcy protection. In bankruptcy, stablecoin holders get first dibs on the reserves, which interestingly are not part of the bankruptcy estate. To the extent the reserves are insufficient to satisfy those claims in full, stablecoin holders get a superpriority admin claim on estate assets. So holders take before creditors extending post-petition credit (i.e. providing the debtors with services, etc.) and professionals. Given the fact that an issuer can’t borrow against the reserves (not estate property) and can’t promise admin creditors and professionals that they will get paid for doing business with the debtor, it seems unlikely that we will see many stablecoin issuer bankruptcies. I suppose that is the purpose of the non-bankruptcy provisions of the Act in any case. So there you have it.
