Below is our initial take on recent bankruptcy-related developments:
On Tuesday, Tehum Care Services, a prison healthcare company, was granted court approval to continue with a new mediator who will replace former bankruptcy judge David Jones, who stepped down from the bench for well-known reasons.
S&K Take: This week in the S.D. Tex. soap opera, Judge Sontchi was appointed to replace Judge Jones as mediator in the Tehum case, which we have covered previously. Tehum had a settlement with med mal claimants (prisoners that had allegedly received poor care from Tehum and its parent entity). Those claimants wanted, and got, another bite at the apple given Judge Jones’ conflict. For his part, Judge Lopez has indicated that he is happy that the settlement is going to be revisited since he wasn’t sure it was right in the first place. Elsewhere, the UST is seeking to get Jackson Walker to disgorge $13 million in fees. In response, Jackson Walker has opted to throw Ms. Freeman directly under the proverbial bus, alleging that she had lied to the partnership about the relationship (she apparently said it ended in 2021, but JW leaned it had not in 2022 – yes, it is hard to keep up with all of this). It still raises the question of why the firm didn’t disclose in the first place—you know what they say, a disclosure a day keeps the disgorgement away (yeah that is pretty bad, sorry)—but I imagine that question will be asked and answered at some point as this saga continues to unfold.
Celsius, the bankrupt crypto lender, received approval for its reorganization plan from the bankruptcy court, with effectiveness slated for early 2024.
S&K Take: It was a long and winding process, but Celsius creditors can breathe a sigh of relief as the Celsius plan was approved by Judge Glenn. The plan will see creditors recover 67-85% of the value of their claims with some of that value attributable to a stake in Newco, which will focus on mining. The mining business has turned profitable of late with the resurgence of cryptocurrency prices. See the Core Scientific case as a corollary. Alex Mashinsky, whose (allegedly) fraudulent activity has flown somewhat under the radar in the shadow of the high profile SBF trial we have covered extensively will take the spotlight in 2024 when his criminal trial kicks off.
On Monday, Bankrupt WeWork Inc.’s stock decline by 20.7 percent in premarket trades after ending Friday’s session up 23 percent. The company’s stock rose on its over-the-counter launch last week, days after the company filed for Chapter 11 bankruptcy protection.
S&K Take: More stonks action in the bankruptcy context! WeWork has an RSA which equitizes some of its $3.6 billion in secured debt and provides for the cancellation of existing equity (with the notable exception of Softbank, of course, who plays in almost all levels of the capital structure). It also has hundreds of landlords facing lease rejection which will create a massive unsecured creditor class. But sure, let’s dabble in some OTC equities action. Worked out well in BBBY, where the company issued massive amounts of equity on the precipice of bankruptcy and used that to pay down its first lien debt (which debt is about the only debt that is getting paid in that case). Sure, there was Hertz, but come on now. Free markets and all I suppose, so enjoy the day trading!