Below is our initial take on recent bankruptcy-related developments:
Spirit Airlines recently emerged from Chapter 11 bankruptcy and announced it plans to rebrand itself as a premium airline.
S&K Take: The Spirit case was obviously a significant undertaking, and the plan was confirmed by Judge Lane on February 20. It was good news (outside of the change, cancellation and baggage fees) but didn’t garner a ton of attention since it was largely uncontested. The main takeaway from the confirmation ruling was Judge Lane’s approval of the opt-out releases, which marked the first time the SDNY dealt with that issue since Purdue. We raise it today because Judge Lane issued his opinion this week and provided some color on his thinking. The opinion noted that the Judge considered the releases consensual, despite their opt-out nature. He focused on several facts—the “clear and prominent” voting procedures, the debtors’ consistent disclosure of the releases during the case, the “clear economic stake” that affected creditors had (and thus a reason for them to pay attention), the well-publicized nature of the cases, and the absence of objection from unsecured creditors—to support his conclusion. Big picture, these were large bankruptcy cases, and highly public in nature, so this doesn’t exactly provide a perfect road map to the approval of opt-outs in the SDNY, but it lays the groundwork for future deals. Judge Lane’s colleagues on the bench may arrive at different viewpoints, but it seems hard to argue with this result.
On Wednesday, electric vehicle battery manufacturer Northvolt filed for bankruptcy in Sweden after seeking financial support to continue its operations amid an ongoing Chapter 11 restructuring process in the U.S.
S&K Take: A very interesting twist in an unusual case. Northvolt filed in SD Tex last November with hopes to either recapitalize or sell the company. The company didn’t seem to have deep ties to the US, so some eyebrows were raised, although there wasn’t much of an objection to the choice of venue. The debtors sourced some DIP financing at the outset of the cases from customer Scania CV AB, and got final approval for that facility just before Christmas. The case was plodding along with Northvolt scouring the globe for financing (or a buyer) with little success. Turns out that the clock has run out—the debtors have now stated that they are out of cash, and the Swedish Northvolt parent filed an insolvency proceeding in Stockholm. That proceeding provides for the appointment of a trustee that will displace management and liquidate the company. For their part, the US debtors noted at a status conference that they will work with the trustee and folks will contemplate dismissing the cases. Tough sledding in the EV world continues.
One of the largest U.S. residential solar companies, Sunnova Energy is arranging to engage with beneficiaries to consider options for its $8.5 billion in debt, options include a potential bankruptcy filing.
S&K Take: Residential solar has been facing incredibly strong headwinds, which has resulted in a number of bankruptcies in the past 18 months. Last year saw iSun and SunPower, among others. Turns out putting panels on your house is not as attractive when interest rates climb (making financing non-economic) and you can’t sell excess power back because of local regulations. In any case, Sunnova may be the biggest of these filings, with multiple creditor groups represented by powerhouse restructuring pros circling the situation. We will be keeping an eye on this as it progresses.