Below is our initial take on recent bankruptcy-related developments:
On Thursday, the Supreme Court rejected the nonconsensual non-debtor releases in the Purdue Pharma plan, finding that the settlement unfairly shielded the Sackler family, meaning that billions of dollars secured for victims is now in jeopardy.
S&K Take: Well, there it is. Like every other law firm out there, we will do a more robust breakdown of this decision and its implications, but this is obviously huge news. The Court rejected nonconsensual non-debtor releases 5-4, and apparently the dissent is hot stuff (full disclosure the opinion is sitting on our desk). The Purdue debtors acted immediately, requesting a status conference where they intend to seek a mediation order to get this thing back on track. Opioid victims are up in arms because remediation that has been in limbo for years is now in further doubt. Plan opponents in Boy Scouts have already asserted that this should kill that plan. There will be many more reverberations as time rolls on and everyone digests this monumental decision.
In a closely watched case on the limits of aggressive financing, Judge Marvin Isgur of the U.S. Bankruptcy Court in Houston indicated that he expects to rule that aerospace parts supplier Incora’s 2022 financing with Silver Point Capital, Pimco and other investors was not permitted under its debt agreements.
S&K Take: Somehow the Robertshaw and Incora decisions (or the Robertshaw decision and Judge Isgur’s insinuations on the record) may fly under the radar this week. We have two disparate decisions. The Robertshaw deal was blessed as appropriate under the docs. Judge Lopez did find a breach of an agreement in an isolated aspect of the transaction, but an unsecured damages claim would be the only remedy for that. The now-validated lenders subsequently credit bid their debt, which offended-lender Invesco has appealed. On the Incora side, Judge Isgur found that the transaction violated the loan agreements in question, and indicated that he was going to rejigger the entire capital stack. The remedy that he ultimately affords in that case and the propriety of that remedy will be something to watch very closely.
Congress didn't renew a key provision of subchapter V which permitted entities with debts between $2.7 million and $7.5 million to seek to shed debts without losing ownership of their companies and without certain procedural oversight mechanisms that often add cost and delay in typical Chapter 11 cases.
S&K Take: The third spot this week goes to what would typically be a huge story – Congress did nothing! Oh, wait. That is what they always do. Raising the debt limit for subchapter V has afforded a lot of small businesses the opportunity to restructure in an affordable process, but alas, no more. Congress was too busy watching the debate in shock and awe like the rest of us. The timing actually doesn’t line up, but I had to throw that in there. Hopefully someone wakes up and fixes this.