Below is our initial take on recent bankruptcy-related developments:
Serta Lenders Win $400 Million Award Over Rival Group’s Debt Deal | The Wall Street Journal
This week, a Texas bankruptcy judge ordered lenders who participated in Serta Simmons Bedding’s 2020 debt restructuring to pay $261 million in damages plus $142 million in interest for wrongfully excluding minority lenders.
S&K Take: Big news in the LME world as Judge Lopez brought Serta full circle, finding that the majority lenders breached the relevant credit agreement’s pro rata sharing provision and awarding the left-behind lenders $261.13 million in damages, along with 9% prejudgment interest that comes in at $142 million. Defendants would be on the hook for their pro rata share of that amount, based on their loan holdings at the time. The case has been on a long and winding road, starting with the former Judge Jones quickly finding that the uptier was an open market transaction. The Fifth Circuit disagreed in 2024 and remanded back to Houston. The main issue addressed by Judge Lopez was a debt for debt exchange constituted a “payment” under the loan agreement. This could have knock on effects on other cashless exchanges, which have frequently avoided pro rata sharing treatment.
Spirit Lines Up $630M Ch. 11 Stalking Horse Bid For 27 Aircraft | Law360
Spirit Airlines is seeking approval for a proposed bidding process covering its remaining 27 aircraft in New York bankruptcy court. The former airline currently has a bid for $630 million from a secured creditor and has additionally asked the court to approve an $11.5 million sale of ground service equipment.
S&K Take: Spirit has ceased operations (netting $14 million of revenue in May) and has been busy liquidating its assets and engaging in limited skirmishes with the UST, the Port Authority and a cast of other characters. This sale, of 27 Airbus aircraft, is on the more robust side of the ledger, coming in with a $421 million cash bid and a $209 million credit bid. The Debtors have also noted that the LaGuardia landing slots they hold are fetching a significant amount of interest and have asked for more time on that sale. It will be interesting to see what the final tally is here, so we may revisit later in the process.
