Below is our initial take on recent bankruptcy-related developments:
The Sackler family, owners of Purdue Pharma, is offering to increase their contribution to the opioid lawsuit settlement to approximately $6.5 billion and accept some potential future legal liability.
S&K Take: Purdue is back in the news and, shocker, we are soooo close to a deal. Late last week the Debtors requested another extension to the litigation stay, this time 35 more days. The Debtors reported that they are now on the “cusp of a deal.” Mediation was scheduled for early this week so the parties could hammer out the last deal points and finalize a 50-page term sheet, a 75-page settlement agreement, individual settlement agreements and other definitive documents. Today the WSJ reported that one of the deal improvements is a $500 million addition contribution from some of the Sackler contingent as well as an acknowledgement that they aren’t going to get all of the releases they want. Sounds like an opt-out mechanism is in the works, but we will wait and see on that. The Debtors seem to think a plan will be filed in the “next few weeks.”
Craft retailer Joann Inc. has filed for Chapter 11 bankruptcy for the second time in under a year, citing inventory shortages. The company intends to find a buyer but will liquidate its assets if a sale isn't achieved.
S&K Take: Joann wants you to put the word out there that they back up, in bankruptcy. 9 months after its April 2024 emergence, Joann again finds itself in Delaware bankruptcy court. Gordon Brothers is providing the backstop solution in this case, which is a liquidation. The Debtors intend to continue their sale process, which they commenced prepetition, to try to find a going concern sale. The Debtors’ term lenders seem unimpressed with this process, arguing that the sale process is a sham, and will only result in a liquidation. That is a problem, because the liquidation only covers the ABL and the FILO loans, leaving the term loans with little to nada. The Debtors allege that vendor and inventory issues led to the 22, but the term loans argue that the ABL and FILO lenders choked out the company’s liquidity. Micheals, another craft retailer, looks to be in trouble as well, with their unsecured bonds trading at 59. We will be keeping an eye on both situations.