Below is our initial take on recent bankruptcy-related developments:
Purdue Pharma and owners to pay $7.4 billion in settlement of lawsuits over the toll of OxyContin
On Thursday, Purdue Pharma and members of the Sackler family who own the company agreed to pay up to $7.4 billion to lawsuits over the toll of the prescription painkiller.
S&K Take: We have been hearing rumors about potential deals for a few weeks now (and have covered some of them in these hallowed pages), but now we have some serious details thanks to NY AG James, who selflessly bit the bullet and volunteered to be the brave AG that would issue a press release (which interestingly states that NY AG James herself secured the settlement). The total payments aggregate $7.4 billion, with $6.5 billy coming from the Sacklers. The Debtors will pay $900 million on approval of the settlement (out of a total $1.5 billion), with $500 million paid annually the following two years, and $400 million paid in year three. So that is $2.9 billion in consideration within three years. The Sacklers will not get “automatic” releases (i.e., nonconsensual), although we don’t know precisely what the release mechanism will look like, which will very obviously be critical. Sounds like 14 other AGs are also on board. In other Purdue news, the latest request for an extension of the Sackler litigation stay drew familiar opposition and support, with Maryland and Nassau County, NY objecting. A hearing is going on as we speak. We will most assuredly report on the full details of the Letitia James Settlement (that’s what people are calling it) when they are available.
DOJ watchdog says silence is not 'consent' in Container Store bankruptcy | Reuters
The UST objected in The Container Store's bankruptcy case to certain insider releases, arguing that opt-outs cannot be used to create creditor consent. Judge Perez overruled the objection.
S&K Take: The UST continued the quest to rid the world of (allegedly) nonconsensual releases, this time in the Southern District of Texas. The current skirmishes are framed by the Purdue decision, and the core question has largely centered around what an opt-out needs to look like to carry the imprimatur of consent. Generally, the UST has taken the position that opt-outs are entirely insufficient, while most courts have held that some form of opt-out is ok, provided that creditors are on notice that if they don’t opt out, a release will be granted. There is certainly gray in there, but that seems to be the way things are shaking out. Judge Perez (as he did in Digital Media Solutions) overruled the UST objection, finding that opt-outs work with proper notice. So The Container Store now joins DMS, DSG and Robertshaw in laying out the SD TX pro-opt-out stance. Similarly, Judge Stickles confirmed the 99 Cents Store plan in Delaware today, approving an opt-out structure over the UST’s objection.
FDIC sues 17 ex-SVB executives in alleged ‘gross negligence’ | Banking Dive
On Thursday, the Federal Deposit Insurance Corp. filed a lawsuit suing 17 former executives and board directors of Silicon Valley Bank for alleged negligence and breach of fiduciary duty that led to the lenders fall in March 2023.
S&K Take: Interesting filing in the ongoing FDIC v. SVB saga, with the FDIC naming 17 Ds&Os as defendants in a breach suit in California state court. The suit essentially alleges that the defendants failed to adequately account for interest rate risk, while at the same time kicking a cool $294 million dividend up to the bank’s parent. At least one officer has called the claims malarkey, noting that the outgoing FDIC leaders just have an axe to grind.
