Below is our initial take on recent bankruptcy-related developments:
Red Lobster Files for Bankruptcy, but Restaurants Will Stay Open | NBC News
The largest seafood chain in the U.S. Red Lobster has filed for voluntary bankruptcy in Florida, but it plans to keep its restaurants open. The restaurant chain has listed its assets and liabilities worth between $1 billion and $10 billion.
Red Lobster Probes "Endless Shrimp" Losses After Bankruptcy Filing | Reuters
Seafood restaurant chain Red Lobster is investigating the role Thai Union, its majority owner, played in seafood chain’s “endless shrimp” promotion that prompted $11 million in losses, according to court documents.
S&K Take:The anticipated Red Lobster filing came down on Monday in the Middle District of Florida. The Debtors have a $100 million DIP with a roll-up of $175 million. The Debtors have also initiated a sale process with the DIP lender (Fortress, the primary TL lender and TL agent) acting as stalking horse. The Debtors have about 600 locations worldwide, with 551 of those in the US, and intend to use the bankruptcy process to rationalize that footprint (already having filed a motion to reject 90+ locations). Feels like a pretty prototypical food & bev case, albeit on a very large scale. There is some nuance, with allusions to management missteps and undue influence asserted by Thai Union, the Debtors’ main equity holder and supplier. Some of those allegations relate to the Debtors’ “ultimate endless shrimp” promotion, which is at least somewhat hilarious. Filings indicate that the shrimp cost the Debtors about $11 million in liquidity. To me the cheddar bay biscuits were always the draw, but to each their own. We will monitor this one for sure.
Crypto Lender Genesis to Return $3 Billion To Customers in Bankruptcy Wind-Down | Reuters
Last Friday, failed crypto lender Genesis Global obtained court approval by U.S. Bankruptcy Judge Sean Lane to pay back nearly $3 billion in cash and cryptocurrency to is customer in a bankruptcy liquidation, which leaves its owner Digital Currency Group with no recovery from the bankruptcy.
S&K Take: The Genesis Debtors got a total win over parent Digital Currency Group with Judge Lane confirming the plan and approving the settlement with the NY Attorney General. The Genesis plan is another unique result in the large crypto cases, with the plan providing for in kind return of the digital assets in the Debtors’ possession (compare with Celsius, which provided for a partial in-kind return and equity in the Celsius mining business, or FTX with a proposed dollarization of claims returning an estimated 129-143% to customers). DCG had argued that claims should have been dollarized as of the Petition Date, meaning that value which has accrued in the Debtors’ digital assets could flow to DCG as equity (instead of to customers). The Debtors proposed to return that value to customers instead. The court ultimately decided that DCG was out-of-the-money in virtually any circumstance, with $32 billion in governmental claims sitting between them and recovery, and thus had no standing. There was some very creative legal maneuvering here, with the Debtors agreeing to a settlement with the NYAG that round-triped funds back to customers in the event that value were to be allocated to the NYAG’s subordinated claims on the doorstep to confirmation. That essentially sealed DCG’s fate (unless it was successful in defeating that settlement, which it was not). FTX is seemingly taking a page out of this book, now having agreed to a settlement with the IRS, and in discussions with the CFTC. Customers may not be ecstatic, but given the situation that was handed to bankruptcy professionals in many of these cases, these are pretty good results.
J&J faces allegations it used 'fraudulent maneuvers' to avoid compensating talc plaintiffs | Fierce Pharma
On Wednesday, a group of cancer victims sued healthcare company Johnson & Johnson claiming the company inappropriately transferred assets in a series of transactions.
S&K Take: We now have the Beasley response to the lates attempt by J&J to deal with its talc liability (along with 5 other law firms). We previously highlighted J&J’s latest foray into bankruptcy, with LLT (nee LTL, and possibly soon to be Red River something or other) proposing a plan that would pay out talc-related claims in a prepack if 75% of affected claimants vote in favor of that plan. The complaint seeks to undo some of the corporate transactions, including the divisive merger. It isn’t clear how this will impact the bankruptcy if at all (if J&J gets the votes), so this may be a bit of a sideshow if the plan is able to garner support.
