Below is our initial take on recent bankruptcy-related developments:
US Supreme Court Lets $2.46 Billion Boy Scouts Sex Abuse Settlement Proceed | Reuters
On Thursday, the U.S. Supreme Court permitted the Boy Scouts of America’s $2.46 billion settlement with sexual abuse victims to continue, lifting a temporary pause imposed pending an appeal of a small number of survivors. The order overrides the order issued by Justice Samuel Alito on February 16 that froze the settlement.
S&K Take: What a pivot! The third-party release saga never fails to deliver. This time last week we were writing that Justice Alito had granted an administrative stay of the Boy Scouts’ plan. What we didn’t discuss last week was what that stay meant for the Purdue case. People smarter than myself were speculating that the stay was a bad omen for third-party releases. That it indicated that the Supreme Court was going to strike down the Purdue releases and with it send a shockwave through the restructuring community. Does the turnabout mean that the Supreme Court is leaning the other way? Or is it simply that the Supreme Court wants to see victims in the Boy Scouts’ case continue to get distributions pending the appeal to be heard in the Third Circuit April 9? My money is still on third-party releases going the way of the dodo, but it is still fraught with uncertainty, to say the least.
Appliance Component Company Robertshaw Files For Bankruptcy | Reuters
Last week, Robertshaw U.S. Holdings, an appliance component company, filed for Chapter 11 bankruptcy protection, looking to eliminate $670 million in debt and settle litigation between its lenders. According to documents filed in Houston, Texas bankruptcy court, the company that is owned by private equity firm One Rock Capital Partners, entered into bankruptcy with a restructuring agreement supported by a majority of its lenders.
S&K Take: We mentioned this case last week in our high-level recap. First, mea culpa, we called it a Kirkland case when it’s a Latham case. That aside, this will be one worth watching. Not only do we have one LME, we have two in a twisted and sordid tale of lenders jockeying for position. One ad hoc group did an uptier in May 2023, with the minority leave-behind lenders hurt and offended. In December 2023, the company entered into another transaction, which hurt and offended one of the lenders that was involved in the May 2023 transaction. Which leaves you with a great bankruptcy oxymoron – “fifth out superpriority debt.” It has superpriority to the sixth and seventh out pieces, but not super enough to prim the first four tiers. This one is headed to mediation with Judge Chapman, but I expect we will be reporting on this again.
After Bankruptcy Court OK, Audacy’s Reorganization Plan Heads To FCC | Inside Radio
Audacy, the second largest radio group, has won approval for its financial reorganization plan from the U.S. Bankruptcy Court for the Southern District of Texas, just over six weeks after beginning prepackaged chapter 11 proceedings. After obtaining approval from the Federal Communications Commission, Audacy stated it expects to come out of bankruptcy.
S&K Take: Just a quick note on this one, as the prepack worked as intended getting the company in and out of the bankruptcy in ix weeks (as long as the FCC agrees). Dealing with the FCC on a matter of our own my observation would be that the FCC works methodically, but this one might be front burner for them.
US Trustee Wants Sorrento Ch. 11 Tossed Or Relocated | Law360
The U.S. Trustee’s Office seeks to dismiss Sorrento Therapeutics Inc.’s Chapter 11 bankruptcy case based on the argument that the company manufactured a venue in Texas bankruptcy court. The biopharmaceutical company’s petition for bankruptcy in the Southern District of Texas hinged on a subordinate’s “fictitious” primary place of business in Texas, which is really a UPS mailbox registered to Sorrento days before the filing.
S&K Take: We mentioned the penchant for third-party releases providing no end of content. We would be remiss if we didn’t grant the SD Texas soap opera the same appreciation. In this one, the UST has moved to dismiss the case arguing that Sorrento manufactured jurisdiction. Don’t see this one often, although this one seems to have teeth. A Sorrento sub grabbed a post office box a day before filing and was provided $60k in cash 3 days before the filing, which the company argues formed the basis of jurisdiction. The response to the UST argues that since the subsidiary was not operating, and the PO box and the money were its only assets, that means its principal place of business was Texas. Feels a little thin if we are putting substance over form, but we will see.
