Below is our initial take on recent bankruptcy-related developments:
The Supreme Court has blocked an appeals court decision that had allowed Purdue Pharma’s restructuring plan to move forward effectively putting the plan on hold. The plan had called for the Sackler family, which controlled Purdue, to pay $6B that could be used to settle opioid-related claims against the company in exchange for a release from any future liability. The case calls into question if the bankruptcy court had the authority to release the Sacklers from the legal claims. The Court has also confirmed that will it hear a challenge to the settlement, with arguments planned for later this year.
S&K Take: Nothing to see here, only one of the single biggest bankruptcy stories of the last 20 years. This decision has Stern v. Marshall potential when it comes to changing the landscape of bankruptcy court jurisdiction. The nonconsensual third-party release issue has been percolating for some time now, and this will put it to rest. Stakes don’t get much higher and the restructuring world will watch with bated breath. On top of deciding one of the most controversial issues in the bankruptcy world, the case has massive immediate impact, with a $6 billion settlement hanging in the balance. Even with that at stake, hard not to feel like the Highest Court in the Land wants to make its view of the jurisdiction of Article I courts known.
Yellow has decided to explore alternate loan offers to support the company's bankruptcy sale of 12,000 trucks, real estate, and additional assets. The trucking company was previously aiming to borrow $142.5 million from private equity firm Apollo Global Management, but is now looking into other offers with more favorable terms.
S&K Take: We have been tracking the epic tale of Yellow for a few blogs now. This looked like a long-term situation at first, and then quickly devolved into a sure-fire bankruptcy. Well, that bankruptcy is real, and it is spectacular. The first day declaration laid the fault for the company’s demise at the feet of one Teamster’s leader in no uncertain terms. It makes for an interesting read if you have some time this weekend, and I don’t make that recommendation lightly. There are some pretty big obligations, both term lenders and the US government, that will play an outsized role in these cases. The company purportedly has multiple DIP financing offers, so next week we will likely be talking about which path they have chosen.
WeWork submitted a filing to the SEC this week, noting that there is growing concern of financial losses and cash flow issues which may impact its future growth. The company, which is a global provider of coworking spaces, was once valued at $40B, but in recent years has faced significant challenges due to the Covid pandemic and widespread economic slump. As the company noted in their filing, if they aren’t able to improve their position, they may need to seek alternatives, including restructuring or refinancing its debt.
S&K Take: We haven’t been following the WeWork saga closely, but it looks like we need to put it on the old radar. This would obviously be a high-profile bankruptcy, particularly with all the attention the company has garnered to date in mainstream media. It is one of a few rapid falls from grace. The company was once on the precipice of a hugely anticipated IPO, and the news has seemingly been bad ever since. To be continued.
FTX administrators submitted a court filing this week, criticizing the response of a creditors’ panel to the group’s reorganization plan which was submitted last week. The creditors committee had claimed that they had provided comments to the debtors which were not accepted or incorporated into the plan. In this latest filing by FTX administrators, the group has argued that they had worked with the committee for many months to develop the draft plan.
S&K Take: It didn’t take long for the Debtors to respond to the FTX Committee’s issues with the plan. As we noted in our last post, the initial plan is typically a bit of a framework for negotiations, particularly in a case as complex as FTX. The amount of different constituencies is mind boggling, and so making everyone happy is a near impossibility. We look for this back and forth to continue as the case progresses.