Below is our initial take on recent bankruptcy-related developments:
Following the airline’s bankruptcy filing, a judge has approved Spirit Airlines’ package of wind-down motions after the company’s unsuccessful attempts to secure federal financing. The motion comes after Spirit Airlines shut down operations and laid off most of its staff in a shift toward Chapter 11 liquidation.
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S&K Take: As of early April, Spirit looked to be on track to prosecute its proposed plan of reorganization, with a DS hearing slated for April 13 and a TEV of $2bn to $2.2bn. As the calendar turned to mid-April, there were rumblings about potential liquidation, with jet fuel prices skyrocketing and the DIP lenders objecting to the proposed plan treatment of their claim. Operating income went negative and liquidation looked like it could be a reality. The DIP defaulted on April 23rd, but there were then rumors about a White House bailout in the form of a $500mm emergency loan (while the Debtors conceded that the prior plan was kaput). Late last week discussions with the Federal Government collapsed. The Debtors filed the wind down motion on May 4 and obtained approval of that May 5. The wind down has commenced, with the DIP lenders permitting the use of cash collateral in accordance with a wind down budget and the asset sales that you would expect. A 30-day roller coaster ride unfortunately does not have a happy ending despite what had to be some wildly interesting negotiations.
Purdue Pharma has concluded its $7.4bn bankruptcy by pleading guilty to federal charges over its role in the opioid epidemic. The criminal sentencing has removed the last hurdle toward implementing the company’s bankruptcy plan including distributing $865m to claimants who became addicted to opioids or lost loved ones.
S&K Take: It seems worth noting that the seven-year bankruptcy saga of Purdue has finally closed. Purdue was sentenced last week to $5.5bn in fines, meaning that its plan of reorganization could go effective. That allows for new non-profit entity Knoa Pharma to begin its charge of distributing opioid overdose and addiction reversal medication at less than the manufacturing cost. A circuitous route but an incredible result, with a Supreme Court decision coming down along the way.
On April 29, the Delaware Supreme Court confirmed the dismissal of a lawsuit regarding a failed purchase of a multimillion-dollar FTX bankruptcy claim, ruling the state lacked jurisdiction over the dispute. The court upheld the 2025 decision that protected Svalbard Holdings Ltd. and Attestor Value Master Fund LP from claims brought by SPCP Group LLC.
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S&K Take: This is an interesting twist on bankruptcy-related jurisdictional questions. The case arises from the sale of an FTX claim. The FTX claims market was robust and competitive, and ultimately very profitable. So it is not a surprise to see disputes arise over claims. In this instance, a jilted prospective purchaser sued the ultimate claim counterparty for tortious interference with contract, but brought suit in Delaware state court, mainly based on the fact that the bankruptcy resided in Delaware Bankruptcy Court. The Delaware Supreme Court ruled that the parties did not have sufficient contacts with Delaware to vest jurisdiction in the state court, and Delaware Chancery upheld that decision. Would have been interesting to see what the ruling would be on the merits, as I am sure there are a few disgruntled would-be claims purchasers out there.