Below is our initial take on recent bankruptcy-related developments:
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Members of the Sackler family and Purdue Pharma reached a new deal with a group of states settling thousands of lawsuits over the company’s and family’s roles in the opioid epidemic. The family will pay as much as $6 billion to treatment programs nationwide addressing the damages wrought by the opioid crisis.
S&K Take: Terms of the new deal between the Sacklers and the “Nine” are out, with the family paying as much as $6 billion in consideration to settle all prospective claims against them. Despite the deal, we have already seen Florida raise an objection, although the objection does not relate to the deal, but instead the allocation of consideration that the deal provides. Ultimately the settlement should be approved and thus put an end to this saga (and the chance of the Second Circuit opining on third-party releases).
U.S. Bankruptcy Judge Michael Kaplan ruled that Johnson & Johnson can move forward with using the bankruptcy system to resolve multibillion-dollar talc-related litigation claims, a strategy known as the “Texas two-step.”
S&K Take: In another huge decision, Judge Kaplan denied a motion to dismiss the bankruptcy case of LTL, a subsidiary of J&J. This keeps the “Texas Two-Step” alive for the time being, subject to (spoiler alert) legislative action which we discuss below.
The operator of the Russian-led Nord Stream 2 pipeline project denied that it had filed for bankruptcy, but confirmed it terminated employee contracts.
S&K Take: The Russian-Ukrainian conflict has caused some significant turbulence in the market. US markets, particularly oil and gas, have been impacted, with oil crossing $116/bbl. There have not, however, been any resultant bankruptcies to date in the US (although that is strictly anecdotal at this point). That seems like it almost has to change at some point.
Please note that membership to The Financial Times is required to access the full summary of this article.
U.S. lawmakers are planning legislation to stop the controversial bankruptcy strategy known as the “Texas two-step” to prevent abuse of the Chapter 11 bankruptcy process by large companies.
S&K Take: It has been a strange time in bankruptcy since the pandemic, with the process and the law underlying the process the focus of mainstream, including legislative, attention. That is not always the case. This includes the discussion of venue reform, third-party releases, private equity strategies, and of course, the Texas Two-Step. It seems as though legislative action on any of these fronts is oft-discussed but infrequently implemented. We will see whether this is any different.