Below is our initial take on recent bankruptcy-related developments:
Stoli Group’s US-based distributor unit filed for bankruptcy protection this week in the Northern District of Texas.
S&K Take: Stoli Group, a US entity formed in 2013 to distribute Stoli products in the US, filed in the ND of Tex this week, blaming the usual parade of horribles—post-Covid sobriety, cost inflation, Vladimir Putin, and a massive data breach—for its troubles. The first day dec alleges that the Stoli group has been fighting a battle over its IP against Putin since 2000, costing the entity “dozens of millions” (is the number easily divisible by 12? Odd way to put it) in legal expenses, and that founder Yuri Shefler was chased out of Russia in 2002 by spurious criminal charges. Russian conspiracies aside (which could be completely accurate or completely fabricated, we are not opining either way), the case opened with a bit of a cash collateral tussle. The company sought to use Fifth Third Bank’s cash collateral, and 5/3rd objected, arguing that nothing permits a non-consensual pre-determined surcharge of its collateral for $700,000 in professional fees. The parties were able to at least kick the can down the road at the first day hearing. Final cash collateral is now set for Dec. 30.
Metropolitan Commercial Bank has been accused of aiding the now bankrupt cryptocurrency firm Voyager in a ploy to defraud their customers.
S&K Take: The next phase of the crypto bankruptcies is upon us—the litigation. We detailed some post-confirmation litigation that was commenced in the FTX in the past few weeks. Now we have an interesting (and robust) 53-count complaint filed by the Voyager plan administrator. The complaint essentially alleges that MCB aided and abetted Voyager’s fraud by (i) helping Voyager duck requirements around money transmitter licenses and (ii) bolstering the illusion that Voyager’s crypto accounts were backed by the FDIC. This is just a piece of the bigger picture, as there promises to be years of litigation surrounding the downfall of the various platforms during the “crypto winter.”
According to industry participants, there’s a high likelihood that the Container Store will file for bankruptcy next year.
S&K Take: Distress in retail has continued throughout 2024, and we have a candidate to advance that narrative early in 2025. The Container Store was riding high in 2020 with influencer partnerships and folks trying to tidy up their homes while waiting out the pandemic. The stagnant housing industry has purportedly altered that dynamic (less moves = less containers), as have pressures from lower-cost providers of The Container Store’s core products (i.e., containers) like the ubiquitous Walmart and Amazon. The Container Store sought a $40 million lifeline from Beyond (the new owner of that once-fine franchise), which would have had TCS sell BBY products. That lifeline is apparently in jeopardy due to inter-lender issues (presumably priming/subordination). New money usually finds a way though, so we will see. TCS is also hoping for a huge holiday season to save the day, but as they often say, hope isn’t a strategy.