Investment management firm CoVenture said it was preparing to discuss restructuring options for Benitago, a struggling e-commerce startup it funded, when it was surprised to learn the business which rolls up popular brands sold on Amazon.com Inc. instead filed bankruptcy, Bloomberg News reported. CoVenture lawyer Oscar Pinkas said on Friday during a bankruptcy hearing in New York the firm consented to waivers and forbearances on a loan it provided Benitago to aid the startup’s turnaround efforts. CoVenture invested in Benitago and is owed roughly $85 million in principal and deferred interest payments on its loan, according to court documents.
3M Co.’s $6 billion settlement of lawsuits accusing the company of selling defective combat earplugs to the U.S. military could fall apart if enough veterans reject the deal as inadequate for their injuries, Bloomberg News reported. Given 250,000 or so active claims of hearing loss 3M has identified, the accord works out to about $24,000 a head, and would be even less after court costs and legal fees. That may not be enough to make up for the life-altering injuries service members say they suffered after the earplugs failed to protect them from the roar of heavy artillery and tanks. 3M itself can walk away from the pact if it doesn’t get the support of at least 98% of claimants eligible for compensation. But that would force the company back to the negotiating table and leave it facing hundreds of thousands of lawsuits and a formidable array of jury trials — the very outcome it sought to avoid by striking the deal. Under the terms of the settlement, which Bloomberg reported Sunday and 3M announced Tuesday, the plaintiffs will have about six months to decide whether to accept a payout under the accord, opt out of the deal to demand a trial, or drop their suit, according to court filings. The lawsuits have been consolidated in a multi-district litigation case in federal court in Pensacola, Florida — one of the biggest MDLs in U.S. history.
More than three years after filing for bankruptcy protection amid mounting claims of child sex abuse by local clergy, the Archdiocese of New Orleans is preparing to sell off seven properties — including the shuttered Sacred Heart of Jesus Church, the St. Jude Community Center and the Catholic Bookstore Uptown — as a way to generate cash that could be used to help settle those claims, NOLA.com reported. In court documents filed this week, the archdiocese is seeking court approval to hire commercial real estate broker The McEnery Company to market the properties. If sold for their proposed asking prices, the properties would generate nearly $10.4 million for the local Roman Catholic Church. That’s likely a drop in the bucket relative to the cost of the bankruptcy process and the claims an estimated 500 or so abuse victims are seeking. Attorneys fees and other costs of the bankruptcy process have already totaled some $25 million, while the total amount of money victims are seeking has yet to be tabulated. It’s also still unclear how many victims will be allowed to file claims because of a 2021 state law that has extended the window to allowing alleged victims of clergy sex abuse to file suit. Until those questions are resolved, the chapter 11 reorganization plan cannot be finalized. Selling off the properties, however, is a first step. “The Archdiocese of New Orleans has stated since filing for chapter 11 reorganization that we anticipated property sales would be part of the proceedings,” archdiocese spokesperson Sarah McDonald said.
Drugmaker Mallinckrodt's opioid creditors will support an expedited second bankruptcy, despite a "gruesome" $1 billion reduction in settlement money for victims of the U.S. opioid crisis, attorneys said yesterday, Reuters reported. Mallinckrodt, which makes both branded and generic drugs, filed for its second bankruptcy on Monday after previously emerging from chapter 11 in June 2022. The company blamed higher interest rates on its debt, upcoming opioid settlement payments, and reduced sales for blockbuster drugs like its Acthar gel treatment for multiple sclerosis and infantile spasms. Mallinckrodt's second restructuring, which would wipe out existing equity shares, will reduce the company's debt by $1.9 billion. It will also trim $1 billion from its previously agreed opioid settlement, which resolved about 3,000 lawsuits alleging that the company used deceptive marketing tactics to boost generic opioid sales. The restructuring agreement has the support of over 90% of its lenders and the trustees in charge of the opioid settlement funds, attorneys said at a hearing yesterday in the U.S. Bankruptcy Court for the District of Delaware. David Molton, an attorney for the opioid trust, said that losing $1 billion in settlement money was a "particularly gruesome" result for states, local governments, individual victims and others who would have benefited from the settlement money. Those creditors will receive just $700 million after Mallinckrodt agreed to an up-front of $250 million payment just before its second bankruptcy. Molton told U.S. Bankruptcy Judge John Dorsey that none of the opioid victims were happy with the deal.
A bankruptcy judge rejected a sex-abuse compensation plan for the Diocese of Camden, N.J., saying that it would violate the rights of insurance companies on the hook for payment to abuse survivors, Bloomberg News reported. Judge Jerrold Poslusny said that he couldn’t release the Camden diocese from bankruptcy because its plan for compensating hundreds of sex-abuse victims would expose its insurers to paying potentially inflated or fraudulent claims. Camden’s failure to win court approval to exit bankruptcy after nearly three years highlights the growing discord among sex-abuse plaintiffs, insurers and religious organizations in a handful of recent chapter 11 cases stemming from childhood abuse. The Roman Catholic diocese, bankrupted by sex-abuse lawsuits, agreed last year to contribute more than $87 million to compensate over 360 abuse survivors on its way out of chapter 11. The reorganization plan left room for victims to pursue further compensation from insurance companies through litigation once the bankruptcy case ended. Judge Poslusny of the U.S. Bankruptcy Court in Camden took issue with several aspects of the Camden diocese’s proposed plan, including the appointment of a so-called neutral third party with the power to value each survivor’s sex-abuse claims. He also determined that abuse plaintiffs would have too much influence over the neutral administrator, potentially inflating the value of abuse claims and ultimately the amount of money the trust would pursue from insurance companies.
An increasing number of creditors are pushing back against a plan to cut the debt load of Puerto Rico’s bankrupt power utility by 75%, with investors and insurers accounting for $3.6 billion of the bonds set to vote against the proposal, a lawyer warned yesterday, Bloomberg News reported. Investors holding approximately $1.8 billion of Puerto Rico Electric Power Authority debt plan to join GoldenTree Asset Management, Syncora Guarantee and Assured Guaranty in opposing the restructuring plan submitted Friday to the court by a federally appointed financial oversight board, Thomas Lauria, a lawyer representing GoldenTree, said Wednesday during a court hearing before U.S. District Court Judge Laura Taylor Swain. Prepa, as the utility’s called, is seeking to restructure $8.3 billion after years of mismanagement and economic decline. The amount of bonds in opposition could increase to about 50% of the utility’s debt, Lauria said. “They intend to vote against the plan,” Lauria told Judge Swain. That $3.6 billion against the debt-cutting plan surpasses the creditor pool that’s in favor of it. That includes an ad hoc group of bondholders led by BlackRock Financial Management along with National Public Finance Guarantee. Swain plans to hold a confirmation hearing on that plan in March, she said Wednesday.
A federal bankruptcy trustee has objected to plans by the University of Iowa to fast-track its planned $20 million purchase of Mercy Hospital-Iowa City, the Iowa Capital Dispatch reported. Faced with the possibility of involuntary receivership, Mercy filed for bankruptcy earlier this month and, at the same time, announced plans for its acquisition by the University of Iowa. The Iowa Board of Regents approved the plan, which stipulates that the university will submit an initial bid of no less than $20 million to acquire Mercy — although the final purchase price could be higher if there are competing bids. Now, however, the federal bankruptcy trustee is objecting to the speed and manner in which the proposed sale is being handled. U.S. Trustee Mary R. Jensen has formally objected to proposed orders approving the bidding procedures and authorizing the hospital to provide certain financial protections to the university as the stalking-horse bidder. In a filing with the court, Mercy’s bankruptcy trustee argues that adequate time has not been allotted for other prospective buyers to submit a bid by the Sept. 19 deadline, undermining efforts to obtain the highest purchase offer for the hospital. “That deadline does not appear to provide sufficient time for other interested bidders to conduct their due diligence and submit a competitive bid,” the trustee has told the court. The trustee also cites the current lack of any evidence of the hospital being marketed to potential buyers, which is a necessary step to justify a shortened timeframe for a sale. The trustee also argues the various protections given to the university as part of the deal could discourage competing bids. Plans for the proposed sale state that to be deemed “qualified,” a bid must be for no less than $21.3 million — an amount that’s equal to the university’s original $20 million bid amount, plus $100,000, plus a 4% breakup fee, plus $400,000 for the university’s expenses. Read more.
The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.
Foxconn Technology Group lost a bid to kick Lordstown Motors Corp. out of bankruptcy, a win for the troubled electric vehicle maker as it attempts to find a new owner for its business, Bloomberg News reported. Judge Mary Walrath yesterday refused to dismiss Lordstown’s bankruptcy case. She rejected Foxconn’s claim that the struggling EV startup improperly sought chapter 11 protection to gain an unfair edge in a legal dispute between the companies over a deal to make Lordstown’s flagship Endurance trucks. Lordstown said that it was running low on cash before it filed bankruptcy in June and facing an exodus of employees and customers after Foxconn said it was prepared to exit a production partnership. Under the circumstances, Judge Walrath said Lordstown had a valid reason for filing bankruptcy and is now pursuing a reasonable strategy for repaying its creditors by attempting to sell the business. Thomas Lauria, a lawyer representing Lordstown, said the Ohio-based manufacturer is formulating a debt repayment plan and is hopeful that it will find buyers in chapter 11 for all or parts of its business. Potential buyers have until Sept. 8 to submit bids for the company’s assets, according to court documents.
3M’s board approved a $6 billion settlement to resolve claims that its earplugs caused hearing loss among veterans, putting a long-awaited price tag on a large chunk of the company’s legal troubles, the Wall Street Journal reported. The settlement is substantially less than the $10 billion to $15 billion some analysts expected. 3M shares climbed on Monday after news of the initial settlement terms was reported over the weekend. 3M said that it would pay $5 billion in cash and $1 billion in stock between 2023 and 2029 to settle the allegations. The company will book a pretax charge of $4.2 billion in the third quarter. 3M said it is seeking insurance recovery to offset some of the settlement payments. Aearo, a company 3M bought in 2008, is suing its insurance carriers related to the litigation. Veterans allege that 3M and Aearo Technologies, a company 3M acquired in 2008, produced faulty earplugs that failed to protect their hearing from noise damage after they were issued by the U.S. military. 3M has said the earplugs work correctly when used with proper training. The earplug litigation has become the largest single mass tort in U.S. history, with more claims than any one company has faced for earlier mass litigation including asbestos exposure, opioid sales or wildfires. (Subscription required.)
