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Generic drugmaker Mallinckrodt is at risk of filing for bankruptcy again, a development that stands to disrupt its commitment to paying opioid victims under a settlement deal — but former executives are likely to keep their liability releases anyway, WSJ Pro Bankruptcy reported. The Dublin-based company, which reached a $1.7 billion opioid settlement last year through a bankruptcy filing, is now considering a repeat chapter 11 filing after struggling financially. If it files for bankruptcy again, its former executives’ grants of legal immunity from civil opioid lawsuits will likely be unaffected, according to legal experts. Those releases will stand “unless somehow the court in the second case felt it had the power to vacate the confirmation order in the first case — which rarely, if ever, happens,” said Bruce Markell, a former bankruptcy judge and now a professor at Northwestern University Pritzker School of Law. But the remaining $1.25 billion in opioid settlement payments that Mallinckrodt still owes could be reduced or delayed because those claims are unsecured, meaning there is no collateral that can be seized. Mallinckrodt’s financial position has weakened considerably since the settlement was reached. Its earnings have faltered since the confirmation of the chapter 11 plan, which shaved off about a quarter of the more than $5 billion debt load that Mallinckrodt brought to bankruptcy court. The company has also been weighed down by some high-interest debt obligations that weren’t resolved in bankruptcy, and it has faced continuing litigation from certain lenders.

ABI’s Subchapter V Task Force will hold its first virtual public hearing today at 3 p.m. ET to receive witness testimony from bankruptcy judges, practitioners and subchapter V trustees on their general experiences with small business reorganizations under subchapter V of chapter 11 of the Bankruptcy Code. Witnesses scheduled to testify include:

·      Hon. Hannah L. Blumenstiel (N.D. Cal.; San Francisco)

·      Hon. Lori V. Vaughan (M.D. Fla.; Orlando)

·      Katherine Clark of Thompson Coburn LLP (Dallas)

·      John-Patrick M. Fritz of Levene Neale Bender Yoo & Golubchik, LLP (Los Angeles)

·      Richardo I. Kilpatrick of Kilpatrick & Associates, PC (Auburn Hills, Mich.)

·      David Mawhinney of Hart Advisory PLLC (Framingham, Mass.)

·      Brian L. Shaw of Cozen O'Connor (Chicago)

·      Michael St. James (San Francisco)

To register to join the public hearing administered via Zoom, please click here.

The judge overseeing FTX's U.S. bankruptcy said Thursday that he would not defer to a Bahamian court about key issues like which FTX entity should collect assets and repay customers of the bankrupt crypto exchange, Reuters reported. Liquidators for FTX Digital Markets, the exchange's Bahamas-based subsidiary, have asked U.S. Bankruptcy Judge John Dorsey to let them seek a ruling from the Bahamas Supreme Court that their company controlled FTX.com's crypto exchange for international customers. FTX's U.S. bankruptcy team seeks to block the Bahamas litigation, calling it a power grab that would derail the company's ongoing efforts to repay customers. Judge Dorsey questioned the value of a Bahamian court ruling during a Thursday court hearing in Wilmington, Delaware, saying that he would retain authority over the $7 billion in assets recovered by the U.S. debtors no matter what the Bahamian court rules. Both courts would have to sign off before any assets transfer from the U.S. to the Bahamas, Judge Dorsey said. "It doesn't go to FTX Digital until I say it goes to FTX Digital," Judge Dorsey said. "So what are we gaining by having two parallel proceedings in two separate courts?" Chris Shore, an attorney for the Bahamian liquidators, said that a Bahamas court ruling would clarify each side's responsibilities and provide a framework for cooperation between the U.S. bankruptcy case and involuntary insolvency proceedings in the Bahamas.

The U.S. Justice Department (DOJ) has filed an objection to a motion by bankrupt cryptocurrency trading platform Bittrex to allow customers to withdraw their crypto and fiat, Cointelegraphc.com reported. The U.S. Treasury’s Office of Foreign Assets Control (OFAC) is Bittrex’s biggest creditor, but its claim would be subordinated under the Bittrex proposal. Bittrex was charged in October by both OFAC and the Treasury’s Financial Crimes Enforcement Network (FinCEN) with sanctions violations for allowing individuals based in Crimea, Cuba, Iran, Sudan and Syria to make transactions from 2014 to 2017. OFAC and FinCEN assessed penalties of $24 million and $29 million, respectively. A Bittrex spokesperson told Cointelegraph at the time that the exchange was “pleased” to resolve the charges. It agreed to pay $24 million of its penalty to FinCEN, receiving a $5 million credit from the agency, while OFAC credited Bittrex $24 million, which remains Bittrex’s largest debt. The crypto platform’s problems did not stop there. The U.S. Securities and Exchange Commission sued Bittrex for unregistered securities operations in April, and that action could also result in monetary penalties. In May, Bittrex declared bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. Within days of its bankruptcy filing, Bittrex proposed a plan to make customers whole. The DOJ argued in its June 7 filing that the Bittrex proposal improperly applies the standard that would allow it to pay some creditors ahead of others.

Compass Medical's decision to file for bankruptcy will affect a class-action lawsuit filed on behalf of patients and might delay access to their health records, lawyers say, the Quincy (Mass.) Patriot Ledger reported. Compass filed for chapter 7 bankruptcy on Monday, less than a week after abruptly closing its doors and discontinuing services to about 70,000 patients. The Quincy, Mass.,-based corporation, which also had a branch in Braintree, will have no money available to pay unsecured creditors after administrative expenses are paid, according to the bankruptcy form submitted by Compass President Bruce Weinstein and his attorney, D. Ethan Jeffery. The bankruptcy filing comes on the heels of a class-action lawsuit filed in Plymouth Superior Court on Friday. The class representative in that case, Richard Callanan, of Abington, is represented by lawyer Jonathan Sweet. In October 2022, a Suffolk County Superior Court jury ordered Compass to pay $16 million to its partner, Steward Health Care System, for fraud.

U.S. vertical farming company AeroFarms has filed for chapter 11 bankruptcy protection, VerticalFarmDaily.com reported. The company has secured $10 million in financing from existing investors to support their operations during the process. The company's CEO, David Rosenberg, will step down, and the CFO, Guy Blanchard, will take on additional responsibilities as the President of AeroFarms. Despite the challenges faced by the industry, the company says their farm in Danville, Va., is performing well, and they aim to continue serving their customers and expanding their business. They have engaged legal, financial and communications advisors to assist them during this process. The company has entered into an agreement with an existing group of AeroFarms investors to provide $10 million in debtor-in-possession (DIP) financing, as part of a larger round of financing that includes those investors.

ABI’s Subchapter V Task Force will hold its first virtual public hearing at 3 p.m. ET on Friday, June 9, to receive witness testimony from bankruptcy judges, practitioners and subchapter V trustees on their general experiences with small business reorganizations under subchapter V of chapter 11 of the Bankruptcy Code. Witnesses scheduled to testify include:

• Hon. Hannah L. Blumenstiel (N.D. Cal.; San Francisco)

• Hon. Lori V. Vaughan (M.D. Fla.; Orlando)

• Katherine Clark of Thompson Coburn LLP (Dallas)

• John-Patrick M. Fritz of Levene Neale Bender Yoo & Golubchik, LLP (Los Angeles)

• Richardo I. Kilpatrick of Kilpatrick & Associates, PC (Auburn Hills, Mich.)

• David Mawhinney of Hart Advisory PLLC (Framingham, Mass.)

• Brian L. Shaw of Cozen O'Connor (Chicago)

• Michael St. James (San Francisco)

To register to join the public hearing administered via Zoom, please click here.

For more information on the Task Force, please click here. 

Blackstone-owned TeamHealth has received a pair of competing offers from two of its biggest creditors that are giving the struggling physician-staffing company starkly different options to repay over $1 billion in debt due next year, WSJ Pro Bankruptcy reported. Pacific Investment Management Co., which is known as Pimco and is the largest holder of TeamHealth’s loans maturing in February, has proposed swapping those loans for new debt backed by some of the company’s assets, such as its accounts receivable from government entities like Medicare. The plan would allow TeamHealth to avoid defaulting on its debts but would give Pimco first dibs on some of TeamHealth’s assets if it went bankrupt, a major advantage relative to other creditors. Ares Management, which holds hundreds of millions of dollars of the company’s bonds, has a different plan: It has requested that Blackstone, TeamHealth’s private-equity backer since 2016, kick in around $250 million of new money to TeamHealth, the people said. Combined with new debts Ares would provide, the funds would help TeamHealth pay down loans due next year. Ares’s deal doesn’t disadvantage any lenders or strip them of their collateral.

White Rock (Texas) Medical Center has laid off 30 workers across 28 departments, including clinical and administrative roles, Becker's Hospital Review reported. An internal memo to the hospital's employees and physicians deemed the job cuts a necessary cost-reduction measure, according to a June 6 news release shared with Becker's. "Such decisions are never easy," the hospital's administrative leadership team wrote in the memo. "Our hospital has had significant losses each month this year, despite investments in hospital programs. Such operating losses cannot be sustained." The hospital is the only Texas hospital owned and operated by El Segundo, Calif.-based Pipeline Health. The health system filed for chapter 11 bankruptcy protection last fall, but exited bankruptcy in January under new leadership.

The Sackler family owners of Purdue Pharma are a giant step closer to being reprieved. In winning an appeals court’s approval last week to resolve lawsuits accusing the family members of fueling the opioid crisis, Purdue’s bankruptcy case had to clear a new, stringent list of criteria that set a high bar for others seeking relief from mass lawsuits, according to a WSJ Pro Bankruptcy commentary. The U.S. Court of Appeals for the Second Circuit in Manhattan took more than a year and 97 pages in the landmark ruling that tackles a thorny issue for the judiciary: When should bankruptcy courts issue grants of immunity, known as third-party releases, to shield nonbankrupt businesses and individuals from lawsuits even when faced with objections? The debate about releases has taken on new meaning as a number of companies, such as 3M and Johnson & Johnson, and individuals, such as the Sacklers, try to escape mass lawsuits alleging harm from defective products or other wrongdoing. Some critics have argued that releases allow the wealthy and the powerful to use bankruptcy to get out of costly lawsuits without having to file for chapter 11 themselves and at claimants’ expense. In Purdue’s case, the pharmaceutical company sought to release its family owners from all current and future lawsuits, alleging that their efforts to drive sales hid the addictive nature of its flagship painkiller, OxyContin. In exchange, the family agreed to pay up to $6 billion in a settlement over time. Purdue’s request to extend the reprieve to the Sacklers cleared all seven factors the appeals court had laid out to consider whether such a release should be granted. Last week’s ruling also indicates that other companies or individuals seeking similar deals now need to meet the same legal threshold.