Bankrupt crypto exchange FTX has recovered over $7.3 billion in cash and liquid crypto assets, an increase of more than $800 million since January, the company's attorney said on Wednesday at a U.S. bankruptcy court hearing in Delaware, Reuters reported. FTX attorney Andy Dietderich said the company is starting to think about its future after months of effort devoted to collecting resources and figuring out what went wrong under the leadership of indicted ex-founder Sam Bankman-Fried. Bankman-Fried has pleaded not guilty. "The situation has stabilized, and the dumpster fire is out," Dietderich said. FTX has benefited from a recent rise in crypto prices, Dietderich said. Its total recovery would be valued at $6.2 billion based on crypto prices from November 2022, when it filed for bankruptcy after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal. FTX's new CEO John Ray has detailed improper fund transfers and poor accounting at the collapsed crypto exchange, describing it as a "complete failure" of controls. Read more.
In related news, FTX may use money marked to repay customers to restart its failed crypto exchange because the project would require a significant amount of cash, a lawyer for the company said in court yesterday, according to Bloomberg News. The company is still in the early stages of deciding whether to bring back the exchange, which allowed customers to trade digital assets before FTX collapsed, Andrew G. Dietderich, an FTX attorney with law firm Sullivan & Cromwell told U.S. Bankruptcy Judge John T. Dorsey. The company could also try to raise money to fund a restart or drop the entire concept. Read more.
Bondholders of KKR & Co.’s Envision Healthcare Corp. have hired law firm White & Case LLP as the physician staffing company faces a looming payment deadline on its unsecured bonds, WSJ Pro Bankruptcy reported. Envision has a bond interest payment coming due Saturday and investors are concerned about whether it will pay because it is in technical default. The bondholder group, which formed recently, has said it represents a majority of the company’s outstanding bonds. Envision issued $1.2 billion of unsecured bonds due in 2026 in connection with its $6 billion purchase by KKR in 2018. Those bonds were recently quoted at around 4 cents on the dollar, according to market-data platform Solve, indicating that investors expect significant impairment. Envision has been in negotiations with some of its other creditors after missing a March 31 deadline to report its fourth-quarter financial results, triggering a technical default under the company’s loans.
U.S.-based online and catalogue retailer AmeriMark Interactive and six affiliated debtors have filed voluntary chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware,Retail Insights reported. The six debtors are AMDRL Holdings, AmeriMark Intermediate Sub, AmeriMark Direct, AmeriMark Intermediate Holdings, Dr Leonard’s Healthcare and LTD Commodities. The Cleveland, Ohio-based company sells home goods, clothing and health care goods mainly via catalogues and online. Before officially filing the bankruptcy cases, the associated debtors retained an investment banker and promoted their assets for sale but have not received offers from one or more buyers. AmeriMark has assured that all the affiliated companies will fulfil the pending orders that were shipped before the beginning of bankruptcy cases. In the case of orders that were not shipped before the bankruptcy filings, the customers will be exempted from being charged.
The prospects of U.S. companies with significant leverage or rated several notches below investment grade have turned bleaker in recent months, credit-rating firms say, and default rates for junk-rated companies could more than double by early next year, the Wall Street Journal reported. While highly rated companies are proving largely resilient during the postpandemic economic turbulence, businesses with lower credit ratings and floating-rate debt are increasingly struggling with steep increases to debt-servicing costs and a possible recession as the Federal Reserve continues interest-rate hikes. What’s more, still-steep inflation and softer demand are also expected to erode some companies’ profit margins, the ratings firms said. The higher borrowing costs for risky credit are resulting in more rating downgrades and an acceleration of defaults. Default rates for low-rated U.S. companies will likely hit 5.4% in February 2024, up from 2.5% in February 2023 and higher than the long-term average of 4.7%, ratings firm Moody’s Investors Service said in a report last month. A recession as well as an increase in unemployment and wider credit spreads, or the difference in corporate bonds compared with that of safe Treasurys, could cause defaults to rise further, Moody’s said.
A Johnson & Johnson unit said cancer victims who refuse to settle with the company are attempting to intimidate other claimants from signing onto an $8.9 billion deal to end lawsuits over allegedly tainted baby powder, Bloomberg News reported. The health-care giant is trying for the second time to use the bankruptcy of its LTL Management to round up support for a plan that would settle more than 40,000 lawsuits that allege baby powder contained talc that was tinged with asbestos, a toxic substance. LTL has the backing of 60,000 victims, or about two thirds of all claimants, lawyer Gregory M. Gordon said in federal court on Tuesday. The company must get to 75% to have a chance at winning approval for the deal from U.S. Bankruptcy Judge Michael Kaplan. The holdouts are working to block the company from reaching that goal, Gordon said. As the bankruptcy goes forward, LTL and J&J will present evidence to “show an aggressive, concerted effort by the plaintiff firms on this committee to scuttle this agreement through threats and intimidation directed at LTL, J&J” and plaintiffs who support the plan, Gordon said.
National CineMedia Inc., the biggest movie-theater advertising business in North America, said on Tuesday it filed for bankruptcy protection and had entered into a restructuring agreement with its lenders, Reuters reported. This adds to the growing list of challenges facing the cinema industry, which has been hit hard by the pandemic and a lack of major film releases, and follows a similar move by Cineworld, which filed for U.S. bankruptcy protection in September. In an effort to de-leverage its balance sheet, NCM said it entered into an agreement with its secured lenders to convert its debt into equity. The company will receive an ownership interest of about 14% in the restructured entity, it said. Despite some progress in post-pandemic recovery, industry executives have cautioned that the sector is still a long way from returning to its pre-pandemic heights, with theaters and studios facing significant disruptions in production and attendance.
Bell Bank Park, an Arizona sports complex that opened last year, has hired a financial adviser to address a shortfall in revenue and a default on its tax-exempt municipal debt last year, WSJ Pro Bankruptcy reported. The 320-acre sports complex has hired investment bank Miller Buckfire & Co. and replaced Legacy Sports USA, the manager of the money-losing facility, according to a regulatory filing posted Tuesday to Electronic Municipal Market Access. Miller Buckfire will explore options for the sports complex, including a sale, according to the filing. Legacy Cares Inc., the nonprofit that borrowed $280 million to build the park, brought on Miller Buckfire after falling far short of revenue projections and defaulting on interest payments last year, according to people familiar with the matter. Bell Bank Park brought in only $15 million in revenue for the first six months after opening. It had originally projected $125 million for that period. Since its opening, the park has been managed by Legacy Sports USA, a for-profit firm. Legacy Cares disclosed Tuesday that a new manager, Elite Sports Group LLC, will replace Legacy Sports USA.
Johnson & Johnson’s second attempt to resolve talc lawsuits in bankruptcy should be dismissed as an unprecedented fraud designed to deny plaintiffs just compensation, lawyers representing cancer victims argued in a Monday court filing, Reuters reported. The attorneys contend J&J defied a January appeals court rejection of its first attempt to settle the litigation, noting that a J&J subsidiary refiled for chapter 11 about two hours after a court dismissed its first bankruptcy. The lawyers blasted the move as the "largest intentional fraudulent transfer in United States history." Johnson & Johnson is offering to settle all claims for $8.9 billion, up from its original offer of $2 billion. Monday's legal broadside challenged the company’s latest gambit as an unlawful abuse of the chapter 11 system, echoing earlier objections to its first effort to resolve the lawsuits. In October 2021, J&J executed a controversial legal maneuver known as a Texas two-step. The tactic involved dividing its consumer business in two and then offloading tens of thousands of talc lawsuits onto a newly created subsidiary, which almost immediately filed for chapter 11. The goal: to halt the avalanche of lawsuits and force plaintiffs into a global settlement in bankruptcy court. The plaintiffs allege J&J's talc-based Baby Powder and similar cosmetic products caused ovarian cancer and mesothelioma. The company maintains its talc products are safe.
