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When a public company like Virgin Orbit goes bankrupt, there is no shortage of headlines, but there’s an undercurrent happening in the bankruptcy world that isn’t getting as much attention: This year, research shows private companies are filing for bankruptcy at rates that exceed what was seen at the height of the pandemic, Straight Arrow News reported. According to UBS, a lot of bankruptcies are at smaller firms for now, so the impact on assets and employees is not as egregious as the sheer number of filings. Experts say real estate is one place that is seeing a bankruptcy boom, while health care, retail, construction, restaurant and financial sectors are areas to watch. Former bankruptcy judge and current ABI President Kevin Carey said he’s witnessed bankruptcy filings ticking up for the past couple of months. “We’ve been talking about, for a really long period of time now, for the recession to happen,” Carey said. “And so a lot of the lending is on hold. Investors don’t want to put money into a volatile economy.” He said the banking crisis is just injecting more uncertainty into an economy that was already tightening credit. The latest Fed survey found that roughly 44% of banks reported tightening standards for business loans in the first quarter of 2023. With the exception of the COVID-19 pandemic, it’s the highest share to say that since 2009 in the wake of the Great Recession. “Once liquidity runs out, companies are faced with very few choices,” Carey said, noting that many chapter 11 bankruptcies he’s seeing now are seeking a sale of the business as opposed to restructuring. “So many businesses that find their way into chapter 11 are over-levered, and businesses find themselves in a situation in which there’s just no way out but to sell the company.”

A report from Maryland Attorney General Anthony Brown alleges that 156 Catholic clergy members and others abused at least 600 children over the course of more than six decades, CNN reported. “From the 1940s through 2002, over a hundred priests and other Archdiocese personnel engaged in horrific and repeated abuse of the most vulnerable children in their communities while Archdiocese leadership looked the other way,” the report reads. “Time and again, members of the Church’s hierarchy resolutely refused to acknowledge allegations of child sexual abuse for as long as possible.” The report lists descriptions of graphic sexual and physical abuse allegations: It includes stories of how some alleged abusers provided victims with alcohol and drugs and describes in vivid detail how they coerced and forced victims to perform sexual acts. The report’s list of abusers includes clergy members, seminarians, deacons, teachers and other employees of the Archdiocese. Forty-three priests who “served in some capacity or resided within the Archdiocese of Baltimore” committed sexual abuse in locations outside Maryland, the report alleged. Of these 43 priests, 40 of them allegedly committed sexual abuse in only one other location, while the other three allegedly committed sexual abuse in two other locations outside Maryland, the report says.

The U.S. services sector slowed more than expected in March as demand cooled, while a measure of prices paid by services businesses fell to the lowest in nearly three years, giving the Federal Reserve a boost in the fight against inflation, Reuters reported. There are also growing signs that the labor market is loosening, with other data showing private payrolls growth slowed considerably last month. This followed on the heels of news that job openings fell below 10 million at the end of February for first time in nearly two years. The Institute for Supply Management (ISM) said that its non-manufacturing PMI fell to 51.2 last month from 55.1 in February. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy. There was no mention of the financial markets turmoil, which has led to a tightening in credit conditions. Economists polled had forecast the non-manufacturing PMI decreasing to 54.5. Despite the pullback in growth in the services sector, Anthony Nieves, chair of the ISM Services Business Survey Committee noted that "the majority of respondents report a positive outlook on business conditions." The PMI remains above the 49.9 level which the ISM says over time indicates growth in the overall economy. Nevertheless, the softer-than-expected reading, coming on the heels of continued weakness in manufacturing activity last month, increases the risk of a recession this year. The ISM reported on Monday that its manufacturing PMI fell in March to the lowest level since May 2020. It was the first time since 2009 that all subcomponents of the manufacturing PMI fell below the 50 threshold. (Subscription required to view article.)

The top creditor of Robin Lehner accused the Vegas Golden Knights goaltender of fraud in obtaining the debt and asked a bankruptcy court to require him to pay what he owes the lender, The Athletic reported. In a separate motion, credit card brand American Express is also alleging fraud in seeking payment of the Swede’s outstanding consumer bills. Lehner and his wife, Donya, filed for chapter 7 protection on Dec. 30, later listing $5.2 million of assets and $27.3 million of liabilities. The creditor filing by Aliya Growth Fund (AGF), which loaned Lehner $4.75 million six weeks before he filed for bankruptcy, is the first signal that the process will not be smooth and is unlikely to end by the close of the year, as the debtor had suggested in previous court filings. Its 14-page complaint, in which Aliya asks for a trial, uses the terms “fraud” and “fraudulent” 10 times. Aliya’s lawyers wrote that the Lehners solicited and received significant sums of money from AGF “by making materially false and misleading representations.” The alleged untruths concerned the Lehners’ alleged failure to disclose litigation, other loans, the truth about their assets and intent and ability to repay the loan. Specifically, Aliya listed 24 separate loans, totaling $21 million, that the Lehners allegedly did not disclose in their loan application, as well as 11 different litigation matters (many of which were closed at the time) and unpaid taxes. (Subscription required to view article.)

Sinclair Broadcast Group said that it will reorganize its various businesses under a new holding company called Sinclair Inc., TheDesk.net reported. The company, which has earned the affectionate nickname “New Sinclair,” will serve as the parent for Sinclair’s broadcast properties, sports subsidiaries, streaming services and various media and non-media related investments, executives affirmed. Sinclair Inc. will become the new publicly-traded company that encapsulates the various media and non-media businesses. Nothing will change in terms of Sinclair’s board of directors, executive leadership or the business of the public company. Prior to the reorganization, Sinclair Broadcast Group included three primary subsidiaries: Sinclair Television Group (which included Compulse and the Tennis Channel), Diamond Sports (Bally Sports regional sports networks) and various private equity and real estate assets. After the reorganization is complete, Sinclair will consist of two primary subsidiaries: Sinclair Broadcast Group and Sinclair Ventures. The plan comes less than a month after Sinclair’s Diamond Sports division filed for chapter 11 protection. The reorganization is not expected to materially affect those bankruptcy proceedings.

Federal appeals court judges appeared skeptical of 3M’s bid to use the bankruptcy of its subsidiary Aearo Technologies to shield itself from nearly 260,000 lawsuits over allegedly defective military-issue earplugs, Reuters reported. Paul Clement, a lawyer for Aearo, urged a three-judge panel of the Seventh Circuit Court of Appeals to reverse a bankruptcy court order allowing the lawsuits to move forward against 3M, even though Aearo is bankrupt. Clement argued that bankruptcy’s so-called automatic stay should apply to 3M as well, because there is “complete overlap” between the facts and legal defenses in earplug lawsuits against the two companies. Aearo, which made the combat arms earplugs, filed for bankruptcy last July, with 3M pledging $1 billion to fund Aearo’s liabilities stemming from the lawsuits that accuse both Aearo and 3M of misrepresenting the earplugs’ effectiveness, leading to hearing damage. Aearo and 3M said the bankruptcy process would facilitate a fair and comprehensive settlement with the plaintiffs. 3M has lost 10 of the 16 cases that have gone to trial so far, with about $265 million being awarded in total to 13 plaintiffs.

Johnson & Johnson has threatened to use a second bankruptcy filing to shield itself from thousands of cancer lawsuits related to its talc-based baby powder, lawyers representing the complainants said in a court filing, Seeking Alpha reported. "There is no reason Johnson & Johnson should be permitted to access the tools of bankruptcy to address their liability at this time," a group of lawyers on behalf of talc claimants wrote. Based on a controversial legal maneuver called "Texas two-step," J&J established a subsidiary called LTL in 2021 to hold all its talc liabilities and later placed it into bankruptcy protection. However, that strategy failed early this year when the Third Circuit Court of Appeals ruled against the company noting that neither JNJ nor LTL was in financial distress to qualify for bankruptcy protection. J&J (JNJ) requested the Third Circuit to delay the court order from taking effect and allow it time to file a U.S. Supreme Court appeal. The court denied the request and directed a bankruptcy judge to dismiss LTL's chapter 11 case.

A Miami-based trucking company has filed for chapter 11 protection, Furniture Today reported. The company also owns a CDL training school. Soler & Soler — a trucking company that carries general freight and materials, and owns 22 tractors and employs 42 drivers — cited financial hardship persisting over the past 12 months. The filing also described negative cash flow, high fuel prices and a greater than usual cost to retain an active fleet. Unsecured creditors include Home Depot, SouthState Bank, Wells Fargo and Ryder Truck Rental. Soler was leasing its 22 trucks from Ryder, which has an unsecured claim of more than $4.5 million. According to the filing, the company made $1.7 million so far this year, and $10.5 million in 2021. The trucking industry has been severely affected by worsening market conditions since mid-to-late last year, with many instances of shutdowns and mass layoffs taking place.