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A group of insurers fighting the Boy Scouts of America’s bankruptcy reorganization plan wants to capitalize on a recent court ruling rejecting Johnson & Johnson’s use of chapter 11 to freeze 40,000 lawsuits linking its talc products to cancer, WSJ Pro Bankruptcy reported. Allianz Global Risks US Insurance Co. and Liberty Mutual Insurance Co. are among the carriers scheduled to appear Thursday in the U.S. District Court in Wilmington, Del., to argue against a bankruptcy court’s 2022 approval of the Boy Scouts chapter 11 plan, which would settle tens of thousands of sexual abuse claims. Last week, they argued in written papers that the now-dismissed bankruptcy of J&J subsidiary LTL Management LLC could apply to the youth group as well. The appeals-court ruling against LTL said that debtors seeking protection in chapter 11 must demonstrate good faith by acting in conformity with the underlying principles of the bankruptcy code, according to the insurers’ recent letter. They have previously said the Boy Scouts plan seeks to inflate financial distress to provide a windfall for sex-abuse attorneys. “Good intentions — such as to protect the J&J brand or comprehensively resolve litigation — do not suffice alone,” the insurers’ letter said, quoting the LTL decision. Some insurers settled with the Boy Scouts, but those that are appealing the chapter 11 plan argue their contractual rights under the policies they issued the Boy Scouts or its affiliates were unfairly disregarded.

Key Cineworld Group Plc lenders are considering a rights offering for the world’s second-largest theater chain to help it emerge from bankruptcy, Bloomberg News reported. Some creditors have recently discussed a share sale that could raise $800 million — open only to existing lenders — for Cineworld as part of a restructuring plan, the people said, asking not to be named because the talks are private. The final size of any issuance depends on creditor appetite and how much debt the restructured company is deemed able to carry following its bankruptcy. Discussions are ongoing and no final decisions have been reached, they added. The restructured business could be valued at about $4 billion including debt. London-based Cineworld filed for chapter 11 protection in Texas in September, after COVID-19 shutdowns hampered income and delayed movie releases, forcing it to reckon with a heavy debt load. The chain’s nearly $9 billion of liabilities including leases came in large part from its blockbuster acquisition of U.S. brand Regal Cinemas in 2018. In a bankruptcy hearing Wednesday, a lawyer for Cineworld said the company recently received a proposal from lenders, but didn’t disclose precise terms and added that the company, rather than its lenders, gets to chart its path out of chapter 11 protection. Cineworld has recently received “a lot of interest” in its assets from potential buyers, the lawyer, Josh Sussberg, said.

Bed Bath & Beyond Inc.’s white knight might be a hedge fund, but the rescue wouldn’t have happened if it wasn’t for the meme traders who made the logic behind the deal possible, WSJ Pro Bankruptcy reported. Even as Bed Bath & Beyond tumbled toward what seemed like a sure bankruptcy — shutting down stores, missing interest payments and having its credit lines frozen — retail investors continued to bet that the iconic home-goods retailer could defy the odds and survive to eke out some equity value. Even though they lacked the sustained, gravity-defying heights that the shares of GameStop Corp. and AMC Entertainment Holdings Inc. enjoyed during their meme-stock heydays, Bed Bath & Beyond’s shares have traded at high volumes and have repeatedly delivered meme-driven spikes in the past month. For Hudson Bay Capital Management LP, the $19 billion Greenwich, Conn.-based hedge fund that gave Bed Bath & Beyond an 11th-hour lifeline this week, the liquidity provided by the actively traded market for the stock means that the hedge fund will likely have options to monetize its position, so long as the retailer’s business operations don’t melt down further and its shares plunge to penny-status. It is rare for a distressed company to obtain a last-minute rescue via an equity raise, as it is much riskier to invest in a troubled company by buying stock that, unlike a senior loan, doesn’t have a claim on collateral. Even while it teetered on the brink of bankruptcy, AMC bagged a ton of meme money by selling shares as its star rose on social media, though the movie-theater chain never came as close to chapter 11 as Bed Bath & Beyond did by actually missing bond payments. Bed Bath & Beyond on Tuesday priced its equity offering led by Hudson Bay and some other investors, in which the investors provided $225 million upfront and are committed for another $800 million over the next 10 months granted that the company meets certain conditions, such as satisfying its debt obligations. Bed Bath & Beyond plans to use some of the proceeds to repay its revolving credit line and to help build back its inventory, according to a securities filing.

Bankrupt cryptocurrency lender Celsius Network’s request to extend the deadline to present its chapter 11 plan has run into opposition because of cash burn and the length of time already taken, Bloomberg News reported. The debtors are seeking to extend the period during which they can exclusively file a plan to the end of March from Feb. 15. They also want to be the only ones who can solicit a plan until the end of June. But the U.S. Trustee, the official committee of unsecured creditors and an ad hoc group of borrowers filed objections on Wednesday, expressing little confidence in the debtors’ ability to come up with a restructuring proposal. Celsius filed for bankruptcy in July after a sharp decline in crypto prices caused risky bets to backfire. The firm is one of a number of digital-asset lenders that hit the buffers in last year’s market rout. A court-appointed examiner late last month blasted Celsius and its former Chief Executive Officer Alex Mashinsky for lacking adequate risk management and misleading customers about its business practices and financial health.

As the cryptocurrency mania raged, Congress took a hands-off approach, keeping the fast-growing industry in legal limbo as it spawned startups and drew billions of dollars from investors. That’s left it to the courts to deal with the wreckage, Bloomberg News reported. The bankruptcies of FTX Group, Celsius Network and Genesis Global are promising to turn judges into after-the-fact rulemakers for an anarchic industry whose pioneers saw it as a way to keep money beyond government reach. With little guidance to go on, the judges will need to decide fundamental questions with high stakes for creditors who bankrolled the companies and the customers who trusted them with their funds. Among them: Is a token more like money or a security like a stock or a bond? What’s owed to those who deposited cryptocurrencies on platforms that are now broke? Who has the right to be repaid first? And how does the court even properly value debts denominated in tokens — just privately concocted bits of digital code — instead of the U.S. dollar? None of that is clear. “Bankruptcy courts are doing things that the normal regulatory system is not able to provide, like guidance,” said Yesha Yadav, a law professor at Vanderbilt Law School and former World Bank lawyer who specialized in financial regulation and insolvency. “It’s essentially becoming like a proxy regulator.” The precedents that emerge from the bankruptcies will have the ability to shape an industry that for years avoided direct oversight as Congress failed to enact legislation to put it under the sway of Washington regulators. In the absence of a cryto-specific law, the Securities and Exchange Commission and the Commodity Futures Trading Commission have been left to decide for themselves how to use their current powers over the securities and derivative industries to crack down on alleged wrongdoing in cryptocurrencies. But the bankruptcy decisions have the potential to affect the business more quickly because regulators typically have to ask a court to enforce their rulings.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Brazilian hedge fund manager SPX Capital is among asset management firms taking the lead in a group of local bondholders of troubled retailer Americanas SA organizing for restructuring negotiations, Bloomberg News reported. SPX, XP Asset Management, Riza, Icatu Vanguarda, Prada, Moneda and Exes were appointed as members of the committee that will represent a group of holders of the firm’s domestic debt, according to a document reviewed by Bloomberg. The group also approved hiring law firm E.Munhoz Advogados as its legal adviser, according to minutes from a Feb. 6 meeting. Americanas filed for bankruptcy protection last month, just days after finding 20 billion reais ($3.9 billion) of “accounting inconsistencies” that artificially boosted its profits and reduced reported liabilities. SPX, one of Brazil’s largest independent hedge fund managers with over 76 billion reais in assets, hired Albano Franco from Banco BTG Pactual’s asset-management unit in 2019 to build out its credit venture. Earlier this week, another Brazilian hedge-fund power house — Verde Asset Management — said it was stung by the rout in Americanas’ local notes. The firm said exposure to local bonds brought a 14 basis-point loss to its flagship fund last month, trimming January gains to 2.7%. 

A federal judge yesterday rejected a proposal to modify Sam Bankman-Fried's bail conditions, despite an agreement between the FTX cryptocurrency exchange founder and prosecutors to address potential witness tampering concerns, Reuters reported. U.S. District Judge Lewis Kaplan in Manhattan did not provide reasons for the denial, and said a hearing on bail remains scheduled for Feb. 9. A spokesman for Bankman-Fried declined to comment. The office of U.S. Attorney Damian Williams in Manhattan also declined to comment. Bankman-Fried, 30, has been free on $250 million bond and living in Palo Alto, Calif., with his parents, who guaranteed the bond, since pleading not guilty to looting billions of dollars from the now-bankrupt FTX. On Tuesday afternoon, he formally appealed Kaplan's Jan. 30 ruling granting a request by 11 media outlets including Reuters to reveal the names of two other people guaranteeing his bail. Bankman-Fried has said his parents, both Stanford Law School professors, had been harassed and received physical threats since FTX's collapse, and there was "serious cause for concern" the additional guarantors might suffer similar treatment. Prosecutors had asked last month to tighten bail, citing Bankman-Fried's efforts to contact both the general counsel of the FTX U.S. affiliate and new FTX Chief Executive John Ray, ostensibly to provide assistance.

Binance, the world’s largest digital-asset exchange, indicated a full audit of its assets and liabilities is some way off amid calls for more transparency following the collapse of rival FTX, Bloomberg News reported. The company’s goal is to hire an auditor for the whole balance sheet but big accountants are still learning about the crypto sector, which lacks agreed standards for challenges like price volatility, Binance’s Asia-Pacific head Leon Foong said. “It’ll take a longer time,” Foong said in an interview. “It shows you the limitations of the more traditional industries because there is a learning curve. Number one, it’s not their core competence. And number two, obviously there’s a lot of scrutiny if they get it wrong.” Binance sits at the heart of a digital-asset sector facing mounting pressure for greater openness after FTX went bankrupt with an $8 billion hole in its finances. While Binance argues crypto audits are challenging, others point to Nasdaq-listed Coinbase Global Inc.’s annual statements by Deloitte as evidence that they can be done by major accountants. In December, Binance released a so-called proof-of-reserves report based on a snapshot review by accounting firm Mazars Group. The step was part of an effort to try and reassure about customer assets. The report didn’t amount to a full financial audit and Mazars later suspended work for crypto outfits.

Hudson Bay Capital Management is the anchor investor of the share sale launched Tuesday by Bed Bath & Beyond to stave off bankruptcy, Bloomberg News reported. The embattled retailer lined up investors for an eleventh-hour cash infusion that would allow it to keep operating outside of chapter 11 protection, Bloomberg previously reported. Hudson Bay, a New York-based multi-strategy hedge fund, comprised the largest order among several institutional investors that helped Bed Bath & Beyond enter into the transaction Tuesday, said the people, who asked not to be named discussing private company information. B. Riley Securities Inc. arranged the deal. The company gathered orders from institutional investors to cover the full offering, which will ultimately raise more than $1 billion. Bed Bath and Beyond also worked with advisers from Kirkland & Ellis, Lazard and AlixPartners.