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H2 Brands Group, a wholesaler of home and hardware products including fans, humidifiers and paint supplies, said it has filed for bankruptcy due to supply-chain problems, vendor lawsuits and potential liabilities from a deadly 2022 fire in New York City, WSJ Pro Bankruptcy reported. The Cranbury, N.J.-based company, which counts Target Corp., Dollar General Corp. and Family Dollar Stores Inc. among its customers, has total debt of roughly $100 million and plans to sell its assets in chapter 11. Its revenue fell to $256 million last year from $325 million in 2021, according to a document filed Monday in the U.S. Bankruptcy Court in Wilmington, Del. Supply-chain problems have played a role in the company’s financial problems, Chief Executive Mark Rostagno said in a sworn declaration. The amount of time needed to receive products from China has increased more than fourfold to 150 days during the pandemic, H2 Brands said. In response, the company said it placed bigger orders so it wouldn’t be caught short of inventory, increasing its financial obligations. H2 Brands said the cost of ocean containers has risen to an average of $8,800, up from roughly $2,500 before the supply-chain disruptions. The company said it also faces claims related to a fire in a Bronx apartment building that killed 17 people last year, one of the deadliest blazes in New York City in decades. Fire investigators said a space heater distributed by the company was a factor in the fire. H2 Brands has disputed the claims.

On direct appeal, the Third Circuit reversed the bankruptcy court and directed dismissal of the petition filed by LTL Management LLC, the subsidiary of Johnson & Johnson created to file in chapter 11 to deal with talc and asbestos claims arising from the sale of Johnson’s Baby Powder, according to today's edition of Rochelle's Daily Wire. In his 40-page opinion yesterday, Circuit Judge Thomas L. Ambro held that “resort to Chapter 11 is appropriate only for entities facing financial distress.” LTL did not qualify because it has a $61.5 billion backstop from another J&J subsidiary and from the ultimate J&J parent. Judge Ambro said that the parent has $400 billion in equity value, a AAA credit rating, plus $31 billion in cash and marketable securities. He also noted that the parent had distributed $13 billion to shareholders in 2020 and 2021. Judge Ambro pointedly declined to rule on whether LTL improperly used chapter 11 as a “litigation tactic.” Unless the debtor is in “financial distress,” this writer reads the opinion to mean that debtors may not justify the use of chapter 11 by contending that it’s superior to the tort system or multidistrict litigation in federal courts.

Cleveland Integrity Services, a provider of inspection services to oil and gas pipelines, filed for bankruptcy on Monday, citing the impact of a decline in capital spending at midstream oil-and-gas companies that began during the COVID-19 pandemic, WSJ Pro Bankruptcy reported. Based in Cleveland, Okla., the company said in court filings that it had struggled to recover from a drying-up in capital spending at oil-and-gas companies that began in 2020. It currently has around $160 million in debt in a single term loan mostly held by Owl Rock Capital Corp., now the leading bidder to buy the company out of bankruptcy, according to court papers and public filings. Owl Rock has offered to forgive $30 million in debt to acquire the business, which is owned by private-equity firm First Reserve Corp. Any restructuring deal would require bankruptcy court approval to take effect and could be subject to competing bids. Despite the rebound in energy prices since Russia’s invasion of Ukraine last year, Cleveland Integrity’s customer spending and demand haven’t returned to their pre-2020 levels, Matt Kesner, the company’s chief operating officer, said in a declaration to the U.S. Bankruptcy Court in Houston. The company has also faced a number of lawsuits that allege it underpaid its pipeline inspectors, some of which have been settled out of court. The increase in litigation-related costs hit the company at the same time it was coping with a decline in its business, according to court papers.

Bankrupt crypto lender Celsius Network used investor money and customer deposits to prop up its own token, inflating its balance sheet while two of its founders cashed out millions, a U.S. court-ordered examiner report released today showed, Reuters reported. Crypto lenders such as Celsius boomed during the COVID-19 pandemic, drawing depositors with high interest rates and easy access to loans. New Jersey-based Celsius filed for U.S. bankruptcy in July last year, after freezing customer withdrawals from its platform. Bankruptcy Judge Martin Glenn, who is overseeing the chapter 11 case, appointed former prosecutor Shoba Pillay as an independent examiner in September. She was tasked with investigating accusations by Celsius customers that the company operated as a Ponzi scheme and also with reporting on its handling of cryptocurrency deposits.

FTX founder Sam Bankman-Fried attempted to stall bankruptcy proceedings in the U.S. in November in order to transfer assets from his crypto exchange to foreign regulators, the Justice Department alleged in a filing Monday, the Wall Street Journal reported. Bankman-Fried hoped foreign regulators would treat him leniently and eventually allow him to regain control of FTX, according to federal prosecutors. FTX’s lawyers wanted to secure the assets for bankruptcy at the time he was trying to move the money, the prosecutors said. He made the statements to Gary Wang, an FTX co-founder and the former chief technology officer, the filing said. Wang pleaded guilty to federal fraud charges and is cooperating with prosecutors. The Manhattan U.S. attorney’s office charged Mr. Bankman-Fried last month with stealing billions of dollars from FTX customers and misleading investors. He pleaded not guilty and was released on a $250 million bond. He is currently under court-ordered confinement in his parents’ Palo Alto, Calif., home. Last week, Bankman-Fried’s lawyers asked a judge to remove bail conditions that prohibit him from accessing assets held by FTX and his investment firm Alameda. Bankman-Fried’s alleged misuse of FTX and Almeda funds in November were a reason for denying his lawyer’s request, prosecutors said in the Monday filing.

BlockFi Inc. won bankruptcy court approval to set up an auction for the crypto lender’s digital coin mining business, Reuters reported. The company wants to get bids in as quickly as possible to take advantage of current market conditions, BlockFi lawyer Francis Petrie said during a video court hearing Monday morning. The company has already gotten some initial bids for various assets and expects more, Petrie told U.S. Bankruptcy Judge Michael Kaplan. “We’ve received substantial interest in the market for bidding purposes and current volatility in the cryptocurrency market, which means we need to act quickly,” Petrie said. BlockFi is selling computer equipment used for mining digital coins at a time when the crypto mining business is on the upswing. Last week, another bankrupt crypto platform, Celsius Network, said it’s aiming to sell tens of thousands of mining machines. Bids for the mining assets are due Feb. 20 and an auction will be held about one week later, Petrie said. The company will return to court in March for approval of any proposed deal that comes out of the auction.

Bed Bath & Beyond Inc is preparing to seek bankruptcy protection as soon as this week, and has lined up liquidators to close additional stores unless a last-minute buyer emerges, Reuters reported. The timing of any bankruptcy filing was in flux Monday evening, with the U.S. home goods retailer's advisers locked in meetings exploring any remaining options to avoid it. Bed Bath & Beyond is negotiating a loan to help it navigate bankruptcy proceedings, with investment firm Sixth Street in talks to provide some funding, two of the people said. The firm loaned Bed Bath & Beyond $375 million last year. The chain, once considered a category killer in home goods like dinnerware and small appliances, has lined up liquidators who are readying store closing sales that could be launched as soon as this weekend, two of the people said. The chain has said it is closing 87 Bed Bath & Beyond stores and five buybuy BABY stores, in addition to 150 closures announced last year. It is also shutting its health and beauty discount chain Harmon.