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New York Diocese, Abuse Victims File Competing Bankruptcy Plans

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A Roman Catholic diocese on Long Island, New York, proposed a bankruptcy plan on Friday, moving to retake control of its chapter 11 case after a committee representing sexual abuse victims filed a competing restructuring proposal, Reuters reported. The Diocese of Rockville Centre, one of the largest in the United States, said in a statement Friday that the proposed aggregate payment and the payment each abuse victim would receive under its proposed plan are "well in excess of any other Diocesan chapter 11 plan in history." The diocese filed for chapter 11 bankruptcy in New York in October 2020, citing the cost of lawsuits filed by childhood victims of clergy sexual abuse. The state’s Child Victims Act, which took effect in August 2020, temporarily enabled victims of child sexual abuse to file lawsuits over decades-old crimes. The diocese's efforts to reach a comprehensive settlement with more than 600 sexual abuse claimants stalled over its two years in bankruptcy. The breakdown in discussions caused the official committee that represents creditors, including abuse victims, in a rare move to propose a restructuring plan without input from the diocese on January 19. The committee's plan would require the diocese to pay $41 million to abuse victims, plus additional payments from the sale of property and future insurance proceeds. Parishes and other non-bankrupt affiliates could opt into the settlement for an aggregate $200 million contribution.

Regulator Says FTX’s LedgerX Auction Shows Need for More CFTC Clout on Acquisitions

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A senior Commodity Futures Trading Commission official says the agency needs the power to approve or reject an unregulated company’s acquisition of a derivatives exchange, Bloomberg News reported. The planned sale of crypto derivatives exchange LedgerX, a solvent piece of Sam Bankman-Fried’s collapsed FTX empire, has raised concerns about the CFTC’s authority over these acquisitions. LedgerX and other parts of the business are being auctioned off as part of the FTX bankruptcy proceedings. CFTC Commissioner Kristin Johnson, a Democrat, is calling for Congress to give the regulator the power to nix or give the nod on such purchases. Otherwise, it’s left largely in the dark about companies that could easily enter U.S. markets through buyouts, she said. “It’s imperative that we as a regulator are in dialogue and open communication with them,” Johnson said in an interview Friday on “Bloomberg Markets: The Close.” “As of now, we have no approval authority with respect to any element or the acquisition of LedgerX.” Initial bids for LedgerX were due Jan. 25, with a final auction scheduled for March 7. Bidders haven’t been publicly disclosed.

FTX Foreign Customers Hit Language Barriers as They Fight for Their Crypto

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Many FTX customers in Asia and Europe are navigating the company’s complex bankruptcy proceedings on their own, pitting them against a convoluted corner of the U.S. legal system in a language many don’t speak, WSJ Pro Bankruptcy reported. FTX built an international customer base by making crypto trading easily accessible on its app in more than a dozen languages. Now overseas traders are forced to take a crash course in esoteric chapter 11 proceedings and sift through nearly 600 court filings in English to glean what might become of their accounts. In most corporate bankruptcies, creditors are financial firms well versed in chapter 11. But FTX’s customers include many retail investors who have never dealt with chapter 11 before and don’t have the resources to hire legal help. Some non-English-speaking FTX customers try to bridge the gap with translation apps and by banding together on social media. Others rely on their lawyers to translate court documents, attempting to figure out how much they might get for their accounts. The language barrier compounds the difficult task of making accessible voluminous chapter 11 filings, leaving international customers largely in the dark. The barriers to understanding FTX’s bankruptcy have made it harder for depositors to determine their best course of action, whether they should sell their accounts now at a deep discount or hold on for potentially more money. Non-English-speaking customers may also be more likely to be shut out of a process that will determine how much money they get back because they are less likely to vote on a future bankruptcy repayment plan due to the lack of understanding.

U.S. Seeks Tighter Bail for FTX Founder Bankman-Fried to Prevent Tampering

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U.S. prosecutors on Friday asked a Manhattan judge to impose tougher bail conditions on Sam Bankman-Fried, expressing concern that the founder of the FTX cryptocurrency exchange might tamper with witnesses or destroy evidence in his criminal case, Reuters reported. Citing Bankman-Fried's "recent attempts to contact prospective witnesses," prosecutors asked U.S. District Judge Lewis Kaplan to ban Bankman-Fried from communicating with current or former employees of FTX or his Alameda Research hedge fund, other than family, unless a lawyer is present. They also asked that Bankman-Fried not use Signal or other encrypted call and messaging applications, though he could still communicate through text messages, email and the phone. Bankman-Fried, 30, has been free on $250 million bond and required to live with his parents since pleading not guilty to looting billions of dollars from the now-bankrupt FTX.

Bed Bath & Beyond to Close 87 More Stores, Harmon Chain as Restructuring Options Narrow

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Bed Bath & Beyond Inc. said Friday it was closing an additional 87 of its flagship stores and its entire Harmon chain of drugstores, as the retailer struggles to find financial support to keep its operations funded, WSJ Pro Bankruptcy reported. The latest closings are in addition to a plan announced in August to shut 150 lower-performing Bed Bath & Beyond locations, a spokeswoman said. The company said Friday it is also closing five of its Buybuy Baby stores. The company had about 50 Harmon stores as of February 2022. The company, which is expected to file for bankruptcy soon, faces limited options to reorganize as a going concern. Its lenders have cut off credit, it hasn’t secured a buyer to acquire its business, it is struggling to raise financing to survive chapter 11 even in shrunken form and many vendors have stopped shipping goods to the retailer. Discussions are continuing and a financing deal could still materialize. On Thursday, Bed Bath & Beyond said it received a default notice from JPMorgan Chase & Co., after it overdrew on its credit lines. If it doesn’t gain access to financing, the retailer might need to close all or most of its stores. Read more.

In related news, Bed Bath & Beyond Inc.’s slide toward a potential bankruptcy filing threatens to flood the retail real-estate market with hundreds of vacant stores after the company said last week it would close about 90 additional locations, the Wall Street Journal reported. But landlords who own big-box space occupied by the troubled home-goods retailer are more confident about finding new tenants than they would have been in years past, according to property owners and retail analysts. One of the bigger Bed Bath & Beyond landlords has received commitments from tenants to fill all 12 locations if and when they close, according to a person familiar with the matter, including Sephora, Trader Joe’s, Dick’s Sporting Goods Inc., T.J. Maxx, Ross Stores Inc. and HomeGoods. After years of shrinking their real-estate footprints, big-box retailers such as bookseller Barnes & Noble and discount-clothing store Burlington have shown signs of expanding again. Demand for larger retail spaces is particularly strong in the Sunbelt region, where the population has grown significantly over the last decade but very little new retail has been built since the 2008 financial crisis, said Chuck McShane, director of market analytics for the Carolinas at CoStar Group Inc. Read more. (Subscription required.) 

Pipeline Health Cleared to Exit Bankruptcy

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El Segundo, Calif.-based hospital operator Pipeline Health System, which filed for chapter 11 protection on Oct. 2, has announced that its reorganization plan was confirmed by the U.S. Bankruptcy Court for the Southern District of Texas, the Los Angeles Business Journal reported. The slimmed-down company expects to emerge from bankruptcy sometime next month. During its time in chapter 11, Pipeline Health sold two Chicago-area hospitals that it had long been trying to offload. The company also submitted a restructuring plan that called for the elimination of $275 million in funded debt obligations and more than $55 million in unsecured liabilities. The bankruptcy exit, which was announced on Jan. 13, also involves some key personnel changes, including the chief executive post. Longtime Chief Executive Andrei Soran will step down on the day the company officially exits bankruptcy. Succeeding him in that post will be the current chief financial officer, Robert Allen, who has 25 years of experience as a local hospital executive.