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Mallinckrodt, one of the largest manufacturers of prescription opioids in the U.S., received court approval for a plan that wipes out more than $1 billion of payments meant for addicts while handing control of the pharmaceutical company to its lenders, WSJ Pro Bankruptcy reported. The U.S. Bankruptcy Court for the District of Delaware yesterday approved the plan that would pave the way for the company to exit from bankruptcy, less than a couple of months after it filed for chapter 11 protection. Mallinckrodt executives have said the company reached a restructuring deal after extensive outreach from its creditors, who, the executives said, believed the drugmaker carried too much debt and needed to right-size its finances to stay in business. This is a setback to governments and individual addicts who filed lawsuits seeking compensation from drugmakers for their role in the opioid crisis. The legal fight stretches back nearly a decade, when more than 3,000 lawsuits from states, Native American tribes and counties alleged the drugmakers, pharmacies and distributors played down the risks of the painkillers and didn’t stem their flow. A few opioid manufacturers that lacked the funds to settle those thousands of lawsuits turned to bankruptcy to try to resolve them. Dublin-based Mallinckrodt, for instance, agreed to pay $1.7 billion into a trust for addicts over eight years to resolve thousands of lawsuits over its alleged role in fueling the opioid crisis. As part of that deal, negotiated during Mallinckrodt’s first bankruptcy filed in 2020, addicts permanently surrendered their legal rights to pursue opioid-related litigation against the company, and the drugmaker was allowed to keep manufacturing the drugs. Mallinckrodt this August filed for bankruptcy again to restructure its debts and outstanding obligations, including more than $1 billion still owed to the opioid victims’ trust.

Three days into Sam Bankman-Fried’s criminal trial in Federal District Court in Manhattan, Judge Lewis A. Kaplan’s warnings to the defense had become unmistakable, the New York Times reported. Judge Kaplan, who is presiding over the high-profile white-collar fraud case, repeatedly told Mr. Bankman-Fried’s lawyers to stop repeating themselves. Over and over, he directed them to rephrase their questions. And with his frequent interruptions of their cross-examinations, Judge Kaplan kept Mr. Bankman-Fried’s legal team off balance, putting it on the defensive. “I just want to express my growing concern about the extent of the entirely unnecessary repetition, and I’ve given you a lot of latitude,” Judge Kaplan told one of Mr. Bankman-Fried’s lawyers, Christian Everdell, during a brief break on Thursday when the jury was not in the courtroom. “You’re wearing out the welcome on the repetition.” Judge Kaplan is a veteran jurist with a history of presiding over prominent trials like that of Bankman-Fried, who is charged with orchestrating a scheme to misappropriate as much as $10 billion that customers deposited with his crypto exchange, FTX. While he is known for his no-nonsense attitude in the courtroom, legal experts say that Judge Kaplan is keeping the defense on an unusually short leash. Bankman-Fried’s trial resumed on Tuesday, with two crucial witnesses. Defense lawyers continued cross-examining Gary Wang, one of FTX’s top executives, who testified last week that Bankman-Fried had instructed him to insert a secret backdoor into the company’s code that enabled the theft of customer funds. There were fewer interruptions, with Everdell pointing out some inconsistencies in Mr. Wang’s initial statements to FBI agents and his testimony at trial last week. Prosecutors then called Caroline Ellison, Bankman-Fried’s former girlfriend, who ran a crypto trading firm that the government says tapped into FTX customer deposits. Wang and Ellison have pleaded guilty and are cooperating with the authorities. Bankman-Fried has pleaded not guilty to seven counts of wire fraud and conspiracy.

The collapse of crypto exchange FTX wiped out millions of its customers’ crypto holdings and turned its billionaire founder into a pariah now facing criminal fraud charges in New York, the Wall Street Journal reported. But the fall of Sam Bankman-Fried and his Bahamas-based exchange, which at its peak held more than $10 billion in customer deposits, hasn’t fundamentally changed how crypto works or is regulated. The sector is still the Wild West of finance. Terrorists and money launderers use cryptocurrencies to cover their tracks. Hackers frequently find ways to steal digital coins. Worldwide trading is still concentrated in a huge offshore exchange, Binance, which has been accused of some of the same risky practices as FTX. Although it roiled the crypto world, FTX’s collapse didn’t alter the legal and regulatory landscape. Unlike past crises that spurred U.S. lawmakers into action, this one has legislators divided over how, and even whether, to address crypto markets. Instead, regulators have pursued a piecemeal enforcement campaign designed to impose Wall Street’s rules on crypto — a move the biggest crypto exchanges, such as Binance, are fighting in court. Read more. (Subscription required.)

*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.

A U.S. bankruptcy court judge granted SAS AB’s request to speed the process of paying $3 million to advisers of the Scandinavian airline’s investor group, keeping its restructuring on track over opposition from creditor Apollo Global Management Inc., Bloomberg News reported. Judge Michael E. Wiles set an Oct. 12 hearing on a motion to expedite reimbursement to advisers to the group led by Air France-KLM and Castlelake LP, who are set to take control of SAS as it exits from chapter 11 protection. SAS’s request appeared to be “in the best interests of the debtors, their estates, their creditors, and all parties in interest,” the judge said in a court filing on Tuesday. Apollo had objected to the expedited hearing, arguing that the move would make it harder to prevail on its plan to object to the payment. It added that it won’t have enough time to review and respond to the reimbursement motion. Apollo provided a $700 million debtor-in-possession term loan to SAS as it went through chapter 11 reorganization. While the U.S. equity firm reportedly sought to buy a majority stake, SAS last week chose rival Air France-KLM group, which also includes the Danish state and Lind Invest ApS.

Deutsche Bank AG squared off against the U.S. parent company of Lehman Brothers in a London court this week, hoping to squeeze more money from obscure notes issued by the long-dead bank’s U.K. arm, Bloomberg News reported. The German lender argued that it should be paid money recovered from the U.K. unit ahead of the company’s U.S. parent. Deutsche Bank is leading the case as a holder of a certain type of junior security issued from Lehman’s European unit. It’s the second trial over the ranking of those subordinated notes, after first handing Deutsche Bank and other holders a big win at the U.K. Court of Appeal. While some investors discarded the Enhanced Capital Advantaged Preferred Securities (ECAPS) for nothing in the years following the U.S. lender’s collapse, so much has been generated by the insolvency of Lehman’s U.K. arm that there is now a fight over the interest on the ECAPS claim. “Maybe interest was a golden possibility that no one had thought of at the time,” Judge Robert Hildyard said while questioning the barrister representing Deutsche Bank.

Montgomery Realty Group, the developer behind a planned 18-story hotel in San Francisco, has filed for chapter 7 bankruptcy, The Real Deal reported. The petition comes just a day before a scheduled foreclosure auction of the site from the firm’s lenders. The site, located at 447 Battery Street in the Financial District, contains the remnants of the Jones-Thierbach Coffee Company. In May 2022, the three-story, 27,000-square-foot commercial property was designated a city landmark owing to “its association with the San Francisco coffee industry and with reconstruction of downtown San Francisco following the 1906 earthquake and fires,” according to Planning Department records. Montgomery first submitted development proposals for the property in 2017. Initial plans called for a 19-story building with 182 hotel rooms, eight condos and a 4,700-square-foot restaurant. The proposal for the site later changed into an 18-story property with 198 hotel rooms, nine residential units and two restaurant spaces totaling nearly 7,500 square feet. Montgomery, headed by Rajendra Maniar, filed its bankruptcy petition on Oct. 4, according to records from California’s Northern District court. The firm estimated its liabilities between $10 million and $50 million.

Business bankruptcies are rising briskly. What’s even more worrisome: Many of the troubled companies are large, according to a Wall Street Journal analysis. Corporate behemoths including SVB Financial, Bed Bath & Beyond and Yellow sought chapter 11 bankruptcy protection this year. The filers blamed elevated inflation, higher interest rates, waning government aid and lingering supply-chain disruptions. More corporate filings are likely on the way as high interest rates push big companies over the edge. While any type of bankruptcy signals distress, large-business bankruptcies carry particularly significant economic risks. To be sure, the rise in business bankruptcies is a far cry from the 2008 financial crisis or the 2020 pandemic downturn, when widespread layoffs led to economic pain. Big-business bankruptcies were unusually low last year, so some of the increase reflects a normalization. The economy is still growing as consumers splurge and businesses snatch up workers. Employers added a surprisingly robust 336,000 jobs in September, with hiring widespread across industries. “Companies have been surviving the past few years by taking advantage of the ultralow interest rates,” said Amy Quackenboss, executive director at the American Bankruptcy Institute. “But many of these corporations are seeing those loans come due now, and they’re struggling to refinance because the interest rates now are significantly higher.”

The sale of failed trucker Yellow’s real estate is turning into a battle for a competitive edge in a corner of the trucking industry that forms a crucial part of the U.S. economy, the Wall Street Journal reported. Estes Express Lines, the largest privately held trucking company in the country with revenues last year of more than $5 billion, is the stalking-horse, or lead bidder, for Yellow’s nationwide network of truck terminals with a bid of $1.525 billion. If Estes wins the auction, scheduled for late November, it would give the Richmond, Va.-based operator a big leg up in the thriving less-than-truckload segment of the trucking industry. The sector has been growing about 15% to 20% annually over the past two years and well-run LTL carriers are operating with margins of 15% or more, said Satish Jindel, president of SJ Consulting Group. “It’s even more attractive and desirable to have control over the assets which are critical entry barriers,” Jindel said. Yellow went out of business this summer, dragged down by years of poor management, heavy debts and a fight with the Teamsters union. It left behind about 30,000 workers, 170 terminals and a once-in-a-generation opportunity for rivals to expand.

Platinum Equity is nearing an agreement to put an extra $100 million into Petmate to help its portfolio company avert a default, WSJ Pro Bankruptcy reported. Platinum, the Beverly Hills, Calif.-based private-equity firm led by Tom Gores, is expected to fund a new secured debt facility for Petmate to help the company meet coming payments due on other debt instruments. Petmate, which Platinum acquired in 2021, has struggled with slumping consumer demand for pet products that has made it difficult to satisfy the company’s high leverage. Petmate has been operating since 1959 and is known for its dog kennels, houses, toys and other canine treats and accessories. Pet owners are scaling back spending to cope with inflation-driven price increases and looking for lower-cost options, especially on discretionary items that generally generate higher margins.