FTX received court approval to sell over $3 billion worth of cryptocurrency that has been frozen since the exchange’s collapse, a move that would help repay its customers and reduce its exposure to sudden changes in crypto prices, WSJ Pro Bankruptcy reported. While FTX has said its nearly 10 million customers likely won’t recoup all the crypto they deposited, the company has been seeking approval in bankruptcy court to sell assets that would partially reimburse them. FTX also said it wants to sell its tokens that have been frozen in bankruptcy for dollars to cut its exposure to swings in crypto prices. FTX lawyers said yesterday that because customer funds were commingled into a general account at the bankrupt exchange, there was no way to track down which user owned any particular coins. The assets in question are the property of FTX’s chapter 11 estate, said FTX lawyer Andrew Dietderich.
Digital Currency Group, parent company of bankrupt crypto lender Genesis Global, said users of Gemini Trust’s Earn program can expect 95% to 110% recovery of their claims against Genesis under a recently announced financial framework, WSJ Pro Bankruptcy reported. Customers of crypto exchange Gemini’s Earn program lent Genesis nearly $1 billion before the latter filed for bankruptcy in January following the failure of crypto exchange FTX. Genesis said last month that under the proposed framework, its customers could receive estimated recoveries of between 70% to 90%. But DCG said the rate of recovery for more than 232,000 users of Gemini’s Earn program would be even better because Genesis had posted about 30.9 million shares of DCG-owned investment firm Grayscale Bitcoin Trust as collateral to secure borrowings from Gemini Earn users, according to its filing Wednesday with the U.S. Bankruptcy Court in White Plains, N.Y. The value of the collateral — which is now held by Gemini — has more than doubled to $607.6 million from $284.3 million in the past several months, giving an edge to Gemini Earn users over the rest of Genesis creditors, according to DCG.
Noble House Home Furnishings LLC filed for bankruptcy with plans to sell its assets after inflation and weakening consumer spending crimped its finances, Bloomberg News reported. The company — which counts Amazon.com Inc., Wayfair Inc., and Target Corp. among its customers — listed assets and liabilities of at least $100 million each in its bankruptcy petition. The filing allows Noble House to keep operating while it works to close a sale of itself to publicly traded GigaCloud Technology Inc. or another, higher bidder. GigaCloud has agreed to buy Noble House’s assets for $85 million, subject to a working capital adjustment, plus $4.1 million for equipment and the assumption of certain debts, according to court papers. The bid sets a floor for further offers and the deal with GigaCloud has an outside closing date of Oct. 31, court papers show. Chatsworth, Calif.-based Noble House was founded in 1992 and is a distributor, manufacturer and retailer of indoor and outdoor home furnishings. Its brands include Christopher Knight Home, LePouf and OkiOki. The company’s sales grew quickly during the COVID-19 pandemic as stuck-at-home customers bought more furniture. But as pandemic restrictions eased, total net sales started falling. They dropped from $671 million in 2021 to $491 million in 2022 and 2023 revenue is projected lower, court papers show. The decrease in sales coupled with persistent inflation and supply chain challenges pushed the company to financial instability. Noble House worked to cut costs in 2023, including reducing headcount, optimizing inventory management and vacating a facility in New Jersey, but those efforts failed to keep it out of bankruptcy.
The Boy Scouts of America's $2.46 billion sex abuse settlement is facing new legal uncertainty as the U.S. Supreme Court weighs how far bankruptcy courts can go to protect non-debtors, a fact acknowledged on Tuesday by the judge overseeing the youth organization's bankruptcy, Reuters reported. Chief U.S. Bankruptcy Judge Laurie Silverstein said at a court hearing in Wilmington, Del., that she would continue to hear disputes related to the Boy Scouts settlement without waiting for a Supreme Court decision in the case of Purdue Pharma. The drugmaker is seeking to resolve thousands of lawsuits related to its allegedly deceptive marketing of the addictive painkiller Oxycontin in bankruptcy. The high court agreed in August to hear a challenge by the Biden administration to the legality of Purdue's bankruptcy settlement, putting on hold a deal that would shield its wealthy Sackler family owners from lawsuits over their alleged roles in the country's opioid epidemic. They have denied wrongdoing. Abuse claimants opposed to the Boy Scouts' settlement on Friday had asked U.S. District Judge Richard Andrews to issue a stay that would stop the settlement from moving ahead until the Supreme Court ruling in Purdue, saying that the settlement should not cut off their ability to sue non-bankrupt organizations, such as churches who co-sponsored Scouting programs.
The Hospital at Westlake Medical Center filed for chapter 11 protection Friday, the Austin American-Statesman reported, but will not be closing. "Our commitment to being a dedicated partner to our patients and community remains unwavering, both during this process and beyond," the hospital said in its information sheet about the bankruptcy. Westlake Medical Center is physician-owned and offers an outpatient surgical center, orthopedic and spine surgeries, imaging, and an emergency room. The hospital is sending out notifications to its employees, vendors, patients and physicians about the chapter 11 filing. No creditors were listed on Friday afternoon on the bankruptcy's website portal. The American Hospital Directory shows the hospital as having 23 beds, and in 2021 it had a net income of minus $2.5 million. The hospital cited the pandemic and cost increases as the reasons for the need to file for bankruptcy. "Over the past 18 months, the healthcare industry has been dramatically impacted by the ongoing economic pressures of the COVID-19 pandemic, exacerbating financial challenges for many businesses in our sector, including us," the hospital said in its information sheet. "Our operations have also been severely impacted by increasing labor, supplies, and drug costs, as well as continued workforce shortage." Read more.
The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.
The same day in July that Mercy Iowa City’s largest bondholder asked for a receiver to take over the hospital’s operations — a move hospital officials said compelled them to file for bankruptcy protection days later — a pair of recently terminated Mercy executives also filed suit against their former employer, accusing the hospital of ghosting them and shorting them payments that were promised, the Cedar Rapids (Iowa) Gazette reported. “Mercy Hospital has not paid the additional payments that are due and owing Miller and Andronowitz under the offer letters and severance agreements,” according to the July 24 lawsuit. “Mercy Hospital has not responded to Miller and Andronowitz’s demand for payment or provided any explanation for its continued non-payment.” Dawna Miller and Judy Andronowitz were Mercy’s chief financial officer and clinic chief operating officer, respectively, until August 2022 — around the time the hospital told employees its search for a new strategic partner had come up dry and it would remain an affiliate of Des Moines-based MercyOne. In an email dated July 28, 2022 — obtained by The Gazette — Mercy’s then-acting President and Chief Executive Officer Mike Trachta, who since has returned to his primary MercyOne position as vice president of network affiliates, announced the failed search and other staff changes. “I wanted to update you on two leaders who are leaving Mercy Iowa City,” Trachta wrote then. “I want to thank Dawna Miller and Judy Andronowitz for their contributions to our organization. Please join me in wishing them well.” A year later, both women report in their lawsuit being terminated in August 2022 and entering into severance agreements “wherein Mercy Hospital agreed, among other things, to pay the 12 months severance pay initially promised in (their) offer letters.”
Bankrupt cryptocurrency lender Genesis Global Holdco LLC sued its parent, Digital Currency Group, seeking to recover about $620 million in outstanding loans despite ongoing settlement talks, Bloomberg News reported. Genesis sued Barry Silbert’s DCG and DCG International Investments Ltd. on Wednesday in New York bankruptcy court but asserted that the companies will keep discussing a potential deal that could end the dispute. The lawsuits were filed after Genesis unveiled a $1.4 billion debt repayment plan backed by some of its customers but which isn’t supported by other key creditors. “Genesis has agreed to stay the turnover action so that we can move forward with documenting the deal in principle that was reached with Genesis, the UCC, and DCG,” a spokesperson for DCG said in an emailed statement. DCG will begin repaying the loans after a standstill agreement is filed with the bankruptcy court, the spokesperson said. The lawsuits concern loans to DCG that Genesis says matured in May. The outstanding debt includes a $500 million loan to DCG and loan to DCGI comprised of about 4,550 Bitcoin, according to the lawsuits. Genesis is also seeking to recover accrued interest and late fees.
Opponents of the Boy Scouts of America’s plan for a $2.4 billion sex-abuse settlement recently found fresh legal ammunition when the Supreme Court agreed to examine a similar plan drawn up by Purdue Pharma, WSJ Pro Bankruptcy reported. Some of the Boy Scouts’ insurers and a small group of sex-abuse victims have renewed calls in federal court to temporarily block the youth group’s chapter 11 plan, saying it shouldn’t advance any further until the Supreme Court weighs in on Purdue’s plan for mass opioid liabilities. Their attempt is the latest example of how the Supreme Court’s decision to hear a challenge to Purdue’s chapter 11 plan is rippling through the bankruptcy system. The Supreme Court last month said it would examine whether bankruptcy law can be used to resolve creditors claims’ against third parties that aren’t in chapter 11 without the consent of all claimants. Such releases are central to the bankruptcy plans crafted by both the Boy Scouts and Purdue. Purdue’s plan would release its Sackler family owners from opioid-related liabilities in return for up to $6 billion in settlement payments. In the Boys Scouts’ plan, local councils and partner organizations of the organization would be shielded from the claims of the sex-abuse claimants. In court papers filed Friday, the Boy Scouts argued that, unlike the Purdue case, the youth group’s plan can’t be halted as the wheels are already in motion to collect the settlement funds and distribute them to plaintiffs.
When private equity firm Prospect Medical Holdings Inc. bought a cash-strapped hospital outside Philadelphia, it promised a return to profitability that would ensure the long-term sustainability of a facility that thousands of people counted on. Seven years later, Delaware County Memorial Hospital is closed, Prospect is in debt and a community group is suing, Bloomberg News reported. It’s a story playing out across the country as Wall Street’s recipe for making big bucks flipping hospitals collides with labor costs and surging interest rates. Combined with increased scrutiny on private equity tactics, ailing hospitals are finding themselves left without access to buyers of last resort. And that’s threatening to leave low-income communities without critical care such as emergency rooms. “Private equity is looking at some of these hospitals now saying, ‘I don’t know what my exit is. There’s too many unknown variables. And the one thing private equity guys don’t like is unknown variables,” said Jim Clayton, who leads the private equity advisory practice at consulting firm BDO USA. “They thought that they could pretty them up and sell them to a larger health system. But the larger systems aren’t buying them. Because they don’t want the headache either.” Private equity owns almost 400 of the approximately 5,100 hospitals — or about 30% of all for-profits — in the U.S., according to the Private Equity Stakeholder Project, with more than 100 in non-urban areas. Rural and other safety-net hospitals are most at risk of closure because they have fewer privately insured patients, and, in the case of rural facilities, lower patient volumes. Read more.
The financially troubled healthcare sector, including the role of private equity, will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.
J.M. Smucker is buying Twinkies owner Hostess Brands for around $4.6 billion, bringing together two big names in snacks, the Wall Street Journal reported. Smucker said yesterday that it will acquire Hostess for $34.25 a share in cash and stock. The deal also includes about $900 million in debt, which Smucker said brings the total value to $5.6 billion. Shares of Hostess, which closed on Friday at $28.11, rose 18.8% in morning trading, while shares of Smucker fell 7.3%. The deal is expected to close in the third quarter of Smucker’s current fiscal year, which ends on April 30. Smucker prevailed in a heated competition with General Mills, parent of Cheerios and Betty Crocker. The sale caps a remarkable turnaround for Hostess, which has been through two chapter 11 bankruptcies. Two investment firms bought the company out of liquidation a decade ago, returning Twinkies to store shelves after an eight-month absence.
