There’s an unusual asset up for grabs in Century 21 Stores’ going-out-of-business sale: a stake in its long-shot legal fight against insurers, Bloomberg News reported. The New York department store company, which filed for bankruptcy in September, claims it’s owed more than $175 million from business interruption policies because COVID-19 devastated its operations, according to court papers. The claim is the most valuable possession that the doomed chain has left, and proceeds from selling it would help repay creditors after Century 21 closes for good. Thousands of businesses across the U.S. — including more than a dozen professional baseball teams and an iconic Hollywood restaurant — began similar legal battles against insurers after the virus crushed the global economy this year. But insurance companies have mostly prevailed, arguing that diseases can’t cause the physical damage needed to trigger a payout, or pointing to clauses that exclude viruses. Still, Century 21’s legal claim has found a buyer. Precisely who isn’t clear — lawyers for the chain have asked the bankruptcy judge to keep the identity a secret. The exact sale price wasn’t disclosed either, but the proceeds would be at least enough to pay off Century 21’s secured debt, which totaled more than $50 million at the time of the bankruptcy filing. A hearing is scheduled for today in New York.
KPS Capital Partners LP has been cleared to buy Hussey Copper, a specialty metal refiner and producer that has been tangled in disputes between turnaround manager Lynn Tilton and the bankrupt investment vehicles she founded, the Zohar funds, WSJ Pro Bankruptcy reported. Based outside Pittsburgh, Hussey dates back to 1848, when it was founded as a metal rolling mill. Under the formal legal name of Libertas Copper LLC, Hussey produces electrical copper bar, transformer winding, construction copper sheet and other specialty metal products. Private-equity firm KPS, which has more than $11.5 billion in assets under management, declined to comment on the transaction, which was authorized by Judge Karen Owens. Judge Owens is presiding over the bankruptcy of Hussey Copper’s lenders, the Zohar funds, in the U.S. Bankruptcy Court in Wilmington, Del. The deal price wasn’t disclosed, but the Zohar funds stand to collect $17 million to $21 million from the sale, court papers say. Founded as a way to channel investor funds to companies in need of a turnaround, the Zohar funds are operating under bankruptcy protection and selling businesses, such as Hussey, that owe them money. Tilton’s affiliates will collect about $1.5 million as part of a deal that means Hussey’s new owners will get the company free and clear of legal quarrels between Ms. Tilton and the Zohar funds, court papers say. Among other things, the Zohar funds and Tilton have been at odds over who owns many of the businesses that borrowed from the Zohar funds, and who has the right to control them. Additionally, Tilton has sued some companies for alleged unpaid management fees. For more than a decade, Tilton managed both the Zohar funds and the businesses, collecting hundreds of millions of dollars in fees. She resigned from managing the Zohar funds in 2016, as they began to default. She resigned from leadership roles at the businesses in March, as COVID-19 pandemic distress slammed the economy, and she suffered a loss to the Zohar funds in a court fight over the sales.
Bankruptcy Judge John Dorsey dismissed a motion to freeze the assets of a digital currency lending platform, leaving its users battling to reclaim their funds, CoinGeek.com reported. Judge Dorsey denied the emergency motion filed by 15 customers of crypto lender Cred Inc., which attempted to freeze funds held by the firm on exchanges, amid ongoing bankruptcy proceedings. Judge Dorsey said he was unable to allow the motion without more evidence of the ownership and status of the crypto assets in question, suggesting that the investors should have put more effort into tracking down their assets. “At this point, all I have is the obligation of the debtors to exercise their fiduciary duty to protect the assets of the estate […] all I can do is admonish the debtors.” The issues involved are likely to be discussed at a hearing on December 9, as part of a separate stream of action in which two investors are attempting to turn the case into liquidation proceedings against the troubled digital currency lender. In the original filing on November 18, Cred was accused of operating as an “unlicensed hedge fund […] rife with fraud and deception on ‘Madoff’ level proportions.” According to the filing, Cred was said to hold assets equal to just 10 percent of its overall liabilities, standing at $136.5 million. In a bid to “to maximize the value of its platform for its creditors,” Cred filed for bankruptcy. In a declaration the following day, the CEO Daniel Schatt said James Alexander, former chief capital officer, had stolen $3 million in BTC from users, while a fraudster inadvertently hired by its debtors had made off with a further $10 million, equivalent to 800 BTC.
Since COVID-19 sparked government-ordered shutdowns in March, judges have dismissed more than four times as many business-interruption lawsuits as they’ve allowed to proceed, according to a preliminary analysis by the University of Pennsylvania Law School. But some plaintiffs are finding weak spots in the industry’s legal defenses, Bloomberg News reported. Christopher Walker, an Orlando doctor, is one of them. Though his policy — like many — contained a provision that Sentinel Insurance Co. contends excluded virus claims, Walker’s lawyer argued that the language used was ambiguous. A federal judge agreed, keeping the case alive after Sentinel sought a dismissal of the suit brought on behalf of Walker’s practice, UroGyn Specialists of Florida. The stakes are high for thousands of businesses. The outbreak has led to a surge in U.S. bankruptcies, including rental-car company Hertz Global Holdings Inc. Century 21 Stores said that it couldn’t survive after its insurer denied its business-interruption claim. But the pandemic is also squeezing insurers. In the second quarter — after the initial shutdowns — Chubb Ltd. reported $1.16 billion in COVID-19 losses. Munich Re said this month that coronavirus losses keep growing. Overall, the industry could face at least $100 billion in total underwriting losses from the pandemic, Lloyd’s of London predicted in May.
Purdue Pharma pleaded guilty yesterday to criminal charges that it misled the federal government about sales of its blockbuster painkiller OxyContin, the prescription opioid that helped fuel a national addiction crisis, the New York Times reported. The admission brought a formal end to an extensive federal investigation that led to a multibillion-dollar settlement between the company and the Justice Department. “The abuse and diversion of prescription opioids has contributed to a national tragedy of addiction and deaths,” Jeffrey A. Rosen, the deputy attorney general, said in a statement. “Today’s convictions underscore the department’s commitment to its multipronged strategy for defeating the opioid crisis.” Purdue’s chairman, Steve Miller, acknowledged in a remotely conducted hearing in federal court in New Jersey that in order to meet sales goals, the company told the Drug Enforcement Administration that it had created a program to prevent OxyContin from being sold on the black market, even though it was marketing the drug to more than 100 doctors suspected of illegally prescribing OxyContin. Purdue also pleaded guilty to paying illegal kickbacks to doctors who prescribed OxyContin and to an electronic health records company, Practice Fusion, for targeting physicians with alerts that were intended to increase opioid prescriptions. Practice Fusion has paid $145 million in fines for taking those kickbacks. The company agreed last month to plead guilty to criminal charges and face criminal and civil penalties of about $8.3 billion as part of the settlement with the Justice Department. A federal bankruptcy judge in New York approved the deal last week. The settlement included $3.54 billion in criminal fines and $2 billion in criminal forfeiture of profits. The department said they were the largest financial penalties levied against a pharmaceutical manufacturer.
