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Puerto Rico’s bankruptcy created some debt securities that don’t pay interest, but still managed to deliver an almost $400 million windfall to investors this month, Bloomberg News reported. Called contingent-value instruments, or CVIs, they’re what investors received in March 2022 as part of a debt restructuring deal that cut $22 billion of the commonwealth’s outstanding bonds down to $7.4 billion. The CVIs are taxable securities that resemble zero-coupon bonds — except they do offer investors a chance to collect interest-like payments before the debt expires. This is because they include a provision that calls for holders to receive a payout in November if sales-tax collections for the prior fiscal year surpass projections. So far they have: CVI holders received $362 million in 2022 and $388.7 million on Nov. 1. Some bondholders view the CVIs as a long-term investment. But others see them as trading vehicles, looking to take advantage of price movements because their longer duration makes them more sensitive to interest rates and susceptible to swings, said Daniel Solender, head of municipal debt at Lord Abbett & Co, which holds some of Puerto Rico’s CVIs.

The U.S. Justice Department is seeking more than $4 billion from Binance Holdings Ltd. as part of a proposed resolution of a years-long investigation into the world’s largest cryptocurrency exchange, Bloomberg News reported. Negotiations between the Justice Department and Binance include the possibility that its founder Changpeng Zhao would face criminal charges in the US under an agreement to resolve the probe into alleged money laundering, bank fraud and sanctions violations. Zhao, also known as “CZ,” is residing in the United Arab Emirates, which doesn’t have an extradition treaty with the U.S., but that doesn’t prevent him from coming voluntarily. The BNB cryptocurrency, a token native to Binance and the BNB Chain blockchain that was created by the exchange, rose as much as 8.5% to $266.42 after Bloomberg reported the negotiations.

Telemedicine company UpHealth Holdings agreed to sell subsidiary Cloudbreak Health LLC for $180 million in cash, the South Florida Business Journal reported. The sale to private equity firm GTCR comes two months after Delray Beach-based UpHealth filed for chapter 11 bankruptcy in New York federal court. The company will use the proceeds from the sale to pay debts and cover other expenses. Moving forward, UpHealth will focus on growing TTC Healthcare, described as a "cash flow positive" behavioral health platform. "UpHealth is executing on paying down majority of its debt to our noteholders, with the goal of freeing capital to grow our behavioral health business," said Avi Katz, chairman of the board. CloudBreak Health, a provider of healthcare focused language interpretation services, more than doubled its revenue over the past three years, Katz added. The deal comes two years after UpHealth's merger with GigCapital2 and Cloudbreak Health LLC in 2021. In September, it filed for bankruptcy after a contract dispute with investment bank Needham & Co tied to the merger. A judge ordered UpHealth to pay Needham $31 million.

Lenders to bankrupt firms are increasingly demanding the use of a controversial contract clause that bolsters their investments in exchange for giving companies a chance at survival, Bloomberg News reported. Known as a roll-up, the provision moves existing debt to the front of the repayment line in lockstep with newly lent money. Senior lenders often require the maneuver when no one else is willing or able to give a bankrupt company turnaround financing. The structure is divisive because it frequently soaks up the scraps an insolvent company hasn’t yet put up as collateral, and which could have helped repay lower-ranking creditors. Rolled-up debt also has to be repaid in cash, limiting the restructuring options available to the borrower. But more and more, bankrupt firms and the judges overseeing them are being forced to accept roll-ups because without new cash, they risk shuttering entirely. The trend is a sign that lenders are amassing more leverage over failed companies as the rates of corporate default and bankruptcies climb. “I hate those things,” said Bruce Markell, a former bankruptcy judge who is now a professor at Northwestern Pritzker School of Law. “It’s a great strategy, you know — if you’re the lender. It’s a game of chicken in the sense that the debtor says, ‘we’re going down unless this happens.’” Although the provision has been around for years, roll-ups are becoming bigger and more prevalent, according to figures compiled by BankruptcyData. The proportion of chapter 11 cases that involve the maneuver has steadily increased since 2021, according to the research.

Timber Pharmaceuticals filed for chapter 11 bankruptcy protection on a day when LEO Pharma terminated a merger agreement that didn’t receive a sufficient stockholder vote at a Friday meeting, WSJ Pro Bankruptcy reported. Timber signed a stalking-horse asset-sale agreement with LEO Pharma. Timber, which focuses on treatments for rare and orphan dermatologic diseases, previously warned that there was substantial doubt about its ability to continue as a going concern and said it would “likely need to seek the protection of the bankruptcy courts” if the merger wasn’t completed. The company adjourned its stockholder meeting on Oct. 16 and again on Oct. 30. Before a trading halt earlier on Friday, Timber shares were up 17%, to $1.46. On the day the LEO Pharma deal was announced in August, Timber shares closed at $2.99, up from $1.42 in the previous session.

Johnson & Johnson said on Thursday that it has settled two lawsuits claiming its talc products caused cancer, the first such cases to go to trial since a federal court rejected the company's plan to move its talc liabilities into bankruptcy court, Reuters reported. The settlements resolved lawsuits brought by two men, Rosalino Reyes and Marlin Eagles, who said they developed mesothelioma related to asbestos in J&J talc powder, and was part of a broader deal to settle all talc cases brought by the law firm representing them, Kazan, McClain, Satterley & Greenwood, the company said. Reyes' family continued his lawsuit after he died in 2020. The company faces more than 50,000 lawsuits over talc, most by women with ovarian cancer. It has said that its talc products are safe and do not contain asbestos. J&J and the plaintiffs' lawyers did not disclose any terms of the settlement, or how many cases it covered. Reyes' trial had begun last week, while Eagles' was about to begin, with a jury chosen. "The Eagles and the Reyes families express thanks to the jurors and courtroom personnel who participated in the trial," Joseph Satterley and Denyse Clancy, attorneys for the plaintiffs, said in a joint statement.
https://www.reuters.com/legal/jj-settles-first-talc-cases-go-trial-afte….

Brigade Capital Management, Capital Research and Management Co. and Sculptor Capital are among now-bankrupt WeWork Inc.’s biggest creditors, court papers show, Bloomberg News reported. The firms are part of a group of seven asset managers and hedge funds that have banded together to negotiate with the the failed co-working firm. Together, they hold more than $1.1 billion of WeWork’s secured notes, according to a Thursday bankruptcy court disclosure. Other members include King Street Capital Management, Aristeia Capital, Silver Point Capital and BlackRock Financial Management, Inc., according to the court filing. By joining forces and sharing the cost of attorneys, such groups can hold significant sway in major corporate bankruptcies. Hashing out deals can take months, which can quickly rack up big professional fees.

Joyride Brewing in Denver said on Friday that it plans to file for bankruptcy protection, the Denver Post reported. Brewery co-founder Dave Bergen said in a video on Facebook that he is making a very public announcement as a way to remain open and honest with customers. “Joyride will be filing for Chapter 11 reorganization due to suspected financial malfeasance from a former manager,” Joyride said in its statement. “This filing has nothing to do with Joyride’s ability to run a successful and profitable business but rather, has everything to do with the improper and unauthorized spending as well as financial mismanagement from the former manager. “During this time, Joyride will be reorganizing the brewery, and Dave Bergen has stepped in as president of the company, and he will also continue his role as director of marketing and brewing. “Joyride will not be closing and everyone will still have their jobs,” the brewery added. Bergen and Grant Babb opened Joyride in 2014 at 2501 Sheridan, in Edgewater, and added a rooftop patio several years later with views of Sloan’s Lake. Bergen has served as president of the Colorado Brewers Guild and is a very active member of the local brewery community.

Rite Aid yesterday sued the U.S. Department of Justice, seeking to block a lawsuit alleging that the bankrupt pharmacy chain ignored red flags and illegally filled hundreds of thousands of prescriptions for addictive opioid medication, Reuters reported. The DOJ, which sued Rite Aid in March, agreed only to a "brief pause" of its lawsuit after Rite Aid went bankrupt last month, a position that threatens to undermine the company's restructuring efforts, Rite Aid said in a complaint filed yesterday in New Jersey bankruptcy court. Rite Aid asked U.S. Bankruptcy Judge Michael Kaplan to rule that the DOJ lawsuit cannot proceed while Rite Aid is bankrupt, which would put the government on equal footing with other opioid plaintiffs whose lawsuits were automatically stopped by the company's bankruptcy filing. The DOJ has argued that U.S. bankruptcy law does not stop it from exercising its "police powers" through its lawsuit. Rite Aid would not concede that point, and said Kaplan, who is overseeing the company's chapter 11 proceedings, should rule on that dispute rather than the judge overseeing the DOJ's lawsuit in Cleveland federal court.