%1

The founders of failed hedge fund Three Arrows Capital Ltd. have resurfaced with a $25 million crypto-exchange venture that will let users trade bankruptcy claims from insolvent platforms and funds, including their own, the Wall Street Journal reported. Open Exchange, or OPNX, was created by Su Zhu and Kyle Davies — who set up Three Arrows together — and the two founders of crypto exchange CoinFLEX. The new platform is expected to launch by the end of this month, Mr. Su said. It has begun accepting applications from individuals who want to be among the first to trade their crypto claims; Mr. Su tweeted on Sunday that there were more than 3,600 sign-ups so far. U.S. residents are among those that aren’t eligible for the wait list, the company said. The company’s website said there is a $20 billion market of crypto claimants, and the exchange will allow creditors to convert their claims into cryptocurrencies to use them as margin collateral for crypto futures trading. Claims against Three Arrows Capital are among those that can be traded on the new exchange, in addition to claims against FTX, Genesis Global Capital, Celsius Network LLC and others, OPNX said. Further down the road, OPNX wants to introduce decentralized custody and clearing services and also stocks and foreign-exchange products, Mr. Zhu said in a tweet.

Bed Bath & Beyond Inc.’s Canadian division will shut down its stores under court protection after the company received an unusual lifeline earlier this week to save its U.S. operations from bankruptcy, WSJ Pro Bankruptcy reported. The troubled home-goods retailer on Friday filed its Canadian division for protection under the Companies’ Creditors Arrangement Act, Canada’s rough equivalent of chapter 11 bankruptcy. Bed Bath & Beyond has “reluctantly concluded” that even with the lifeline of its recent equity raise, there isn’t enough capital available both to restructure its U.S. business and bring the Canadian business to profitability, the company said in filings with an Ontario court. Bed Bath & Beyond operates 54 Bed Bath & Beyond stores and 11 Buybuy Baby stores in Canada, with 387 full-time employees and 1,038 part-time employees, court papers show. The company said it plans to “effect an orderly liquidation of its remaining inventory with assistance from a third-party professional liquidator and vacate its leased retail stores and premises.” The Canadian insolvency case doesn’t cover the U.S.-based parent company, which struck an unusual equity-raising deal earlier this week with hedge fund Hudson Bay Capital Management LP and other investors. It provided the company with $225 million in immediate proceeds, along with commitments for up to $800 million over the next 10 months, so long as the company meets certain financial conditions such as staying current on its debts.

The biggest bondholder of the bankrupt Pennsylvania city of Chester is scheduled to appear in court on Monday to argue that the city’s chapter 9 bankruptcy petition is invalid and should be dismissed, WSJ Pro Bankruptcy reported. Preston Hollow Community Capital LLC, which holds municipal bonds issued by Chester in 2017 with the initial principal amount of $19.2 million, has argued that the city failed to engage in the good-faith negotiations required before a municipality can access the protections of chapter 9 bankruptcy. Once a thriving industrial and manufacturing hub near Philadelphia, Chester filed for bankruptcy in November after facing financial challenges in recent years. The unsecured bonds held by Preston Hollow make up a fraction of the city’s overall obligations, notably mounting pension obligations that include at least $127.2 million in back payments. Recognizing Chester’s financial distress, Preston Hollow approached the city in June 2022 to discuss its proposal for the city to pay down the bonds using a portion of the $30.4 million in federal assistance that it received under the COVID-19 stimulus package. The firm’s proposal would have reduced the city’s debt service obligations by more than $900,000 in the fiscal year 2023, according to court papers filed by Preston Hollow managing director Charles Visconsi. He said the city’s receiver, Michael Doweary, didn’t engage in negotiations and just said he would contact the firm “in the coming weeks.”

Sycamore Partners Management LP’s Nielsen & Bainbridge LLC, a wholesale supplier of home décor for major online retailers, filed for bankruptcy protection to turn itself over to lenders KKR & Co. LP and Silver Point Capital LP, WSJ Pro Bankruptcy reported. Nielsen & Bainbridge said in court papers Thursday that top lenders KKR Credit Advisors (US) LLC, the credit arm of KKR, and Silver Point agreed to provide a $60 million bankruptcy loan and exchange the debt plus $57.7 million outstanding under its asset-based loan facility the lenders hold for full ownership of the company. The lenders’ credit bid requires court approval to take effect and could be challenged by any higher or better offer for the business, which supplies home décor and other home goods to bricks-and-mortar and online retailers including Walmart Inc., Target Corp. and Amazon.com Inc. The company’s chief transformation officer, Amy Lee, blamed the chapter 11 filing on “recent events all too common for retail vendors,” including supply-chain problems, rising freight costs, tariffs on Chinese imports and inflation’s impact on consumer spending. Nielsen & Bainbridge needs to emerge from bankruptcy in fewer than 60 days, Ms. Lee said in a sworn declaration filed with the U.S. Bankruptcy Court in Texas.

A U.S. judge on Thursday extended a ban on FTX cryptocurrency exchange founder Sam Bankman-Fried's ability to contact employees of companies he once controlled and use encrypted messaging technology while out on bail awaiting trial on fraud charges, Reuters reported. U.S. District Judge Lewis Kaplan on Feb. 1 had temporarily barred Bankman-Fried from contacting any current or former employees of FTX or Alameda Research, his hedge fund, after prosecutors raised concerns that the 30-year-old former billionaire may be trying to tamper with witnesses. As a condition of his release on $250 million bond, the judge also prevented Bankman-Fried from using messaging apps such as Signal that let users auto-delete messages. After rejecting an agreement between defense lawyers and prosecutors to loosen those conditions on Tuesday, Kaplan on Thursday said the restrictions would remain in place until Feb. 21 and instructed both sides to explain by Feb. 13 how they could be sure Bankman-Fried would not delete electronic messages.

FTX’s bankruptcy lawyers, legal and financial advisors have billed the company more than $19.6 million in fees for their work done in 2022, according to court documents unveiled on Tuesday, the Wall Street Journal reported. The law firms that billed FTX are Sullivan & Cromwell, Landis Rath & Cobb, and Quinn Emanuel Urquhart & Sullivan. Advisory firms Alvarez & Marsal and AlixPartners also billed the company, according to their applications for compensation.

A group of insurers fighting the Boy Scouts of America’s bankruptcy reorganization plan wants to capitalize on a recent court ruling rejecting Johnson & Johnson’s use of chapter 11 to freeze 40,000 lawsuits linking its talc products to cancer, WSJ Pro Bankruptcy reported. Allianz Global Risks US Insurance Co. and Liberty Mutual Insurance Co. are among the carriers scheduled to appear Thursday in the U.S. District Court in Wilmington, Del., to argue against a bankruptcy court’s 2022 approval of the Boy Scouts chapter 11 plan, which would settle tens of thousands of sexual abuse claims. Last week, they argued in written papers that the now-dismissed bankruptcy of J&J subsidiary LTL Management LLC could apply to the youth group as well. The appeals-court ruling against LTL said that debtors seeking protection in chapter 11 must demonstrate good faith by acting in conformity with the underlying principles of the bankruptcy code, according to the insurers’ recent letter. They have previously said the Boy Scouts plan seeks to inflate financial distress to provide a windfall for sex-abuse attorneys. “Good intentions — such as to protect the J&J brand or comprehensively resolve litigation — do not suffice alone,” the insurers’ letter said, quoting the LTL decision. Some insurers settled with the Boy Scouts, but those that are appealing the chapter 11 plan argue their contractual rights under the policies they issued the Boy Scouts or its affiliates were unfairly disregarded.

Key Cineworld Group Plc lenders are considering a rights offering for the world’s second-largest theater chain to help it emerge from bankruptcy, Bloomberg News reported. Some creditors have recently discussed a share sale that could raise $800 million — open only to existing lenders — for Cineworld as part of a restructuring plan, the people said, asking not to be named because the talks are private. The final size of any issuance depends on creditor appetite and how much debt the restructured company is deemed able to carry following its bankruptcy. Discussions are ongoing and no final decisions have been reached, they added. The restructured business could be valued at about $4 billion including debt. London-based Cineworld filed for chapter 11 protection in Texas in September, after COVID-19 shutdowns hampered income and delayed movie releases, forcing it to reckon with a heavy debt load. The chain’s nearly $9 billion of liabilities including leases came in large part from its blockbuster acquisition of U.S. brand Regal Cinemas in 2018. In a bankruptcy hearing Wednesday, a lawyer for Cineworld said the company recently received a proposal from lenders, but didn’t disclose precise terms and added that the company, rather than its lenders, gets to chart its path out of chapter 11 protection. Cineworld has recently received “a lot of interest” in its assets from potential buyers, the lawyer, Josh Sussberg, said.

Bed Bath & Beyond Inc.’s white knight might be a hedge fund, but the rescue wouldn’t have happened if it wasn’t for the meme traders who made the logic behind the deal possible, WSJ Pro Bankruptcy reported. Even as Bed Bath & Beyond tumbled toward what seemed like a sure bankruptcy — shutting down stores, missing interest payments and having its credit lines frozen — retail investors continued to bet that the iconic home-goods retailer could defy the odds and survive to eke out some equity value. Even though they lacked the sustained, gravity-defying heights that the shares of GameStop Corp. and AMC Entertainment Holdings Inc. enjoyed during their meme-stock heydays, Bed Bath & Beyond’s shares have traded at high volumes and have repeatedly delivered meme-driven spikes in the past month. For Hudson Bay Capital Management LP, the $19 billion Greenwich, Conn.-based hedge fund that gave Bed Bath & Beyond an 11th-hour lifeline this week, the liquidity provided by the actively traded market for the stock means that the hedge fund will likely have options to monetize its position, so long as the retailer’s business operations don’t melt down further and its shares plunge to penny-status. It is rare for a distressed company to obtain a last-minute rescue via an equity raise, as it is much riskier to invest in a troubled company by buying stock that, unlike a senior loan, doesn’t have a claim on collateral. Even while it teetered on the brink of bankruptcy, AMC bagged a ton of meme money by selling shares as its star rose on social media, though the movie-theater chain never came as close to chapter 11 as Bed Bath & Beyond did by actually missing bond payments. Bed Bath & Beyond on Tuesday priced its equity offering led by Hudson Bay and some other investors, in which the investors provided $225 million upfront and are committed for another $800 million over the next 10 months granted that the company meets certain conditions, such as satisfying its debt obligations. Bed Bath & Beyond plans to use some of the proceeds to repay its revolving credit line and to help build back its inventory, according to a securities filing.

Bankrupt cryptocurrency lender Celsius Network’s request to extend the deadline to present its chapter 11 plan has run into opposition because of cash burn and the length of time already taken, Bloomberg News reported. The debtors are seeking to extend the period during which they can exclusively file a plan to the end of March from Feb. 15. They also want to be the only ones who can solicit a plan until the end of June. But the U.S. Trustee, the official committee of unsecured creditors and an ad hoc group of borrowers filed objections on Wednesday, expressing little confidence in the debtors’ ability to come up with a restructuring proposal. Celsius filed for bankruptcy in July after a sharp decline in crypto prices caused risky bets to backfire. The firm is one of a number of digital-asset lenders that hit the buffers in last year’s market rout. A court-appointed examiner late last month blasted Celsius and its former Chief Executive Officer Alex Mashinsky for lacking adequate risk management and misleading customers about its business practices and financial health.