A bankruptcy judge will rule on Wednesday on whether to approve the chapter 11 protection motion of United Furniture Industries Inc., the Winston-Salem (N.C.) Journal reported. Bankruptcy Judge Selene Maddox conducted a hearing on Friday on United Furniture's chapter 11 motion which would focus foremost on how the sale of its assets would be handled. Judge Maddox chose not to address the chapter 7 liquidating motion filed on Jan. 6 by Wells Fargo & Co., United Furniture's largest creditor. Judge Maddox took Friday's presentations "under advisement," pending issuing a bench ruling at 4 p.m. on Wednesday. Judge Maddox also chose to reset Wells Fargo's motion for an interim bankruptcy trustee pending a ruling on the United Furniture motion. The United Furniture motions are the company's first formal legal response since it unexpectedly shut down on Nov. 22.
Avaya Holdings Corp. has held talks with lenders over a plan that could hand them control of the company as part of a bankruptcy filing, Bloomberg News reported. The chapter 11 filing, which allows a company to keep operating while working out a plan to repay creditors, could come as soon as the end of the month, said the people, who asked not to be identified because the matter is private. The company has been in negotiations with first-lien lenders including Apollo Global Management, Ares Management and Invesco, the people added. The telecommunications firm has also started discussions with select lenders about potential debtor-in-possession financing to help fund the company while in bankruptcy, the people said. Talks are ongoing and plans could change, they added. Avaya last month disclosed that it received multiple restructuring proposals from creditor groups, with some pushing for the company to restructure via bankruptcy, while others wanted Avaya to stay out of court, according to regulatory filings.
Bed Bath & Beyond Inc. may find it hard to justify making coming interest payments of roughly $28 million as its cash dwindles, WSJ Pro Bankruptcy reported. The coming payments, due Feb. 1, are the next big hurdle the beleaguered housewares retailer faces as it looks for ways to keep its business going. Bed Bath & Beyond has coupons due on all of its $1.2 billion in bonds outstanding as of August, and while it has more than enough cash on hand to make the payments, it will face a difficult choice between staying current on its debts and conserving its cash as it charts its future course. The housewares retailer, which warned last week it may have to file for bankruptcy, burned over $300 million in cash in the quarter ended Nov. 26 and reported having $500 million in cash and credit lines to draw on for additional funds. If it does miss the interest payment, Bed Bath & Beyond will have a 30-day grace period during which it can come forward with funds before the company would be considered as being in default and before its bondholders and other creditors can take legal action. Bed Bath has said it is exploring raising debt or equity, as well as filing for bankruptcy. On Tuesday, the company said it is planning to make up to $100 million in cost cuts, including through layoffs.
Sam Bankman-Fried said in a blog post yesterday that he did not steal money and blamed the collapse of his now-bankrupt FTX exchange on a broad crash in cryptocurrency markets, Reuters reported. Federal prosecutors in Manhattan in December said Bankman-Fried stole billions of dollars from FTX customers to pay debts for his crypto-focused hedge fund, Alameda Research, purchase lavish real estate, and donate to U.S. political campaigns. He has pleaded not guilty. The Substack blog post — a rare public statement by a U.S. criminal defendant — amounts to a preview of the defense case Bankman-Fried may present when his trial begins on Oct. 2. "I didn't steal funds, and I certainly didn't stash billions away," Bankman-Fried wrote. In the post, Bankman-Fried did not directly address many of the other charges brought against him by federal prosecutors in Manhattan last month, namely that he misled investors and lenders about the financial conditions of FTX and Alameda. He wrote that he had "a lot more to say." The 30-year-old onetime billionaire wrote that Alameda failed to hedge against an "extreme" crash in the crypto markets, which ultimately came to pass last year. "As Alameda became illiquid, FTX International did as well, because Alameda had a margin position open on FTX," Bankman-Fried wrote. Read more.
In related news, the father of FTX founder Sam Bankman-Fried has retained a New York attorney in recent weeks as prosecutors probe Bankman-Fried's alleged cryptocurrency fraud scheme, Reuters reported. Joseph Bankman, a tax law professor at Stanford Law School, has tapped Sean Hecker of Kaplan Hecker and Fink LLP. Hecker, who focuses on white collar crime, previously represented a former top foreign exchange trader at Barclays accused of an alleged multi-billion-dollar fraud scheme. In a rare move, a federal judge tossed out that case immediately after prosecutors presented it. Bankman had closely advised his son ever since Bankman-Fried launched his hedge fund Alameda Research in 2017, according to three former FTX executives. In his later consulting work for FTX, Bankman helped arrange meetings in Washington for his son, the sources said. Read more.
House Republicans on Thursday unveiled a new panel focused on cryptocurrency, following the collapse of the prominent crypto exchange FTX late last year, The Hill reported. Rep. Patrick McHenry (R-N.C.), the chairman of the House Financial Services Committee, announced the new Subcommittee on Digital Assets, Financial Technology and Inclusion on Thursday, alongside other subcommittee assignments. The subcommittee, which will be chaired by Rep. French Hill (R-Ark.), aims to provide clear rules for federal regulators in the “digital asset ecosystem,” according to a committee press release. It also seeks to develop policies that promote financial technology in underserved communities and increase diversity and inclusion in the field. The creation of the new panel comes in the wake of FTX’s collapse in November. The crypto exchange’s founder and CEO, Sam Bankman-Fried, was arrested in the Bahamas in December and is now facing a slew of criminal charges over the company’s meltdown, including wire and securities fraud.
Crypto lenders have repossessed so many Bitcoin mining rigs they’re resorting to plugging them in and extracting tokens themselves, Bloomberg News reported. Lenders are getting creative as to what to do with the mining machines they accepted as collateral for the some $4 billion in rig-backed loans they underwrote when the rally in Bitcoin seemed unstoppable. With the recent surge in loan defaults and plunge in cryptocurrencies, the value of new generation machines has dropped 85%, according to data from Luxor Technologies. While some machines are just sitting in warehouses, waiting for prices to recover, lenders like New York Digital Investment Group LLC are using debt negotiations to find alternative solutions. In December, NYDIG agreed to pay Greenidge Generation Holdings not only for its mining rigs but to operate them in exchange for debt reduction. The deal effectively made Greenidge — once one of the largest Bitcoin miners — a hosting firm while NYDIG became the miner. “Lenders are flooded with mining rigs,” said Wolfie Zhao, head of research at TheMinerMag, a research arm of mining consultancy BlocksBridge. “One way for the lenders to prevent further losses from the defaulted loans is to keep the collateralized machines running and generate some income.” It’s an option lenders are taking more seriously, especially those that already have mining capabilities to build on, including Galaxy Digital LP and Digital Currency Group Inc.’s Foundry. Bitcoin mining — which uses specialized computers known as rigs to validate transactions on the blockchain in exchange for rewards in the token — was among the most lucrative businesses in crypto. Miners had sought to leverage that value in the runup of Bitcoin’s historic rally. But with a surge in energy prices and Bitcoin down 58% on the year, a number of loans are now underwater. A Valkyrie index of Bitcoin miners is down 75% from a year ago, even after this week’s 30% jump on optimism a U.S. economic recovery could prop up crypto prices.
Crypto exchange FTX has recovered more than $5 billion in liquid assets but the extent of customer losses in the collapse of the company founded by Sam Bankman-Fried is still unknown, an attorney for the company told a U.S. bankruptcy court on yesterday, Reuters reported. The company, which was valued a year ago at $32 billion, filed for bankruptcy protection in November and U.S. prosecutors accused Bankman-Fried of orchestrating an "epic" fraud that may have cost investors, customers and lenders billions of dollars. "We have located over $5 billion of cash, liquid cryptocurrency and liquid investment securities," Andy Dietderich, an attorney for FTX, told U.S. Bankruptcy Judge John Dorsey in Delaware at the start of Wednesday's hearing. Dietderich also said the company plans to sell nonstrategic investments that had a book value of $4.6 billion. However, Dietderich said the legal team is still working to create accurate internal records and the actual customer shortfall remains unknown. The U.S. Commodities Futures Trading Commission has estimated missing customer funds at more than $8 billion. Dietderich said the $5 billion recovered does not include assets seized by the Securities Commission of the Bahamas, where the company was headquartered and Bankman-Fried resided. Read more.
The intersection of cryptocurrency and bankruptcy is one of the key issues to be discussed by expert panels at ABI's upcoming Rocky Mountain Bankruptcy Conference from January 26-27 in Salt Lake City, Utah. Are you registered?
FTX raised equity capital before its collapse from Robert Kraft ‘s Kraft Group and entertainment giant Endeavor Group Holdings Inc., among other newly-identified backers who now face the loss of their investments in the once-highflying exchange, the Wall Street Journal reproted. The crypto firm’s chapter 11 administrators disclosed a new roster of its financial backers that listed affiliates of Kraft Group and entertainment giant Endeavor as holding common and preferred stock. FTX also disclosed that it raised capital from affiliates of investment offices including Daniel Och’s Willoughby Capital LLC and Blue Pool Capital, a Hong-Kong office backed by Alibaba Group co-founder Joseph Tsai, according to the shareholder list, filed in bankruptcy court on Tuesday. Marquee investors from the U.S. and around the world poured roughly $1.8 billion into FTX with few strings attached, valuing the firm at $32 billion at its peak. Equity holders are likely to be wiped out now that FTX has filed chapter 11. Customers are facing big losses and generally must be paid ahead of stockholders.
Forma Brands LLC, the parent company of beauty retailer Morphe LLC, filed for bankruptcy in Delaware on Thursday as it reached a deal with lenders including Jefferies and Cerberus Capital Management, Bloomberg News reported. As part of the agreement, secured creditors will take over Forma’s wholesale operations, online platforms and international Morphe retail stores while providing $33 million of new money, subject to court approval, according to a company statement. The court filing caps a tumultuous two-and-a-half years for the San Francisco-based company that failed to see revenues grow in spite of marketing deals with youtubers and influencers. The retailer recently announced that it would shutter all of Morphe’s retail locations in the U.S. It had to cut ties with two of its big three influencers and wrestle with a litany of litigation for missed rent and vendor payments. Forma has between $500 million and $1 billion in liabilities, according to court documents.
The owner of a former vermiculite mine in northwestern Montana that spread harmful asbestos in and around the town of Libby has offered $18.5 million to settle the last of the state’s claims for environmental damages, Gov. Greg Gianforte announced on Tuesday, the Associated Press reported. The proposed settlement was filed in W.R. Grace & Co.’s bankruptcy case in Delaware for the Libby Asbestos Superfund Site in Lincoln County. Asbestos from a vermiculite mine owned by W.R. Grace beginning in 1963 polluted the area until the mine was shuttered in 1990. Cleanup began in 2000, after media reports spurred federal officials to investigate widespread health problems among area residents. Health officials estimate that several thousand people have been sickened in northwest Montana from exposure to Libby’s asbestos and at least 400 have died. More than 2,600 homes, businesses and other properties were cleaned up at a cost of more than $600 million under the U.S. Environmental Protection Agency’s Superfund program for hazardous sites. W.R. Grace agreed in a 2008 settlement to pay the EPA $250 million for cleanup work.
