%1

A former money manager for Celsius Network LLC deceived the company about his investing abilities and lost or stole tens of millions of dollars in assets, the bankrupt crypto lender alleged in a lawsuit yesterday, Bloomberg News reported. Celsius, which filed for bankruptcy last month after freezing customer assets, alleges Keyfi Inc. and founder Jason Stone lied about his investing prowess and was incompetent in managing Celsius assets. The crypto lender also accused Stone of outright theft. Stone began managing money for Celsius in 2020, according to the complaint. Unhappy with Keyfi’s reporting practices, Celsius demanded the return of coins under Stone’s control just months after the arrangement began. Celsius was unable to recover all of the assets and found Keyfi was “extraordinarily inept” at crypto investing and failed to hedge against price swings, according to the lawsuit. “The Defendants’ liability to Celsius is staggering,” attorneys for Celsius wrote in the complaint. In addition to mismanagement and deception, the company claims Keyfi converted Celsius assets into non-fungible tokens and stole them, covering its tracks with a so-called crypto mixer recently banned by the U.S. Treasury Department. The allegations come after Stone sued Celsius last month, accusing the crypto lender of fraud and cheating him out of potentially hundreds of millions of dollars in pay.

Regional air carrier ExpressJet Airlines LLC filed for bankruptcy Tuesday and will shut down its business, unable to rebound from the loss of its contract with United Airlines, WSJ Pro Bankruptcy reported. The College Park, Ga.-based regional air carrier ceased operations on Monday in advance of its chapter 11 filing and is now planning to sell off its remaining assets, according to a declaration filed with the U.S. Bankruptcy Court in Wilmington, Del., by ExpressJet’s President, John Greenlee. ExpressJet provided regional flight services for other airlines using aircraft subleased from United Airlines. In January 2019, the company signed a contract with United to fly exclusively for United through 2022. But in 2020, when the COVID-19 pandemic grounded many flights, United scrapped the contract, and ExpressJet was forced to suspend its operations. In an attempt to rebound, ExpressJet launched its own leisure brand, Aha, in the fall of 2021 to connect Reno-Tahoe International Airport and cities along the West Coast, but the company was unable to turn it into a profitable business. In the first seven months of 2022, the company’s estimated gross revenue was $5.5 million, while expenses were $23.3 million, generating an operating loss of $17.7 million.

Carestream Health Inc., an X-ray imaging products supplier once owned by Eastman Kodak Co. and now backed by buyout firm Onex Corp., filed for bankruptcy with a prearranged plan to cut its $1 billion debt load by roughly half, WSJ Pro Bankruptcy reported. In recent years, Carestream’s medical films business has seen falling demand as digital-only products gain traction, Chief Financial Officer Scott Rosa said in a declaration filed Tuesday in the U.S. Bankruptcy Court in Wilmington, Del. Government efforts to curb healthcare costs have also hurt the business, which was started more than a century ago, he said. Lenders under a $448 million second-lien term loan have agreed to swap their debt for equity ownership and participate in a rights offering to become majority owners of the reorganized company, based in Rochester, N.Y. Originally formed as Kodak’s health group, Carestream was acquired in 2007 for almost $2.4 billion by investors led by Onex Corp. Yesterday’s bankruptcy filing comes four months after Carestream said it had reached an out-of-court restructuring deal expected to cut $220 million in debt. The chapter 11 filing aims to add another $250 million in debt reduction. Medical film is the largest of Carestream’s divisions. The unit includes printer systems, laser-imaging films and dental films and generated roughly half of the company’s more than $1.1 billion in sales last year. Carestream has roughly 8,000 direct customers and 900 dealers in more than 130 countries. Its products are used by health systems, hospitals and imaging centers. Its foreign entities aren’t part of the bankruptcy case. The company’s debts also include $507.7 million in first-lien term loans and $77 million in first-lien revolver borrowings, according to court papers. Lenders, including First Eagle Investments, LCM Asset Management LLC and Apollo Capital Management LP, have offered to supply an $80 million loan to help Carestream get through bankruptcy. Providers of the bankruptcy financing may also get an equity stake. First-lien lenders are getting a combination of cash and their share of a new term-loan facility of roughly $540 million, projected to provide them a full recovery. Second-lien lenders are expected to recoup 23% of what they’re owed. The restructuring plan also envisions raising up to $75 million of new equity capital through a common stock rights offering.

3M’s attempt to block jury trials of more than 230,000 lawsuits accusing it of harming U.S. soldiers faces a key test this week in front of a federal judge in Indianapolis, Bloomberg News reported. Bankruptcy Judge Jeffrey Graham is set to consider a temporary halt to the lawsuits so that 3M and its bankrupt subsidiary, Aearo Technologies, can try to settle the claims, most of which have been filed by veterans who say the combat arms earplugs left them with hearing damage. Judge Graham’s decision will echo across the offices of other firms facing massive numbers of product liability lawsuits, said Prof. Jared Ellias of Harvard Law School. The Aearo case uses an increasingly popular strategy in which profitable companies use insolvency proceedings to force settlement talks with victims of allegedly harmful products. Johnson & Johnson and lumber giant Georgia-Pacific have also put units into bankruptcy with the same goal of ending their litigation woes in one place instead of fighting thousands of trials around the country. Fighting each case in front of different juries around the country is impossible, the bankrupt units of J&J and 3M have argued in court. Critics of the mass tort system agree. “Mass torts are legal terrorism because, even if a company has no liability for 80% of the claims made against it, the defense costs will kill it,” said bankruptcy attorney Martin Bienenstock. On July 26, the company put Aearo Technologies into bankruptcy in Indianapolis. Under chapter 11 rules, Aearo is automatically entitled to freeze the lawsuits it faces, but because 3M itself didn’t file bankruptcy a judge must agree to give the industrial conglomerate the same protection.

Pharmaceutical giant Bausch Health Cos. has retained advisers to help it map out its future after the company lost a major patent dispute and has drawn controversy over the recent spinoff of its eye-care business, WSJ Pro Bankruptcy reported. Canada-based Bausch said yesterday that it hired law firm White & Case LLP and investment bank Houlihan Lokey Inc. to advise on strategic alternatives. Last month Bausch lost a legal dispute over a patent it holds on gastrointestinal tract drug Xifaxan, known as rifaximin, to treat irritable bowel syndrome. Losing the patent battle means Bausch will likely face competition from generics manufactured by companies like Morristown, N.J.-based Alvogen Inc. Bausch has already launched an appeal to the decision. “We expect that generic competition will enter the market no later than year-end 2024 — much earlier than our previous base-case assumption of January 2028,” S&P Global Ratings analysts wrote in a recent report after the ruling. They also estimated that Xifaxan contributes to about 50% of Bausch’s total pretax earnings. The potential revenue drop from Xifaxan adds additional pressure on the company as it faces an uproar from its creditors over the spinoff of its eye-care business, Bausch + Lomb Corp., which saw a limited initial public offering of shares this spring. Bausch pursued the spinoff at the behest of activist investors Carl Icahn and Glenview Capital Management. Unsecured creditors have hired law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to advise them on possible legal claims stemming from the spinoff, which they contend transferred value away from them, according to people familiar with the matter. They have already communicated their concerns about the spinoff to the company in writing. Secured creditors have separately brought on Gibson Dunn & Crutcher LLP for advice in relation to the spinoff. Without a patent for Xifaxan, losses may increase for holders of Bausch’s roughly $20 billion in debt. Franklin Templeton and JPMorgan Chase & Co. number among the company’s largest creditors, and the company carries $12 billion in unsecured bonds and $7.7 billion in secured debts, company filings show.

Revlon Inc. told the judge overseeing the cosmetics giant’s bankruptcy that shareholders don’t need a special, company-funded committee to represent them in the chapter 11 case because there is no evidence the equity is worth anything, Bloomberg News reported. The company urged U.S. Bankruptcy Court Judge David S. Jones in Manhattan to reject the request from minority equity owners in part because low bond prices imply that equity has little hope of recouping anything. The committee representing unsecured creditors also asked Judge Jones to reject a shareholder committee. “Revlon stock trading has all the outward appearances of a so-called ‘meme’ stock,” the committee said in its objection, referring to shares that rise in value only because of Internet chatter, not economic reason. Revlon shares tumbled as much as 34% to as low as $5.62 Monday before rebounding to around $8.31, leaving it down some 2% on the day. That price is up from as little as $1.17 in June. Nearly all official committee are appointed by the Office of the U.S. Trustee, an arm of the U.S. Justice Department that acts as a watchdog in corporate bankruptcies. In the Revlon case, the office appointed the unsecured creditor committee, but last month rebuffed the shareholders. The shareholder group, which owns 4.7% of Revlon’s common stock, asked Judge Jones on Aug. 9 to order the U.S. Trustee to appoint a panel. On that day the shares closed at about $8.

A judge has approved the third attempt to settle disputes among the founders and early investors in Relief Telemed, now known as Relief, paving the way for the early-stage health tech firm to emerge from bankruptcy proceedings, the Baton Rouge Business Report reported. Under the agreement, founding CEO Vishal Vasanji will pay $50,000 and give up his stock and any claims on the company’s technology and other intellectual property. Relief claims that Vasanji had misappropriated more than $200,000 in company funds for personal use, which he denies. The parties to the settlement are not admitting any liability. Relief voluntarily entered chapter 11 bankruptcy last year. Co-founders Vasanji and James Davis envisioned their on-demand care delivery platform as “the Waitr of health care.” Vasanji reported a surge in demand for the telemedicine platform as the pandemic raged in 2020 and further growth when the company got into COVID-19 testing for state clients such as LSU, though those prospects withered as the pandemic waned and there was less demand for testing.

Cineworld Group Plc, the owner of Regal Cinemas, is preparing to file for bankruptcy within weeks after struggling to rebuild attendance from pandemic lows, WSJ Pro Bankruptcy reported. The British cinema company has engaged lawyers from Kirkland & Ellis LLP and consultants from AlixPartners to advise on the bankruptcy process, these people said. Cineworld is expected to file a chapter 11 petition in the U.S. and is considering filing an insolvency proceeding in the U.K., they said. Cineworld said on Wednesday that despite a gradual recovery in attendance since reopening theaters last year, recent admissions have lagged below expectations due to a limited film slate. The company is evaluating strategic options to generate liquidity and potentially restructure its balance sheet through a comprehensive deleveraging transaction, it said. Any such deleveraging likely will be highly dilutive to shareholders, Cineworld said. The company is negotiating with its lenders to fund the costs of the bankruptcy process, according to a person familiar. Cineworld and Kirkland didn’t immediately respond to requests for comment. AlixPartners declined to comment. The London-based chain narrowly escaped bankruptcy in 2020 after landing a lifeline from creditors while its nearly 800 theaters were shut due to COVID-19 restrictions.

A creditor group that holds roughly $3.2 billion in Endo International PLC debt said it is weighing a rival bid to purchase the pharmaceutical company’s assets out of chapter 11, WSJ Pro Bankruptcy reported. The group, comprising more than a dozen institutions that own a cross section of Endo’s bank and bond debt, is a potential challenger to a stalking-horse bid, which sets a minimum for others to beat, that the company announced when it filed for bankruptcy this week under the weight of opioid litigation. The first-lien creditors behind the stalking-horse bid have agreed to acquire the business out of chapter 11 in exchange for forgiving $6 billion in company debt. The cross-holding group includes J.P. Morgan Investment Management Inc., Citadel Equity Fund and funds managed by Franklin Advisers Inc. and Oaktree Capital Management LP, according to papers filed on Thursday in the U.S. Bankruptcy Court in New York. Andrew Rosenberg, a lawyer representing the group, said during Endo’s debut bankruptcy hearing Thursday that his clients don’t believe “the keys to this company” should be turned over to the stalking-horse bidders. The leading bid, he said, provides a starting point for a sale of the business and nothing more. The creditor group formed in April 2021 and negotiated for months on a potential restructuring, but talks with Endo cooled off in the weeks leading up to the bankruptcy filing because the price of the drugmaker’s debt had fallen, Mr. Rosenberg said. But the price of Endo’s first-lien debt rebounded after the company released information showing it “vastly outperformed” negative first-quarter guidance, Mr. Rosenberg said, adding the drugmaker’s second-lien debt has also experienced a similar rebound. “We definitely are considering a bid but we’re not promising what we’ll do in these cases yet,” Mr. Rosenberg said.

Crypto lender Voyager Digital's creditors do not believe the company needs to pay employees "retention awards," according to a new legal filing shared late Friday, CoinDesk.com reported. Voyager, which is currently undergoing bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of New York, asked a federal judge to approve $1.9 million of its funds for a "Key Employee Retention Plan" (KERP), meaning bonuses to 38 employees that the company claimed were vital to its continued operation and restructuring. On Friday, the official unsecured creditors' committee objected, saying that Voyager's employees are "already well-compensated," and arguing that the company has otherwise done little to reduce costs. "The Debtors have not provided any evidence to justify the retention awards beyond conclusory statements that these employees are needed. Importantly, the Debtors provide no evidence that the 38 Participants are at risk of resigning. And that is because no such evidence exists — since the Petition Date, only 12 of the Debtors’ approximately 350 employees have voluntarily resigned," the filing said. The employees perform "essential accounting, cash and digital asset management, IT infrastructure, legal, and other critical functions for the Debtors," Voyager's August 2 filing said.