%1

Sexual-abuse survivors who signed up for a quick $3,500 payment option in the Boy Scouts of America’s bankruptcy case could get their money about 18 months after the youth group’s chapter 11 plan is approved, WSJ Pro Bankruptcy reported. That “achievable” timetable was disclosed Tuesday by a victims’ representative during a trial where the Boy Scouts are seeking approval to exit chapter 11 and leave behind a $2.7 billion compensation trust. James Patton, the legal representative for future claimants, testified in the U.S. Bankruptcy Court in Wilmington, Del., that the trust could require hundreds of thousands of hours to process the roughly 82,200 individual claims filed. Of those, more than 6,700 of those who supported the bankruptcy plan have opted for expedited $3,500 payments, rather than subjecting their claim to the general trust distribution procedures for evaluation. “I wouldn’t be surprised if they’re getting a payment within the next 18 months,” Mr. Patton said of those opting for speedier payments. “I think that is achievable.” For those who haven’t selected the expedited option, the process will take longer as the settlement trust values victims’ claims based on the severity, location and duration of the abuse, among other factors.

A court ruling allowing Johnson & Johnson to use a controversial bankruptcy strategy to force cancer victims into potential settlement talks has raised the odds that other companies facing costly product-liability claims like 3M Co., and Dow Inc. may follow suit, analysts and legal experts say, Bloomberg News reported. A judge in February cleared J&J to employ a legal tactic known as the Texas Two-Step in which it shunted almost 40,000 claims into a purposely created unit that then filed for bankruptcy under a business-friendly Texas law. The ruling temporarily halted the litigation over J&J’s iconic baby powder while the company tries to negotiate settlements. Some legal experts worry the ruling may set off a chain reaction of similar filings by otherwise solvent companies that could swamp the courts. J&J argues the move was its only way of corralling talc litigation costs. Advocates for cancer victims counter the filing is just a way for J&J to cap how much it has to pay out. Two victim groups have appealed the court decision to let the bankruptcy continue. On Monday, one of the groups said it will press to have the case dismissed because the chapter 11 petition was filed in bad faith and isn’t a legitimate attempt to reorganize a financially struggling company.

Blackstone Inc.’s Service King Collision Repair Centers Inc. has engaged AlixPartners LLP as a restructuring adviser as the company contends with headwinds in its business and faces a looming debt maturity, WSJ Pro Bankruptcy reported. Investors in the company’s $775 million senior loan in recent weeks signed nondisclosure agreements with the company in order to negotiate debt restructuring terms. The company faces a debt maturity in July. The automotive collision-repair business has struggled since the onset of the pandemic due to fewer collisions and higher labor costs. Service King also has faced setbacks after putting new operating systems in place. The company has been working to conserve cash since last fall when it elected to defer cash payments to term lenders and instead tack on additional debt to the loan balance. Service King also drew down on a revolving line of bank credit.

Jekyll & Hyde Club, a New York restaurant popular with tourists for its horror-themed food and shows, filed for bankruptcy, Bloomberg News reported. The kitschy eatery located in Greenwich Village owes creditors less than $7.5 million, including $1.5 million in back rent, according to papers filed in bankruptcy court in Manhattan. Actors put on shows during dinner and each floor of the restaurant focuses on a different aspect of a fictional, 1930s British explorers club, from science fiction to the Gothic horror of its namesake characters, Dr. Jekyll and Mr. Hyde. Club owner Deacon Brody Management Inc. elected to file under subchapter V of chapter 11 bankruptcy that is designed for small businesses to quickly rearrange debt without the usual expenses associated with bigger corporate reorganization cases, according to court papers.

Boston Consulting Group filed a lawsuit against GameStop that seeks $30 million in damages over the retailer's alleged "bad faith refusal to pay fees" owed to the consultancy under a written agreement, Retail Dive reported. More specifically, the firm said in its complaint that, starting in mid-2020, GameStop has "refused to pay significant amounts" of BCG's fees and demanded discounts "with no justification," as well as refused to continue "contractually-obligated meetings" tied to its fees. According to BCG, the consulting firm started working with GameStop in 2019, when the company was "on life support" and "[h]emorrhaging customers." The retailer's then-general counsel, Daniel Kaufman, who later became GameStop's chief transformation officer, led the relationship. BCG was brought on to "evaluate its operations and develop solutions that would enable a corporate transformation to ensure its continued viability," according to the firm. BCG said the agreed-on fee structure for its work with GameStop was based on projected profit improvements resulting from the firm's recommendations. Its work revolved around growing revenue through a video game ecosystem and manufacturer partnerships; finding cost cuts and operational improvements; driving category improvement; growing a pre-owned electronics business; pricing; and GameStop's loyalty program, among other areas of the business.

Two years after Art Van Furniture went bankrupt and started closing all its stores, the bankruptcy case's trustee is now attempting to go after the family of the late Art Van Elslander for tens of millions of dollars in proceeds from the retailer's 2017 leveraged-buyout sale to a private-equity company, Detroit Free Press reported. The lawsuit, filed this month in federal bankruptcy court in Delaware, focuses on the flurry of sale-leaseback transactions that were part of the deal and involved nearly 40 Art Van Furniture stores and related properties that the retailer had owned outright. Those transactions financed 70% of the Van Elslanders' $621 million deal in March 2017 with Boston-based Thomas H. Lee Partners. The sale-leasebacks saddled Art Van Furniture with new rent expenses — on top of a debt load from the deal — that, according to the lawsuit, immediately doomed the company and would prove unsustainable. Company founder Art Van Elslander was still alive when the sale happened. He died the following year at age 87. Proceeds from the real estate transactions went to do the deal — not support the furniture company's future. The Archie A. Van Elslander Trust received more than $529 million from the sale, and entities controlled by the patriarch's children, including Gary Van Elslander and David Van Elslander, received more than $75 million, according to the lawsuit. The lawsuit seeks to recover more than $105 million in what it calls "fraudulent transfers" that included the sale-leaseback transactions, as well as $8 million in transfers to Gary Van Elslander and $2.5 million to David Van Elslander, among other transfers.

BLT Restaurant Group was quick to apply for a Paycheck Protection Program (PPP) loan in April 2020, filing its request as soon as the aid became available as its steakhouses suffered at the start of the pandemic. After all, the company said, it did not know how long the funding, or the public health crisis that necessitated it, would last. Nearly two years later, BLT has filed for chapter 11 bankruptcy, in part because it hasn’t been able to repay all of the PPP money it received, Restaurant Business reported. Founded in 2004, New York-based BLT owns four restaurants under the names BLT Steak and BLT Prime and manages four others under those brands in New York, Florida, Charlotte, Washington, D.C., and Hawaii. In April 2020, the company received a PPP loan of $3.3 million to help restart operations and pay employees, according to a bankruptcy petition filed March 18. But BLT said it wasn’t able to operate at anywhere near full capacity for most of the 24-week period covered by the loan. For more than 90 percent of that time, from late April to mid-October 2020, indoor dining was off limits in New York City. With its Manhattan dining rooms dark, BLT said, it was unable to meet the staffing levels required for full PPP loan forgiveness. BLT said it spent all of its PPP funds on approved expenses, including 60 percent on payroll. The Small Business Administration (SBA) approved forgiveness of about $1.9 million of BLT's loan in September 2021, leaving about $1.3 million for the company to repay — a sum that remains outstanding, according to the bankruptcy filing. BLT also owes more than $7.8 million on loans from its majority owner, JL Holdings 2002 LLC. And BLT said its federal aid troubles did not end with that first PPP loan. It filed for a second round of PPP funding in 2021 that, per SBA rules, had to adhere to the same terms as BLT’s first loan, which was made on a consolidated basis. Had BLT been able to apply for loans for its restaurants individually, it would have received $3.4 million rather than the $2 million it got in the second round of funding, according to the filing.

Film studio STX Entertainment has put an indirect subsidiary company holding the rights to the Chris Pine and Ben Foster-starring thriller “The Contractor” into chapter 11 bankruptcy, The Hollywood Reporter reported. The move, detailed in an SEC filing from Eros Global Corp., parent of STX, aims to protect the value of the action thriller for the company’s shareholders as Eros moves ahead on a deal to sell the indie studio built and led by Robert Simonds to an affiliate of the Najafi Companies. Unveiled on Tuesday, the SEC filing indicates that a Dec. 6, 2021 agreement for the sale of STX was amended on March 15. The Najafi Companies will now acquire 85 percent of the equity interests and 100 percent of the voting interests of STX, while Eros STX Global Corp. agrees to retain 15 percent of the non-voting shares in the indie studio. “We anticipate the purchase price and the amount of outstanding debt at closing to be approximately $157 million,” Eros said in the SEC filing. The deal for STX Entertainment calls for the indie studio to repay $148 million in debt, and follows STX Entertainment and Eros completing a stock-for-stock merger to form Eros STX Global Corp. in 2020. The Najafi Companies is a private investment company with holdings in consumer, media, talent-driven brands, e-commerce, tech and sports.

Insurers protecting Florida’s homeowners are going under. And it’s not the state’s infamous storms dragging the firms down — it’s a deluge of lawsuits and fraud, Bloomberg News reported. More companies may follow the two insurers declared insolvent in recent weeks, Tampa, Florida-based Avatar Property & Casualty Insurance Co. and St. Johns Insurance Co., based in Orlando, Florida. And lawmakers failed to pass a bill that could offer a potential remedy before the state’s legislative session wrapped up earlier this month. Insurers, meanwhile, are opting not to renew certain policies, refraining from writing new business and increasing premiums. The pullback offers homeowners few choices: pay up, take the risk of forgoing coverage or throw in their lot with the state’s insurer of last resort, which is already facing an influx of new customers as hurricane season looms. “There are going to be other insolvencies,” said Bruce Lucas, chief executive officer of Tampa-based insurance-technology firm Slide Insurance Holdings Inc. and a veteran of the state’s underwriting industry. “There are just other companies that are too thinly capitalized.” The largest U.S. insurers have spent years shrinking their footprint in Florida to reduce their exposure to violent Atlantic hurricanes. As of the third quarter of last year, companies that primarily write policies in the state control more than three-quarters of the homeowners’ insurance market, according to Kyle Ulrich, president of the Florida Association of Insurance Agents.

An additional 9,000 individuals claiming they were sexually abused while in the Boy Scouts of America voted in favor of a $2.7 billion compensation plan, pushing support for it to nearly 86% of all ballots cast ahead of a bankruptcy-court trial next week, the Wall Street Journal reported. The additional votes among the roughly 82,200 individuals who have filed sexual-abuse claims against the youth group increase its chances of winning approval for the settlement from Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del., at a trial scheduled to begin today. The final tally released late Thursday puts the Boy Scouts over a self-imposed target of three-quarters support from abuse survivors. While bankruptcy law generally requires two thirds approval from creditors for a proposed deal, chapter 11 cases involving mass injury and tort liabilities typically have to garner greater support. The Boy Scouts have said that 75% approval from survivors would ease court approval, while anything less could make the bankruptcy plan more vulnerable to legal challenges from objectors. Read more. (Subscription required.) 

In related news, the Boy Scouts of America’s plan for resolving 82,200 claims of childhood sexual abuse is being opposed by some insurance companies that worry some victims’ claims may not be worth as much as what the youth group says they are, the Wall Street Journal reported. Several liability insurers have said the Boy Scouts’ chapter 11 plan pegs the value of abuse claims at higher levels than what victims likely would get in state-court lawsuits or private negotiations, and that those estimates could be used by victims to extract more money from them. The Boy Scouts have said in court filings that the estimates of values of claims and the process established under its plan to award payouts mimic what victims would experience in the state-court system. Read more. (Subscription required.)