%1

A group of Latam Airlines Group SA’s creditors said they are prepared to provide alternative financing if a bankruptcy judge rejects a financial lifeline from another creditor group, WSJ Pro Bankruptcy reported. The splinter group of creditors, which includes Pentwater Capital Management LP, Invictus Global Management LLC and Avenue Capital Group, said it is ready to backstop $400 million of a rights offering and roughly $3.27 billion in the sale of convertible notes. The creditors, whose unsecured debts include lease claims and unsecured notes maturing in 2024 and 2026, said their proposal would increase the restructuring plan’s equity value to $7.79 billion from $7.61 billion, according to the commitment letter and related materials viewed by The Wall Street Journal. The offer is an alternative to an existing financing deal proposed by another group of creditors including Sixth Street Partners that Latam is hoping to get court approval for in order to end the bankruptcy brought on by the COVID-19 pandemic. Since the current offer was presented in November, dissenting creditors, including the holders providing the new deal, have contended that Latam is paying an unreasonable amount of fees to secure the funding it needs.

Guo Wengui, the exiled Chinese businessman and former partner of Trump political strategist Steve Bannon, filed for bankruptcy less than a week after a judge ordered him to pay $134 million for moving and keeping a yacht out of the reach of creditors, Bloomberg News reported. Guo sought chapter 11 protection from creditors in Connecticut late Tuesday, estimating assets of no more than $500,000 and liabilities of as much as $500 million, according to court papers. In the U.S., bankruptcy pauses lawsuits against a filer while a plan to repay creditors is sorted out. Last week, Judge Barry Ostrager of New York state court said Guo has racked up fines of $500,000 a day over 268 days for moving and keeping a yacht, the Lady May, outside the court’s jurisdiction in violation of a prior order. Ostrager told Guo to pay the sum in five business days. The Lady May made news in 2020 when Bannon, a partner in a media venture with Guo, was arrested on unrelated federal charges while on board. The yacht was purchased for 28 million British pounds in 2015 ($38 million today).

Sexual-abuse victims of the Boy Scouts of America have a new option to potentially receive more compensation. But to initiate the process, they must pay as much as $20,000 to the youth group’s settlement trust, WSJ Pro Bankruptcy reported. The option was part of a deal the bankrupt Boy Scouts reached Thursday with one of its harshest critics, the official committee representing more than 82,000 abuse victims. The youth group, which apologized for past failures to protect children from pedophiles, hopes the new agreement can bring it closer to ending a bankruptcy that began two years ago. The organization faces a trial scheduled for March on its bankruptcy-exit plan, which includes roughly $2.7 billion for abuse victims. How much victims stand to get is disputed. Victims of the worst abuses are eligible to receive as much as $2.7 million each, though many plaintiffs’ lawyers believe that most will get a fraction of that amount. Under the new option, victims who believe that their abuse cases were particularly severe and that they should be entitled to additional compensation can ask for an independent review of their claims. The review will be conducted by an outside party picked from a panel of retired judges with tort experience. To trigger the review, victims would need to pay the Boy Scouts trust an initial $10,000 administrative fee, followed by an additional $10,000 immediately before the review begins. The Justice Department’s bankruptcy watchdog and an abuse victim criticized the fees during a virtual Boy Scouts hearing in the U.S. Bankruptcy Court in Wilmington, Del., on Friday, saying they place an unreasonable burden on claimants.

Johnson & Johnson adopted its controversial strategy for battling cancer claims tied to baby powder after a $2 billion court loss sparked concern that the company’s perfect credit rating could be damaged by the growing number of similar lawsuits, a retired J&J treasurer testified, Bloomberg News reported. Michelle Ryan exchanged emails with credit rating firms previewing the company’s bankruptcy options last year before the court strategy was implemented, according to records shown Tuesday in a federal trial on whether that tactic is legitimate. Through the maneuver, J&J shunted all its baby-powder liabilities into a separate unit and then put that entity in bankruptcy. Victims suing J&J have asked U.S. Bankruptcy Judge Michael Kaplan in Trenton, New Jersey to dismiss the chapter 11 filing of the unit, LTL Management, arguing that case wrongly manipulates the bankruptcy system. The legal strategy would force a negotiated end to more than 38,000 lawsuits alleging that the talc in baby powder causes cancer. Should J&J lose, victims would be free to resume jury trials, potentially exposing the company to billions in additional payouts. The consumer giant says that it filed bankruptcy to create a fair and efficient process for paying all current and future talc claims. Advocates for cancer victims say the bankruptcy is just a way for J&J to cap how much it has to pay out.

Brooklyn’s Williamsburg Hotel and its top lender are at odds as the property owners seek to end its bankruptcy by replacing its defaulted mortgage with a new, borrower-friendly loan, WSJ Pro Bankruptcy reported. The Williamsburg Hotel is attempting to exit from bankruptcy despite opposition from secured lender Benefit Street Partners LLC, which isn’t satisfied with the new loan terms dictated by the hotel’s owners. Unable to refinance and pay off the mortgage, they have offered a new loan instrument of $70.7 million to Benefit Street, bearing interest of 4% for four years and 5% for two more years. That proposed coupon is 2.25 to 2.75 percentage points lower than the original loan, according to Benefit Street, which has said it isn’t fairly compensated under the bankruptcy plan for the risk of investing in the 147-room hotel. Benefit Street has said the loan balance stands at $95 million including interest and fees, and it is entitled to either full payment from a sale of the hotel or a new loan with higher rates, which the hotel disputes. Exiting from bankruptcy is more difficult, but still possible, when secured lenders aren’t paid off in full. The hotel, backed by developers Toby Moskovits and Michael Lichtenstein of Heritage Equity Partners, argued in court papers Tuesday that the payment terms offered to Benefit Street are fair and consistent with its “minimal” degree of investment risk.

The families of nine victims of the Sandy Hook Elementary School shooting announced yesterday they have agreed to a $73 million settlement of a lawsuit against the maker of the rifle used to kill 20 first graders and six educators in 2012, the Associated Press reported. The case was watched closely by gun control advocates, gun rights supporters and manufacturers, because of its potential to provide a roadmap for victims of other shootings to sue firearm makers. The families and a survivor of the shooting sued Remington in 2015, saying the company should have never sold such a dangerous weapon to the public. They said their focus was on preventing future mass shootings by forcing gun companies to be more responsible with their products and how they market them. As part of the settlement, Remington also agreed to allow the families to release numerous documents they obtained during the lawsuit including ones showing how it marketed the weapon, the families said. It’s not clear when those documents will be released. Remington, one of the nation’s oldest gun makers founded in 1816, filed for bankruptcy for a second time in 2020 and its assets were later sold off to several companies. The manufacturer was weighed down by lawsuits and retail sales restrictions following the school shooting.

A Johnson & Johnson subsidiary came under attack in court on Monday for attempting to use the bankruptcy process to resolve tens of thousands of claims that its baby powder and other talc-based products caused cancer, Reuters reported. The subsidiary, LTL Management, is fighting to remain in bankruptcy, arguing that is the best way to reach an “equitable, efficient, and consensual resolution” of more than 38,000 claims alleging that J&J’s talc-based products caused cancers including mesothelioma. J&J maintains that its consumer talc products are safe. J&J used a legal maneuver known as the “Texas two-step,” which allows companies to split valuable assets from liabilities through a so-called divisive merger. Lawyers representing cancer patients say that the bankruptcy case is meant to delay and frustrate lawsuits that would otherwise go to a jury trial against J&J directly. “At its core, this case is rotten,” Jeffrey Jonas, a lawyer for one of the plaintiffs’ committees said during Monday’s opening arguments. Robert Wuesthoff, president of LTL Management, testified that it would be impossible to take all of the cases to trial. Before LTL was formed, J&J had completed about 10 talc trials per year, Wuesthoff said. Most of the cancer plaintiffs would be better off resolving their claims in a bankruptcy settlement than hoping to join the “select few” who won “lottery-sized awards” in jury trials, he added. As Reuters has reported, J&J secretly launched “Project Plato” last year to shift liability from its pending talc lawsuits to the newly created subsidiary, which was then to be put into bankruptcy.

The Archdiocese of Santa Fe and four insurance companies Monday backed away from a request to have some records sealed from public view in its bankruptcy case involving hundreds of people who allege sexual abuse by Catholic clergy, the Santa Fe New Mexican reported. During a meeting and conference call with U.S. Bankruptcy Judge David Thuma, attorneys in the case also discussed the sale last week of the Immaculate Heart of Mary Retreat and Conference Center in Santa Fe for about $6.75 million. Modern Elder Academy, a Santa Fe-area business that offers lifelong learning opportunities, confirmed it is the buyer. The archdiocese is selling properties in an effort to raise enough money to settle its chapter 11 bankruptcy with more than 400 claimants of clergy sexual abuse. Archdiocese attorney Thomas Walker had argued last month in a court filing the archdiocese and numerous insurers reached confidential agreements in the 1990s, when the clergy abuse scandal began to gain attention. Los Angeles attorney James Stang, an attorney for a committee that represents victims in the case, objected to the motion to keep the documents sealed. Stang wrote in a response to the archdiocese’s request “the need for transparency is overwhelming and creditors [victims] should not be kept in the dark.”

A Johnson & Johnson subsidiary today will urge a judge to allow it to use the bankruptcy process to resolve tens of thousands of claims that the company's baby powder and other talc-based products caused cancer, Reuters reported. More than 38,000 plaintiffs have alleged the company's talc products caused ovarian cancer and mesothelioma, a deadly cancer linked to asbestos exposure. J&J maintains that its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free. The company in October placed the talc claims into a newly-created entity called LTL Management LLC, which filed for bankruptcy protection in North Carolina. J&J used a legal maneuver known as the "Texas two-step," which allows companies to split in two through a so-called "divisive merger," with one part of the company keeping valuable assets while the other is saddled with liabilities. Bankruptcy Judge Michael Kaplan in New Jersey, who took over the LTL case in November when it was transferred from North Carolina, has scheduled a five-day trial to consider a bid by committees representing the plaintiffs to dismiss the bankruptcy case. The plaintiffs argue that allowing the LTL bankruptcy to proceed would unfairly cap the payout that could be available for people who have been harmed. The bankruptcy proceeding “makes dying cancer victims, even those with a judgment, scratch, claw, and fight, potentially for years, to be compensated from funds that would have been available" before LTL was split off, the plaintiffs’ lawyers wrote in December court papers. LTL countered in court filings that bankruptcy is a legal and appropriate response to an unpredictable and "potentially financially ruinous" wave of lawsuits. J&J has proposed giving the subsidiary $2 billion to put into a trust to compensate the 38,000 current plaintiffs and future claimaints. The company has said in court filings and in public statements that LTL could also tap a stream of royalty revenue valued at more than $350 million at the time of the bankruptcy filing. Before J&J split off LTL, it faced $3.5 billion in verdicts and settlements, including one in which 22 women were awarded a judgment of more than $2 billion, according to bankruptcy-court records. The talc lawsuits have been temporarily halted while J&J, which has a market value exceeding $446 billion, awaits the outcome of the LTL bankruptcy proceedings. Judge Kaplan has said he intends to decide whether or not to dismiss the bankruptcy case before the end of the month.

The judge presiding over the Boy Scouts of America bankruptcy has delayed the start of a trial to determine whether the BSA’s reorganization plan should be confirmed after an agreement with the official committee representing more than 80,000 men who say they were molested as children by Scout leaders and others resulted in several new plan provisions, the Associated Press reported. During a three-hour hearing Friday, Judge Laura Selber Silverstein pushed back the start of the confirmation hearing from Feb. 22 to March 9. The Boy Scouts had asked for only a one week delay, while plan opponents said they would need several weeks to analyze and respond to changes in the plan. The move follows Thursday’s announcement of a tentative agreement between the BSA and the official abuse claimants committee, known as the tort claimants committee or TCC. The committee was appointed by the U.S. bankruptcy trustee to represent and act in the best interests of all sexual abuse survivors. It had long maintained that the BSA’s plan to compensate child sex abuse victims was “grossly unfair,” representing only a fraction of the potential liabilities of insurers and local Boy Scout councils, and a fraction of their ability to pay.