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Only two companies in the world can pay their bills so reliably that they wield perfect credit ratings from both S&P and Moody’s. But one of them, Johnson & Johnson, just turned to bankruptcy court to deal with customers who argue the company’s products gave them cancer, Bloomberg News reported. The consumer products giant put a unit into bankruptcy on Thursday because it owes at least $2 billion to people who say they got sick from J&J baby powder tainted with asbestos. J&J is far from the usual user of chapter 11 protection. It’s got about $25 billion of cash and a $10 billion line of credit — easily enough to set up the proposed victims’ trust fund. Yet, J&J isn’t the first solvent company facing asbestos claims to take this route. At least three others — Georgia Pacific, Trane Technologies and Saint-Gobain Corp. — are all trying the same strategy. In a move known in legal circles as the “Texas Two-Step,” bankruptcy judges have allowed companies facing major litigation claims to scramble their corporate org charts and set up special units to house their asbestos liabilities using a business-friendly Texas law. A company first moves its corporate charter to Texas, then splits in two: one part holds its healthy assets and businesses, while the other has the asbestos claims.

Johnson & Johnson placed into bankruptcy its liabilities for tens of thousands of lawsuits linking talc-based products to cancer, betting the move will help drive a settlement of personal-injury claims that are expected to grow for decades to come, WSJ Pro Bankruptcy reported. J&J said yesterday that a corporate affiliate holding talc-related liabilities had filed for chapter 11 protection in the U.S. Bankruptcy Court in Charlotte, N.C., shifting the landscape of a yearslong legal fight over whether Johnson’s Baby Powder caused ovarian cancer, asbestos poisoning and other illnesses. The company has maintained that the powder, which it stopped selling last year, is safe and doesn’t contain asbestos. While J&J itself didn’t file for bankruptcy, it is the latest business to use chapter 11 as a mechanism to settle large numbers of lawsuits over defective products or other alleged harms and underscores the financial risks to the company from the litigation, which as of July totaled roughly 34,600 lawsuits. J&J’s defense costs have totaled nearly $1 billion in the last five years, and settlements and verdicts were another $3.5 billion, court papers show. The bankruptcy filing means J&J will now get a breathing spell from further trials, plus the chance to put both current and future talc claims behind it for good through a bankruptcy settlement. Yesterday’s filing also confirms the fears of personal-injury lawyers, who had voiced worries that J&J would put talc claims into chapter 11 to stop jury verdicts, protect assets and pressure plaintiffs to accept settlements.

Generic drugmaker Teligent Inc. filed for bankruptcy protection after the Food and Drug Administration flagged problems at the company’s manufacturing plant in Buena, N.J., that led to a recall and production halt, WSJ Pro Bankruptcy reported. The chapter 11 filing comes days after the resignations of Chief Executive Tim Sawyer and legal chief Philip Yachmetz. Teligent said Thursday that they had left the company, effective Oct. 8, without specifying a reason for their departures. Based in Iselin, N.J., the company filed for chapter 11 protection on Wednesday in the U.S. Bankruptcy Court in Wilmington, Del., with plans to sell its assets. Teligent received a warning letter from the FDA in November 2019 and worked to fix problems at the plant, but failed to get a green light from the regulator following an inspection in July and August, Chief Restructuring Officer Vladimir Kasparov said in a court filing. The company is still working to address issues raised by the FDA, he said. Mr. Kasparov said the company’s finances grew strained as it devoted resources to resolving issues raised in FDA inspections. The COVID-19 pandemic also reduced demand for Teligent’s prescription skin products as elective visits to doctors’ offices slowed, he said. Teligent was previously a contract manufacturer, producing goods for other businesses, but in 2010 it shifted to focus on making generic drugs, according to Mr. Kasparov. The company makes injectable and topical medicines, including those prescribed to treat conditions such as dermatitis, psoriasis and eczema. The company has lined up $12 million in fresh financing in the form of two bankruptcy loans from senior and junior lenders, while rolling up over $15 million in existing loans into the loan facility. Ares Capital Corp. will act as one of the agents on the bankruptcy loans, court records show.

The judge overseeing the bankruptcy case of Johnson & Johnson’s longtime talc supplier disqualified the decisive ballots cast in favor of a cancer-victim compensation plan, ruling that most of one law firm’s asbestos-injury clients had no basis to vote, WSJ Pro Bankruptcy reported. Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del., threw into doubt the chapter 11 plan put forth by the defunct supplier Imerys Talc America Inc., saying that more than 15,700 ballots cast in its favor by personal injury lawyer Thomas Bevan can’t be included in the vote totals. The judge’s decision affects a critical vote on the Imerys plan, which is designed to resolve its liability for thousands of lawsuits linking the talc it supplied for J&J baby powder products to ovarian cancer, asbestos poisoning and other ailments. Without yes votes from Mr. Bevan’s clients, the bankruptcy plan falls short of the three-quarters support from injury claimants needed to resolve current and future injury liabilities, as Imerys has proposed, according to the judge’s ruling. An Imerys spokeswoman said Wednesday it is evaluating the appropriate next steps “and will continue to work constructively with all parties to chart a path forward.” J&J, which also faces vast talc litigation, has been opposing the Imerys plan and had sought to disqualify votes submitted by Mr. Bevan’s firm and other plaintiffs’ lawyers who gave their support under what J&J alleged were suspicious circumstances. Wednesday’s ruling stated that Mr. Bevan did nothing to establish that his clients were ever exposed to allegedly dangerous talc products from Imerys that would give them an interest in the chapter 11 plan.

A federal judge said that appeals of a $4.5 billion bankruptcy settlement shielding Purdue Pharma LP’s family owners from civil opioid lawsuits would hinge on whether the agreement is permitted under bankruptcy law and the U.S. Constitution, WSJ Pro Bankruptcy reported. “There’s never been a case like this before,” Judge Colleen McMahon of the U.S. District Court in Manhattan said during a Tuesday hearing over pending appeals arising from Purdue’s chapter 11 proceedings. The Justice Department’s bankruptcy watchdog and a handful of state attorneys general are appealing the drugmaker’s chapter 11 plan and its settlement with members of the Sackler family. Judge McMahon said yesterday that she intends to rule this week on the government authorities’ request to pause enactment of the Sackler settlement and Purdue’s broader reorganization plan, pending the resolution of legal challenges arising out of the bankruptcy. She said that the bankruptcy presents a unique set of facts compared with earlier cases reviewed by the U.S. Court of Appeals for the Second Circuit dealing with the type of legal releases the Sacklers will be provided under the settlement. The U.S. Trustee, the Justice Department unit monitoring bankruptcy cases, and authorities from states including California, Connecticut and Washington have raised concerns about a doctrine called equitable mootness, which they argue could defeat their challenge before higher courts get a chance to consider the legality of the Purdue settlement.

The Limetree Bay refinery in the U.S. Virgin Islands is behind on more than $63,000 in interest on its bankruptcy loan, according to court papers filed by the crude facility as it searches for a buyer, WSJ Pro Bankruptcy reported. The bankrupt refinery signed a forbearance agreement Monday with bankruptcy lender Arena Investors LP that sets a Tuesday deadline to cure the default. Arena said it has the right to terminate its loan with Limetree if it is not paid by then, according to papers in the U.S. Bankruptcy Court in Houston. Limetree Bay Refining LLC ended the month of August with a cash balance of $11.7 million, court filings show. The default and forbearance marks another dispute between Arena and Limetree over the terms of an up-to-$19.5 million bankruptcy loan and the company’s plan to exit from chapter 11. In August, Arena called a default under the loan after it said the company failed to present a budget and operational winddown plan on time. Arena also reduced the total amount of financing it would furnish to Limetree Bay after the company wrote down the value of certain receivables it was due to be paid.

A New York judge said that she will likely issue an order pausing the implementation of Purdue Pharma’s reorganization plan to allow the U.S. Department of Justice's bankruptcy watchdog and a handful of states time to appeal the deal, Reuters reported. U.S. District Judge Colleen McMahon in Manhattan issued a temporary restraining order on Sunday, putting the plan and underlying opioid litigation settlement on hold until Tuesday afternoon, when she will hear arguments on a motion for a longer-term stay. The OxyContin maker secured bankruptcy court approval of its plan and settlement in September, with support from around 40 states and a wide range of municipalities, Native American tribes, hospitals, and personal injury claimants, among others. The deal includes legal protections for the members of the Sackler family that owned Purdue, who are contributing approximately $4.5 billion to the settlement, against opioid-related civil lawsuits in the future. Court documents show that overall approximately $5.75 billion will be placed into trusts that will funnel money to opioid abatement programs and personal injury claimants. DOJ's bankruptcy watchdog, the U.S. Trustee, and a handful of states have appealed the September order, specifically taking issue with the protections for the Sacklers.

A bankruptcy trustee alleged that Ron Burkle’s Yucaipa Cos. transferred nearly $380 million to pension funds and other private-equity investors to avoid looming liabilities tied to its former portfolio company, car hauler Allied Systems Holdings Inc., WSJ Pro Bankruptcy reported. Wednesday’s lawsuit in the U.S. Bankruptcy Court in Wilmington, Del., continues years of disputes between Allied’s creditors and Yucaipa, which allegedly drained money from two investment funds that faced “massive liabilities” stemming from the transport firm’s chapter 11 case. A bankruptcy judge issued a $132 million judgment against the Yucaipa funds in June after finding they failed to make a promised capital contribution to Allied, ensuring its 2012 bankruptcy. Yucaipa distributed $380 million to pension systems and other investors, and now claims the investment funds lack the cash to pay the judgment against them, according to Wednesday’s complaint. The trustee is seeking a court order to unwind the distributions made to backers including California Public Employees’ Retirement System and other public and private pensions, along with Yucaipa itself.

Minnesota-based organic food and feed supplier Pipeline Foods LLC on Thursday secured approval to move forward on a fast-tracked auction and sale of certain property in Iowa and to work with junior creditors to sell off the rest of its assets, Reuters reported. U.S. Bankruptcy Judge Karen Owens in Wilmington, Del., signed off on the sale procedures during a brief virtual hearing. Pipeline filed for bankruptcy protection in July with $143.7 million in debt, blaming the economic impact of the COVID-19 pandemic for its troubles. Judge Owens also approved The Scoular Company as the lead bidder for Pipeline’s Atlantic, Iowa-based real estate and storage facility. Scoular has offered $4.35 million for the property. Competing bids are due on Oct. 21. If additional bids are made, an auction will occur on Oct. 22. A sale hearing is set for Oct. 28.

The owner of Condé Nast has offered to buy SportTechie Inc., which publishes a newsletter covering the intersection of sports and technology and filed for bankruptcy yesterday to execute the sale and eliminate debt, WSJ Pro Bankruptcy reported. The proposed sale would expand the reach of Advance Publications Inc. subsidiary Leaders Group Holdings LLC and its collection of athletics-focused publications, including Sports Business Journal and Leaders, which hosts conferences and provides news and information to sports executives, according to its website. Leaders Group Chief Executive Warren Thune said the company intends to integrate SportTechie’s newsletter and calendar of in-person and virtual events into its business, bolstering the breadth of its coverage and value to its subscribers. SportTechie was founded as a blog in 2012 and now has more than 35,000 newsletter subscribers—about 500 of which are paid subscribers—and hosts sports industry conferences, according to papers filed in the U.S. Bankruptcy Court in Wilmington, Del. The media company also hosts conferences and live events that were switched to virtual gatherings during the pandemic, SportTechie co-founder and CEO Taylor Bloom said in a sworn declaration filed with the court. Leaders Group lent SportTechie money before the bankruptcy filing and has also agreed to provide about $1.1 million to fund the chapter 11, according to court papers. Under the deal, which requires court approval, Leaders Group would use its debt claims as currency to acquire SportTechie’s assets through a credit bid.