Bankrupt regional sports network operator Diamond Sports Group is walking away from the NHL’s Arizona Coyotes and shuttering yet another channel, Bally Sports Arizona, YahooFinance.com reported. The move comes after the network’s other tenants, the NBA’s Phoenix Suns, WNBA’s Phoenix Mercury and Major League Baseball’s Arizona Diamondbacks, all broke loose from Bally Sports and set up their own local TV arrangements. Broadcaster E.W. Scripps announced yesterday that the Coyotes would broadcast 81 of their 82 regular season games via its new Scripps Sports operation on Scripps-owned ABC affilate Channel 15.2 (KNXV.2). The Stanley Cup Champion Vegas Golden Knights also entered a similar arrangement with Scripps Sports in May after fleeing now-defunct AT&T SportsNet Rocky Mountain. “The Debtors have been conducting an ongoing analysis of their rights agreement portfolio to identify those rights agreements that are burdensome and/or otherwise unnecessary for the Debtors’ go-forward business operations,” Diamond said in a motion filed on Wednesday in the Houston federal court overseeing its restructuring.
The highest of two bids for the 800-acre plus Aspen Valley Ranch, which was advertised for $220 million in May 2020, came in at $28.5 million during a privately conducted virtual auction on Wednesday, according to bankruptcy court records, the Aspen Daily Ranch reported. The winning bid was placed by the lenders who initiated a foreclosure action on the ranch property in March, citing an outstanding debt of $88.2 million, an amount that has since grown past $100 million with interest. The loan was given to Charif Souki, who developed the property and pledged it as collateral. Aspen Valley Ranch, however, declared chapter 11 bankruptcy in late July, icing the lenders’ run at a foreclosure auction in Pitkin County. An auction was held nonetheless this week and conducted by Aspen Valley Ranch following months of written and oral arguments in the bankruptcy case about the terms of the auction and bidding process. As secured creditors, the lenders prevailed in the closed auction with a “credit bid,” meaning that amount would be applied to the balance owed by Souki, who led a group of investors that bought the ranch for $27 million in 2013, before it was developed into a family retreat and a neighborhood of luxury homes.
The New York Stock Exchange has informed Philadelphia-based Rite Aid Corp., which for weeks has been the subject of bankruptcy rumors, that the company is no longer in compliance with its listing standards, the Philadelphia Business Journal reported. The retail pharmacy chain, according to the NYSE, no longer meets the exchange's minimum market capitalization standard of $200 million or its minimum stock price standard of $1 per share. As of late Thursday morning, stock in Rite Aid was trading at 51 cents per share and the company's market cap was at about $30 million. Rite Aid said that it will continue to be listed on the NYSE during "cure periods," typically six months, that will give it time to regain compliance. "As previously disclosed, the company has been engaged in reviewing and continues to review strategic alternatives to recapitalize, refinance or otherwise optimize its capital structure which may ultimately result in the Company pursuing one or more significant corporate transactions or other remedial measures," Rite Aid stated. "The ongoing review includes an evaluation of available options to regain compliance with the NYSE’s continued listing standards." Rite Aid, which operates more than 2,200 retail pharmacy locations across 17 states including Pennsylvania, New Jersey and Delaware, said that it can provide no assurances that it will be able to regain compliance. The company, which employs more than 6,300 pharmacists and more than 47,000 workers overall, has not specifically addressed speculation that a bankruptcy filing is imminent.
Long Beach officials are resigned to never getting back millions of dollars that were supposed to go toward fixing up the Queen Mary, the Long Beach Post reported. As of last week, the city has essentially bowed out of the ongoing bankruptcy case of Los Angeles-based real estate firm Urban Commons, which took over the ship’s lease in 2016 and left a wake of unmet promises and financial disasters. The city remains on a list of creditors and is seeking a mere $200,000, “but we don’t really expect to receive anything,” Deputy City Attorney Rich Anthony said on Wednesday. Long Beach was left in control of the historic ocean liner in 2021 but was still suing Urban Commons to try to determine whether the company defrauded the city of any of the $23 million in bonds issued to cover critical repairs on the ship—some of which never got done. Through the legal proceedings, the city was able to subpoena accounting ledgers and other financial documents to help trace the bond money. That information showed most of the money the city paid out indeed matched Urban Commons’ invoices for work it subcontracted, but that doesn’t necessarily absolve the company or its principals of wrongdoing, City Attorney Dawn McIntosh wrote in a Tuesday memo to the City Council.
Drug maker Mallinckrodt Plc made its final push Wednesday for a new debt-reduction plan that gives victims of America’s opioid epidemic about $1 billion less than they were promised the last time the company tried to use the bankruptcy process to revive itself, Bloomberg News reported. The company asked Bankruptcy Judge John Dorsey to dismiss objections from shareholders who argue that Mallinckrodt should have tried harder to resolve its debt woes without filing a chapter 11 case. Under the plan, shareholders will be wiped out, which happens in nearly all big bankruptcies unless creditors are paid in full. Judge Dorsey said he would announce his ruling next week. During the court hearing yesterday in Wilmington, Del., Judge Dorsey aimed skeptical questions at attorneys for shareholders, who argued the company had enough cash to survive until early 2024. Dorsey said current law only requires Mallinckrodt, or any other struggling company, to be in financial distress, not completely insolvent. “The only evidence I have,” Judge Dorsey told a shareholder attorney, “is that if they didn’t file this bankruptcy, they would have been in trouble.”
Months before the collapse of FTX, some of its U.S.-based employees discovered the so-called backdoor that Alameda Research allegedly used to withdraw billions of dollars of customer funds from the cryptocurrency exchange, the Wall Street Journal reported. The employees who made the discovery reported it to the boss of their division, who discussed it with one of FTX founder Sam Bankman-Fried’s lieutenants. But the problem never got fixed. In the summer of 2022, the leader of the team that raised concerns about Alameda’s special privileges was fired. The backdoor figures prominently in the case against Bankman-Fried, whose trial on criminal charges of fraud began in a New York federal court this week. The former head of FTX has pleaded not guilty to all charges. Prosecutors say Bankman-Fried stole funds from FTX customers, in part, by secretly ordering the programming of “special features” that gave Alameda — his crypto trading firm — the ability to treat FTX as a giant slush fund. Court filings have revealed a line buried deep in FTX’s code that allowed Alameda to have a negative balance of as much as $65 billion on the exchange. Read more. (Subscription required.)
In related news, splashy advertisements featuring football star Tom Brady and comedian Larry David were among the first evidence seen by jurors Wednesday as prosecutors launched a historic fraud case against cryptocurrency maven Sam Bankman-Fried, depicting him as a villain who portrayed himself as the Robin Hood of the crypto world, the Associated Press reported. Assistant U.S. Attorney Nathan Rehn said in his opening statement in Manhattan federal court that it was only a year ago that Bankman-Fried seemed to be “on top of the world,” operating the multibillion dollar company he founded, FTX, a seemingly pioneering cryptocurrency trading platform. Rehn said the 31-year-old lived in a $30 million apartment in the Bahamas, jetted around the world on private planes, socialized with celebrities and spent billions of dollars as he flaunted power and made big political donations to gain influence in Washington over cryptocurrency regulation. The prosecutor, though, said that the son of two Stanford law professors was not as he seemed. “Sam Bankman-Fried was committing a massive fraud by taking billions of dollars from thousands of victims,” Rehn said. When his businesses were collapsing, he backdated documents and tried to cover up his crimes by deleting messages and ordering employees to automatically delete all messages every month, the prosecutor said. Read more.
Wine drinkers who bought from online marketplace Underground Cellar before its collapse are squaring off with its top lender for the rights to more than 500,000 bottles of red, white and rosé in storage, WSJ Pro Bankruptcy reported. Underground Cellar gained popularity among wine lovers because of its gamelike platform offering customers occasional upgrades to more expensive bottles than they had paid for. The company then stored bottles of wine purchased by customers in its “CloudCellar” — a climate-controlled warehouse in southern Napa County, Calif. — until they requested to ship them to their addresses. “I thought they really were good at what they did,” said Michael Klein of Glendale, Calif., a former customer. “It was almost like a lottery or gambling when you bought wine from them, because they promised you these upgrades.” But earlier this year, customers started having trouble accessing the wine they had ordered. Underground Cellar filed for a chapter 7 liquidation in the U.S. Bankruptcy Court in Wilmington, Del., in May, indicating the company would shut down its business. The bankruptcy filing included up to an estimated $11.6 million worth of wine, mostly ordered by roughly 25,000 customers, that has been stuck in limbo at the Napa warehouse. A court-appointed trustee has proposed selling the company’s remaining assets, including the wine, to Liquid Lotus, an entity owned by the company’s founder, Jeffrey Shaw, for $600,000.
A federal judge rejected pleas by opponents of the Boy Scouts of America’s bankruptcy reorganization to block distributions from the $2.4 billion settlement fund for sex-abuse victims created in the youth group’s chapter 11 case, WSJ Pro Bankruptcy reported. Insurance companies and a small group of sex-abuse plaintiffs who had opposed the Boy Scouts’ reorganization plan recently renewed their efforts to block it, seizing on the Supreme Court’s decision to examine a similar plan drawn up by closely held drugmaker Purdue Pharma. U.S. District Judge Richard Andrews in Wilmington, Del., said on Tuesday that, unlike Purdue’s bankruptcy plan, which hasn’t been put into motion, the youth group’s reorganization went into effect five months ago and many of the transactions it contemplates have already happened. Judge Andrews said the Boy Scouts and tens of thousands of sex-abuse victims have relied on the court-approved chapter 11 plan. A pause on the reorganization plan would throw into limbo the overwhelming majority of abuse claimants who support it, he said. The Supreme Court is set to examine on an expedited basis a central feature of both the Purdue and Boy Scouts reorganization plans: whether bankruptcy courts can extinguish legal claims against third parties that aren’t in chapter 11 without the consent of all claimants. Purdue’s plan would release its Sackler family owners from opioid-related liabilities in return for up to $6 billion in settlement payments over time from the family members, who have denied wrongdoing. Similarly, the Boys Scouts’ affiliated councils and partner organizations are being shielded from sex-abuse lawsuits under its chapter 11 plan. The youth group’s plan took effect in April after winning approval from a bankruptcy court last year and surviving an appeal before Judge Andrews in March. The plan is now being appealed to the Court of Appeals for the Third Circuit in Philadelphia.
Prison healthcare provider YesCare and its backers reached a $37 million settlement of legal and financial liability it moved into bankruptcy court through an emerging corporate restructuring tactic, WSJ Pro Bankruptcy reported. YesCare, among the nation’s largest providers of healthcare in prisons and jails, agreed to the proposed deal with a committee of creditors whose claims it shifted to chapter 11 through a legal tactic known as the Texas Two-Step. The settlement payment from YesCare and its investors would cover only a fraction of the claims asserted by inmates who filed malpractice lawsuits against the business or vendors it failed to pay. If approved in bankruptcy court, the proposed deal would also resolve the bankruptcy case filed earlier this year by Tehum Care Services, the shell entity used to ferry the company’s debts and liabilities to chapter 11. YesCare put a new spin on the Texas Two-Step by using it earlier this year to address not just tort lawsuits, but ordinary commercial debts to hospitals, physicians and other vendors. YesCare began the chapter 11 process by separating assets from liabilities last year through a corporate reorganization in Texas. The Tehum affiliate was made responsible for the company’s liabilities before it filed for protection in February in the U.S. Bankruptcy Court in Houston.
A New Jersey appeals court on Tuesday threw out a $223.8 million verdict against Johnson & Johnson that a jury had awarded to four plaintiffs who claimed they developed cancer from being exposed to asbestos in the company's talc powder products, Reuters reported. The Superior Court of New Jersey, Appellate Division found that a lower court judge should not have allowed some of the scientific expert testimony the plaintiffs presented to jurors at trial. J&J Worldwide Vice President of Litigation Erik Haas said in a statement that the decision "resoundingly rejects ... the 'junk science' advanced by purported 'experts' paid by the mass tort asbestos bar." The company again said that its talc products are safe and do not contain asbestos. The jury in the case had ordered the company to pay $37.2 million in compensatory damages and $750 million in punitive damages, though that amount was automatically reduced to $186.5 million under state law. In reversing the verdict and ordering a new trial, a three-judge panel of the appeals court found that the trial court failed to fulfill its "gatekeeping role" of assessing whether the plaintiffs' experts based their testimony on sound science. In their opinion, the judges found that three experts had not explained the facts or methods they used to support their opinions that the plaintiffs got cancer from being exposed to asbestos in talc products.
