Online retailer Overstock.com has won the auction for some assets of Bed Bath & Beyond, including the bankrupt home goods chain's intellectual property and mobile platform, for $21.5 million, court filings showed today, Reuters reported. Last week, Overstock had offered to buy those assets for the same price under a "stalking horse" bid. Bed Bath & Beyond had then said it would continue to solicit other offers. While Bed Bath & Beyond's stores are not part of the deal, it will include the retailer's business data and publicity rights. Overstock will also assume certain liabilities related to transferred contracts. The sale is subject to approval by the bankruptcy court at a hearing on Tuesday.
Koch Industries’ Georgia-Pacific can use a corporate affiliate’s bankruptcy case to shield itself against asbestos-related litigation, a federal appeals court said yesterday, WSJ Pro Bankruptcy reported. The U.S. Court of Appeals for the Fourth Circuit upheld an injunction in the chapter 11 case of Georgia-Pacific affiliate Bestwall that has prevented some 64,000 asbestos-related injury claims from proceeding against the pulp and paper manufacturer. Yesterday’s ruling backed the use of chapter 11 to resolve mass lawsuits through an emerging corporate restructuring strategy that has offered solvent corporations including Georgia-Pacific, Johnson & Johnson and France’s Compagnie de Saint-Gobain some of the protections of bankruptcy. They shifted legal liabilities to new subsidiaries before filing them for chapter 11, shifting more than a quarter-million injury lawsuits to bankruptcy court for resolution without the parent companies needing to enter chapter 11 themselves. Courts have taken varying views of the bankruptcy strategy, known in legal circles as the Texas Two-Step. Plaintiffs’ attorneys and other critics have argued the companies are misusing the chapter 11 system to sidestep jury trials and pressure injury victims into a favorable settlement for the firms.
The wind-up of crypto exchange FTX is set to be “very expensive by any measure” with professional fees already amounting to over $200 million, a court-appointed examiner said in a filing made on yesterday, CoinDesk.com reported. Katherine Stadler, a bankruptcy attorney appointed in March to check fees, said lawyers and other professionals had already racked up nearly 35,000 billable hours, equivalent to four solid person-years of work, by the end of January. “These proceedings appear on track to be very expensive by any measure,” said Stadler, citing costs that already amount to 2% of estate assets and 10% of reported cash, with 46 of the 242 attorneys assigned to the case charged over $2,000 an hour. "What makes these cases extraordinary… is the largely unregulated financial system in which the Debtors (and other similar financial technology companies) operate,” she said, citing the “nonexistence of even the most basic corporate governance” at Sam Bankman-Fried’s exchange, a description which echoes criticism leveled by new CEO John J Ray III.
Lannett Co. Inc. has emerged from chapter 11 protection following the confirmation of its reorganization plan earlier this month, the Philadelphia Business Journal reported. Under its restructuring plan, the Trevose-based generic and specialty pharmaceutical company reduced its debt by about $600 million. Lannett said that it also has entered into a credit agreement to support post-emergence liquidity and invest in future growth. Details of the agreement were not disclosed. The company is now operating as a privately held company under the ownership of its pre-petition lenders. Equity shares of Lannett have been canceled and are no longer publicly trading. Lannett will continue to be led by its existing management team, with Tim Crew as CEO, alongside a newly constituted three-member board of directors. Crew is serving on the board with Jeffrey D. Goldberg and Jason Shandell. The reorganization plan was supported by all major creditors, including more than 80% of the holders of its senior secured notes and 100% of the holders of its second lien term loan. Lannett listed assets of $334.6 million and debts of $708.9 million in its chapter 11 filing in early May.
A South Florida tanning salon chain filed for chapter 11 reorganization in U.S. District Court on June 19 with more than $1 million in debt, the South Florida Business Journal reported. Stanley Olszewski, managing member of Master III LLC, which does business as Copper Tan USA, submitted a 39-page voluntary petition listing $1,072,897.92 in total liabilities and $118,372.66 in property assets for five Palm Beach County salons in Delray Beach, Boynton Beach, Palm Beach Gardens, Wellington and West Palm Beach. The petition listed the U.S. Small Business Administration (SBA) as the company's largest creditor, with $650,000 in disputed total claims. According to the SBA, the West Palm Beach-based company received a combined total of $249,840 in two rounds of Payment Protection Program loans from Wells Fargo in May 2020 on behalf of 33 jobs. Despite this, Copper Tan stated in its case management summary that its tanning salons were unable to generate sales following the pandemic and incurred too much debt.
The Rokit Group of Companies, the conflict-prone business conglomerate founded by billionaire John Paul DeJoria and his British partner, Jonathan Kendrick, may be reaching its legal event horizon in a series of court cases across the U.S., Sportico reported. Last week, the bankruptcy trustee managing the chapter 7 case of a Rokit subsidiary received court approval to retain an outside law firm to “investigate potential litigation claims.” The move by trustee Peter Mastan comes as the creditors’ meeting in the bankruptcy of Able Events, previously known as Rokit Marketing Inc., was continued last week for the 10th consecutive time since last summer. It has now been rescheduled for mid-September. Five years ago, Rokit put itself on the American sports map by entering into a series of high-profile, multimillion-dollar sponsorship deals with professional teams, including the NBA’s Houston Rockets, Formula 1’s Williams Racing, and the NFL’s Las Vegas Raiders and Los Angeles Chargers. However, each of these agreements prematurely collapsed after Rokit ceased making good on its payments. This pattern of delinquency extended to other of its business dealings as well: Last month, for example, a Los Angeles Superior Court jury ruled against a different Rokit subsidiary in a case brought by a former employee who had sued for breach of contract. That verdict represented just the latest legal setback for Rokit. After the company defaulted on its agreements with Williams Racing and the Houston Rockets, those teams separately took Rokit to arbitration and each prevailed with eight-figure rulings that were later reaffirmed in court. Rokit responded by putting six of its subsidiaries into voluntary bankruptcy, including the entities that were parties to the team sponsorships. Rokit has also since filed separate lawsuits against Team Williams Racing and the Houston Rockets parent company Fertitta Entertainment, in an effort to invalidate the arbitral rulings.
Mallinckrodt Plc struck a deal to delay a $200 million opioid settlement payment originally due Friday as it continues evaluating options to restructure its balance sheet, Bloomberg News reported. The company got an extension to June 23 from representatives of the opioid trust administering settlement proceeds, according to a Friday regulatory filing. Mallinckrodt said it is continuing to evaluate its capital needs given its obligations under the opioid settlement and its long-term debt. Mallinckrodt is negotiating a 30-day waiver with its secured lenders to avoid a default tied to skipping the settlement payment, said the people, who asked not to be identified because the negotiations are private. The company and some of its lenders are discussing a potential restructuring of its settlement obligations, they added. The company agreed to a $1.7 billion opioid settlement as part of its exit from bankruptcy last year. Since then, its sales have missed projects, tipping the company back into financial distress. The payment due Friday was scheduled to be its second after an initial $450 million contribution last year. Mallinckrodt had been negotiating with lenders about its options ahead of the payment, with some of them urging the company to skip or delay the payment as it looks to renegotiate the settlement. The company has said it’s considering options including a second chapter 11 filing to address its financial woes and “there can be no assurance of the outcome of this process.”
Beleaguered U.S. medical technology company Surgalign Holdings SRGA.O filed for a voluntary chapter 11 bankruptcy yesterday, Reuters reported. Surgalign filed for the bankruptcy with estimated assets and liabilities in the range of $50 million to $100 million in the Bankruptcy Court for the Southern District of Texas. The Deerfield, Ill.-based company said in March that it had reduced its workforce by about 20% and cut non-essential spending, and realigned resources. In November last year, the company approved a corporate restructuring plan, which included discontinuing some of its lower-performing units as well as intending to continue its brand and product rationalization programs.
Bankrupt media outlet Vice Media has found a bidder for its business that wants to chart a new course for the beleaguered company outside chapter 11 bankruptcy, the Wall Street Journal reported. Digital media conglomerate GoDigital is in advanced talks to buy all of Vice’s assets including its core news business and female-focused Refinery29 at an upcoming bankruptcy auction, the people said. A bid could put GoDigital in competition with Fortress Investment Group and Soros Fund Management, lenders to Vice that have offered to swap outstanding debts for ownership of the business. GoDigital’s bid would likely value Vice at between $300 million and $350 million. The talks involving GoDigital aren’t guaranteed to produce a workable deal. Any bidder needs to show it has sufficient funds to buy Vice, and GoDigital is still finishing due diligence on the company and preparing documentation.
Liquidators of Three Arrows Capital want a judge to fine co-founder Kyle Davies $10,000 per day, claiming their ability to unwind the failed cryptocurrency hedge fund has been impeded by his refusal to cooperate with their investigation into the firm’s collapse, Bloomberg News reported. The substantial fine is warranted because Davies hasn’t responded to a subpoena served nearly 5 months ago, lawyers for the 3AC liquidators said in a filing in New York bankruptcy court earlier this week. The decision to impose the fine is up to Judge Martin Glenn who said in a ruling earlier this year that Davies risked being held in contempt of court if he failed to comply with the subpoena and continued to sit out the proceedings. Liquidators have taken unorthodox steps in an effort to get the 3AC co-founders to turn over information, including getting approval from Glenn to issue the subpoena to Davies via Twitter, where he frequently posts. Given the circumstances, a $10,000-per-day fine “is fair and likely meaningful in persuading Davies to respond,” the liquidators said. The liquidators have said they don’t know where Davies or fellow co-founder Su Zhu are currently residing. However, they referenced a June 9 New York Times article that reported Davies flew to Bali after 3AC collapsed. In a sworn statement, 3AC liquidator Russell Crumpler cited Davies’ comments in the article as evidence that the founder has shown no remorse for the collapse of the firm, which owes creditors roughly $3 billion.
