Mallinckrodt said it plans to file for bankruptcy in the coming days after reaching a deal with most of its lenders to restructure its debt as the company struggles to make opioid settlement payments, WSJ Pro Bankruptcy reported. The filing will mark the company’s second bankruptcy filing. Mallinckrodt, one of the largest makers of opioids, emerged from chapter 11 last year. The company said it has reached a restructuring deal that has the support of most of Mallinckrodt’s creditors. The agreement provides for a final payment of $250 million to an opioid victims compensation trust. Mallinckrodt said it has already paid $450 million to the trust, which was established to fund addiction treatment and address the U.S. opioid crisis. The creditor agreement also would reduce the company’s total funded debt by about $1.9 billion, Mallinckrodt said. The company said it expects to complete the chapter 11 process in the fourth quarter of this year, and said it is still operating normally.
Juul Labs plans to lay off roughly 30% of its workforce, whittling its operations as it seeks to raise capital or sell the company, the Wall Street Journal reported. The e-cigarette maker has been on tenuous financial footing since U.S. regulators last year ordered its vaping products off the market, then suspended the ban pending the company’s appeal. Juul staved off bankruptcy last fall after some early investors bailed it out. Since then, Juul has sought and failed to make a deal with a larger company on a sale, investment or licensing arrangement that could provide capital to continue its operations. Juul is awaiting a final decision from the Food and Drug Administration on whether its current products can remain on the U.S. market. The dispute hinges on unresolved technical questions in Juul’s application for federal authorization. Last month, in a separate application, Juul submitted its next-generation vaporizer for U.S. clearance. Juul hasn’t been able to strike a deal at what it deems a fair valuation without FDA authorization for one of its devices, a company spokesman said. Potential investors also have expressed concerns about the proliferation of illegal disposable vaping products, which have taken market share in the U.S. from Juul and others.
Hawaiian Electric said that it has begun working with investment bank Guggenheim Securities as it seeks to address difficulties arising from the Maui wildfires, WSJ Pro Bankruptcy reported. “We are seeking advice from various experts as we position HEI and Hawaiian Electric to be the strong, financially healthy local utility that the people of Maui and Hawai’i need over the long term,” a company spokesperson said. “One of those experts is Guggenheim Securities, and their deep experience working with other utilities will be invaluable as we move forward.” The Wall Street Journal reported last week that the utility was in talks with firms that specialize in restructuring advisory work after investors sold off its stock and bonds and Maui residents began filing lawsuits alleging it was negligent before and during the fires. The Journal also reported that Hawaiian Electric concluded in 2019 that it needed to do more to prevent its power lines from emitting sparks, but did little work since then to upgrade its infrastructure and equipment for fire-safety. Credit ratings agencies have downgraded Hawaiian Electric to junk status, with S&P Global Ratings last week saying the wildfires destroyed a significant segment of the company’s customer base and will take many years to restore. On Monday, Fitch Ratings said the utility’s potential liabilities from the Maui fires could be upwards of $3.8 billion, representing an existential threat to the company barring substantial regulatory or legislative support.
FTX cryptocurrency exchange founder Sam Bankman-Fried is "subsisting on bread and water" because the federal jail where he is being held ahead of his fraud trial has not provided him with a vegan diet as he requested, his lawyer said on Tuesday, Reuters reported. Bankman-Fried pleaded not guilty in Manhattan federal court to seven criminal charges contained in a new indictment during a hearing before U.S. Magistrate Judge Sarah Netburn. His lawyer, Mark Cohen, told Netburn during the hearing that a lack of adequate food and medication provided at Brooklyn's Metropolitan Detention Center was hampering Bankman-Fried's ability to prepare for his scheduled October trial. The former billionaire was led into court wearing leg restraints and a beige-colored uniform for his first appearance since his bail was revoked on Aug. 11 by U.S. District Judge Lewis Kaplan, who found that Bankman-Fried had tampered with witnesses at least twice.
McKinsey and several of its executives must face a critic’s lawsuit alleging the consulting firm concealed conflicts of interest from bankruptcy courts to win business advising on major corporate restructurings, WSJ Pro Bankruptcy reported. Judge Jesse Furman of the U.S. District Court in New York declined on Monday to dismiss the bulk of claims filed against McKinsey by the founder of a competing firm accusing it of submitting false disclosures to bankruptcy courts that omitted potentially disqualifying financial conflicts. The judge’s ruling allows Jay Alix, the retired founder of turnaround consulting firm AlixPartners, to advance his claims that McKinsey’s disclosures were part of a racketeering conspiracy to boost its restructuring advisory practice at the expense of competing firms. Judge Furman granted McKinsey’s motion to dismiss one of the four racketeering counts Alix alleged, while finding the other three were plausible enough to proceed against the firm. It has denied the allegations and said Alix wants to use the lawsuit to drive McKinsey out of the lucrative marketplace for restructuring advice.
The Roman Catholic Archdiocese of San Francisco filed for bankruptcy on Monday, saying a chapter 11 filing will facilitate a settlement of about 500 lawsuits accusing the church of enabling childhood sexual abuse by priests, Reuters reported. The filing in U.S. bankruptcy court in San Francisco will put the lawsuits on hold and buy time for settlement talks, Archbishop Salvatore Cordileone said in a statement. "We believe the bankruptcy process is the best way to provide a compassionate and equitable solution for survivors of abuse while ensuring that we continue the vital ministries to the faithful and to the communities that rely on our services and charity," Cordileone said. The "overwhelming majority" of the alleged abuse occurred in the 1960s and 1970s, involving priests who are deceased or no longer in ministry, Cordileone said. The current wave of lawsuits was filed after California passed a 2019 law allowing people to bring claims for childhood sexual abuse that otherwise would have been barred due to the expiration of the statute of limitations. The dioceses of Oakland and Santa Barbara this year also filed for bankruptcy, each citing the impact of hundreds of sex abuse lawsuits.
The Supreme Court recently announced that it will review Purdue Pharma’s bankruptcy settlement, which would release the company’s owners, the Sackler family, from future civil liability for the harms they imposed on millions of opioid victims. Some see this as an opportunity to vindicate victims and prevent abusive bankruptcy settlements. That is wrong. The reality is that the Supreme Court’s review comes at a major cost to opioid victims, potentially delaying compensation they would receive by months or even years, according to a commentary today in the Washington Post by Profs. Anthony Casey of the University of Chicago Law School and Edward Morrison of the Columbia Law School (New York). It might also cost the entire legal system. If the court rejects the settlement in this case, it would cripple our bankruptcy courts, which play a key role in remedying mistreatment of mass tort victims by our legal system. The Sacklers played a key role in these misdeeds, yet they never filed for bankruptcy, and victims never had an opportunity to pursue lawsuits against them in civil courts. Instead, Purdue commenced a bankruptcy case, which brought all victims, governments and other injured parties into a single court. The Sacklers agreed to offer settlement money in exchange for a release from liability. After injured parties pushed back, and after months of mediation, the Sacklers increased their offer from more than $4 billion to nearly $6 billion for a release. The company has twice pleaded guilty to criminal charges — first in 2007, for misleading the public about the safety of its products, and again in 2020, for defrauding the United States and violating the federal anti-kickback statute. Today, more than 95 percent of victims who voted did so in favor of this settlement; so have nearly 80 percent of the states and territories and more than 96 percent of tribes and other non-state governments with claims against Purdue and the Sacklers. Read more.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
Fitch on Monday downgraded Hawaiian Electric Industries's credit rating to junk status, becoming the third ratings agency to flag risks associated with the utility's potential exposure to Maui wildfire-related liabilities, Reuters reported. It cut the utility's long-term issuer default rating to "B" from "BBB+" and put the stock on "Rating Watch Negative." "The rating action reflects potential exposure to large third-party wildfire-related liabilities if utility equipment is determined to have ignited recent wildfires in Maui," Fitch said. The agency said potential liabilities could be above $3.8 billion, which represents an 'existential threat' to the company. Its shares were down 4.5% in afternoon trading. Last week, Moody's and S&P Global downgraded the company to junk status. Hawaiian had said it was not looking to restructure but was seeking expert advice amid investor worries over its role in the Maui wildfires that have claimed at least 114 lives.
Survivors who say they endured sexual abuse during their involvement with the Boy Scouts of America are one step closer to receiving compensation, CBSNews.com reported. According to a statement from the trustee of the Scouting Settlement Trust, Hon. Barbara J. Houser (ret.), the processing portal for all general claimants opened on Aug. 17 which is estimated to include 75,000 people or their legal counsel. The trust first opened the portal on Aug. 4 only to those survivors who elected to have expedited claims. The trust's team says 7,000 people are included in that group. Last fall, the U.S. District Court of Delaware approved a $2.46 billion bankruptcy reorganization plan for the BSA approximately two years after it filed for bankruptcy protection. The protection allows the organization to continue to operate while compensating thousands of people who submit claims against the trust.
Hawaiian Electric Industries faces $3.9 billion in potential liabilities if it’s deemed negligent for its role in the Maui wildfires, investment research firm Capstone LLC said in a Friday note, Bloomberg News reported. The hefty potential legal liabilities and still-developing investigations into the deadly blazes add up to a growing risk that a Hawaiian Electric affiliate files for chapter 11 bankruptcy protection, Capstone analysts said. The research firm included fatalities, missing people, damaged and destroyed structures in its estimate. The company’s stock rose on Friday after saying in a regulatory filing that its goal isn’t to restructure but to endure as a financially strong utility that Maui and the state needs. Nearly $4 billion in wildfire liabilities would dwarf Hawaiian Electric’s current market capitalization and exceed its existing debt load.
