Below is our initial take on recent bankruptcy-related developments:
Sunac, a leading Chinese property developer, is the second giant Chinese developer in weeks, following Evergrande, to file for bankruptcy protection in the U.S. After being permitted from its creditors to restructure early $10 billion worth of debt, Sunac filed an appeal for Chapter 15 protection with the U.S. Bankruptcy Court for the Southern District of New York on Tuesday.
S&K Take: Real estate distress has been a major issue in China. Sunac is the first of the massive Chinese developers to cut a deal with its creditors to restructure and is going to implement that cross-border deal with the help of a chapter 15. Evergrande has been looking to strike a bargain but has been unable to get creditors on board. Whether the Sunac deal is ultimately successful remains to be seen. The underlying issues that plague these developers haven’t been alleviated, although it appears as though the Chinese government is considering some assistance. Real estate distress has been bubbling up in the US as well, although there have not yet been any filings of this magnitude. Perhaps those are on their way.
After filing for its Chapter 11 in November, a bankruptcy judge granted FTX permission to liquidate its digital assets to repay creditors. In previous bankruptcy court filings FTX has said that its digital assets, including its three biggest holdings (Solana, Bitcoin and Ether), amount to about $3.4 billion.
S&K Take: One of these crypto cases is not like the others. FTX has been very different than Celsius, for example, in that it has largely been viewed as a liquidation from day 1, where Celsius and the other cases have wrestled with the ownership issue for many months, as well as what form a prospective restructuring might take. That led to a lot of professional fees that have frustrated creditors. This decision by Judge Dorsey to allow Galaxy Digital to liquidate FTX’s crypto assets (subject to some guardrails) continues that theme—FTX has abandoned the concept of returning any crypto in kind, which has been a central tenet of other cases (think Bittrex). One pro se creditor raised the ownership issue in this case, but no showed the hearing and thus had its objection overruled.
On Wednesday, Stanford University certified that it was gifted funds from operations linked to bankrupt crypto lender FTX and that it’s working to repay all the money it acquired from FTX and its associations. Stanford’s decision comes after the parents the former FTX founder Sam Bankman-Fried are being sued for clawing back funds and paying millions of dollars to the university.
S&K Take: A little bonus FTX coverage. Stanford has seen the FTX estates go after SBF and his parents and seemingly wants nothing to do with any litigation, so it is returning funds contributed by FTX. All in all, likely a good idea.
The Boy Scouts of America victims who were abused as children by troop leaders have begun receiving payments from the Boy Scouts $2.6 billion bankruptcy settlement trust that is still facing appeals from a minority group of abuse survivors.
S&K Take: The Boy Scouts’ trust has started to make distributions to claimants, although they are relatively de minimis to date. The interesting aspect of this is that the parties that seek to continue to challenge the Boy Scouts’ deal have not waved the white flag quite yet, particularly in light of the Supreme Court granting certiorari to hear the third party release issue in the Purdue case (which will likely be the death knell for those releases if everyone is right about the textualist bent of the current USSC). Non-settling claimants have sought a stay pending appeal which is to be heard by the District Court (which denied expedited consideration). So if the trust can get on its horse and kick out a lot of money before a decision is made, the more likely that the issue is moot.
