Below is our initial take on recent bankruptcy-related developments:
Diamond Sports has been in Chapter 11 bankruptcy proceedings since it filed for protection last March with debt of $8.67 billion. Amazon will partner with Diamond as part of a restructuring agreement that will allow it to emerge from bankruptcy, continue operations and prevents a complete collapse of the regional sports network system.
S&K Take: Massive news in the DSG case. The Debtors have provided the framework of a deal that would maintain the business as a going concern under the majority ownership of the Debtors’ lenders. There are several pieces to the deal, including a $495 million deal with Amazon under which Amazon Prime would become DSG’s broadcast partner (Bally’s would dissolve). Amazon would also provide a $115 million exit facility. Sinclair, DSG’s former parent, would settle existing litigation for $495 million. There would be a $450 million DIP which would be provided by a Paul Hastings’ represented cross-holder group, which would pay down existing debt and roll into an exit. The opportunity to fund that DIP would be pro rata among the holder group. Sounds like a path to an exit, although the UCC and other case constituents, like MLB, have noted that they will need to consider.
On Monday, shares in Gol, Brazil’s second-largest airline in terms of passengers transported, tanked after a local newspaper reported that the airline company was assessing filing for Chapter 11 bankruptcy protection in the U.S. The airline has been dealing with high debt and hired Seabury Capital last month to assist it in a broad capital structure review.
On Tuesday, Judge William Young ruled that JetBlue’s $3.8 billion proposal to purchase Spirit violates antitrust law. Spirit can seek out another buyer. However, according to a veteran airline analyst, a more likely scenario is Spirit filing for Chapter 11 bankruptcy, followed by liquidation.
S&K Take: Little 2 for 1 action here with a couple of airline stories. Gol, Brazil’s second largest airline, is in the news as a local newspaper reported that the company was considering bankruptcy. Based on the story, it looks like it is more of a balance sheet issue than an operational issue, with Gol struggling to meet debt service. Spirit was in the news because the District Court of Massachusetts blocked a potential merger with Jet Blue. The stock plummeted in the aftermath but has since bounced back. The company is reportedly evaluating refinancing options with debt coming due in 2025.
Kirkland & Ellis has been sued for allegedly profiting from an undisclosed relationship between former U.S. Bankruptcy Judge David Jones and Elizabeth Freeman, a local bankruptcy lawyer. Michael Van Deelen, the plaintiff whose lawsuit led to Judge Jones’ resignation and public acknowledgement regarding his romantic relationship with Elizabeth Freeman, expanded his lawsuit to add Freeman, her former law firm Jackson Walker, and Kirkland & Ellis as defendants. .
S&K Take: This seemed like an inevitability. The pro se claimant that had first accused Judge Jones of violating his constitutional rights has hired counsel and expanded his pursuit. Van Deelen now included Kirkland, Jones Walker and Freeman, and has alleged a conspiracy giving rise to RICO and fraud claims, among others. Essentially one of the biggest bankruptcy stories in a decade has now gotten even bigger. There is no doubt that the firms will vigorously contest these allegations.
