Below is our initial take on recent bankruptcy-related developments:
Budget retailer 99 Cents Only filed for Chapter 11 bankruptcy protection in Wilmington, Delaware, and stated that it plans to shut down all of its stores in the U.S. and to sell its lasting real estate and remaining inventory. The company intends to close 125 out of its 371 stores by April 30, and close the remaining locations by May 31.
S&K Take: 99 Cents filed a long-anticipated bankruptcy last Sunday focusing on a straight liquidation with Milbank as counsel. Most industry professionals had been monitoring the credit for a few years at least, as the company seemed to consistently wriggle off the hook just prior to a filing. The company cites a number of factors for the bankruptcy that would be familiar to anyone that has seen a retail bankruptcy before. There is one that is somewhat new―rampant theft. It is a bit anecdotal, but any consumer can feel the difference in stores these days, so it is at least a bit interesting to see it in print. The other interesting element has been price inflation, which had the company price less than 50% of its stock below the price the store’s name suggests. The case looks less acrimonious than most, as it seems folks are waving the white flag, although here was some jockeying over the DIP, which was approved on an interim basis yesterday. Seems unlikely that we will be talking about this one again, but you never know.
WeWork said it intends to come out of Chapter 11 bankruptcy in the U.S. and Canada by May 31. The company has negotiated over $8 billion of reduction in rent commitments from landlords.
S&K Take: The WeWork debtors have touted their recent achievements, which are admittedly significant. They have made a lot of progress in negotiating with landlords and progressing the cases. Emergence by May 31 though remains (at least) somewhat dubious. The Debtors are currently seeking an extension of exclusivity to July 3. That motion mentions a host of issues that are yet to be resolved. We also have the Neumann offer hanging out there, which could make things really interesting really fast. All of which makes May 31 look aspirational.
The Diocese of Sacramento announced that they had officially filed for Chapter 11 bankruptcy last week. The diocese’s bankruptcy filing comes months after it had announced its plans to file for bankruptcy in lieu of over 250 lawsuits claiming sexual abuse by clergy and staff.
S&K Take: We had seen this in the offing for some time and it has finally filed. This looks like most other Diocese cases that we have covered, with survivor claims at around 250. These are always difficult cases, with the operative questions being how much can the Diocese (here the Roman Catholic Bishop of Sacramento) afford to contribute and how much will insurers kick in. These cases typically span 3 years or so. We will be keeping an eye on this to see if this can be any different and get funds to survivors in some reasonable time frame.
On Thursday, lawyers for FTX founder Sam Bankman-Fried filed a notice of appeal of his federal fraud and conspiracy conviction and his sentence to 25 years in prison. The appeal comes two weeks after Bankman-Fried was sentenced in U.S. District Court in Manhattan and directed to pay $11 billion in forfeiture for the fraud committed at the crypto exchange and a related hedge fund.
S&K Take: The ubiquitous SBF is back in the news today, appealing both his conviction and his 25-year sentence. The appeal is going up to a three-judge panel in the second circuit. The article notes that about 10% of appeals are successful, and I wouldn’t bet on SBF in this one. His cohorts are scheduled to be sentenced in the near future.
