Below is our initial take on recent bankruptcy-related developments:
After struggling to pay back some of its $2 billion in debt, radio broadcaster Audacy is preparing to file for bankruptcy protection according to a report in the Wall Street Journal. Audacy, one of the largest radio owners, continues to lose money, according to its most recent report it had $281.7 million loss in the third quarter of 2023.
S&K Take: Looks like a sizeable case incoming, although it also looks like a number of other recent mega cases, in that it is a pre-pack. Latham and PJT reportedly pulling it together. This report (which presumably parrots the WSJ report that is behind a paywall) indicates that Audacy has about $2 billion in debt, with the $650 million-ish first lien debt set to mature in November. The article points to a 2017 merger w CBS Radio, where the company inherited $1.5 billion in debt, as a driving factor in the restructuring. Sounds like this could be teed up in the next few weeks.
On Sunday, the Franciscan Friars of California declared Chapter 11 bankruptcy after facing nearly 100 sexual-abuse lawsuits, most cases involved older allegations filed within the past two years. The Franciscan Friars estimated in its bankruptcy filing that they had $10 million worth of assets and were seeking litigation costs around $50 million.
S&K Take: This case is on the smaller scale of the abuse survivor cases, but still worth noting as the number of organizations that are using bankruptcy to deal with tort claims continues to climb. The majority of these cases have been in NY and California, where state laws lifted statutes of limitation permitting older survivors to file claims based on historical abuse. Most of these cases have been logjams, taking an average of 3 years to resolve. Recently filed Baltimore appears to be headed down that track as well. Will be curious to see if the bankruptcy bar can’t find a way to get these cases resolved in shorter order, getting survivors, many of which are aging, recoveries in a more timely fashion.
Former Houston bankruptcy judge David Jones has said that he cannot be personally sued over his rulings as a judge and has asked a federal court to toss a lawsuit that revealed his romantic relationship with a bankruptcy attorney that led to his resignation. Jones’ resignation shocked the corporate bankruptcy world, spawning the reassignment of 3,500 cases and magnifying questions about how he handled cases in which Jackson Walker represented bankrupt companies.
S&K Take: There has been a lot of jockeying in the various pieces of litigation that have sprung from the Jones resignation over the past few weeks, with this article highlighting one aspect. IN this instance, Judge Jones is claiming judicial immunity from an individual lawsuit (which started this whole ball rolling). The big picture fallout will be something to watch in 2024. Several recent cases (Ebix and Impel Pharmaceuticals, for example) were filed in the Northern District of Texas. Would those have been bound for Houston in the absence of the resignation? We can’t really know. Same for some of the larger cases that have found a home in the DNJ.
In 2023, U.S. bankruptcy filings surged by 18% in 2023 on the back of increased interest rates, stiffer lending standards and continued runoff of COVID-19-era backstops, while insolvency case volumes persist well below the level seen before the outbreak of the COVID-19 pandemic. Total bankruptcy filings in 2023, including encompassing commercial and personal insolvencies, increased from 378,390 in 2022 to 445,186 and are expected to continue climbing in 2024.
S&K Take: It is that time of year for prognostication, and restructuring professionals are always interested in what case volume might look like over the upcoming 12 months. Not much new to see here, as I know everyone is very familiar with rising interest rates, tighter lending standards, etc. While everyone called for a recession at the outset of 2023, that never materialized, and most are now calling for a soft landing as the Fed begins to ease back interest rates with inflation declining. There is still an enormous amount of dry powder in the market, particularly in the private credit space, so that will likely absorb some of the distress. There are, however, any number of businesses with fundamentals that just don’t work, irrespective of the liquidity available, which will certainly restructure in 2024. No one has a crystal ball, but here is to a busy year.
