Below is our initial take on recent bankruptcy-related developments:
On Thursday, Bed Bath & Beyond warned the public of a potential bankruptcy, sending the company’s shares into a 25% plummet. The retailer has cited loss in revenue and customers, lack of inventory, and inability to refinance portions of its debt of nearly $1.2 billion in unsecured notes.
S&K Take: A familiar story in retail, as another big box retailer looks primed to succumb to overleverage, too many locations and supply chain woes. It remains to be seen what form this restructuring takes, whether it is out of court or utilizes the protections of chapter 11. Regardless, this is likely the tip of the iceberg in 2023 as credit markets tighten and consumer sentiment weakens with inflation.
A bankruptcy judge ruled on a potentially precedent-setting key legal issue in crypto-related bankruptcies, deciding that crypto assets deposited into the Celsius Network’s interest accounts belong to the firm, not the individuals.
S&K Take: This is a big one. Judge Glenn finally ruled that coins in Earn accounts are property of the estate under the various terms of use employed by Celsius. He didn’t rule on Custody, Withhold or Borrow accounts, and left the door open to claims of individuals that differ from the standard account set up. The issue has been looming for months. It has some precedential value, although the determination will be fact-specific and made on a case-by-case basis. FTX and BlockFi, for example, had very different terms of use that did not explicitly spell out that the coins placed on the platform by a customer were becoming property of the platform.
Citing revenue decreases and increased costs, TOMS King Holdings, one of the largest Burger King franchisees, has thrust its subsidiaries operating 90 stores in four states into Chapter 11 bankruptcy.
S&K Take: Bankruptcy professionals have seen a few of these franchisee cases at this point. This case isn’t massive by most standards, with 90 locations and about $35.5 million in funded debt. While clearly different than Bed Bath & Beyond, the company cites a decrease in foot traffic, supply chain issues, inflation, an increase in wages and prohibitive rent payments as the reasons for bankruptcy. Feels like a retailapocalypse redux.
