Below is our initial take on recent bankruptcy-related developments:
Once valued at $5.7 billion, Vice Media Group filed for bankruptcy this week with a planned sale to a group of lenders. The bankruptcy filing comes at a time when technology and media companies have been downsizing due to a challenging economy.
S&K Take: Vice was one of a slew of cases that filed this weekend. The company has been through some pretty high highs, and now is seeing some pretty low lows. Three lenders (Fortress, Soros and Monroe) are providing a DIP with a 5 to 1 rollup (asserting that is justified based on prepetition rescue advances which lower the ratio) and credit bidding as the stalking horse for the Debtors’ assets. The credit bid is $225 million, a far cry from the company’s $5.7 billion once-upon-a-time valuation. The Debtors drew Judge Mastando in the SDNY. There was some acrimony over the DIP with the UST, but that seems to have been solved for the moment.
Kidde-Fenwal, a company specializing in fire control systems, filed for bankruptcy this past Sunday after suffering from ongoing litigation, costing the company $6 million so far this year. Since 2016, Kidde-Fenwal has been named as a defendant in more than 4,000 lawsuits alleging the chemicals used in its firefighting foam products have contaminated water around U.S. airports and military bases.
S&K Take: Carrier Global sub Kidde-Fenwal has filed in the wake of significant litigation claims. Carrier has essentially thrown its hands up and is trying to walk away. The Debtors apparently have a claim for the claims against another entity, but the creditworthiness of that entity is questionable. Not your typical mass tort case, so we will be watching.
Bankrupt crypto lender Celsius Network is nearing the end of the auction for its assets, reportedly receiving bids hundreds of millions of dollars higher than the initial bid. Fahrenheit LLC, a group that includes a blockchain venture capital firm, is the current lead bidder.
S&K Take: The Celsius auction is going gangbusters it seems, with a series of overbids past the NovaWulf original bid. And the auction continues. Debtors’ counsel has differentiated the Celsius case from Voyager (more on Voyager below) noting that the two prospective purchasers, NovaWulf and Fahrenheit, have the wherewithal to close and have been mindful of regulatory issues (which doomed the Binance/Voayger bid). There is a lot of wood to chop, but it seems like this situation is heading in a positive direction.
Following the failed purchase by crypto exchange Binance, Voyager Digital claims that its customers will soon recover roughly 35% of their cryptocurrency deposits as the company winds down operations.
S&K Take: We have covered this previously but felt like it was worthy of a refresh. Judge Wiles approved Voyager’s plan of liquidation, including in-kind distributions (for the most part) to customers of 35% of what was in their account pre-bankruptcy. That number could rise to as high as 63% (and change) depending on the outcome of litigation with FTX. We had previously reported 40-65% in these hallowed pages, so pretty close to that estimate. It has been a long ride for customers with some serious ups and downs (more downs if we are being honest) but they will finally get some coins back.
According to S&P Global, more than 230 U.S. companies have filed for bankruptcy in the first four months of 2023, the highest level through April of any year since 2010. Experts predict that given certain economic and market challenges, this rate of Chapter 11 filings will likely continue through the rest of the year.
S&K Take: You can feel the industry activity pick up, and the numbers seem to bear out the fact that restructuring has been on the upswing. It is about time! Benign credit markets have depressed restructuring for years, so clearing out some of the businesses propped up by cheap credit and the government might not be a bad thing.