Below is our initial take on recent bankruptcy-related developments:
On Monday, U.S. Supreme Court justices grappled with whether to affirm OxyContin producer Purdue Pharma’s bankruptcy plan.
S&K Take: Really couldn’t lead with any other story (this is actually a decent video which has some sound bites from the SC argument). The Supreme Court decision, which sounds like it could be rendered in June, will have far reaching impacts on the bankruptcy world and for opioid victims, who stand to either collect on a $6 billion settlement or go back to the drawing board with the Sacklers. I think that both sides of the argument have been laid out well in coverage of this case. You have overwhelming support for the settlement from every major constituency in the case on one hand, and a Bankruptcy Code that doesn’t expressly provide a basis for a Bankruptcy Court to grant nonconsensual third-party release on the other. My hunch is that the “major questions” doctrine will be Chekhov’s Gun in the decision. Setting that wild guess aside, the one other aspect of the argument that caught my attention was what seems to be a very cavalier stance from the US Trustee with respect to an alternative settlement. The UST seems to think that if the Court reverses the Second Circuit, the Sacklers will come back to the table and just come to some other agreement. Thankfully the Court seemed skeptical of that proposition, which strikes me as outlandish considering the parties have been at this for 4 years.
In a closely watched auction of bankrupt transportation company Yellow Corp.’s assets, XPO Inc, a trucking company, won a bid to purchase 28 service centers of the bankrupt transportation company for $870 million. XPO anticipates that the deal will increase its main profit in 2024 as well as its adjusted profit per share from continuing operations from 2025.
S&K Take: Pretty incredible result in the Yellow case. XPO was a large part of the sale, but certainly not the only one. The Debtors and their advisors pieced together a doozy of a sale, with 21 bidders providing an aggregate bid of $1.883 billion for 128 properties. 46 owned properties remain, along with leased properties. You can also throw rolling stock into the mix. Despite what looks like a big success, unsecured creditor recoveries are going to be contingent on the sales from here forward (and of course the size of the claim pool). Admins and secured debt (including the DIPs) total about $2.25 billion, while assets are looking to be about $2.4 billion to $2.6 billion exclusive of those other sales. After accounting for priority claims it gets lean for GUCs at the moment. Hopefully the additional revenue will put them in a good place. We will keep an eye on it.
Core Scientific, a Bitcoin miner, is seeking approval of its third amended joint Chapter 11 bankruptcy plan filed in a U.S. bankruptcy court on November 16.
S&K Take: : Core Scientific is nearing a conclusion to its bankruptcy case as it solicits votes on its plan of reorganization. The plan provides for a full distribution to convert holders, including interest (about $1.63 for every $1 held) as well as a distribution of $1.08 per share of common to go with warrants for a big chunk of equity. Shareholders also have the right to participate in an equity rights offering for more shares at a $.34 value. It is a far cry from the uncertain start to the case, mainly attributable to a rapid increase int eh value of crypto. The newco will still carry debt of $724 million. Hopefully that has been carefully calculated to account for a subsequent decrease in the value of BTC and its cronies, or we may be talking about this one again in the future.
