Below is our initial take on recent bankruptcy-related developments:
Healthcare giant Johnson & Johnson has offered a settlement pool of nearly $6.5 billion to resolve tens of thousands of talc-related lawsuits. This marks a third potential foray into bankruptcy, with two prior attempts having been dismissed.
S&K Take: Ok, let’s try this another way. We are now two-stepping back to Texas. J&J disclosed in an 8-K that it has a third bankruptcy salvo in the works. This time, it would be a prepack filed in Texas resolving all current and future ovarian cancer claims. Claimants would be entitled to participate in a trust funded by $8 billion over 25 years, which has an NPV of $6.475 billion. That amount could be subject to increase if settlements with the estates of Imerys and Cyprus Mines Corp. come together. LLT (not a typo), the putative debtor, changes its name from the not-so-subtle LTL and reincorporated in the great state of Texas. LLT intends to begin soliciting its prospective prepack on June 3 with a voting deadline of July 26. If 75% of claimants accept, LLT is going to undergo another corporate restructuring and file chapter 11 as Red River Talc LLC in Texas, far from the 3rd Circuit which has given LTL the boot twice. The plan would not resolve mesothelioma claims, governmental claims or Canadian claims. So we are much more focused this time. LLT threw some anticipatory shade at the Beasley Allen plaintiffs’ firm, which they believe will be the primary opponent of the plan because a bankruptcy resolution would prevent the firm from collecting certain fees. J&J has already sought to have a firm partner DQ’s from the MDL plaintiffs’ steering committee. This will undoubtedly be fun to watch. .
On Thursday, teen retailer rue21 filed for Chapter 11 Bankruptcy in Delaware listing assets and liabilities between $100 million and $500 million and plans to liquidate its assets. This marks the third time the company has sought court protection.
S&K Take: Guess these things come in threes. This time rue21 is waving the white flag. The debtors have consent from the ABL lenders for use of their cash collateral, although the term loan lenders have not yet fallen into line. The company has $27,000 on hand. That seems unlikely to cover professional fees in this case, so the cash collateral carve out is going to be pretty important. The parties will undoubtedly reach an agreement on that, unless the TL lenders want to take back their collateral. The company is closing all of its locations and has retained Gordon Brothers to liquidate its inventory. The ABL is a little less than $30 million and seems to anticipate being paid in full. Far less likely that the TL lenders get similar treatment, as they have $164.7 million outstanding.
