Below is our initial take on recent bankruptcy-related developments:
Bankrupt FTX has located over $5 billion of cash, liquid cryptocurrency, and liquid investment securities, which does not include another $425 million in crypto held by the SEC of the Bahamas. This amount still falls short of what FTX’s customers are owed in total.
S&K Take: Clearly big news for FTX creditors here. FTX advisors also reported that some of the Debtors’ investments may have a value of up to $4.6 billion. Creditors need to take those numbers with a grain of salt, as there is still a lot of work to be done reconstructing the Debtors’ books and records (to the extent that they ever existed) and we don’t really have any idea of what how the $5 billion could be valued. Nevertheless, these are good things. Claims traders that bought claims at $.08 are dancing in the streets.
Bankruptcy attorneys released a long list of names and the number of shares held by former FTX investors, which included several celebrities such as Tom Brady, his ex-wife Gisele Bundchen, Shark Tank’s Kevin O’Leary, and companies under the control of New England Patriots owner Robert Kraft. The list also includes companies such as Blackrock and Coinbase.
S&K Take: The intersection of bankruptcy and TMZ. There are a significant number of high profile parties interested in the FTX cases, including TB12 and his ex-wife. The numbers we are talking about aren’t small either. While this grabs headlines it clearly isn’t a big issue in the case, since most of the celebrity parties in interest are equity holders of some variety. But, if John Ray finds another $5 billion in the couch cushions, it might matter.
Last week, Party City announced that it plans to file for bankruptcy in the coming weeks as it is faced with struggling sales and increasing costs due to inflation. The retailer is in discussions with its bondholders to convert debt to equity.
This week, Bed Bath & Beyond reported a larger than expected quarterly loss and sales dropped by more than 30%, as the home goods retailer has warned of a possible bankruptcy in the coming months.
S&K Take: A couple of big names looming on the bankruptcy horizon, both in the retail space. As filings (at least anecdotally) seem to mount, it looks like retail will be a big part of the restructuring equation again in 2023. These are some names that we saw in connection with the pandemic that managed to stave off bankruptcy for a while. It seems like we may finally see these entities run out of runway and face the music.
