Below is our initial take on recent bankruptcy-related developments:
Bus carrier and owner of the Megabus brand and commuter bus lines connecting New York and New Jersey, Coach USA filed for Chapter 11 bankruptcy in Wilmington, Delaware, because it could not recover from a decrease in ridership due to the COVID-19 pandemic. The bus company owes its creditors between $100 and $500 million.
S&K Take: Coach filed this week with an aggressive DIP roll-up of $180 million on $20 million of new money and plans to sell the company’s assets in a number of separate transactions. The debtors have three stalking horses lined up, with nine other business units to sell. The debtors are apparently not selling some of their IP. Not sure how much IP a us company has, but who am I to know. Outside of the massive roll-up seems pretty plain vanilla. We will keep an eye on the case as it develops.
On Wednesday, after being found liable by a jury for defrauding crypto investors who lost approximately $40 billion when the TerraUSD and Luna tokens subsided, Terraform Labs came to a $4.47 billion civil settlement with the U.S. Securities and Exchange Commission.
S&K Take: Pretty big settlement in the crypto arena, as regulators and debtors continue to resolve their differences in various cases. In this one the SEC will get a claim in the bankruptcy case which will be deemed satisfied if the debtors comply with certain requirements, including establishing a liquidating trust with all of Terraform's assets under the control of the committee. Terraform would also not receive a discharge under the plan, and the plan's releases would be subject to SEC approval and prevent the plan from limiting any criminal actions.
The court found Truck Insurance Exchange should have been allowed to object to Kaiser Gypsum's proposed $50 million settlement of thousands of lawsuits through its Chapter 11 bankruptcy reorganization because the deal would be funded largely by the company's insurance policies. The justices claimed the 4th U.S. Circuit Court of Appeals erred by wrongfully applying a doctrine of "insurance neutrality" when ruling Truck wasn't entitled to object.
S&K Take: Another USSC decision in the bankruptcy space (still waiting on Purdue of course) and this one seems to make sense. If an insurer’s rights are implicated in the bankruptcy process, they are a party in interest with a right to appear. I imagine I am oversimplifying that, but seems like the takeaway. The case is already reverberating through cases as motion for judicial notice of the decision are being filed.
Last week, U.S. District Court for the Western District of Texas Judge Alia Moses said it was mandatory for Jones to disqualify himself on any case involving his attorney girlfriend in the latest skirmish.
S&K Take: We are legally bound to report updates in the SD Tex drama, and the latest was significant. In argument on several motions to dismiss, Judge Moses said in no uncertain terms that Judge Jones should have recused himself from cases involving Freeman. She is struggling with the issue of whether the plaintiff (Van Deelen in the McDermott case) actually has standing to bring the claim. The result could have been identical with another judge. So while Judge Moses found some impropriety, it may be much ado about nothing. Stay tuned.
