Below is our initial take on recent bankruptcy-related developments:
On Wednesday, low-cost carrier Spirit Airlines denied a bid of about $2.16 billion from rival Frontier Group as it was not suitable for the airline that expects to exit chapter 11 bankruptcy in the first quarter.
S&K Take: Frontier and Spirit continue to engage in hopes of finding a combination. The latest is a Frontier proposal that would give Spirit’s senior creditors $400 million in take back paper plus 19% of the pro forma combined company. One if the issues that those same creditors raise is that it also requires them to pony up $350 million in equity. Spirit rejected the offer and blew out the info. Spirit has advanced a stand alone plan that purports to provide more value than Frontier’s offer (which has received sufficient votes to be approved), although I suspect that we will see negotiations continue.
On Tuesday, the official committee of unsecured creditors in Yellow Corp’s chapter 11 bankruptcy trial filed a motion to terminate Yellow’s exclusive right to file a bankruptcy plan, or alternatively, to covert to chapter 7.
S&K Take: There have been a series of twists and turns in the Yellow bankruptcy, including litigation surrounding the validity of pension withdrawal claims and WARN claims despite massively successful sales processes. The Committee, in a recent motion, argues that the conviction of the Debtors to litigating those issues to conclusion has prevented the cases from moving forward. The Committee’s motion seeks termination of exclusivity or conversion to chapter 7, based on the fact that the plan is unconfirmable (because the Debtors needs GUCs to get the required votes). The Committee raised two primary issues. One, the Committee wants complete control of the liquidating trust (which is the norm in most cases), and two, the Committee wants to pare back the plan releases which they assert are overly broad. Will be interesting to see how Judge Goldblatt deals with this. Debtors, for their part, have stated they won’t ask for any exclusivity extension beyond the current confirmation hearing date in February.
Last Friday, the U.S. Departments of Veterans Affairs and Health & Human Services objected to Johnson & Johnson’s $10 billion proposed settlement of thousands of ovarian cancer lawsuits, stating that amending the cases in bankruptcy could damage the government’s reimbursement rights.
S&K Take: The J&J plan unsurprisingly drew a series of objections from the “Coalition of Counsel for Justice for Talc Claimants” (the COCFJFTC, for short), the UST, the US (as described in the article), multiple insurers, and certain individual claimants, among others. The arguments articulated are legion. The COCFJFTC, for example, argues that the plan was filed in bad faith, violates section 524(g), and contains releasees that run afoul of Purdue. The objectors also suggest that the Debtors be required to resolicit the plan, since the current revised plan is not the plan negotiated and solicited prepetition. Seems like we are a long way from the finish line on this one.
