Below is our initial take on recent bankruptcy-related developments:
A Del. bankruptcy court stated Yellow Corp. is liable for some portion of the $6.5 billion in withdrawal liability claims, but the exact amount to be paid is yet to be determined. Yellow contends its liability to multiemployer pension plans is much less than claimed, stating the plans are fully funded after the American Rescue Plan Act's pension fund bailout in 2021.
S&K Take: Judge Goldblatt’s decision in Yellow is the most impactful of the week, even if it may not serve as precedent on a frequent basis in the future. Yellow had argued that it should have been off of the hook for its failure to fund certain multi-employer pension plans because those plans received federal support post-COVID (and were therefore not underfunded). Judge Goldblatt did not find that argument persuasive, ruling that Yellow remained obligated to those plans. The ruling would drastically change the distribution scheme in the case—approximately $500 million in unsecured trade obligations were previously set to receive 100% on their claims, with equity getting a significant (approx. $1.1. billion) distribution. If the pension claims are included, they massively dilute the unsecured claims pool and leave no value for equity. The stock dropped from $5 a share to about $0.75 based on the decision.
Following a years-long attempt to strengthen its business amid decreasing demand, Tupperware Brands announced its voluntary chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware.
S&K Take: Tupperware was on almost every watchlist in the industry, and finally commenced its bankruptcy cases in freefall fashion on Tuesday the 17th. The catalyst for the case appears to be an attempt by an ad hoc group of lenders to foreclose on the company’s assets. The debtors allege that the group acquired the majority of its debt for three to six cents on the dollar. There is also some intra-lender prepetition litigation, with a minority lender alleging that the AHG did not provide the opportunity for other lender to participate in a prepetition bridge loan. The AHG has filed a motion to dismiss or convert the case as well as an objection to the debtors’ use of their cash collateral. For their part, the debtors want to run a 30-day sale process to try to unload the company as a going concern. Judge Shannon set an evidentiary hearing on Sept. 25 on cash collateral, with an Oct. 11 date for the motion to dismiss or convert. Seems to be plenty of acrimony around the Tupperware corpse.
The parent company of crypto-focused Silvergate Bank filed for bankruptcy to wind down operations and liquidate after shutting down in 2023. The company aims to pay creditors and bondholders, the latter owed $18 million, using its remaining cash of about $163 million.
S&K Take: Silvergate has filed bankruptcy to get it through the last steps of its voluntary liquidation originally commenced in March of 2023. The bankruptcy is premised on an RSA and a pre-arranged plan. The Debtors purportedly have approximately $163 million on hand to satisfy claims. That would easily clear unsecured debt of more than $18 million and provide a recovery for preferred shareholders. Statements at the first day hearing indicate that there may be a valuation issue arising between different equity holders, so we will stay tuned.
