In re Boxed, Inc., No. 23-10397 (Bankr. D. Del.)

  • New York based e-commerce and software company, Boxed, Inc., filed for bankruptcy after failing to generate needed capital in a 2021 SPAC.
  • Boxed, Inc. tried to sell its e-commerce retail business and its software and service business either together or separately in 2022, but despite an extensive process could not find a buyer.
  • Boxed, Inc. now hopes to sell its software company via a private sale in bankruptcy and wind down the e-commerce business. At the first day hearing, the bankruptcy court explained that approval will depend on the stance of a yet-to-be-appointed official committee of unsecured creditors.
Continue Reading Boxed, Inc. in Bankruptcy After Failing to Find a Buyer, Now Seeks a Private Sale of its Spresso Business

Ultra Petroleum Corporation et al. v. Ad Hoc Committee of OpCo Unsecured Creditors,
No. 21-20008 (5th Cir. 2022)

  • Make-whole provisions—common provisions in credit agreements providing for lump sum payments to compensate a lender for unpaid interest if a borrower prepays—have been the subject of litigation concerning whether a claim for a make-whole payment is disallowed under the Bankruptcy Code.
  • In the recent Fifth Circuit decision, Ultra Petroleum Corp. v. Ad Hoc Committee of OpCo Unsecured Creditors,[1] the Court addressed the consequential question against enforceability, holding that make-whole payments are equivalent to impermissible unmatured interest.
  • The Ultra Petroleum decision was the first circuit court case to directly answer the question of whether make-whole payments are generally allowable, and it broke with lower court decisions allowing claims for make-whole payments.
Continue Reading Considering the Allowability of “Make-Whole Payments” in Bankruptcy

Herrick’s Work on Behalf of Well-Renowned Bankruptcy Professors Supported Dismissal

In October 2021, LTL Management LLC (“LTL”), an entity created by Johnson & Johnson (“J&J”) to hold its liabilities to cancer victims exposed to talc in J&J’s products, filed for Chapter 11 bankruptcy protection. The Herrick team filed amicus briefs on behalf of a group of well-renowned bankruptcy professors in support of the Official Committee of Talc Claimants’ motion to dismiss LTL’s chapter 11 case.

Continue Reading Third Circuit Court of Appeals Reverses Bankruptcy Court’s Decision and Dismisses the Chapter 11 Case filed by J&J entity LTL

In re Compute North Holdings, Inc., No. 22-90273 (Bankr. S.D. Tex.)

  • The bankruptcy court approved a portion of proposed bid procedures for the sale of Compute North.
  • Debtors sought an expedited sale timeline, with bids due by October 27, 2022, but the Compute North UCC objected. The parties agreed the sale timeline would be addressed at an October 21 hearing. 
  • Compute North contractual counterparties objected, seeking favorable carveouts and clarifications in the approved sale procedure, which were also pushed to the October 21 hearing. 
  • Other provisions of the sale procedure were approved including bid protections for a stalking horse and contract assumption notice procedures. 

Continue Reading Sale Procedures for 363 Sale of Compute North Partially Approved With Timing of Sale to Be Addressed at Supplemental Hearing

In re Compute North Holdings, Inc., No. 22-90273 (Bankr. S.D. Tex.)

  • Compute North Holdings, Inc., a large data center with a focus on cryptocurrency mining, files for Chapter 11 protection amidst an atrocious business environment for all things crypto.
  • Compute North was pushed into bankruptcy after its relationship with one of its primary lenders broke down.
  • Debtors’ plan to sell all its assets quickly may be a challenge for unsecured creditors.

Continue Reading Cryptocurrency Mining Data Center Files for Chapter 11 Amid Crypto-Recession

Bankrupt cryptocurrency lender Celsius Network LLC recently sought permission to sell some of its “stablecoin” for U.S. dollars to continue operations through its Chapter 11. Celsius requires court approval for the sale pursuant to an earlier order requiring court authorization to convert its cryptocurrency to cash. According to Celsius, the sale of its stablecoins would pose no risk to creditors due to the relative stability provided by stablecoins versus traditional cryptocurrencies. Stablecoins are fiat-pegged cryptocurrency meant to track government issued currencies, usually the U.S. dollar. By pegging its value, stablecoins seek to reduce volatility and offer a stable crypto option not subject to market fluctuation. This allows investors to trade digital assets potentially free of the big swings inherent in assets like Bitcoin and Ethereum which are both down over 70% since last November. Continue Reading Bankrupt Cryptocurrency Debtor Seeks Sale of Stablecoins

On September 8, 2022, the Second Circuit held that lenders to Revlon, Inc., a global cosmetics company, must return approximately $500 million to Citibank N.A., which Citibank had inadvertently paid on Revlon’s behalf. The decision vacated a lower court’s ruling from 2021 that the lenders could retain the funds.

On August 11, 2020, Citibank, as agent under a term loan agreement, intended to process a $7.8 million interest payment by Revlon to its lenders. Instead, Citibank mistakenly wired the entire principal loan balance of nearly $1 billion from Citibank’s own account, giving the lenders a “huge windfall,” per the Second Circuit’s decision.

The next day, after realizing its error, Citibank began sending recall notices to the lenders notifying them of the mistake. Some lenders returned funds, but the defendants did not. Continue Reading Revlon Lenders Must Return $500 Million Mistaken Wire Transfer to Citibank, N.A.

In a recent Delaware Supreme Court decision, the Court held that there is no “insolvency exception” to the requirement in Section 271 of the DGCL that a transfer of all or substantially all of a corporation’s assets foreclosure transfer be approved by the corporation’s shareholders.

The Delaware Supreme Court overruled a decision by the Delaware Chancery Court that used Section 271—which requires a shareholder vote when a corporation sells all or substantially all of its assets—to interpret a Class Vote Provision in Stream TV Networks, Inc.’s charter. The Chancery Court also read a Delaware common law board-only insolvency exception into Section 271 while doing so. Continue Reading There’s No Insolvency Exception to a Shareholder Vote Requirement to Transfer a Corporation’s Assets in Delaware

Restructuring and Finance Litigation partner Steven B. Smith recently met with Phil Neuffer, the Managing Editor of ABF Journal, to discuss the recent United States Supreme Court decision Siegel v. Fitzgerald, No. 21-441, in which the Court unanimously held that a significant quarterly  fee increase applicable to debtors in the United States Trustee judicial districts and not to debtors in the Bankruptcy Administrator judicial districts located in North Carolina and Alabama violated the uniformity requirement of the Constitution’s Bankruptcy Clause. The ABF Journal interview will be featured in a series of podcast episodes and will focus on the history of the dual United States Trustee and Bankruptcy Administrator programs which led to North Carolina’s and Alabama’s different, non-uniform, treatment, enactment of the Bankruptcy Judgeship Act of 2017 and the Bankruptcy Administration Improvement Act of 2020, and various court decisions over the years addressing the constitutionality of having two different funding sources to operate the program. Steven also discusses the parties’ arguments to the Supreme Court and their differing interpretations of the Bankruptcy Clause’s grant of power to Congress to establish “uniform laws on the subject of Bankruptcies throughout the United States.”

The first (episode 66) and second (episode 67) of the three-part series can be found here:  The ABF Journal Podcast.

Last November, Judge John Dorsey of the Delaware Bankruptcy Court held in the Mallinckrodt chapter 11 case that the debtors did not have to pay a $94 million “make-whole” premium that was provided for in an indenture governing first lien notes. The indenture provides for automatic acceleration following an Event of Default, which includes a bankruptcy filing. Acceleration makes “the principal of, premium, if any, and interest on all the Notes . . . immediately due and payable . . . .”

A “make-whole” premium is a loan provision to compensate a lender if a borrower repays the debt before maturity for the loss of the lender’s anticipated yield, and can also be called “yield maintenance,” or a “redemption” or “prepayment” premium. The make-whole amount is typically the net present value of the interest payments that the lender would have received if the debt was paid at maturity. While make-whole premiums are generally enforceable under state law outside of bankruptcy, courts have rendered conflicting decisions on their enforceability in chapter 11. Economics drives the continuing bankruptcy court litigation over make-whole payments. For large bond issues, the make-whole amounts can often exceed nine figures. Continue Reading Landmark Delaware Bankruptcy Court Ruling that Debtors Did Not Have to Pay Make-Whole Premium Was in Error, First Lien Lenders’ Argue on Appeal