Stephen Selbst

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Stephen Selbst is the co-chair of Herrick's Restructuring & Finance Litigation Group. He has more than 30 years of experience representing debtors, creditors, official committees, distressed investors and asset purchasers in bankruptcies and out-of-court restructurings. Stephen advises clients from a wide range of industries, including financial services, telecommunications, government agencies and real estate. A skilled commercial litigator, Stephen also has significant experience in district and state courts, where he regularly represents clients in separate litigation arising out of bankruptcy.  He also advises clients on structured finance and derivative transactions.

He is a frequent lecturer on bankruptcy and restructuring topics and has published articles and book chapters on bankruptcy-related topics. He has been frequently quoted in newspaper articles on insolvency related topics and has appeared on CNBC.

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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

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

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

The introduction in 2020 of subchapter V for small business chapter 11 cases was the biggest structural reform in business bankruptcies since the enactment of the Bankruptcy Code in 1978. Subchapter V was enacted in 2019 as part of the Small Business Reorganization Act and became effective in February 2020.  It was originally limited to cases with $2,725,625 or less in debt, but when Congress passed the CARES Act in 2020 in response to the COVID pandemic, it increased the subchapter V debt limit to $7.5 million. While that increase was originally scheduled to expire on March 27, 2021, it was extended through March 27, 2022.

Now there appears to be bipartisan support in Washington for making the $7.5 million debt limit permanent. Senator Charles Grassley, a ranking member of the Senate Judiciary Committee, who has had a long interest in reforms of the Bankruptcy Code, has said that he supports a permanent revision in the debt limit.
Continue Reading Congress May Consider Making $7.5 Million Debt Limit for Subchapter V Permanent: Should the Limit Be Increased?

On November 22, 2021, the United States Bankruptcy Court for the Southern District of New York announced a modification to its judge-assignment scheme for “mega chapter 11 cases.” Under the new Local Bankruptcy Rule 1073-1(f), which took effect on December 1, 2021, mega chapter 11 cases will be randomly assigned among each of the district’s …