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Bankruptcy Headlines

OxyContin Maker Purdue Begins Showdown to Halt Opioid Lawsuits

OxyContin maker Purdue Pharma LP will ask a bankruptcy judge today to pause litigation against the company and its owners over the objections of U.S. states that allege the company is trying to protect the controlling Sackler family, Reuters reported. Purdue’s request promises to be one of the most contentious of the company’s chapter 11 case, which was filed in September to try to implement a settlement proposal it values at more than $10 billion. Privately held Purdue said last month it needed to pause more than 2,600 lawsuits so the company can reduce legal costs and try to win over more plaintiffs to its proposed deal. The lawsuits accuse Purdue and the Sacklers of fueling a public health crisis by aggressively marketing opioids while downplaying their overdose risks, contributing to some 400,000 deaths from 1999 to 2017, according to U.S. statistics. The company said that it has the support of a majority of the local governments that brought the bulk of the lawsuits, although at least 24 states oppose the deal. Read more. 

In related news, Bankruptcy Judge Robert Drain yesterday urged parties that will benefit from a proposed settlement with OxyContin maker Purdue Pharma LP to focus on addressing the opioid addiction crisis and avoid battling over the deal’s billions of dollars, Reuters reported. The outline of a proposed settlement that Purdue values at more than $10 billion was filed in the U.S. Bankruptcy Court in White Plains, N.Y., on Tuesday. The deal aims to resolve more than 2,600 lawsuits by states, local governments and other plaintiffs against Purdue and its Sackler family owners. The lawsuits accuse them of fueling a public health crisis by aggressively marketing opioids while downplaying their overdose risks, contributing to some 400,000 deaths from 1999 to 2017, according to U.S. statistics. “No one can ignore the individual people affected by this crisis,” Judge Drain said at a hearing yesterday. “So I hope that you all will be able to work together to use the money as wisely as possible.” Judge Drain urged the parties to consider ways to distribute settlement funds quickly, rather than follow the usual bankruptcy practice of evaluating each creditor claim before making payments. Read more. 

Lampert Accused of Strong-Arming Buyout After Stripping Sears

Ex-Sears CEO Eddie Lampert and his hedge fund were hit with a Delaware lawsuit claiming they’re trying to force a self-dealing $121 million buyout of the bankrupt retail giant’s remaining assets after decades of stripping it for parts, Bloomberg News reported. Lampert and ESL Investments Inc. used their majority control of Sears Hometown and Outlet Stores Inc. to run an unfair sale process designed to root out dissident board members, according to the Chancery Court complaint. The heavily redacted suit was made public Oct. 10 after being filed under seal Oct. 4 by two investors, including one who owns nine Sears Hometown showrooms in Arizona. Lampert ultimately made a lowball offer of $3.25 per non-insider share, a “paltry premium” of 1.5 percent  over the stock price, according to the complaint. He allegedly timed the proposal “opportunistically” to coincide with poor financial results that made the price more attractive by comparison. Those actions reflect Lampert’s “long and similar pattern” of “dominating” the boards of his investment targets and using that control solely for his own benefit, according to the complaint.

Barneys, Racing to Avoid Liquidation, Now at Odds with Lenders

A dispute has erupted between Barneys New York Inc. and its lenders ahead of a Friday deadline for the retailer to produce an acceptable bid for its assets, WSJ Pro Bankruptcy reported. Barneys has been seeking an extension of the deadline while bidders, including a group of fashion executives and brand investors led by Sam Ben-Avraham, continue to negotiate potential terms. But disagreements have cropped up over some terms of the company’s $217 million financing package from B. Riley Financial Inc. and Brigade Capital Management LP, according to court papers filed this week. Among them, the lenders want Barneys to pay a 2 percent fee before making certain priority payments called administrative expenses, such as legal fees. The company said in a filing yesterday that the lenders are threatening it with potential liquidation. Multiple potential bidders are conducting due diligence, and if Barneys can finalize a deal with a lead bidder by midnight Friday, its advisers will work to develop competing offers ahead of an auction on Oct. 24, the company said yesterday. Barneys said that the lenders are using the approaching deadline to pressure the company so they “can be in a position to force a liquidation if there is even the slightest of foot faults.”

Fed Eases Post-Crisis Rules for Domestic, Foreign Banks

The U.S. Federal Reserve yesterday unveiled a final package of rules easing capital and liquidity requirements for domestic U.S. and foreign banks that was originally introduced following the 2007-2009 global financial crisis, Reuters reported. The changes, which should reduce the compliance burden and free up funds for U.S. Bancorp, Capital One and PNC Financial, among others, mark another win for the industry after the Fed also relaxed rules on derivatives trades and banks’ annual health checks. Yesterday’s package stems from bipartisan legislation passed by Congress in May 2018 that rewrote parts of the 2010 Dodd-Frank financial reform law. That 2018 law ordered the Fed to reduce the burden on community and regional lenders, but progressive Democrats and consumer groups are likely to criticize the central bank for giving larger banks too much leeway with its final changes. Randal Quarles, the Fed’s top regulatory official, said the package allows the Fed to more closely tie stricter rules to risks and retains the toughest requirements for the largest firms.

California Governor Says Broad Power Shutdown to Prevent Fires 'Unacceptable'

alifornia Governor Gavin Newsom (D) called a widespread electricity shutdown triggered by a power company to prevent wildfires “unacceptable,” as gale-force winds and dry weather posed a critical fire threat to the north of the state, Reuters reported. Pacific Gas and Electric Co (PG&E) has imposed unprecedented shut-offs that left more than 730,000 homes and workplaces in northern California without power on the second day of planned outages. But as of late yesterday, power was restored to more than half of those who had lost it, PG&E officials said in a release. About 312,000 electric customers remained without power as of 10 p.m., officials said. Some of the state’s most devastating wildfires were sparked in recent years by damage to electrical transmission lines from high winds, with flames then spreading through tinder-dry vegetation to populated areas. Newsom said that he did not fault the utility for shutting off electricity as a safety measure, but he described the outage as too broad and said it resulted from years of mismanagement by the utility. “We’re seeing a scale and scope of something that no state in the 21st century should experience,” Newsom said. “What’s happened is unacceptable and it’s happened because of neglect.”

Former Manhattan Residence of Iranian Princess Ashraf to Be Sold in Bankruptcy

The former Manhattan residence of Iranian Princess Ashraf Pahlavi, the twin sister of the last shah of Iran, has been put into bankruptcy and received a $10.3 million purchase offer from an anonymous buyer, WSJ Pro Bankruptcy reported. The seven-story townhouse located at 29 Beekman Place was listed earlier this year for $17.9 million and has been pitched to wealthy foreign nationals and governments as a potential embassy space because of its close proximity to the United Nations, according to court papers filed on Tuesday in the U.S. Bankruptcy Court in New York. The proposed buyer listed in court papers is an anonymous limited liability corporation. The property was listed for $49.9 million as recently as 2014, the Wall Street Journal reported at the time.
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