Wesco Aircraft Holdings (d/b/a Incora) kicked off its trial in an adversary proceeding this week with holders of its 2024 and 2026 notes and 2027 noteholder Langur Maize, who argue that they were impermissibly excluded from a 2022 uptier exchange transaction that left the company with USD 250m in new super senior first-out debt. The trial began after the bankruptcy judge overseeing the dispute issued a supplement to a prior memorandum opinion on outstanding issues, including those regarding the extent to which Langur Maize has standing and breach of contract claims against Wilmington Savings Fund Society and guarantor defendants. Incora’s litigation over the uptier exchange is pending at the same time as an action commenced by a group of lenders to Robertshaw US Holding Corp challenging the design, engineering, and manufacturing company’s uptier transaction that took place in 2023.

Diamond Sports Group (DSG) filed its anticipated motions this week seeking authorization to enter into a (i) settlement with Sinclair Broadcast Group (SBG), (ii) a USD 450m debtor-in-possession (DIP) financing agreement, and (iii) an exit note commitment letter with Amazon.com Service, the terms of which were referenced in DSG’s restructuring support agreement (RSA). Pursuant to the settlement, DSG would separate from its parent, SBG, which would pay USD 495m in cash to DSG, waive USD 175m in asserted prepetition and administrative expense claims, and provide transition services to help facilitate DSG’s reorganization and separation from SBG. Shortly after DSG sought approval of its DIP financing, DSG’s unsecured creditors committee (UCC) filed a response to the motion, arguing that the DIP financing gives unfair advantages to lenders who opt to serve as “DIP commitment parties.” The UCC has requested an emergency hearing on DSG’s proposed DIP election procedures and asked that the company be forced to obtain bankruptcy court approval before moving ahead with the DIP financing and related restructuring transactions called for in the RSA.

In other settlement news, Talen Energy Corp received bankruptcy court approval of its USD 115m settlement with PPL Corp, which resolves litigation that became the subject of a USD 900m adversary proceeding between the parties. As a result of the settlement, Talen Montana will dismiss its claims to recover USD 900m from PPL Corp in exchange for a USD 115m payout.

Several debtors progressed toward emergence from Chapter 11 this week, with cryptocurrency company Core Scientific Inc announcing that its plan of reorganization went into effect, eliminating nearly USD 300m in debt through exchanges for new equity and providing USD 95m in new capital through an equity rights offering and exit financing. Littlejohn-backed glass recycler Strategic Materials also put its prepackaged reorganization plan into effect this week, giving first lien lenders 96.5% of the reorganized company’s equity plus second lien take back debt.

Borrego Community Health Foundation obtained confirmation of its liquidation plan, which the debtor jointly proposed with its UCC, and lubricant base oil manufacturer, Novvi Inc, obtained confirmation of its Chapter 11 plan, which provides secured creditors H&R Group US Inc and Chevron Products Company with ownership of the reorganized business. Novan Inc and EPI Health also scored confirmation of their liquidating Chapter 11 plan this week after selling their assets for a combined USD 20m to Ligand Pharmaceuticals and Mayne Pharma in September 2023. Lastly, Molekule Group, a maker of air purifiers, obtained confirmation of its Chapter 11 plan that calls for an exchange of debt for equity in the reorganized company.

In other Chapter 11 plan news, the Chapter 7 trustee overseeing Lucky Bucks Holdings LLC’s bankruptcy case filed a lawsuit against Lucky Bucks LLC and Lucky Bucks Holdco LLC (the OpCo debtors) alleging that the OpCo debtors perpetrated a fraud on the court and caused harm to creditors. In the action, the trustee accuses the OpCo debtors of failing to disclose material assets belonging to Lucky, including hundreds of millions of dollars in claims and causes of action that would have been valuable unencumbered assets to be shared by the creditors of the OpCo debtors, and has asked the court to revoke the confirmation order or enter a judgment granting other equitable relief.

In sale news, Troika Media Group cancelled its auction after failing to receive any bids to compete with the USD 51m bid from its stalking horse bidder, an affiliate of lender Blue Torch Finance, and Rite Aid again postponed its retail asset sale process, pushing the auction date to 8 February and extending the bid submission deadline to 6 February, out from 24 January and 19 January, respectively. Timber Pharmaceuticals, on the other hand, obtained court approval of its USD 14.35m asset sale to stalking horse bidder and DIP lender, a subsidiary of LEO Pharma.

In other sale news, SmileDirectClub’s judge refused to approve the company’s request to sell its remaining assets to its DIP lenders for USD 35.65m, with the proposed sale to be followed by a structured dismissal. Notwithstanding UCC support for the sale and structured dismissal, the judge stated that he was unable to find that the deal was in the best interest of creditors and ultimately ruled that he would convert the case to a Chapter 7 liquidation.

In terms of new Chapter 11 filings, medical apparel company Careismatic Brands LLC and certain affiliates commenced Chapter 11 cases to be funded by a USD 125m DIP financing facility with Jeffries as agent. The company entered bankruptcy with an RSA that proposes a recapitalization or a toggle to a sale transaction. The debtors subsequently obtained interim approval of their DIP financing as their counsel warned of little to no recoveries for unsecured creditors. Although Eye Care Leaders entered Chapter 11 the prior week, the Debtwire team profiled the case this week after substantive documents had been filed, disclosing that the company is looking to accomplish an asset sale ahead of an Amazon Web Services deadline to make payments under the parties’ contract, reporting that losing Amazon’s service would be “catastrophic” to the business.

Terraform Labs Pte Ltd, the company behind the TerraUSD and Luna digital currencies whose collapse in 2022 helped set off a wave of distress in the cryptocurrency sector, also commenced a Chapter 11 case in the face of litigation from the US Securities and Exchange Commission and criminal charges against co-founder Do Kwon. Rounding out the week of Chapter 11 filings, Brazilian airline Gol Linhas Aereas SA entered Chapter 11 with a financing commitment for USD 950m in DIP financing from members of an ad hoc group of bondholders of Abra Group, the holding company for the operations of Gol and Colombia’s Avianca.

View all Debtwire coverage.

Next week, Debtwire subscribers can look forward to our coverage of the disclosure statement  hearings for Near Intelligence, Infinity Pharmaceuticals, and High Valley Investments and much more.

New Cases

Source: Debtwire Restructuring Database

Source: Debtwire Restructuring Database

Six Month Lookback

The following table illustrates the number of Chapter 11 cases profiled by the Debtwire team during the last six month period. Debtwire profiles cases for debtors that have at least USD 10m in funded debt or are otherwise significant.

Source: Debtwire Restructuring Database

The Week Ahead

Additional Reading

Wesco Aircraft Holdings d/b/a Incora Plan Profile – Update

Robertshaw’s uptier transaction litigation turns the spotlight on sacred rights clauses and other pro rata sharing provisions

Careismatic Restructuring Profile