Third Party Releases in Bankruptcy

Third-Party Releases are the source of some contention in SquareTwo Financial's bankruptcy case with the SEC and UST objecting to the company's proposed plan of reorganization. There are concerns that Mom and Pops with no vote in the reorganization will have no right to pursue causes of action against the debtor - like violations of the Fair Debt Collection Practices Act. This act is meant to prevent "Johnny" from coming over and basically busting kneecaps to collect on some debt - which, according to the UST at least, may not even be outstanding anymore. Now, remember: venue in that case is the Southern District of New York and NOT some random off-center jurisdiction with more favorable (or non-existent) third-party release precedent. Hold on to your butts. Recently third-party releases were approved in the First District in the Cosi Inc. matter despite an objection from the United States Trustee. Because there was an opt-out provision in the plan for those who didn't want to grant releases, the Judge let it slide. Yup, opt-out. Right. Because people read 200-page plans. 

News for the Week of 12/04/16

Filings down this week so packing in the news...

• Aeropostale. Cascading effect. American Eagle Outfitters blames Aeropostale's going-out-of-business sales for same store sales declines and lowered forward guidance. Seems, however, that the pain is more widespread than that: this week mall retailer Express Inc.'s stock got trounced after reporting YOY net and comp sales declines (silver lining: e-commerce sales were up 15%). E-commerce isn't immune to downtrends either: Bodybuilding.com laid off 90 workers this week with minority owner Ryan DeLuca stating the VERY obvious, "E-commerce is tough and getting tougher with competition from Amazon and thousands of others." 
• Salus Capital. The zombie that was once Salus Capital is in the news again as it funds the Chapter 11 wind-down of Hampshire Group.
• Sobey's. Another deadbeat (Canadian) grocer. Apparently the synergies expected from buying Safeway's Canadian stores haven't come to fruition.
• Solar. A synopsis of the industry's convergence with restructuring and challenges that lay ahead.
• Fast Forward: Many are now starting to call Uber's business model into question: an argument made easier by a $1.2b cash burn loss in the first six months of '16. 
• Rewind I: Cosi Inc. was unable to find a new buyer, settling, in the end, on a $10mm sale to the original stalking horse bidder (including a credit bid).
• Rewind II: Nasty Gal. If this report is true, there is something strangely disturbing about a company called "Boohoo" buying another called "Nasty Gal." 
• Rewind III: Bennu Oil & Gas, LLC filed for Chapter 7 weeks after the involuntary chapter 11 filing against its subsidiary, Bennu Titan. Last week we discussed feasibility and the (seeming) proliferation of Chapter 22s. This story is too brutal to even be a 22.  
• Chart of the Week: This International Energy Agency chart forecasts that we've reached peak oil demand. Still, tepid interest in Verengo Inc.'s SoCal solar assets (no bid topping stalking horse: effectively sold for credit bid).

Chart of the Week II: Nike. The sneaker manufacturer announced this week that it would skip conventional wholesale channels like Dicks Sporting Goods, Foot Locker and others and sell its self-tying $720 HyperAdapt sneakers BtoC via its Nike+ app and at the NYC retail store. Clearly, Nike is paying attention to these recent consumer trends:

News for the Week of 10/16/16

• In Australia, alternative capital providers like Oaktree and Bain Capital Credit look to replace banks pulling back from risky lending amidst the increasingly distressed commodities bust.
• Last week, we discussed Chicago's stress and efforts there to stem the tide. Here is a more technical look at Chicago's options and whether it can even go the Detroit route.
• Here is an interesting list of the worst corporate M&A flops, some of which are familiar to restructuring professionals, e.g., KMart/Sears.  
• Number of new pianos sold in the US is down nearly 1/3 since 2005, a fact that may force Paulson & Co. to navigate loan defaults for portfolio company, Steinway Musical Instruments.
• As predicted last week, Relativity Media inches closer to a Chapter 7 liquidation mere months after emerging from Chapter 11. 
• On the heels of Cosi and Garden Fresh both filing for chapter 11 recently and grocers like A&P, Haggen, and Fresh&Easy having already filed, food is filling the docket more than our stomachs these days. Along these lines, the news that Amazon is now pursuing fresh groceries has raised eyebrows and called into question, generally, the "Amazon effect":