U.S. Bankruptcy Tracker: Litigation Rules the Realm

For most of last week’s large bankruptcy filings, companies were simply trading one court for another.

Three companies with at least $50 million of liabilities sought court protection from creditors last week, according to data compiled by Bloomberg. Two of those -- MatlinPatterson Global Advisers LLC and U.S. Tobacco Cooperative Inc. -- trace their filings to long-running litigation.

MatlinPatterson, a distressed-debt investor hammered by soured bets on Brazil’s airline industry, has seen a years-long liquidation effort hampered by three lawsuits. U.S. Tobacco Cooperative, a grower-owned tobacco seller, in court papers said its decision to file stems from class-action lawsuits that began around 2005.

U.S. Bankruptcy Tracker: Litigation Rules the Realm

Litigation underpins some of the largest ongoing bankruptcies as well. Purdue Pharma LP and Mallinckrodt Plc were overwhelmed by opioid-related litigation in recent years and sought court protection to resolve them.

Mediation is a big part of those cases, and it’s a trend that will continue because “it brings finality and reduces costs” in bankruptcy, David Molton of law firm Brown Rudnick said in an interview. An agreement between parties also “accelerates the time needed to get a deal done so everyone can be paid and a debtor’s plan can be confirmed” quickly, he said.

While Chapter 11 is in some ways a safe haven from litigation, it also opens new avenues for attack. Bankruptcy “has changed dramatically, in an aggressive way up until the pandemic, then Covid became the excuse for even more aggressive behavior” between creditors, debtors, and sponsors, said Robert Stark, also of Brown Rudnick.

Meanwhile, the total amount of traded distressed bonds and loans fell 0.1% week-over-week to $61.5 billion as of July 9, data compiled by Bloomberg show. The amount of traded distressed bonds fell 2.4% week-on-week, while distressed loans climbed 4.9%.

Click here for a worksheet of distressed bonds and loans

There were 172 distressed bonds from 97 issuers trading as of Monday, up from 163 and 91, respectively, about one week earlier, according to Trace data.

Diamond Sports Group LLC had the most distressed debt of issuers that hadn’t filed for bankruptcy as of July 9, data compiled by Bloomberg show. Its parent company, Sinclair Broadcast Group Inc., said in a March filing that it expects Diamond to have enough cash for the next 12 months if the pandemic doesn’t get worse.

Top 5 Distressed IssuersDebt ($B)
Diamond Sports Group LLC8.0
GTT Communications2.3
Lightstone Holdco1.8
PBF Holding Co.1.7
Endo International1.5

Click here for more news on distressed debt and bankruptcy. First Word is curated by Bloomberg editors to give you actionable news from Bloomberg and select sources, including Dow Jones and Twitter. First Word can be customized to your Worksheet, sectors, geography or other criteria by clicking into Actions on the toolbar or hitting the HELP key for assistance.

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