What we read this week [October 21, 2022] – Insolvency/Bankruptcy


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October 19e, The Wall Street Journal reported that electric vehicle startup Mullen Automotive Inc. has won court approval to buy an Indiana manufacturing plant and assets from Electric Last Mile Solutions for $92 million. The deal, which boosted Mullen’s stock price 64%, includes Electric Last Mile Solutions’ manufacturing facility in Mishawaka, Indiana, as well as its inventory and intellectual property. Mullen pays $55 million in cash and takes on about $37 million in contract debt. Electric Last Mile Solutions had filed for bankruptcy in the District of Delaware in June 2022 due to ongoing investigations by the Securities and Exchange Commission, after it merged with a special purpose acquisition company last year.

The Wall Street Journal also reported on October 18e, that Bed Bath & Beyond has made a debt exchange offer to holders of unsecured notes to help extend debt maturities and reduce interest costs. Specifically, Bed Bath & Beyond offered to exchange its unsecured notes maturing in 2034 and 2044 for new third lien debt bearing an interest rate of 12%. Bondholders have until November 15e to accept the offer and those who do will receive a discount of approximately 78% off their face value. Some Bed Bath & Beyond investors are wary of potentially coercive swap deals that could raise new secured debt and weaken other claims on the retailer’s assets. Ultimately, the move appears to be part of a larger strategy to ease the financial burden on the company amid declining sales.

October 17e, Bloomberg reported that the city of Chester, Pennsylvania is considering filing for bankruptcy. Chester is a city just outside of Philadelphia with a population of approximately 33,000, 30% of whom live below the poverty line. A state-appointed receiver, who was appointed in 2020, noted that the city’s debt had “piled up” as the city faced a deeper downward financial spiral. A potential bankruptcy ruling also comes as the city’s police pension fund is expected to run out of cash in the coming months. The city had underpaid its pension funds amid budget shortfalls, a problem amplified by an alleged miscalculation of benefits. Chester currently owes $53.9 million in pension contributions.

October 15e, Reuters reported that LATAM Airlines, Latin America’s largest airline, announced that it will emerge from bankruptcy on November 3, 2022. LATAM, like many travel services, has suffered significant challenges resulting from the disruptions travel related to COVID. It filed for bankruptcy in May 2020 in the Southern District of New York. LATAM’s Chapter 11 reorganization plan was confirmed in June 2022 but has been challenged by some interested parties. Now, the company expects to emerge with around $10.3 billion in equity and nearly $6.9 billion in debt.

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This article by Mayer Brown provides information and commentary on interesting legal issues and developments. The foregoing is not a complete treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action regarding the matters discussed here.

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