Monthly Archives: May 2023

NEW YORK, May 17 (Reuters) - A lawyer for Celsius Network on Wednesday said the crypto lender hopes to conclude an auction for its assets within days and the current lead bidder is Fahrenheit LLC, a consortium that includes blockchain-based venture capital firm Arrington Capital, at a U.S. bankruptcy court hearing in Manhattan.

Celsius attorney Ross Kwasteniet told U.S. Bankruptcy Judge Martin Glenn the auction has taken longer than expected, but has been highly competitive. The current bids are "hundreds of millions of dollars" higher than the initial bid by NovaWulf LLC, a digital asset investment firm, he said.

New Jersey-based Celsius filed for Chapter 11 protection in July, one of several crypto lenders to go bankrupt following the rapid growth of the industry during the COVID pandemic. Celsius said at the time it had more than 1.7 million registered users and approximately 300,000 active users with account balances greater than $100.

Celsius kicked off an auction on April 22, seeking to find a buyer who can guide its crypto lending and bitcoin mining businesses out of bankruptcy. Celsius initially planned to accept NovaWulf's bid, but took more time to develop additional bids from Fahrenheit, and Blockchain Recovery Investment Committee (BRIC), a holding company affiliated with the Winklevoss-owned Gemini Trust.

Celsius plans to choose between the Fahrenheit and NovaWulf bids, since both offer a way to continue Celsius's lending business as well as its bitcoin mining business. Celsius has not set a deadline for final offers, but expects to conclude the auction within a week, Kwasteniet said.

BRIC's bid, which would preserve only the mining business, will serve as a backup bidder in case the Fahrenheit or NovaWulf bids fail to get regulatory approvals.

Kwasteniet said he does not expect Celsius to share the fate of Voyager Digital, a crypto lending company forced to liquidate after regulatory concerns scuttled Binance.US's plan to acquire it.

"We've kept the regulatory concerns front of mind and are confident that either party would be able to consummate a transaction," Kwasteniet said.

Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and Chris Reese

Our Standards: The Thomson Reuters Trust Principles.

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Celsius bankruptcy auction nears end, with Fahrenheit in the lead - Reuters

Craig Barritt/Getty Images for VICE Media

Think back to a faraway time when Vice Media was a darling of the journalism landscape. It sported a hefty $6 billion valuation, had a high-profile documentary series on HBO, and web traffic soared largely thanks to a certain polarizing president who'd just taken office. The year was 2017.

Fast-forward to the present, when Vice saddled with liabilities of up to $1 billion has filed for bankruptcy.

It's far from alone. Six other large companies threw in the towel within a recent 48-hour span, the most active such period for bankruptcies since 2008, according to Bloomberg data looking at companies with at least $50 million in liabilities.

The reason is relatively straightforward: the Federal Reserve's interest-rate hikes designed to rein in inflation have laid bare the market's weak hands. A credit crunch is here, and it's spreading quickly, crippling companies with large, cumbersome debt loads. For those looking to refinance, the ship has sailed.

A look at the other recent bankruptcies from recent days (handily compiled by Bloomberg) shows a consistent theme: exorbitant liabilities, mostly in the form of debt.

It's worth noting that a bankruptcy filing is not necessarily a death knell for a company. Bankruptcies tend to wipe out stockholders, and give companies an opportunity to restructure their debt and come out the other side with a healthier balance sheet. Still, an uptick in bankruptcy filings clearly demonstrates increasing economic stress.

Data from Moody's suggests that the bankruptcy trend is just getting underway. The ratings giant expects defaults for companies with speculative-grade debt to rise to 4.9% by March 2024, up from 2.9% at the end of the first quarter of 2023, and exceeding the long-term average of 4.1%.

S&P Global's reading of the situation isn't much more promising. It sees the default rate for junk-rated companies getting to 4% by year-end, more than double the 1.7% figure from the end of 2023, though still off the peaks of the post-COVID era.

A separate look at private bankruptcy is arguably even more troubling. As of early April, UBS found that private filings were outpacing even the early stages of COVID, when many firms went under. A four-week moving average of 7.8 registered in late February handily exceeded a comparable figure of 4.5 reached in June 2020, the firm found.

The chart below highlights this comparison between present conditions and early COVID-era times, with the caveat that the same trend isn't being seen in public filings:

On a specific industry basis, the financial sector is under duress following the collapse of Silicon Valley Bank, with multiple other institutions following suit in recent weeks. Retailers from Bed Bath & Beyond to David's Bridal have filed for bankruptcy in recent weeks. Envision Healthcare a medical-staffing company backed by KKR was one of the six firms to declare alongside Vice.

What this assorted list shows is that no industry is safe from balance-sheet bogeys. If a company got too aggressive loading up on debt during the low-interest-rate era, chances are it will soon be feeling the pain.

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Surge in corporate bankruptcies just the start for debt-loaded firms - Business Insider

At least seven companies declared bankruptcy in the last 48 hours, a reported 15-year record.

Among the firms seeking Chapter 11 protection were digital media group Vice Media and as reported here Monday (May 15) private equity-backed healthcare firm Envision.

According to a Bloomberg News report, this was the largest number of bankruptcy filings recorded for a two-day stretch since at least 2008.

Among the other weekend bankruptcies were biotech firm Athenex, oil producer Cox Operating, fire protection company Kidde-Fenwal, home security provider Monitronics International and chemical company Venator Materials.

Bloomberg notes that companies across a range of industries are coping with higher interest costs, making it harder to refinance loans and bonds, while executives are under more scrutiny from their investors and creditors.

As PYMNTS wrote last week, a new Federal Reserve report shows that banks expect to continue tightening lending standards across all loan categories for the remainder of the year.

Banks most frequently cited an expected deterioration in the credit quality of their loan portfolios and in customers collateral values, a reduction in risk tolerance and concerns about bank funding costs, bank liquidity position and deposit outflows as reasons for expecting to tighten lending standards over the rest of 2023, the Fed report said.

The report also found that lending standards for government-sponsored enterprise (GSE)-eligible and government residential mortgages stayed the same, while those for all other categories of residential real estate (RRE) loans tightened during the first quarter. Demand weakened across all REE loan categories, the Fed said.

Meanwhile, tightening demand has led banks and FinTechs to connect small businesses with other lenders.

Speaking with PYMNTS Karen Webster recently, Rohit Mathur, head of Bridge built by Citi, explained that Theres not many out there helping connect borrowers and lenders in the $250,000 to $10 million space. His company, he said, has more than 60 lenders, including community banks and CDFIs (Community Development Financial Institutions) that are focused on lending to small businesses.

PYMNTS also explored the issue in the report Digital Banking Rises To Meet SMB Needs, an NCR collaboration. That study found that 75% of small and medium-sized businesses (SMBs) in need of working capital were the most likely to work with a digital-only bank as their main financial institute in this business lending climate.

The pressure to find the right working capital solution is increasing, with one survey finding that big banks approval rate for business loans dipped to just below 15%, a 10-month low, the report said.

Alternative lending saw the biggest increase at nearly 2%, meaning small businesses are increasingly looking to FinTechs and digital-first offerings to deal with cost pressures.

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7 Companies Declare Bankruptcy Over Weekend in 15-Year Record - PYMNTS.com

(Bloomberg) -- At least seven large companies filed for Chapter 11 bankruptcy protection in less than 48 hours, a breakneck pace of restructurings that included once-hot digital-broadcaster Vice Media LLC and KKR & Co.-backed Envision Healthcare Corp.

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Thats the largest number of filings on record during a two-day period since at least 2008, according to Bloomberg-compiled data on companies with at least $50 million of liabilities. And it comes as two Federal Reserve officials signaled that they favor a pause in their aggressive monetary-tightening campaign amid the ongoing fallout in credit markets.

Firms across every sector are struggling with higher interest costs making it more challenging to refinance loans and bonds while corporate executives are drawing more scrutiny from investors and creditors.

The weekend also saw filings from home security company Monitronics International Inc., chemical producer Venator Materials Plc, oil producer Cox Operating LLC, fire protection firm Kidde-Fenwal Inc. and biotechnology company Athenex Inc.

For Vice Media, the filing marks a dramatic fall from its status as a media darling. The company secured a $450 million investment from private equity firm TPG in 2017, which valued the firm at $5.7 billion a startling figure for a newcomer. Journalism has been an easy target for advertisers cost-cutting plans in an uncertain economy.

For others, like Venator and Monitronics, the breaking point came amid looming debt maturities in the next few years.

Here are more details on the wave of recent filings:

Vice Media

Vice listed both assets and liabilities in the range of more than $500 million to as much as $1 billion in a Chapter 11 petition filed in Southern District of New York. The company struck a deal to sell itself to creditors including Fortress Investment Group, Soros Fund Management and Monroe Capital. The deal, which will see the investors purchasing its assets for $225 million and assume significant liabilities, allows for rival bidders to emerge.

Story continues

Monitronics

Monitronics, which had more than $1 billion in debt coming due in 2024, said earlier this month that it planned to start a Chapter 11 bankruptcy to help implement its restructuring. The company said it would cut its debt by $500 million under the pre-arranged and partially prepackaged plan.

The Dallas-based firm previously filed for bankruptcy back in 2019, with a plan that gave control to creditors and allowed it to slash close to $1 billion in debt. The company listed $1 billion to $10 billion in estimated assets and the same range for liabilities in its petition filed in the Southern District of Texas.

Envision Healthcare

Envision, a medical staffing company backed by KKR, had been in talks about restructuring options after it skipped a bond coupon payment due in mid-April.

The company raised more than $1 billion in fresh cash just last year, but it has still been struggling to make good on its debt obligations in the face of a higher interest burden and wage inflation. It filed in the Southern District of Texas, listing both assets and liabilities in the range of $1 billion to $10 billion.

Venator Materials

Pigment maker Venators upcoming debt maturities included a roughly $350 million first-lien term loan due in August 2024 and around $600 million of notes due in 2025. In February, the company commented on challenging macroeconomic conditions, and said it had reduced spending and planned to cut inventory. It listed both assets and liabilities in the range of more than $1 billion to $10 billion in a petition filed in Southern Texas.

Cox Operating

Cox, a closely held oil producer, had been attempting to reach an agreement with its creditors on reducing or deferring payments to avert filing for bankruptcy, people familiar with knowledge had told Bloomberg earlier this month. The company has estimated liabilities and assets of $100 million to $500 million each, it said in a filing.

Athenex

Pharmaceutical company Athenex said it had reached agreement with its lenders to move forward with an expedited sales process of its assets across its primary businesses, which is expected to conclude by July 1. The company has $100 to $500 million in estimated liabilities. In a statement, the company blamed regulatory hurdles tied to a new drug, along with challenging biotech markets and the difficult economic environment for its downfall.

Kidde-Fenwal

Industrial fire protection and suppression company Kidde-Fenwal said it will seek options including a sale of the company as a going concern. The company has $1 billion to $10 billion in estimated liabilities, and filed after mounting litigation related to forever chemicals. A unit of the company sold firefighting foam containing the chemicals from 2007 to 2013 and has been named in more than 4,000 lawsuits, according to a statement.

--With assistance from Paula Seligson.

(Updates with additional details throughout.)

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Credit Crunch Fuels 48-Hour Bankruptcy Rush With Seven Filings - Yahoo Finance

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Private equity-backed Envision Healthcare files for bankruptcy - Financial Times

We appreciate Lee Hutchinson's efforts toward situational archaeology in his initial Drobo FS review. Historians one day will know that, at a minimum, this device was released after 1999's The Matrix.

Lee Hutchinson

You don't hear nearly as much about Drobo boxes as you used to, especially on sites like Ars Technica. We now have some news, but it isn't good.

StorCentric, the holding company for the Drobo and Retrospect brands, filed for Chapter 11 bankruptcy in late June 2022. Now, AppleInsider reports that, based on an email sent by StorCentric, the bankruptcy shifted from reorganization-minded Chapter 11 to liquidation-focused Chapter 7 in late April.

The writing for Drobo was on the wall, or at least on its website. Text at the top of the homepage notes that, as of January 27, 2023, Drobo products and support for them are no longer available. "Drobo support has transitioned to a self-service model," the site reads. "We thank you for being a Drobo customer and entrusting us with your data."

Drobo began in 2005 as Data Robotics and launched into the tech consciousness with the original Drobo, a "storage robot." The marquee feature was being able to hot-swap drives of nearly any size without migrating data. In our review of the initial $500 Drobo, we liked its low management requirements, flexible data protection schemes, and "quiet, sleek, and attractive" body (please keep in mind the 2007 date).

Senior Technology Editor Lee Hutchinson's first front-page Ars feature was a two-part, in-depth look at the Drobo FS (here's part 2) in 2011. Drobo wasn't the fastest or most secure, nor did it sport elegant software. But it was "competent, powerful, extensible, and above all else just plain easy."

We'd mention the Drobo optionless nerd cred, more usabilityin occasional reviews and roundups of the network-attached storage (NAS) market. But cloud storage, streaming media, and a general trend away from "huge piles of local files" for all but the most specialized hobbies and careers seemingly ate away at Drobo over time. A NAS that wasn't quite a full NAS but wasn't as easy to use as, say, Backblaze or one of many S3 resellers made for a tough pitch to most people considering a consumer data storage device.

We've reached out to Drobo/StorCentric for comment and will update this post if we hear back.

Listing image by Lee Hutchinson

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Drobo, having stopped sales and support, reportedly files Chapter 7 bankruptcy - Ars Technica

WHEELING A federal judge on Wednesday dismissed the bankruptcy cases filed by Roxby McLure LLC and Roxby Development and lifted the stays that had temporarily protected the embattled company from legal action by a long list of creditors.

Judge David L. Bissett presided over a hearing via teleconference Wednesday afternoon in the U.S. Bankruptcy Court of the Northern District of West Virginia on a motions to dismiss Roxbys bankruptcy cases based on failure to maintain insurance specifically property insurance on the Scottish Rite building and the McLure Hotel and its adjacent parking garage. Parties noted that there is only liability insurance on the McLure Hotel properties at this time.

Several parties joined the hearing, including a number of creditors to whom Roxby owes significant amounts of money.

Attorneys representing the former owners of the McLure House and the Scottish Rite Cathedral both concurred with attorney Shari Collais, representing the Office of the U.S. Trustee in the bankruptcy cases, that property insurance on both landmark buildings in the city was necessary to protect the interests of the creditors involved.

Roxby President Jeffrey Morris and his attorney, Salene Kraemer, requested additional time to secure money through a DIP (Debtor-in-Possession financing) loan to secure property insurance for the properties within the next week or two, but the judge dismissed the bankruptcy cases and granted motions to lift the stay.

The Chapter 11 bankruptcy filings had triggered an automatic stay against further legal proceedings just before a foreclosure sale on the McLure House and the adjacent parking garage was scheduled to take place. Attorney David Delk, named substitute trustee on the deed of trust for the McLure Hotel and parking garage, had planned to move forward on a foreclosure sale of the property on behalf of the hotels previous owner FA Management Inc. and FG Management LLC.

Shortly after Wednesdays ruling in U.S. Bankruptcy Court, Delk submitted a public notice of a new date of sale at 10 a.m. June 1 in the Ohio County Courthouse for the McLure House Hotel and parking garage.

Attorney David Croft of Spillman Thomas & Battle, representing the Scottish Rite, said he is also planning to take similar action as soon as possible to foreclose on the Scottish Rite Cathedral.

According to the bankruptcy filing on behalf of Roxby Development, Roxby Labs and Roxby McLure LLC, the company is in debt to the tune of between $10 million and $50 million.

Return to theintelligencer.net later for more on this developing story.

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Roxby Bankruptcy Cases Dismissed, Foreclosure Action Expected ... - Wheeling Intelligencer