“Retailers are flush with cash and possibly the best performing sector at this point,” said Mandarino. “This might be the first January in a long time you don’t see the typical post-holiday spike in retail bankruptcies.”
Citi’s Surprise Court Loss
Citigroup Inc.’s $900 million back-office payment blunder looked even worse this year when efforts to recoup the funds in court failed.
The surprise ruling is on its face a victory for the funds including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, which received the mistaken Revlon Inc. loan payment and took the matter to court instead of returning the money, but the funds later found themselves shut out of the bank’s debt deals, illustrating the power major banks like Citi still wield in the credit markets.
Meanwhile, Citi appealed the decision in Manhattan federal court, and it awaits a ruling. For now, the bungle has left the bank as one of Revlon’s biggest creditors. The cosmetics company has seen its earnings improve from 2020 lows, though its debt remains deeply distressed.
China Property Meltdown
China Evergrande Group’s construction delays in September spiraled into a major crisis by December, with stress spreading to other Chinese developers. Evergrande and Kaisa Group Holdings Ltd., two giants of the dollar bond market, defaulted on debt payments, while other peers fell in sympathy.
Experienced distressed players including Marathon Asset Management, Saba Capital Management and Redwood Capital Management rushed in to one of the biggest opportunities they’d seen in years. Now they wait to see what China has in store for them.
While exact next steps are unknown, U.S.-based distressed investing heavyweights risk being placed near the bottom of a priority list that includes homeowners, employees, individual investors, suppliers and Chinese banks.
Purdue Pharma
The saga of Purdue Pharma LP came to a stunning crescendo this month that threw the contours of future bankruptcy deals into doubt. A federal judge in New York struck down the OxyContin maker’s multi-billion dollar opioid settlement, wherein its billionaire owners would pledge more than $4 billion and be immune from current and future civil opioid lawsuits.
In her ruling, U.S. District Judge Colleen McMahon said bankruptcy courts don’t have the authority to grant those kinds of releases.
The decision is key for distressed investors because it turns on a long-controversial piece of the bankruptcy process—so-called third-party releases, which insulate non-bankrupt parties from related litigation whether all creditors agree to it or not, and act as a strong incentive to bring parties to the negotiating table.
Purdue has said it will appeal the decision.
—With assistance from Jeremy Hill.
This article was provided by Bloomberg News.