History Rhyming

The fact that private credit defaults in the United States hit 9.2% in 2025, sounds a lot like the leadup to money market funds "Breaking the Buck" in 2008.

The default rate among U.S. corporate borrowers of private credit rose to a record 9.2% in 2025, ​according to a report Friday by credit rating agency ‌Fitch Ratings.

In its monitor of 302 companies with outstanding private credit debt, Fitch recorded 38 defaults among 28 different borrowers. The 9.2% default rate in ​2025 follows a previous record 8.1% rate of defaults ​in 2024.

Smaller issuers with $25 million or less in earnings made ⁠up the majority of last year's defaults, which were diversified ​among sectors, according to the report.

………

Most of ⁠the private credit loans were floating rate and tied to the federal funds rate, which has ​persisted at a high level over the past three ​years. ⁠Fitch pointed to this as a catalyst for last year's defaults.

There are a lot of companies out there who could only service their debts when rates were near 0%.

They are now insolvent, and there is a non-zero chance that this will take down the private credit firms.

This is not good. 

Look Out Below

The 4th largest intermodal trucking company in the United States has just declared bankruptcy.

I guess they couldn't squeeze any more blood from their drivers. 

After nearly half a century in the business, a trucking company has filed for bankruptcy.

This news signals the latest of what’s being called the “Great Freight Recession,” during which a demand for shipping services has dropped while capacity has stayed high.

According to industry publication FreightWaves, STG Logistics — a Dublin, Ohio-based institution that also happens to be the country’s fourth-largest asset-based intermodal marketing company — filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey on Monday.

This pre-negotiated plan, FreightWaves explains, wipes out 91 percent of STG’s almost $1 billion debt. It also gives it $1140 [sic should be $140 million] in new capital in order to support its core business operations, and to compensate its employees and vendors.  

Best economy ever, huh?

We are already in a full recession, not just a, "Freight recession." 

Maybe I Can Buy the World's Smallest Violin on Amazon

Saks, the failing retailer once known as Saks 5th avenue, is filing for bankruptcy, and Amazon is fighting this, because it will make its $457,000,000.00 investment worthless. (Wiping out stockholders is a feature, and not a bug of corporate bankruptcy.

It seems that Amazon bought into the less than successful acquisition of Neiman Marcus,  with the hope of selling overpriced crap with a high end name.

Pardon me while I clean my screen. 

Amazon wants a federal judge to reject Saks Global's bankruptcy financing plan, writing in court papers the beleaguered department store "burned through hundreds of millions of dollars in less than a year" and failed to hold up their agreement.

When Saks acquired Neiman Marcus for $2.7 billion in December 2024, Amazon invested $475 million into the venture on the grounds the retailer would start selling its products on Amazon's website and the tech company would offer technology and logistics expertise.

………

As part of the deal, Saks launched a branded "Saks at Amazon" storefront on the e-commerce company's website featuring a range of luxury fashion and beauty items. It also agreed to pay a referral fee for Saks-branded goods sold on the platform, guaranteeing at least $900 million in payments to Amazon over eight years.

In its filing, Amazon argued that Saks' bankruptcy financing plan harms the company, and other creditors, because it saddles parts of the Saks corporation with new debt that it previously didn't have. It also pushes Amazon further down the pecking order in terms of repayment, which reduces the amount it could potentially be repaid during the proceedings, the e-commerce company said in the filings.

Amazon's argument is basically, "How dare they go bankrupt without us having the opportunity to suck them dry for a decade first."

That's some sweet, sweet schadenfreude. 

Gee, What a Surprise

23andMe is going through bankruptcy, and as a part of the process, it will be selling off DNA data of its customers.

Even if a company promises to be good with your personal data, in bankruptcy, you are f%$#ed.

Twenty-seven states and the District of Columbia have sued the genetic-testing company 23andMe to oppose the sale of DNA data from its customers without their direct consent.

The suit, filed on Monday in U.S. Bankruptcy Court in the Eastern District of Missouri, argues that 23andMe needs to have permission from each and every customer before their data is potentially sold. The company had entered an agreement to sell itself and its assets in bankruptcy court.

The information for sale “comprises an unprecedented compilation of highly sensitive and immutable personal data of consumers,” according to the lawsuit.

“This isn’t just data — it’s your DNA. It’s personal, permanent and deeply private,” Dan Rayfield, the Oregon attorney general, said in a statement. “People did not submit their personal data to 23andMe thinking their genetic blueprint would later be sold off to the highest bidder.”

 We don't need to just fix federal privacy laws, we need to fix federal corporate bankruptcy laws as well.

First of Many?

Here is an interesting equation:

Microsoft Backing + AI Startup + $½ Billion venture funding = Bankruptcy

Builder.ai, the British artificial intelligence startup backed by Microsoft Corp. and the Qatar Investment Authority, is filing for bankruptcy after the chief executive officer said a major creditor had seized most of its cash.

Viola Credit, which provided $50 million in debt to the software firm last year, has seized $37 million from Builder.ai’s accounts, leaving the company with $5 million, Builder.ai Chief Executive Officer Manpreet Ratia said in an interview Tuesday, without giving a clear reason for the seizure. Viola didn’t immediately respond to a request for comment left after business hours.

The company, which operates in five jurisdictions — the UK, the US, India, the United Arab Emirates and Singapore — will file for bankruptcy in due course, following each region’s process, Ratia said.

I am old enough to remember the Dot Com crash of the early aughts, where the VCs made money until they ran out useful idiots to sell their garbage to.  (I also remember LP records, rotary phones, manual typewriters, turning the knob to change the channel, payphones, the Sears catalogue, and Star Trek's original run.  F%$# I'm Old!)

While the internet did eventually produce useful things, in its early days, it was a morass of fraud and stupidity.

So is Large Language Model Artificial Intelligence.

Speaking of Economic Warning Signs

In Germany, the home of sado-monetarism, small and medium company bankruptcies have hit the highest level since 2009.

Not good. 

Germany recorded the highest number of company insolvencies since 2009 in the last quarter of last year, a study from the Halle Institute for Economic Research (IWH) showed on Thursday, reflecting high interest rates and increased prices.

The fourth quarter of 2024 saw 4,215 company insolvencies with almost 38,000 jobs affected, according to the study, a level unseen since the financial crisis in mid-2009.

Compared with the fourth quarter of 2023, the number of insolvencies at the end of last year rose by 36%, as calculated by IWH.

The institute attributes the negative development only partly to the current economic crisis and increases in the cost of energy and wages."Years of extremely low interest rates have prevented insolvencies, and during the pandemic, insolvencies have failed to materialize due to subsidies such as short-time work benefits," said Steffen Mueller, head of insolvencies research at IWH.

Fasten your seat belts, it's going to be a bumpy night.

Damn

The bankruptcy judge in Houston rejected the sale of Alex Jones' Infowars to The Onion.

I think that his ruling was complete bullash%$, and is an indication of the general corruption of the US bankruptcy courts.

A judge late Tuesday night said he would not approve the sale of Infowars, the website founded by the conspiracy theorist Alex Jones, to the Chicago-based satirical publication The Onion, prolonging a messy tug of war between two high-profile suitors.

The ruling, by Judge Christopher M. Lopez in federal bankruptcy court in Houston, poses a roadblock for The Onion’s plan to take possession of the Infowars site and its associated assets after it won an auction last month. The Onion’s bid was backed by the families of the victims of the Sandy Hook shooting, who in 2022 won a $1.4 billion defamation lawsuit against Mr. Jones.

Mr. Jones spent years claiming that the 2012 school shooting was a hoax and that victims’ family members were actors complicit in the plot. The Onion has said that it wants to turn Infowars into a satirical site mocking the kind of conspiracy theories that Mr. Jones spreads.

Judge Lopez’s ruling put the fate of Infowars in limbo. He instructed a court-appointed trustee, Christopher Murray, to come up with an alternative resolution, though it was not immediately clear what approach Mr. Murray would take. He did not immediately respond to a request for comment.

The deal that the trustee approved basically had the Connecticut parents foregoing much of their award so that other creditors were to get more.  (They really wanted to hurt Jones, a sentiment that I support)

This sucks.

Headline of the Day

FTX Sues Binance for $1.76b in Battle of Crypto Exchanges Founded by Convicts

—Ars Technica

If this does not make absolutely clear Crypto is a scam, and always has been, you have not been paying attention.

The bankruptcy estate of collapsed cryptocurrency exchange FTX has sued the company's former rival Binance in an attempt to recover $1.76 billion or more. The lawsuit seeks "at least $1.76 billion that was fraudulently transferred to Binance and its executives at the FTX creditors' expense, as well as compensatory and punitive damages to be determined at trial."

The complaint filed yesterday in US Bankruptcy Court in Delaware names Binance and co-founder and former CEO Changpeng Zhao among the defendants. FTX founder Sam Bankman-Fried sold 20 percent of his crypto exchange to Binance in November 2019, but Binance exited that investment in 2021, the lawsuit said.

"As Zhao would later remark, he decided to exit his position in FTX because of personal grievances he had against Bankman-Fried," the lawsuit said. "In July 2021, the parties negotiated a deal whereby FTX bought back Binance's and its executives' entire stakes in both FTX Trading and [parent company] WRS. Pursuant to that deal, FTX's Alameda Research division directly funded the share repurchase with a combination of FTT (FTX's exchange token), BNB (Binance's exchange token), and BUSD (Binance's dollar-pegged stablecoin). In the aggregate, those tokens had a fair market value of at least $1.76 billion."

Because FTX and Alameda were balance-sheet insolvent by early 2021, the $1.76 billion transfer "was a constructive fraudulent transfer based on a straightforward application" of bankruptcy law, and an intentional fraudulent transfer "because the transfer was made in furtherance of Bankman-Fried's scheme," the lawsuit said.

My Heart Bleeds Borscht

With the recent Supreme Court decision voiding the Purdue Pharma bankruptcy has resulted in dozens of lawsuits being mooted against the company and its owners, the Sackler family.

Good.

While I don't expect these lawsuits to impoverish the family, who consciously stripped the company of assets as its liability issues increased, they will, at least be less rich:

Purdue Pharma’s creditors and more than 40 states are preparing a barrage of legal actions against members of the Sackler family, less than two weeks after the Supreme Court denied them legal immunity for their role as the company’s owners in the opioid crisis.

Purdue itself is supporting a proposal by a group of its creditors to sue individual Sacklers for transferring billions of dollars out of the company and into family trusts and overseas holding companies.

The motions, some filed and others in the planning stage, are part of intense maneuvering to pressure the Sacklers to settle thousands of opioid lawsuits brought years ago against them and their company. Negotiations are expected to resume imminently in mediation sessions and are widely seen as a last-ditch effort to reach a fresh deal. If one isn’t struck by Sept. 9, thousands of lawsuits against the company and family members, which have been on hold for nearly five years, are likely to proceed.

The Supreme Court’s ruling, on June 27, effectively dissolved an agreement negotiated between the Sacklers and Purdue, the manufacturer of the prescription opioid OxyContin, and states, local and tribal governments as well as individuals and other groups. Under that plan, the Sackers had agreed to contribute $6 billion — but only on the condition that they be granted protection from all civil lawsuits involving opioid claims.

The court said that although Purdue was entitled to liability protections, the Sacklers were not eligible. That is because Purdue sought bankruptcy restructuring, in which liability shields are commonly granted, but the Sacklers did not file for personal bankruptcy.

The Supreme Court got one right this session.  Stopped clock and all that.

………

Documentation that the Sacklers withdrew billions from Purdue has been public for years, notably from an audit by an independent firm that Purdue commissioned.

“The case for fraudulent transfer certainly looks strong,” said Melissa B. Jacoby, a law professor at the University of North Carolina at Chapel Hill and author of a book about the bankruptcy system.

Technically, the looting of Purdue Pharma by the Sacklers is fraud.  There should be criminal investigations in addition to the civil suits.

The Joys of Private Equity

It turns out that Wall Street whiz kids took over a regional hospital in Florida, and turned it into a sewage and bat infested hellhole.

The Cerberus Capital Management backed Steward Healthcare Systems is circling the toilets, and medical care at the roughly three dozen medical institutions has descended into something that resembles the black hole of Calcutta:

The Rockledge Regional Medical Center reeks of raw sewage and bat guano. No one knew that bat shit was called “guano,” or that the pungent smell emanating from the fifth-floor intensive care unit had bat guano as a source, until last spring, when a delirious patient complained he was being attacked by a “giant grasshopper,” which turned out to be a bat, which turned out to be one of what four nurses told the Prospect was estimated to be at least five thousand more.

The exterminators alleged in court that Steward Health, Rockledge’s corporate owner, never paid them the $936,320 they were owed for “evicting” the bats from the hospital, which sits roughly eight miles southwest of the Cape Canaveral Space Force Station. And so when, a week or two before Christmas, the sinks on the second floor began backing up with thick, black gunk that smelled like feces of the human sort, the hospital’s in-house maintenance staff tried to handle the job themselves.

For a few frenzied days, they snaked the drain trying to find the clog, at which point they realized that one of the pipes was leaking sewage from what seemed to be a massive hole. “There was literally poop everywhere: on the walls, on the floor, I know it was on the equipment,” says a nurse, who snapped some photos of the storage room where the maintenance crew had attempted to fix the building’s aging pipes. One photo of a sink partially filled with the mysterious black liquid showed up on the “Rockledge, Florida Community Updates & News” Facebook group, posted by the granddaughter of a stroke victim who had been admitted to the ICU. Somehow the photo disappeared, and Poopageddon

Rockledge is just one of 32 hospitals operated by Steward Health, which the Democratic mayor of Haverhill, Massachusetts, recently described by saying, “I think we are, perhaps, the victims of a Ponzi scheme.” Nurses say the hospital is chronically out of heart valves, urology lasers, Impella catheters, cardiac catheterization balloons, slings for lifting heavier patients, blood and urine test reagents, and most recently, prescription paper. Medical equipment used in lifesaving treatment has been repossessed, as have Pepsi machines and even, according to one account from an alleged longtime employee posted on Reddit, a quantity of Boar’s Head deli meats. And Steward has been sued by dozens of vendors and service providers, from landscaping services to revenue cycle managers to a long list of physician and nurse staffing agencies, for failing to pay its bills.never made it onto the local TV news, the way the bat infestation had.

Rockledge is just one of 32 hospitals operated by Steward Health, which the Democratic mayor of Haverhill, Massachusetts, recently described by saying, “I think we are, perhaps, the victims of a Ponzi scheme.” Nurses say the hospital is chronically out of heart valves, urology lasers, Impella catheters, cardiac catheterization balloons, slings for lifting heavier patients, blood and urine test reagents, and most recently, prescription paper. Medical equipment used in lifesaving treatment has been repossessed, as have Pepsi machines and even, according to one account from an alleged longtime employee posted on Reddit, a quantity of Boar’s Head deli meats. And Steward has been sued by dozens of vendors and service providers, from landscaping services to revenue cycle managers to a long list of physician and nurse staffing agencies, for failing to pay its bills.

………

In Steward’s early days, de la Torre told investors the company would disrupt health care by promoting a new business model that would “integrate” patients’ medical needs under one roof (and according to lawsuits and federal regulations, evade certain federal laws banning physician kickbacks and self-referrals). But by the time Steward bought Rockledge, a former administrator says, integrating networks was no longer a priority. The company immediately sold the hospital’s brand-new hospice center and home health care business and began shutting down or outsourcing the management of other departments to service providers. “It was pretty clear they were just there to move money around,” the former administrator, who left Steward less than a year ago, told the Prospect.

Gee, private equity and regulatory arbitrage destroying people's lives.  Sounds a lot like PayPal, or Theranos, or college financial planning outfit Frank, or various cryptocurreny firms.

If the business model is based on evading regulations, the business is probably a fraud.

Good Riddance

Bird, the dockless electric scooter company that has been blocking sidewalks, and preventing people in wheelchairs from getting around, has filed for bankruptcy. 

Good.  They were a bunch of parasites whose whole business model was predicated on monetizing the public commons for their own personal profit:

Bird has filed for Chapter 11 bankruptcy, capping off a turbulent year for the electric scooter company.

In a press release today, Bird confirmed that it had entered into a “financial restructuring process aimed at strengthening its balance sheet,” with the company continuing to operate as normal in pursuit of “long-term, sustainable growth.”

Founded in 2017 by former Lyft and Uber executive Travis VanderZanden, Bird is one of numerous startups to introduce dockless micromobility platforms around the world, allowing city-dwellers to pay for short-term access to electric scooters or bikes. The company went public in late 2021 via a SPAC merger, but in a crowded market built on questionable economics, its stock went into a perennial nosedive, with its market cap dropping from more than $2 billion at its New York Stock Exchange (NYSE) debut to just $70 million 12 months later. This decline led the NYSE to issue a warning that Bird’s share price was too low.

Things didn’t improve, and with its share price continuing to plummet, CEO VanderZanden departed in June with the company eventually delisted from the NYSE in September.

Let's see, you had a business model where the basic product had safety issues (ever been nearly run down on a side walk?), few barriers to competitor entry, large ongoing maintenance costs, and they are having problems?

Hoocoodanode?  Certainly not the plethora of venture capital firms that dropped about a billion before it went public, and then probably cashed in before the roof fell in.

I am sick and tired of the pump and dump VC Ponzi bullsh%$.

Oh, You Poor Baby

Rudolph Giuliani has filed for bankruptcy in response to a $148,000,000.00 defamation judgement against him.

It won't help much.  Much of that judgement is for intentional infliction of distress, and intentional harms cannot be discharged through bankruptcy.

Maybe he should set up a GoFundMe.

An Update on US Bankruptcy Courts

So, I posted on Twitter that Robert Drain of Perdue Pharma infamany had redired as a judge in the context of the resignation of Judge David Jones, (See my post from yesterday) and someone made the whole sordid affair even worse:

Not only did Drain retire after Purdue, he joined the firm that represented Purdue in his court, Skadden! pic.twitter.com/eVRVFarPTc

— Baraa Shaheen (@alba_shah) October 18, 2023

So, not only Drain let the Sackler Crime Family, but then he got paid off with a choice sinecure from the law firm representing them.

So it ain't just Judge Jones who needs a visit from the local constabulary.

Good Riddance

When you look at big ticket bankruptcy trials, there were 3 courts in the US that handle the majority of them, (61% of cases) White Plains, New York, Houston, Texas, and Richmond, Virginia, and just 5 judges,

As I have observed before, this happens because judges are aggressively wooing big bankruptcy cases with the promise of courts that are biased in favor of the filers..

The judges are/were Robert Drain (White Plains), David Jones and Marvin Isgur (Houston), and Keith Phillips and Judge Kevin Huennekens (Richmond).

It should be noted that Robert Drain moved from New York City, where was one of a number of judsges chosen randomly, to White Plains where he was the only available judge, and where the Sackler crime family moved Purdue Pharma headquarters prior to filing bankruptcy because they wanted a big corporation friendly judge.

In Houston, home of the notorious Texas Two Step Bankruptcy scam, any large cases are automatically moved to either Jones or Isgur, who have publicly and aggressively solicited these large cases.

Following his disgraceful and corrupt ruling in the Purdue Pharma, which gained him some well deserved, if undesired, public infamy, he retired and went to work for the Corporate Restructuring Group at the law firm Skadden, Arps, Slate, Meagher & Flom, where I am sure that he is crying all the way to the bank.

Well another judge, this time David Jones in Houston, resigned and a misconduct investigation has initiated because he was hearing cases from his live in girlfriend.

The remarkable thing about this is that it was uncovered by a litigant who was representing himself in court (the legal term is pro se) who uncovered this.

Actually, that bit about the pro se litigant revealing this may not be that surprising.  Unlike the lawyers who regularly represent clients before that court, he did not have to worry about retribution from from either Jones or his fellow judges.

It seems that judge thought that, even though he had lived with his girlfriend for years, it wasn't a conflict of interest because they were not married. (J.D. Harvard Law. Who knew that a Harvard Law School diploma was not worth the paper on which it was printed?)

David Jones has resigned his post as chief bankruptcy judge for the Southern District of Texas– a stunning turn of events for one of the country's most powerful bankruptcy judges who has overseen a series of high-profile cases during his tenure.

Chief District Judge Randy Crane of the Southern District of Texas confirmed Jones' resignation in an interview with Insider. He said that the decision would go into effect on November 15.

The more than 3,000 cases that were on Jones' docket will be redistributed to other judges, Crane added.

3,000 cases?  Given that the average number of cases on the docket of a federal judge in the 5th circuit, Jones' circuit, is 783, it appears to me that he has been a very busy boy.

My guess is that he had a bankruptcy fraud friendly "Rocket docket," and that is why he had so many cases on his docket.

There has clearly been a f%$# tonne of pandering to rich pig mega corporations who want to ditch retirement obligations, or, as in the case of the Sackler crime family, the consequences actual homicide.

………

Until Insider disclosed it, neither Jones nor Freeman had acknowledged their relationship. The allegations first emerged in a suit filed earlier this month by pro se plaintiff Michael Van Deelen, who shared the complaint with Insider.

Jones later confirmed to The Wall Street Journal that he and Freeman are in a romantic relationship and had shared a home for years.

[Chief District Judge Randy] Crane told Insider that Freeman was recently removed from the Attorney Admissions Fund Committee, which administers the fees collected when attorneys join the bar. It's unclear whether she'll remain in her role as the chair of the court's bankruptcy bench bar conference, he added.

………

On Friday, Jones said in a federal court hearing that he was under investigation by the US Court of Appeals for the Fifth Circuit following media reports about the relationship, and that he would be stepping down from his cases. Later that day, Judge Priscilla Richman of the Fifth Circuit issued a formal complaint against Jones, writing that there was "probable cause to believe" that Jones had engaged in misconduct.

Richman specifically cited Jones' role as mediator in a matter involving Freeman, alluding to the Tehum case. "Judge Jones did not disclose his relationship with Ms. Freeman to the parties, to their counsel or to the bankruptcy judge who appointed Judge Jones," the misconduct complaint says.

It should be noted here that the, "Bankruptcy judge who appointed Judge Jones," was in fact Judge Jones.

Jones and his girl friend need to be disbarred at a minimum, and probably should be arrested.

As for the rest of the 5th Circuit, they had to know that Jones and Freeman were living together, and that entire circuit should be gone over with a microscope.

Dictionary Definition Of, “This Sh^% Is Getting Real.”

On Sunday, I mentioned that Ammon Bundy had been arrested and was jailed over the weekend for contempt of court.


I kind of figured that this would be the end of this, and that Bundy would use of it as a way to enhance his highly lucrative American revolutionary act, so I figured that a couple of days in lockup would as much amusement as I would find.

Thankfully, I was wrong about this, because the judge who Bundy dissed just froze his accounts, because Bundy has been aggressively concealing assets.

Going after his money is kind of the definition of it getting real, at least in the United States:

Just days after St. Luke’s Health System filed a new lawsuit against far-right activist Ammon Bundy — accusing him of hiding assets to avoid paying damages a jury awarded in a defamation case — an Idaho judge has restricted the failed gubernatorial candidate’s finances.

Third District Judge Brent Whiting issued a verbal restraining order during a Monday afternoon hearing restricting Bundy and his wife — as well as entities he controls — from transferring ownership of any properties, companies or other significant assets, attorney Erik Stidham, who is representing St. Luke’s, told the Idaho Statesman.

………

“The individual gets to, of course, pay his bills, feed his family, those kinds of things,” Stidham said.

Ammon, need some ointment for that burn?

In July, a 12-person jury ordered Bundy and Diego Rodriguez, his former campaign adviser and close associate, and their organizations to pay a total of $52.5 million in damages to St. Luke’s and other plaintiffs, the Idaho Statesman previously reported. Bundy and Rodriguez led protests at the St. Luke’s hospitals in Meridian and downtown Boise in March 2022 over a child welfare case involving Rodriguez’s 10-month-old grandchild, leading to the defamation case.

St. Luke’s filed a 22-page complaint Friday asking the 3rd Judicial District to void any transfers of property or assets made by Bundy and his wife, including what the plantiffs called the “sham transaction” of their 5-acre, 4,760-square-foot Emmett home, which St. Luke’s claims was done to avoid paying millions in damages.

………

The defendants, including Bundy’s People’s Rights Network, Bundy for Governor and White Barn Enterprises, are also prevented from transferring ownership of any assets, Stidham said. White Barn is controlled by Aaron Welling, a former gubernatorial campaign treasurer for Bundy and his longtime friend, according to the lawsuit.

According to the Idaho Capital Sun, which first reported on Monday’s hearing, the defendants are also restricted from spending more than $5,000 for the next two weeks.

Once again I feel the need to quote Billy Ray Valentine (Eddie Murphy) from the movie Trading Places, "The best way you hurt rich people is by turning them into poor people." 

I am amused.

Good News Everyone!

I did not expect this, but has just stayed Purdue Pharm's bankruptcy.  More specifically, it will rule on the bankruptcy discharging liability for the Sackler family as a part of this deal.

Good.

I did not expect this, but it seems to me that if corporations are people, then the bankruptcy of a corporation should not discharge any obligations of any other person. 

It is only in federal bankruptcy courts in certain districts, such as the one where Purdue relocated to just prior to their bankruptcy extend bankruptcy to right owners and it seems to me that SCOTUS would have not placed a stay on the bankruptcy unless there was significant sentiment on the court for reversing the decision of the lower court: (On edit: See Cory Doctorow here detailing how they "Moved" to White Plains, New York to get one of the 3 corrupt bankruptcy judges favored by big companies declaring bankruptcy*)

The Supreme Court blocked Purdue Pharma’s $6 billion settlement of opioid lawsuits against its Sackler family owners, agreeing to hear the Justice Department’s claim that the drugmaker’s bankruptcy plan improperly wipes out potential liability to additional parties for allegedly fueling the opioid addiction crisis.

The justices, by taking up the case and preventing Purdue from carrying out the settlement during the appeal, ensured that a sizable chunk of tens of billions of dollars pledged by the pharmaceutical industry to combat the opioid crisis will be delayed—or not paid at all. But the move eventually could open the door for parties who balked at the deal to win additional compensation.

The court’s review also will extend the long, costly litigation alleging that drug manufacturers, distributors and pharmacies oversupplied painkillers as opioid addiction grew into an epidemic.

The legal uncertainty also will continue for the Sacklers, who sought to use Purdue’s chapter 11 proceedings to resolve opioid lawsuits aimed at holding them responsible for the costs of addiction and clawing back distributions they received from the closely held manufacturer before its bankruptcy.

The idea that owners should not be liable for a company's debts is at the core of modern finance and bankruptcy law, and I generally support this, particularly for mere shareholders, though I think that it is carried to far in recent years

The difference here is the Sacklers were not just owners.  Members of the Sackler family ran the company, and this firm to aggressively pursue addiction and misuse of Oxycontin because it increased their profits.

They are criminals, and even those who just won the birth lottery and did not participate in the management of the company knew where their money came from.

I'm not optimistic about a Billy Ray Valentine scenario,^† but at the very least, the Sackler family, have to be sh%$ting their pants right now.

^*Here is the important quote:

Three judges – David Jones and Marvin Isgur of Houston and Bob Drain of New York – hear 96% of the country's large corporate bankruptcies:

https://www.creditslips.org/creditslips/2021/05/judge-shopping-in-bankruptcy.html

These judges are unbelievably horny for corporations, embracing a legal theory "that casts the invention of the limited liability corporation alongside that of the steam engine as a paradigmatic development in the pursuit of prosperity":

https://prospect.org/justice/how-do-you-solve-a-problem-like-the-sacklers-purdue-pharma-bankruptcy/

Now there are more than three bankruptcy judges in America, so how do the nation's biggest companies get their cases heard by these three enthusiastic Renfields for corporate vampirism?

They cheat.

For example: when GM was facing bankruptcy, it argued that it was a New York company on the basis that it owned a single Chevy dealership in Harlem, and got in front of Judge Drain.

The Sacklers were – characteristically – even more brazen. They really wanted to get their case in front of Judge Drain, the nation's most enthusiastic supporter of "third party releases," through which bankrupt billionaires can wipe the slate clean, securing dismissals of all claims by the people they wronged.

Drain is also uniquely hostile to independent examiners, "an independent third-party appointed by the court to investigate 'fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity…by current or former management of the debtor."

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3851339

If you're the Sacklers, hoping to keep two thirds of your billions and extinguish all claims by your victims, there is no better helpmeet than Judge Robert Drain of the Southern District of New York. So, 192 days before filing for bankruptcy, the Sacklers opened an office in White Plains, New York (a company may claim jurisdiction in a specific court once they've operated a business there for 180 days).

Then they filed a bankruptcy in which they altered the metadata on their casefile, inserting the code for a Westchester county hearing into the machine-readable, human-invisible parts of the documents they uploaded to the federal Case Management/Electronic Case Files (CM/ECF) system (they also captioned the case with "RDD, for "Robert D Drain").

They chose their judge, and the judge obliged. UCLA Law's Lynn LoPucki is one of the leading scholars of these bankruptcy "megacases," and has written extensively on why these three judges are so deferential to corporate criminals seeking to flense themselves of culpability. She sees judges like Drain motivated by "personal aggrandizement and celebrity and ability to indirectly channel to the local bankruptcy bar. The judge is the star and the ringmaster of a megacase – very appealing to certain personalities."

Thus, these judges are "willing and eager to cater to debtors to attract business…[an] assurance to debtors that…these judges will not transfer out cases with improper venue or rule against the debtor…"

https://www.fulcrum.org/concern/monographs/02870w66d

^†It comes from the movie Trading Places, "You know, it occurs to me that the best way you hurt rich people is by turning them into poor people."

Occasionally, There Is Justice

So Envision Healthcare, which has gained notoriety for buying up hospital emergency room practices, and then cheating patients through balance billing, forcing doctors to upcode, and firing doctors who complained about their fraud, has had to file for bankruptcy:

Physician staffing firm Envision Healthcare has filed for Chapter 11 bankruptcy, citing its $7.7 billion in debt obligations, declining patient volumes, “flawed” implementation of the No Surprises Act and exclusionary health insurers as reasons for its financial decline in a restructuring announcement on Monday.

The bankruptcy wipes out private equity firm KKR’s investment in Envision. In 2018, the PE firm shelled out over $5 billion in 2018 to take Envision private, in a deal valued at $9.9 billion including debt. Last week, The Wall Street Journal reported that an Envision bankruptcy filing would be one of the steepest losses in KKR’s history.

The physician staffing firm suffered from declining profits amid hurdles from the COVID-19 pandemic and prolonged legal battles with health insurer UnitedHealthcare over payment to Envision clinicians, which caused Envision to lose its in-network status with the insurer in early 2021.

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UnitedHealthcare sued the staffing firm in September, alleging that it overpaid Envision after it exaggerated the complexity of care provided by its clinicians. In April, Envision announced that it was awarded $91 million from an arbitration panel for payment disputes in 2017 and 2018. At the time, Envision CEO Jim Rechtin said it had three outstanding lawsuits against UnitedHealthcare that would take “several more years” to resolve.

Envision also targeted recent regulatory efforts to stop surprise out-of-network bills for patients in its bankruptcy announcement, saying that implementation of the No Surprises Act caused the company to lose “hundreds of millions of dollars” in delayed or reduced payments from insurers.

So a a healthcare operation whose business model was predecated on fraud is in bankruptcy, and the PE firm which created the firm in its current form lost billions.

I call that a good start.

My guess is that the lawsuit by physicians groups claiming that they were using shell companies to illegally acquire corporate control of doctor's practices had something to do with this: (Ownership of medical practices by non-doctors is illegal in most states)

Physicians and consumer advocates are monitoring a California lawsuit against Envision Healthcare, which alleges that Envision uses shell business structures to retain de facto ownership of emergency room staffing groups and asks the court to declare these structures illegal, Kaiser Health News reported Dec. 22.

Milwaukee-based American Academy of Emergency Medicine Physician Group, the plaintiff in the case set to start in January 2024, said a victory would result in prohibition of the practice across California in emergency rooms as well as anesthesiology and hospital medicine.

I agree with LA Times writer Michael Hiltzik, this is, "A rare victory for patients in the healthcare business." 

For profit enterprises, particularly those pump and dump artists in private equity, are completely incompatible with public health.

 

Never Worth $5.7 Billion

Vice Media has filed for bankruptcy.

At one point, Vice had a market capitalization of $5,700,000,000.00.

That's a lot of zeros, but it appears that they were a mirage.

Vice Media filed for bankruptcy on Monday, punctuating a yearslong descent from a new-media darling to a cautionary tale of the problems facing the digital publishing industry.

The bankruptcy will not interrupt daily operations for Vice’s businesses, which in addition to its flagship website include the ad agency Virtue, the Pulse Films division and Refinery29, a women-focused site acquired by Vice in 2019.

A group of Vice’s lenders, including Fortress Investment Group and Soros Fund Management, is in the leading position to acquire the company out of bankruptcy. The group has submitted a bid of $225 million, which would be covered by its existing loans to the company. It would also take over “significant liabilities” from Vice after any deal closes.

My comment on the whole Unicorn phenomenon a while back applies. The sky high valuation was a function of a pump and dump operation.

………

Still, the dreams that Vice executives once had of a stock market debut or a sale at an eye-popping valuation have been wiped away. The company was considered to be worth $5.7 billion at one point.

By comparison, the New York Times Company currently has a market capitalization of $6.03 billion, and Vice had a market cap almost equal to this.

The venture capitalists pumped the market capitalization into the stratosphere, and doubtless sold off much of their stakes before the inevitable reckoning came.

It's fraud, pure and simple.

Your Mouth to God's Ear, Warren

Warren Buffett is saying that executives and board members at the three (3½?) failed banks should face, "Punishment."

Buffett is suggesting financial consequences, something that I agree with and not criminal prosecution.

I am of the, "Why not both?" persuasion myself.

As I noted more than 4 years ago, we have historical studies showing that bankers are more reckless when they are provided greater insulation from the consequences of their mismanagement.  (It involves the potential use of spousal assets to mitigate the personal effects on bank presidents of failures of their institutions.)

If people take stupid risks because they make money now, and can walk away when it all blows up, then they will continue to take stupid risks:

The billionaire investor Warren Buffett has said executives who led the US banking system into crisis should face “punishment”, as the American economy grapples with the worst series of bank failures since the 2008 financial crash.

The owner of the investment firm Berkshire Hathaway said US bank directors “should suffer” when they run into trouble, adding that he was wary of most banking stocks because of “the messed-up incentives”.

………

Speaking at Berkshire’s annual shareholder meeting, Buffett criticised how politicians, regulators and the press had handled the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank, saying their “very poor” messaging has unnecessarily frightened depositors.

He said “the CEO and directors should suffer” when the banks they run get into trouble. Otherwise, it “teaches the lesson that if you run a bank and screw it up, you’re still a rich guy, the world still goes on … That is not a good lesson to teach the people who are holding the behaviour of the economy in their hands.”

………

He said: “The incentives in bank regulation are so messed up and so many people have an interest in having them messed up … it’s totally crazy.” You have to have a punishment for people who do the wrong thing.

………

Charlie Munger, the Berkshire Hathaway vice-chairman and Buffett’s right-hand man, echoed his concerns, telling the meeting: “I don’t think having a bunch of bankers, all of whom are trying to get rich, leads to good things. I think bankers should be more like an engineer, avoiding trouble rather than trying to get rich … It’s a contradiction in values.”

Indeed.  To quote Elizabeth Warren, "What I want to do is get banking back where it ought to be, and that is boring."

Also, frog-marching executives out of their homes and offices in handcuffs is a good way to do this.

And Now on to Credit Suisse

In response to years of mismanagement, with a side order of money laundering, Credit Suisse was subject to a forced sale to UBS with a backstop from the Swiss government to the tune of ₣12,500 ($13,00.00) for every man, woman, and child in Switzerland, a total of ₣109,000,000,000.00.

But it's not a bailout, because ……… The Aristocrats!

There is not a whole bunch that I can add to the immediate cause of all of this, that Credit Suisse was a corrupt and poorly run bank was a not particularly well kept secret for years.  (The same goes for Deutsche Bank, but it's not in crisis ……… so far ……… today)

It's been experiencing a slow-walked bank run for the past 2-3 years, and SVB's collapse turned that into a rout.

Adam Tooze has an interesting take on all this, which is that Switzerland, specifically Zurich, and he calls out the, Zurich based liberal elites, (Liberal in the 19th century hyper-capitalist sense) specifically,  their efforts, "To build corporate champions of global scale on the basis of the incestuous networked politics of Switzerland."

It is a rather interesting  take on all of this, but I am more inclined to believe that this, much like Silicon Valley Bank's failure, is more an artifact of our corrupt and risky international financial amusing.

There is a bit of Shadenfreude in all of this though,

The Swiss Bank's failure looks to be turning one of the constants in bankruptcy on its head.

Typically, the shareholders are at the very end of the line as debtors, but in the case of Credit Suisse, Contingent Convertibles (CoCo) bond holders are behind the shareholders, which is creating outrage from people who neglected to read the specific terms of those bonds, which means that as opposed to getting a major haircut, they are getting nothing:

One of the elements in the takeunder by UBS of Credit Suisse was that CHF 16 billion (about $17.3 billion) in CoCo bonds got wiped out totally, while shareholders got wiped out only almost totally. Swiss regulator FINMA, when announcing the deal on Sunday, said that CoCo bonds would be written down to zero, in a sense subordinating bondholders to shareholders, which is like a total no-no very-bad-boy thing to do, because normally, shareholders would get totally wiped out first, and then bond holders would start taking their turn.

Turns out, there were some clauses in the documents of the CoCo bonds, issued in Switzerland, that allowed this under certain conditions and triggers. But no one ever reads any clauses, and so it came as a surprise, shaking up the $275 billion market for these creatures that came out of the swamp of the Financial Crisis.

What are Additional Tier 1 CoCo bonds?

CoCos – short for “contingent convertible capital instruments,” also known as Additional Tier 1 (AT1) bonds – were created in Europe in response to the financial crisis as a way to boost bank capital without diluting existing shareholders. Before, a bank would have to sell shares to raise capital, thereby diluting existing shareholders. With this instrument, they could weasel their way around selling shares and still raise capital for regulatory purposes. 

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Credit Swiss has been teetering on the brink for years. It has been hobbling from scandal to scandal, each time losing billions of francs along the way, and each time, its shares got beaten to a new record low. And all along the way, new investors were bamboozled into investing billions of dollars in this thing to boost its capital and keep it alive. And the money just vanished. The culture of risk-taking and doing shady deals was something that could apparently not be changed by the CEOs that came and went. Or they didn’t want to change it – despite rhetoric to the contrary – because they were focused on boosting the share price or whatever. The SNB wouldn’t let it collapse, and regulators didn’t force it to straighten out. But a lot of losses to the Swiss public and investors could have been avoided if this creature had been taken out the back and shot years ago.

Please, won't someone think of the investment bankers? 

They have a mistress, a rent boy, and cocaine habit to support.

The idea that they should have to find honest work shocks the conscience.

Oh the hu……… Well, you know.