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What We’re Reading This Week [October 21, 2022]

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On October 19th, the Wall Street Journal reported that the electric vehicle startup Mullen Automotive Inc., gained court approval to buy an Indiana manufacturing plant and assets from Electric Last Mile Solutions for $92 million. Such deal, which boosted Mullen’s share prices by 64%, includes Electric Last Mile Solutions’ manufacturing plant in Mishawaka, Indiana and its inventory and intellectual property. Mullen is paying $55 million in cash and assuming roughly $37 million in contractual liabilities. 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 merging with a special-purpose acquisition company last year.

The Wall Street Journal also reported on October 18th, that Bed Bath & Beyond has made a debt-exchange offer to unsecured noteholders to help extend debt maturities and reduce interest expenses. Specifically, Bed Bath & Beyond has offered to exchange its unsecured notes maturing in 2034 and 2044 for new third-lien debt carrying a 12% interest rate. Bondholders have until November 15th to accept the offer and those who do will take a roughly 78% discount to face value. Some investors in Bed Bath & Beyond are wary of potentially coercive exchange 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 company’s financial burden amid dropping sales.

On October 17th, Bloomberg reported that the city of Chester, Pennsylvania, is considering filing for bankruptcy. Chester is a city just outside of Philadelphia which has a population of approximately 33,000 residents, 30% of whom live below the poverty line. A state-appointed receiver, who was appointed in 2020, has noted that the city’s debt has “piled up” as the city has faced a deepening downward financial spiral. A potential bankruptcy decision also comes as the city police pension fund is set to run out of cash in the coming months. The city had underpaid its pension funds amid budget deficits, an issue magnified by a purported miscalculation of benefits. Chester currently owes $53.9 million in pension contributions.

On October 15th, Reuters reported that LATAM Airlines, the biggest airline in Latin America, announced that it will exit bankruptcy on November 3, 2022. LATAM, like many travel services, suffered significant challenges resulting from COVID-related travel disruptions. It entered bankruptcy in May, 2020 in the Southern District of New York. LATAM’s Chapter 11 Plan of Reorganization was confirmed in June, 2022 but was challenged by certain claimholders. Now, the company plans to emerge with approximately $10.3 billion in equity and close to $6.9 billion in debt.

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