Financial experts from Reorg, Mike Legge, Karen Leung, and David Mayo, discuss the current state of third-party releases in bankruptcy, focusing on recent decisions in Purdue Pharma and Mallinckrodt. They also explore the controversies surrounding third-party releases and the legal arguments surrounding non-consensual releases. Additionally, they discuss the Texas two-step strategy in bankruptcy and the ongoing bankruptcy case of the J and J subsidiary, LTL Management.
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Quick takeaways
The interim final rule implementing the Arbitration Provisions of the Federal No Surprises Act could have devastating consequences on out-of-network reimbursement and jeopardize emergency providers and air ambulance services.
AMC's potential financing options and ability to repurchase its second-lien notes are impacted by the film slate for 2022 and the January box office slump.
The bankruptcy court lacks the statutory authority to approve the releases of the Sacklers' debts and the releases themselves contravene specific provisions of the bankruptcy code.
Deep dives
Medical associations argue for vacating no surprises act arbitration rules
The American Medical Association and the American Hospital Association have filed a combined reply in the consolidated surprise billing litigation, arguing for the vacating of the interim final rule implementing the Arbitration Provisions of the Federal No Surprises Act. They claim that the rule could have devastating consequences on out-of-network reimbursement and jeopardize the viability of emergency providers and air ambulance services.
Reorg analysis of AMC's potential financing options
Reorg published an analysis of AMC's potential financing options following its debt refinancing. The analysis takes into account the film slate for 2022, the liquidity position of the company, and the ability to repurchase its second-lien notes. The report explores the impact of a January box office slump on AMC's liquidity and its ability to repurchase the notes.
Appeal filed by Malincrot Octar claimants denied
Humana and another claimant have asked for leave to directly appeal Judge Dorsey's decision in the Malincrot bankruptcy case. The claimants argue that their appeal raises a critical question of antitrust law that the Third Circuit should address. However, their request was denied, and the ruling on the antitrust and Rico claims stands.
Lack of statutory basis for releases of debtors' claims
Judge McMahon states that the bankruptcy court lacks the statutory authority to approve the releases of the Sacklers' debts. She argues that the cited sections only give the bankruptcy court power to enter orders implementing other provisions of the bankruptcy code, which do not authorize the releases. Additionally, the releases themselves contravene specific provisions of the bankruptcy code by discharging the Sacklers from debts they couldn't obtain if they filed for bankruptcy.
Bankruptcy court's constitutional authority
Judge McMahon discusses the bankruptcy court's constitutional authority to enter a final judgment releasing claims covered by the Sackler release. She distinguishes between core and non-core claims and concludes that the bankruptcy court lacks constitutional authority to enter a final judgment in a related-to jurisdiction unless all parties consent. She states that the third-party claims in question are not claims that stem from the Purdue bankruptcy and cannot be resolved in the bankruptcy claims allowance process. She also mentions that the bankruptcy court erred in considering the releases as core because they were part of Purdue's plan of reorganization.
Featuring: Peloton, AMC, Mallinckrodt and Surprise Medical Billing legislation.
For this week’s Deep Dive, Reorg’s Mike Legge, Karen Leung and David Mayo join us to discuss the current state of play of third-party releases in bankruptcy, reviewing recent decisions in Purdue Pharma, Ascena Retail and Mallinckrodt, as well as reviewing the ongoing case of LTL Management and other “Texas two-step” bankruptcies.
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