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What We’re Reading This Week [August 30, 2022] – Insolvency/Bankruptcy

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Judge David Jones in the Southern District of New York has
rejected a request for an official committee of equity holders in
Revlon’s chapter 11 proceedings, as reported by Reuters. Debtor’s counsel argued that the
equity holders “cannot possibly” prove that they are
entitled to a meaningful recovery at this stage of the bankruptcy
proceedings, and the company’s lenders argued that recent stock
price fluctuations were “untethered to market realities.”
Judge Jones found that the cost of appointing a committee, with its
expenses being paid from the estate, outweighed its likely value.
[Reuters; Aug. 24, 2022]

The first non-bank mortgage lenders are going out of business, a
trend that Bloomberg expects will continue as a result of
increased interest rates, a sharp decrease in mortgage
originations, and non-bank lenders’ reliance on credit lines
that can be short term. Independent lenders gained market share
following 2008 when banks pulled back from the mortgage industry.
The situation is most dire for those lenders that make riskier
loans that are not eligible for funding from Fannie Mae and Freddie
Mac. [Bloomberg; Aug. 19, 2022]

The Wall Street Journal reports on the uneasy
situation retailers find themselves in as they work to offload
inventory ahead of the holiday season and yet, at the same time,
consumer spending has shifted to essential items such as food and
gas due to increasing inflation. Retailers from Walmart to
Nordstrom are offering deep discounts to clear out inventory. The
picture going forward is uncertain, as the industry anticipates its
slowest sales growth in the period between November and January in
years. [WSJ; Aug. 28, 2022]

Lumileds filed bankruptcy under Chapter 11 with a prepackaged
plan in the Southern District of New York, as reported by Bloomberg. The company’s lenders will take
over control of the Netherlands-based lighting manufacturer with a
plan that will cut $1.3 billion in debt from the company’s
balance sheet and provide the company with $275 million in DIP
financing. [Bloomberg; Aug. 29, 2022]

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