Talc, airlines and energy at center of bankruptcy cases to watch in 2022

4 minute read

A arrives at the U.S. District Bankruptcy Court for the Southern District of New York in Manhattan, New York, U.S., January 9, 2020. REUTERS/Brendan McDermid

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Dec 30 (Reuters) - Some corporate Chapter 11 cases that grabbed headlines in 2021 have a long way to go before they see a resolution. While some are just getting started, others have been stymied by unhappy creditors, insurers or state regulators. Below are five cases to keep an eye on in 2022.

LTL Management LLC (J&J talc liabilities)

Can a financially sound company with a market cap of more than $400 billion use bankruptcy to unload mass tort liabilities? Johnson & Johnson is hoping to convince a New Jersey bankruptcy judge that it can. But the pharmaceutical giant, which created subsidiary LTL Management LLC to place more than 38,000 talc-related claims into bankruptcy, faces staunch opposition from plaintiffs suing the company who say J&J’s talc products have caused cancer and want their day in court, which is currently on hold as a result of the bankruptcy. LTL is still in the early stages of the bankruptcy. If opponents get their way, the Chapter 11 process won’t get much further, as they have filed papers seeking the dismissal of the bankruptcy entirely. However, if J&J, which has denied wrongdoing and maintains that its talc products are safe, manages to keep the case alive, there’s no telling how long it will take to reach a potential settlement or how much money plaintiffs may see. Adding to the uncertainty is J&J's plan to split into two publicly-traded companies.

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Imerys Talc America/Cyprus Mines Corporation

These companies are two separate entities conducting two separate Chapter 11 cases that are nonetheless impossibly intertwined. The former talc supplier (Imerys) and miner (Cyprus) are bound by a 30-year-old transaction that transferred some of Cyprus’s talc assets and liabilities to Imerys. Since then, disputes have surfaced over insurance obligations related to widespread talc litigation. To make matters even more complicated, J&J is involved, as Imerys was once the pharmaceutical giant’s top talc supplier. A proposed restructuring plan in 2021 that aimed to resolve both bankruptcies was ultimately rejected by creditors after the judge overseeing the two cases tossed 15,000 votes, effectively sending the lawyers back to the drawing board.

Brazos Electric Power Cooperative

Remember the freak winter storm that knocked out power for millions of Texas residents in February? The Electric Reliability Council of Texas certainly hasn’t forgotten, and it’s still fighting with Brazos, the state’s largest wholesale electric co-op, over the $2 billion bill it incurred during the nine-day event. Brazos, however, says ERCOT’s prices during the outage were illegal, up to 500 times the usual cost of electricity. The pair have been duking it out in Houston bankruptcy court since March, and now Brazos’s member co-ops are worried that customers are going to be the ones footing the bill for years to come.

LATAM Airlines Group SA

After a year and a half in bankruptcy, Latin America’s largest airline recently proposed a reorganization plan that would infuse $8.19 billion into the company. Some junior creditors are not on board with the deal, saying it gives certain shareholders too much value and that the airline should instead consider other options, including a sale to rival Azul SA. Still, LATAM Airlines is hoping that it has finally secured its ticket out of bankruptcy and will be able to either sway holdouts to drop their opposition or convince a judge to overrule their concerns.

Alfred Siegel v. John Fitzgerald III

Bankruptcy fights don't often make their way to the U.S. Supreme Court, but parties on both sides of this case are hoping this one will, since it has divided top appellate courts across the country. The dispute stems from an alleged inconsistency among fees Chapter 11 debtors must pay the government depending on where they are located. The purported disparity arose following a 2017 law that increased the fees and has created uncertainty about the legal status of around $324 million in fees, according to the government. The law has been challenged in several districts with conflicting outcomes – the 4th and 5th U.S. Circuit Courts of Appeal have upheld the law while the 2nd and 10th Circuits have deemed it unconstitutional.

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Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.