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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 2: The Supreme Court's docket in twenty twenty four is shaping

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Speaker 2: up to be an important one, with cases on the

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Speaker 2: abortion pill, social media, and the prosecution of Donald Trump,

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Speaker 2: to name a few. What's more, the justices appear to

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Speaker 2: be putting themselves right into the middle of political debates

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Speaker 2: leading up to the twenty twenty four election. One of

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Speaker 2: the cases that's already garnering headlines is over the use

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Speaker 2: of mifa pristone, the abortion pill that's the most common

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Speaker 2: method of terminating a pregnancy in this country. The conservative

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Speaker 2: Fifth Circuit Court of Appeals block changes the FDA put

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Speaker 2: in place in twenty sixteen to expand access to mifa pristone,

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Speaker 2: saying the agency gave short shrift to safety concerns. But

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Speaker 2: doctor J. Haney, the FDA commissioner at the time, defended

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Speaker 2: her agency, saying MiFi pristone has been reviewed again and

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Speaker 2: again to make sure if it's safety.

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Speaker 3: This is a drug that's been on the market for

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Speaker 3: over twenty years, with numerous studies that have followed that

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Speaker 3: original approval, all confirming the safety profile of this drug.

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Speaker 2: Joining me is Greg Store Bloomberg, new Supreme Court reporter.

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Speaker 2: But let's start with the case over MiFi pristone, which

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Speaker 2: is the most common way of terminating an abortion in

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Speaker 2: this country, approved by the FDA decades ago. By taking

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Speaker 2: this case, is a Supreme Court sort of going back

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Speaker 2: on what the conservative majority said in the Dobbs case

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Speaker 2: that abortion question should be left to elected officials in

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Speaker 2: the States.

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Speaker 4: Well, the Court really didn't have much of a choice

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Speaker 4: but to take this case. A lower court, a federal

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Speaker 4: appeals court imposed some restrictions on the use of MiFi pristone,

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Speaker 4: and the Biden administration asked the Supreme Court to intervene.

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Speaker 4: This is not a case that's about the sorts of

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Speaker 4: issues that were before the court in the Dobs case.

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Speaker 4: This case is about whether federal courts have the power

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Speaker 4: to second guests the Food and Drug Administration on decisions

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Speaker 4: about the safety of drugs that are approved. The Fifth Circuit,

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Speaker 4: a very conservative appeals court, said that the FDA gave

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Speaker 4: short shrift to safety concerns and the would have imposed

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Speaker 4: some new restrictions on the use of the drug. And

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Speaker 4: the Biden administration said, Supreme Court, we really need you

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Speaker 4: to take this up.

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Speaker 2: The case started with a ruling by a federal judge

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Speaker 2: in Texas who is a Christian fundamentalist, Matthew Kismerk, and

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Speaker 2: his decision had rhetoric used in anti abortion movements like

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Speaker 2: fetuses are unborn humans and that women who get abortions

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Speaker 2: often feel shame and depression. And yet the Fifth Circuit

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Speaker 2: did approve some of his decision.

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Speaker 4: Yeah, Judge kas Meyrick, who's kind of one of the

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Speaker 4: go to judges for conservative and you know in Texas,

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Speaker 4: just because of the way the court system is structured,

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Speaker 4: it's pretty easy for the state and other conservative litigants

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Speaker 4: to pretty much pick their judge to handle cases like this.

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Speaker 4: Judge Kasmerk would have taken the drug off the market entirely.

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Speaker 4: He would have rescinded the FDA's approval of it back

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Speaker 4: in two thousand. The Fifth Circuit said that goes too far.

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Speaker 4: It's actually too late to challenge the FDA's approval. But

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Speaker 4: the Fifth Circuit said, it's not too late to challenge

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Speaker 4: some changes the FDA made starting in twenty sixteen, and

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Speaker 4: indeed we're going to block those changes. Those, among other things,

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Speaker 4: said that women trying to get the drug don't have

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Speaker 4: to pay it in person, visit to a clinic three

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Speaker 4: times like they had to previously. So the This Circuit

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Speaker 4: decision is still very much a big blow to the

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Speaker 4: abortion rights movement, but it did not go nearly as

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Speaker 4: far as what Judge Cosmeric would have.

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Speaker 1: I mean, if you look.

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Speaker 2: At where this could lead if judges start to substitute

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Speaker 2: their own judgment for the FDAs, that could open up

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Speaker 2: a Pandora's box.

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Speaker 4: Yeah, it sure could, because this is the kind of

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Speaker 4: issue that is very much one about expertise and medical

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Speaker 4: and scientific judgment. This is really a first of its

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Speaker 4: kind ruling, which is why an awful lot of folks

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Speaker 4: think that the Supreme Court is going to reverse the

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Speaker 4: Fifth Circuit, and perhaps the Supreme Court when it stayed

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Speaker 4: the Fifth Circuit ruling earlier that kept methipristone fully available

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Speaker 4: while the legal fight goes forward.

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Speaker 2: Although there were descents from Justices Clarence Thomas and Samuel

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Speaker 2: Alito even to that also they might base their decision

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Speaker 2: on standing. But even that, if they grant standing here,

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Speaker 2: that means that any healthcare provider could challenge the FDA's

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Speaker 2: approval of drugs. It seems like this is just, you know,

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Speaker 2: just a bad case in many respects.

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Speaker 4: Yeah, it's a really aggressive use of standing to file

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Speaker 4: a federal lawsuit. These are anti abortion doctors and organizations

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Speaker 4: who say, we are going to have to end up

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Speaker 4: treating people who use mefipristone and then have medical issues,

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Speaker 4: and because we inevitably will have to treat patients who

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Speaker 4: are harmed by this drug, they say that gives us

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Speaker 4: standing to sue to challenge the FDA's approval decision. It is,

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Speaker 4: as you suggested, entirely possible the Supreme Court won't even

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Speaker 4: get to that question about whether a court should be

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Speaker 4: second getting the FDA's decision. It might say this lawsuit

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Speaker 4: should have even gotten in the door, and so we're

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Speaker 4: going to throw it out just on the basis of standing.

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Speaker 1: Greg, do you.

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Speaker 2: Think that the Justices have been shying away from abortion

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Speaker 2: cases since the ruling overturning Row.

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Speaker 4: You know, they haven't really had a clear abortion case

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Speaker 4: to my recollection, certainly not a case that anybody really

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Speaker 4: thought there was a good chance they were going to

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Speaker 4: take up. You know, one other note about the methipristone

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Speaker 4: case that's pretty important is the anti abortion doctors and

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Speaker 4: organizations wanted the Supreme Court to take up their appeal

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Speaker 4: as well and to essentially put mith pristone off the market.

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Speaker 4: They were trying to revive that part of Judge Chasmmerick's

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Speaker 4: ruling that said the initial approval division exceeded the FDA's power.

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Speaker 4: So to that extent, the Court has backed away from

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Speaker 4: or chosen not to get involved in one aspect of

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Speaker 4: the abortion fight that it could have.

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Speaker 2: The Justices have agreed to hear an appeal from a

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Speaker 2: January sixth Capital riot defendant.

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Speaker 1: Tell us about disappeal and.

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Speaker 4: Yeah, this is a charge that came under the two

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Speaker 4: thousand and two law that grew out of the Enron collapse,

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Speaker 4: and the charges were obstructing in an official proceeding. And

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Speaker 4: kind of the question in the case is is that

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Speaker 4: just about documents shredding and things like that, which is

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Speaker 4: what people were initially thinking about when when the law

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Speaker 4: was enacted, because we were thinking about the shredding of

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Speaker 4: documents by Arthur Anderson in the aftermath of Enron, Or

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Speaker 4: is it broader and can be used for, say, trying

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Speaker 4: to interfere with a congressional proceeding as happened on January

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Speaker 4: the sixth, and so federal appeals courts adopted the broader

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Speaker 4: construction said it could be used against January sixth defendants,

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Speaker 4: and Supreme Court is going to hear an appeal from

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Speaker 4: one of those defendants. And importantly, two of the four

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Speaker 4: accounts that Donald Trump is facing here in Washington involving

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Speaker 4: his efforts to overturn the election, stem from this very

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Speaker 4: same law. And so if the January sixth defendant in

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Speaker 4: this case is successful at the Supreme Court, it could

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Speaker 4: mean that two of those Trump charges get dismissed as well.

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Speaker 2: And so the concern is also that Trump will try

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Speaker 2: to delay that trial until the Supreme Court comes down

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Speaker 2: with a decision in this case, and you delay it

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Speaker 2: past the election. Is that something that justices would consider

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Speaker 2: when deciding whether it takes this case up.

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Speaker 4: It was not presented to them in quite that way,

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Speaker 4: So it's a little hard to speculate as to whether

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Speaker 4: they would have considered it. One has to imagine they

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Speaker 4: were aware of it, and it was presented to them

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Speaker 4: that Donald Trump was facing connected charges. Of course, the

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Speaker 4: Supreme Court is also dealing with this question of whether

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Speaker 4: Donald Trump is immune from any charges stemming from actions

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Speaker 4: he took while president to overturn the election. That's also

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Speaker 4: potentially going to delay this March fourth scheduled trial date.

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Speaker 4: So there are a lot of sources of pressure on

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Speaker 4: that trial date. It's a little hard to see exactly

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Speaker 4: how they're going to end up fitting to get there,

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Speaker 4: but certainly what the Supreme Court does in the next

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Speaker 4: few months is going to make an awful lot of

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Speaker 4: difference in terms of that trial. Donald Trump, So let's turn.

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Speaker 2: To guns or bump stocks. The Court's going to consider

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Speaker 2: a federal criminal ban on bump stocks. So explain what

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Speaker 2: bump stocks are.

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Speaker 4: So bump stocks are these devices that make a semi

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Speaker 4: automatic rifle fire a bit like a machine gun. They

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Speaker 4: gained prominence after the twenty seventeen Las Vegas concert massacre,

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Speaker 4: when a man who was using bumpstocks killed sixty people.

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Speaker 4: That's the deadliest mass shooting in American history. And after

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Speaker 4: that mass shooting, the Bureau of Alcohol, Tobacco, and Firearms

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Speaker 4: under Donald Trump redefined or reclassified bumpstocks so that they

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Speaker 4: are now covered under the federal ban against machine guns.

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Speaker 4: And so the question is it's not a Second Amendment

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Speaker 4: question like other gun cases that we've seen including when

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Speaker 4: the court heard in the fall. It's another question of

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Speaker 4: administrative law and whether ATF went beyond its authority in

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Speaker 4: deciding that these devices that convert something into something like

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Speaker 4: a machine gun actually constitutes a machine gun and is

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Speaker 4: therefore illegal.

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Speaker 2: Greg, is this going to be sort of a technical

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Speaker 2: case on what it means that a weapon can automatically discharge?

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Speaker 4: Yeah, it looks like it will be. It is a

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Speaker 4: question of statutory interpretation, you know. It may be a

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Speaker 4: combination of technical and actual discussions about how bump stocks work.

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Speaker 4: And basically what they do is they replace the standard

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Speaker 4: stock and a rifle with this plastic casing that lets

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Speaker 4: a weapon slide forward and backward. And it means that

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Speaker 4: without moving the trigger finger, the weapon moves back and

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Speaker 4: forth in a way that causes the trigger to depress

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Speaker 4: over and over and over again without you having to

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Speaker 4: move your finger. And so there may be some discussion

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Speaker 4: about exactly what that is and whether that meets the

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Speaker 4: definition of to use that word you used, automatically discharging.

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Speaker 4: The statute also uses the phrase by a single function

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Speaker 4: of the trigger, so we'll probably have a lot of

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Speaker 4: discussion about whether those words meet the description of what

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Speaker 4: a bump stock is.

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Speaker 1: Peeals courts are split on this.

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Speaker 2: It's the Fifth Circuit saying that bump stocks qualifies machine

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Speaker 2: guns and two other circuits saying they don't. And I

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Speaker 2: want to note the Fifth Circuit because it was the

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Speaker 2: Fifth Circuit also in the mif of Pristone case, I

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Speaker 2: want to keep track of the Fifth Circuit. Explain why

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Speaker 2: I want to keep track of the Fifth Circuit.

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Speaker 4: Greg Well, because they are the most conservative federal appeals

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Speaker 4: court in the country, and it's a court that is

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Speaker 4: very willing to sort of go out on the limb

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Speaker 4: with things. And so in this case, as with MEFI Pristone,

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Speaker 4: as with several other cases this term, it is the

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Speaker 4: Biden administration that is actually appealing to the Supreme Court

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Speaker 4: asking the Supreme Court to overturn a ruling by the

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Speaker 4: Fifth Circuit. And you know, in at least some of

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Speaker 4: those cases, there are probably a decent chance, certainly based

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Speaker 4: on the arguments in some cases in the fall, that

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Speaker 4: the Supreme Court will that the Supreme Court will say,

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Speaker 4: you know, the Fifth Circuit, you know, we're conservative, but

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Speaker 4: that's you know, that goes too far. We'll see.

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Speaker 1: Okay. So, last month, the Court took another case.

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Speaker 2: It peripherally involves guns because it involves the NRA, the

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Speaker 2: National Rifle Association, and claims of blacklisting. There are claims

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Speaker 2: that a New York state official unconstitutionally pressured insurance companies

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Speaker 2: to stop doing business with the NRA because it's a

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Speaker 2: gun lobby and they're saying their First Amendment rights are

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Speaker 2: being infringed on.

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Speaker 4: Yeah, exactly. They are saying that government officials are undermining

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Speaker 4: our work because they don't like what we're doing. They

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Speaker 4: don't like the viewpoints that we're expressing, and that is

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Speaker 4: a violation of the Constitution's First Amendment. The Federal Appeals

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Speaker 4: Court disagreed with that. They tossed out the NRA's allegations

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Speaker 4: against a state official. It's the lawsuit itself is multifaceted

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Speaker 4: and included actually claims against former Governor Andrew Cuomo. Those

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Speaker 4: are still in place, but the Supreme Court is going

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Speaker 4: to decide weather claims against the former Superintendent of the

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Speaker 4: Department of the Poinancial Services can go forward.

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Speaker 2: Okay, Greg, That ends it for tonight, but we're going

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Speaker 2: to have more about the Supreme Court term coming up

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Speaker 2: next time. On the Bloomberg Lass Show. That's Bloomberg, Supreme

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Speaker 2: Court reporter Greg Store. I'm June Grosso and you're listening

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Speaker 2: to Bloomberg.

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Speaker 5: What do you think when I say workspace, cubicles, ugly furniture,

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Speaker 5: bad fluorescent lighting. Exactly?

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Speaker 4: The future of work looks different for.

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Speaker 1: Selling an experience, we need a name.

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Speaker 5: We we Live, We.

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Speaker 4: Dream, we Were.

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Speaker 2: It's not often that you have a TV drama series

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Speaker 2: about corporate bankruptcy, but this year there was We Crashed

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Speaker 2: on Apple TV about the rise and fall of We Work,

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Speaker 2: Painkiller on Netflix about Purdue Pharma and the opioid epidemic,

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Speaker 2: and in the Making is an Amazon series about the

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Speaker 2: collapse of FTX. US corporate bankruptcies are at the highest

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Speaker 2: level since twenty twenty. There have been five hundred and

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Speaker 2: ninety one US corporate bankruptcy filings in the first eleven

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Speaker 2: months of the year, according to data from S and

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Speaker 2: P Global Market Intelligence. Joining me is bankruptcy expert Joseph Acosta,

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Speaker 2: a partner at Dorsey and Whitney. So why all these

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Speaker 2: corporate bankruptcies? Is it the end of super low interest rates,

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Speaker 2: the rise of inflation?

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Speaker 5: Well, I think we're realizing the government can't support the

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Speaker 5: economy for that long. We had a lot of government

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Speaker 5: aid after the pandemic, and that has worn out, so

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Speaker 5: companies are now facing less government aid. Individuals are facing

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Speaker 5: less government to pump money into the economy, and there's

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Speaker 5: inflationary pressures that cause industries to suffer from just the

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Speaker 5: debt servicing obligations.

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Speaker 2: Let's start with the We Work bankruptcy, which got a

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Speaker 2: ton of publicity.

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Speaker 1: This this was a stunning fall from.

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Speaker 2: Grace that surprised a lot of people what happened here.

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Speaker 5: We were expanded too fast and it was focused more

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Speaker 5: on getting more space and building it out than actually

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Speaker 5: being profitable. So the concept of office therees. You know,

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Speaker 5: if you take a bigger lease in a building and

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Speaker 5: you chop it up to the smaller pieces and offer

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Speaker 5: it to the smaller tenant. The problem is that you're

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Speaker 5: on the hook for the entire leak we Work, and

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Speaker 5: you also have to manage all the subleases and pay

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Speaker 5: the landlord. So it's a lot of work. It's an

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Speaker 5: interesting concept that grew quickly. A lot of it was

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Speaker 5: with the help of venture capital, so it wasn't necessarily

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Speaker 5: something that they, you know, raised a lot of it

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Speaker 5: debt for it was venture capital. Soft Bank supported them

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Speaker 5: for a long time and they became very popular. I

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Speaker 5: like to say they became like the MTV of office shes.

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Speaker 5: They popularized the concept. What happened is they were focused

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Speaker 5: too much on getting locations. You know, they grew up

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Speaker 5: to seven hundred locations in thirty four countries. They spent

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Speaker 5: billions of dollars improving the properties, but they didn't ever

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Speaker 5: worry about, Okay, at the bottom line, am I profitable

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Speaker 5: or not? I mean bringing a returner. They just wanted

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Speaker 5: to dominate the market and then worry about profitability. Towards

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Speaker 5: the end, they switched gear and started focusing on profitability,

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Speaker 5: but it was too late. They suffered from the traditional pandemic,

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Speaker 5: loss of people coming to work, and their membership suffered,

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Speaker 5: so they couldn't raise enough revenue, which is through their

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Speaker 5: memberships and or the tenants occupy the spaces to meet

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Speaker 5: their debt service.

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Speaker 2: So they had to restructure, I mean even without the pandemic.

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Speaker 2: You know, It's planned an initial public offering in twenty nineteen,

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Speaker 2: and that failed, and then there was all these revelations

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Speaker 2: about their financials and corporate governance.

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Speaker 1: Problems.

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Speaker 2: Do you think all those issues played a part in

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Speaker 2: the bankruptcy.

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Speaker 5: Well, the failed IPO's supposed that their valuation was the

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Speaker 5: tie of thy estimated to see. They eventually ended up

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Speaker 5: doing an IDO after the pandemic from a Deespac transaction,

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Speaker 5: but their valuation was about one ninth of what they

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Speaker 5: originally estimated to seek. And by that time they had

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Speaker 5: already accumulated an enormous amount of debt, so they didn't

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Speaker 5: have ways with the money to work their way out

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Speaker 5: of the problems, which is, they had a huge amount

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Speaker 5: of debt. They had all these obligations with you know,

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Speaker 5: those seven hundred locations that they had, and they weren't

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Speaker 5: receiving enough revenue from the tenant to meet their debt

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Speaker 5: and work out their turnarounds. So they used the bankruptcy

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Speaker 5: to do that. Reduce their footprint and a lot of

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Speaker 5: these unprofitable areas decreased their expensive They would build a

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Speaker 5: luxurious spaces in these buildings, and they realized that bell

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Speaker 5: impact profitibility pretty quickly. Then. You know, traditional macroeconomic factors

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Speaker 5: like inflation, the place always hurts everyone servicing obbligations in

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Speaker 5: pandemic related issues like people don't want to go back

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Speaker 5: to the office, so you have less tenant revenue and

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Speaker 5: a new trend in the market, which is that other

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Speaker 5: people that don't want to go back to the office

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Speaker 5: are starting to sub lease their space. So there's a

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Speaker 5: flooding of the market of this workshare space. And they

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Speaker 5: didn't have enough liquidity to adjust to that flexibility in

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Speaker 5: the market, so they've.

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Speaker 1: Been canceling leases.

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Speaker 2: How does that work? Are they allowed to cancel any

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Speaker 2: lease they want? Do they have to reach some kind

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Speaker 2: of agreement with the less sore?

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Speaker 5: Well, that's the benefit of bankruptcy. The company in bankruptcy

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Speaker 5: is allowed to cancel any lease that it wants, So

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Speaker 5: they're using that as leverage against the landlords to try

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Speaker 5: to negotiate down the lease, you know, negotiate the terms

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Speaker 5: to a more favorable payment terms, or cancel it. And

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Speaker 5: they've already identified I think sixty unprofitable leases, and I

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Speaker 5: suspected it'll identify more before they exit bankruptcy.

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Speaker 2: Do you think they have a good chance to succeed

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Speaker 2: in chapter eleven once they.

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Speaker 1: Get rid of some of these a lot of these leases.

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Speaker 5: I think they do because they're also reducing their debt

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Speaker 5: they're converting some of their debt to equity, so they'll

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Speaker 5: have less debt obligations once they leave bankruptcy. They're reduced

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Speaker 5: their footprint. This it will give them the room that

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Speaker 5: they needed to turn the company around, focus on profitability.

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Speaker 5: That are focusing on dominating the market, and it's going

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Speaker 5: to be a smaller footprint, but flexible workspace or office

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Speaker 5: share so to speak, is going to be more popular

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Speaker 5: in the future as a means of reducing operating expenses

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Speaker 5: of other companies. So I think they have a good

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Speaker 5: model there, it's just that they needed more time to

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Speaker 5: implement it.

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Speaker 2: Consumer discretionary companies top the list of bankruptcies in twenty

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Speaker 2: twenty three with seventy six filings, including bed Bath and

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Speaker 2: Beyond after fifty two years in business. It filed in April.

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Speaker 5: I attributed to the pandemic exposing some of bed Bath

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Speaker 5: and Beyond frailties some of the things that they needed

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Speaker 5: to work on to begin with, they were one of

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Speaker 5: the big box stores. Big box stores carry a lot

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Speaker 5: of operational costs. They needed to adjust to the e

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Speaker 5: commerce environment, which is what they became ultimately after the bankruptcy,

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Speaker 5: and they couldn't sustain their operations, and then they made

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Speaker 5: some wrong marketing strategies that didn't align with consumer sentiment,

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Speaker 5: including going into their own brand instead of using national

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Speaker 5: brands at their stores, doing away from their twenty percent

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Speaker 5: off marketing coupons. Those types of things affected their profitability.

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Speaker 1: Competitors like Amazon, Target, and Walmart.

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Speaker 2: Were they better at the online experience for consumers?

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Speaker 5: I mean they're approven success so the answer is yeah.

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Speaker 5: But in hindsight twenty twenty, they tried to reverse course,

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Speaker 5: but the pandemic interfered, like it interfered with a lot

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Speaker 5: of retail which prevented them from actually turning the company around.

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Speaker 5: For it actually had to go to bankruptcy.

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Speaker 1: Did it have problems before the pandemic?

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Speaker 3: It did.

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Speaker 5: It was a gradual slide. As I mentioned, it was

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Speaker 5: the original big box retailer dating back to the sixties,

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Speaker 5: and it grew, but then it started changing models like

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Speaker 5: the twenty ten era and converting the brands that it

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Speaker 5: sold and it wasn't popular now with the pandemic again,

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Speaker 5: it pandemic exposes you. It created a huge supply chain

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Speaker 5: issues because the specific brands that they were selling weren't

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Speaker 5: readily available at the post of the national brand. The

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Speaker 5: customers used to buy from their store, so there was

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Speaker 5: a point in time where you could find some bed

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Speaker 5: Bath and Beyond stores that were thirty five percent out

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Speaker 5: of stock, and that's just not what you used to

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Speaker 5: seeing from a big box store. So that reduced demand,

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Speaker 5: reduced consumer confidence in bed Bath and Beyond, and decreased

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Speaker 5: their revenues.

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Speaker 2: So they relaunched in August with this revamped website after

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Speaker 2: the company's intellectual property assets were bought by overstock dot.

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Speaker 1: Com in June.

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Speaker 2: I'm just interested in your take on this relaunch and

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Speaker 2: whether bed Bath and Beyond will be better or more

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Speaker 2: successful in this online setting than.

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Speaker 1: It was before.

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Speaker 5: I mean, it's an extreme change in business model. You

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Speaker 5: go from big box stores with brick and mortar to

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Speaker 5: complete e commerce which is overstocked. So I think the

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Speaker 5: name means something to people. I think that with the

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Speaker 5: relaunch and some marketing efforts, you could have a bed

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Speaker 5: Bath and Beyond come back, And who knows, maybe a

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Speaker 5: more scale down version of brick and Mortar can come

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Speaker 5: back in the future, but right now, overstock is just

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Speaker 5: taking advantage of the bed Bath and Beyond name. Which

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Speaker 5: still has a lot of cachet because it's been around

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Speaker 5: forever and it's trying to use some of the bed

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Speaker 5: Bath and Beyond brands to revive the business. I think

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Speaker 5: it's a great strategy from going to now where somewhere.

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Speaker 5: I think the overstock is onto something.

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Speaker 1: Coming up next.

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Speaker 2: More high profile bankruptcies of twenty twenty three and the

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Speaker 2: outlook for twenty twenty four. I'm June Grosso and you're

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Speaker 2: listening to Bloomberg. This year, US corporate bankruptcies reached the

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Speaker 2: highest level since twenty twenty. Among sectors, consumer discretionary companies

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Speaker 2: top the list of bankruptcies. I've been talking to bankruptcy

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Speaker 2: expert Joseph Acosta, a partner at Dorsey and Whitney. The

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Speaker 2: past several years have been tumultuous for retailers. In twenty twenty,

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Speaker 2: JC Penny, Nieman, Marcus and J Crew all file for bankruptcy.

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Speaker 2: What factors allow some retailers to continue to hang on?

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Speaker 5: Party City is an example. They were able to hang

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Speaker 5: on for a while, but eventually they realized they weren't

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Speaker 5: generating enough revenue, they suffered enough from the pandemic effects

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Speaker 5: and to boot that inflation came up, which made their

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Speaker 5: best servicing obligations higher. So they survived for a while.

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Speaker 5: You know, they all suffered a con you know, from

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Speaker 5: the pandemic. So there was less demands if people aren't gathering,

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Speaker 5: there's less demands for balloons, less demands for parties, less

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Speaker 5: demands for everything. They're able to hang on for a while,

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Speaker 5: and they're still going to hang on. It's just a

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Speaker 5: matter of their feeling the effect from the pandemic.

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Speaker 2: I want to talk a little bit about the timelines

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Speaker 2: of these Chapter eleven bankruptcies. So Party City file for

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Speaker 2: bankruptcy in January and a bankruptcy judge has already approved

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Speaker 2: its bankruptcy plan. It seems pretty fast for legal proceedings.

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Speaker 2: Is that par for the course or is Party City different?

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Speaker 5: Well, Party City bankruptcy is a bit of a success

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Speaker 5: story because it's planned it with a restructuring support Agreement,

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Speaker 5: which is kind of a roadmap through bankruptcy where you

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Speaker 5: get the major constituent to all agree how this bankrupcy

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Speaker 5: is going to go. And so you know, it wasn't

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Speaker 5: a very complicated bankruptcy in that respect, since the groundwork

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Speaker 5: was already laid prior to the bankruptcy and so so.

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Speaker 2: It's attorney said at a court hearing that it will

440
00:25:03,359 --> 00:25:06,760
Speaker 2: emerge from bankruptcy as a stronger business, closing just a

441
00:25:06,800 --> 00:25:11,200
Speaker 2: handful of its approximately eight hundred stores and preserving thousands

442
00:25:11,200 --> 00:25:15,840
Speaker 2: of jobs. Is that true of most companies emerging from

443
00:25:15,960 --> 00:25:16,800
Speaker 2: Chapter eleven?

444
00:25:17,480 --> 00:25:18,360
Speaker 1: Or does it.

445
00:25:18,320 --> 00:25:21,320
Speaker 2: At times lead to yet another bankruptcy filing.

446
00:25:21,760 --> 00:25:24,760
Speaker 5: The goal of bankruptcy is that you reorganize one. It

447
00:25:24,760 --> 00:25:28,680
Speaker 5: does happen that sometimes they have to reorganize twice. However,

448
00:25:29,000 --> 00:25:32,479
Speaker 5: in this respect, they reduce their debt by equitizing some

449
00:25:32,520 --> 00:25:36,040
Speaker 5: of their debt, so they no longer have significant debt

450
00:25:36,080 --> 00:25:39,679
Speaker 5: service and obligations. They are stronger in that respect. The

451
00:25:39,880 --> 00:25:42,600
Speaker 5: former debt now owns the company. They pump more money

452
00:25:42,680 --> 00:25:46,040
Speaker 5: into the company, and so the company has time and

453
00:25:46,640 --> 00:25:50,280
Speaker 5: capital to implement its growth initiatives, which was trying to do,

454
00:25:50,480 --> 00:25:53,240
Speaker 5: you know, but the pandemic interfered with inflation, interfered with

455
00:25:53,280 --> 00:25:55,919
Speaker 5: its supply chain issues, interfered with it. You know, all

456
00:25:55,960 --> 00:25:59,080
Speaker 5: those things were exposed. But I think Party City planned

457
00:25:59,080 --> 00:26:01,520
Speaker 5: the bankruptcy ahead at a time. It didn't wait too

458
00:26:01,560 --> 00:26:05,200
Speaker 5: long like some of the retailers. Some wait forever until

459
00:26:05,240 --> 00:26:08,120
Speaker 5: they have no other options. They planned ahead of time

460
00:26:08,320 --> 00:26:12,080
Speaker 5: and thus were able to avail themselves with successful reorganizations.

461
00:26:12,840 --> 00:26:16,840
Speaker 2: So still in the retail space after sixty years in business,

462
00:26:17,240 --> 00:26:20,919
Speaker 2: Right Aid file for bankruptcy in October. How much of

463
00:26:20,920 --> 00:26:24,520
Speaker 2: the bankruptcy was about the opioid related suits.

464
00:26:25,000 --> 00:26:28,520
Speaker 5: Part of it was, but it also had some operational

465
00:26:28,520 --> 00:26:31,360
Speaker 5: issues that it had to deal with. Right eight wasn't

466
00:26:31,400 --> 00:26:35,119
Speaker 5: a typical mass tour bankruptcy, if there's anything. Twenty twenty

467
00:26:35,119 --> 00:26:37,560
Speaker 5: three was the year of mass toward bankruptcies, but it

468
00:26:37,600 --> 00:26:39,919
Speaker 5: wasn't a typical when it only had about sixteen hundred

469
00:26:40,119 --> 00:26:43,080
Speaker 5: mass torts against it, which is not the same as

470
00:26:43,240 --> 00:26:46,760
Speaker 5: other levels mass toward bankruptcy. It had some operational issues.

471
00:26:46,760 --> 00:26:50,320
Speaker 5: It hot, they had high debts, it based inflationary pressures,

472
00:26:50,400 --> 00:26:54,520
Speaker 5: you know, labor costs increase. All those things affected profitability

473
00:26:54,680 --> 00:26:57,439
Speaker 5: and so it planned with its debt holders again to

474
00:26:57,480 --> 00:27:00,400
Speaker 5: acquitize some of their debt, reduce the debt burden, and

475
00:27:00,640 --> 00:27:03,120
Speaker 5: you know, right size the company, reduce some of its

476
00:27:03,119 --> 00:27:06,719
Speaker 5: footprint which was unprofitable, and then emerge from bankruptcy.

477
00:27:06,960 --> 00:27:08,000
Speaker 1: What makes right Aid.

478
00:27:07,960 --> 00:27:12,680
Speaker 2: So different from competitors like CBS and Walgreens.

479
00:27:12,520 --> 00:27:15,240
Speaker 5: Those are the competitors. I think right AIDS suffered from

480
00:27:15,320 --> 00:27:18,720
Speaker 5: a lack of competitive banking those companies, so that's part

481
00:27:18,720 --> 00:27:21,880
Speaker 5: of the reason why I couldn't rebound as quickly after

482
00:27:21,920 --> 00:27:25,320
Speaker 5: the pandemic or fix its problems outside of bankruptcy.

483
00:27:25,440 --> 00:27:26,720
Speaker 1: What is happening now at right it?

484
00:27:26,840 --> 00:27:30,160
Speaker 2: What stage are they at in the chapter eleven process

485
00:27:30,600 --> 00:27:31,399
Speaker 2: they're in them.

486
00:27:31,320 --> 00:27:33,480
Speaker 5: I would say the middle of it. They filed a

487
00:27:33,720 --> 00:27:37,280
Speaker 5: plan that's alternative plan where they equitize some of their

488
00:27:37,359 --> 00:27:39,919
Speaker 5: debts thereby reducing it at the end of the bankruptcy,

489
00:27:40,040 --> 00:27:43,439
Speaker 5: or sell their pharmacy benefits manager, which is one of

490
00:27:43,440 --> 00:27:46,359
Speaker 5: their crown tools, and whichever raise is more capital is

491
00:27:46,400 --> 00:27:49,560
Speaker 5: the way they're going to go. They started marketing Alexir,

492
00:27:49,640 --> 00:27:53,280
Speaker 5: which is their benefits manager, prior to the bankruptcy. They

493
00:27:53,320 --> 00:27:56,119
Speaker 5: haven't announced that sale is going to be successful. So

494
00:27:56,480 --> 00:27:59,320
Speaker 5: in a lot of these cases, when they're alternative paths

495
00:27:59,359 --> 00:28:02,040
Speaker 5: to take, you know, you go with the original plan path,

496
00:28:02,080 --> 00:28:04,520
Speaker 5: which is just equitize some of the debts. So it's

497
00:28:04,600 --> 00:28:07,560
Speaker 5: early on or kind of in the middle. Until they

498
00:28:07,600 --> 00:28:10,760
Speaker 5: announced whether there's going to be a sales flixer, we

499
00:28:10,800 --> 00:28:12,520
Speaker 5: don't know exactly which direction it's going.

500
00:28:12,560 --> 00:28:12,760
Speaker 3: To go.

501
00:28:13,160 --> 00:28:15,520
Speaker 5: Either way, it's going to raise more capital to allow

502
00:28:15,560 --> 00:28:18,440
Speaker 5: it to turn around the company. Either way, it's still

503
00:28:18,480 --> 00:28:20,639
Speaker 5: going to be allowed to get rid of some of

504
00:28:20,840 --> 00:28:24,960
Speaker 5: some profitable locations, which is good. And either way, I mean,

505
00:28:24,960 --> 00:28:27,480
Speaker 5: I think it's going to survive through the bankruptcy.

506
00:28:28,080 --> 00:28:31,080
Speaker 2: Did you mentioned there are other mass toward bankruptcies.

507
00:28:31,520 --> 00:28:35,080
Speaker 5: There are other mass toward bankruptcies. Opius are rampant. You know,

508
00:28:35,160 --> 00:28:39,280
Speaker 5: you have Johnson and Johnson face and litigations claiming that

509
00:28:39,520 --> 00:28:43,200
Speaker 5: tal caused a varying cancer. These are tornadoes. These are

510
00:28:43,720 --> 00:28:47,920
Speaker 5: like tsunamis that overwhelm a company. This issue is something

511
00:28:47,960 --> 00:28:51,840
Speaker 5: that is so prevalent today society that it's being taken

512
00:28:51,920 --> 00:28:54,640
Speaker 5: up by the Supreme Court in a recent case to

513
00:28:54,720 --> 00:28:58,480
Speaker 5: decide whether some of the tools that people have traditionally

514
00:28:58,560 --> 00:29:02,680
Speaker 5: used to dress maps or can be used. And so

515
00:29:02,720 --> 00:29:07,080
Speaker 5: we'll see how the Supreme Court decide will impact the

516
00:29:07,120 --> 00:29:10,400
Speaker 5: future of how mass torture restructured in the country.

517
00:29:11,440 --> 00:29:14,360
Speaker 2: And then we have bankrupt trucking company Yellow Corp. It

518
00:29:14,440 --> 00:29:18,160
Speaker 2: received court approval to sell most of its shipping centers

519
00:29:18,240 --> 00:29:22,520
Speaker 2: in real estate to multiple buyers for one point eighty

520
00:29:22,560 --> 00:29:26,360
Speaker 2: eight billion dollars, ending a Biitter's long shot effort to

521
00:29:26,480 --> 00:29:28,080
Speaker 2: keep the company intact.

522
00:29:29,160 --> 00:29:34,080
Speaker 5: I'd say Yellow Trucking is indicative of how much labor

523
00:29:34,160 --> 00:29:39,040
Speaker 5: has dominated leverage against companies. The reason why Yellow Trucking

524
00:29:39,520 --> 00:29:42,320
Speaker 5: very successful company had to file bankruptcies because they couldn't

525
00:29:42,360 --> 00:29:45,120
Speaker 5: reach an agreement with labor as to how to share

526
00:29:45,200 --> 00:29:48,600
Speaker 5: the cost of the business. Labor wanted more more of

527
00:29:48,600 --> 00:29:52,120
Speaker 5: the profit, and finally Yellow Trucking decided that it wasn't

528
00:29:52,120 --> 00:29:55,760
Speaker 5: the finis to come to labor's demands and decided that

529
00:29:55,840 --> 00:29:57,680
Speaker 5: it was going to go out of business. That's the

530
00:29:58,000 --> 00:30:00,120
Speaker 5: really big takeaway from Yellow truck.

531
00:30:00,960 --> 00:30:03,880
Speaker 2: So when you look forward to twenty twenty four, do

532
00:30:03,960 --> 00:30:07,160
Speaker 2: you see the sort of the headwinds changing. Do you

533
00:30:07,160 --> 00:30:10,640
Speaker 2: think bankruptcies will be on the rise or on the decline?

534
00:30:11,400 --> 00:30:15,480
Speaker 5: That is a million dollar questions. But I believe inflation

535
00:30:15,600 --> 00:30:18,640
Speaker 5: is not going to go down anytime, So more companies

536
00:30:18,680 --> 00:30:21,400
Speaker 5: are going to suffer from the same that people have suffered.

537
00:30:21,440 --> 00:30:24,760
Speaker 5: In twenty twenty three, the rite aids of WE works

538
00:30:24,880 --> 00:30:29,120
Speaker 5: the party cities, So you're going to see that in

539
00:30:29,200 --> 00:30:34,240
Speaker 5: twenty twenty four, you're going to see real estate suffering

540
00:30:34,240 --> 00:30:36,720
Speaker 5: the trickle effects of the WE Works coming down. More

541
00:30:36,760 --> 00:30:40,680
Speaker 5: real estate suffer, as I mentioned before, than other real

542
00:30:40,800 --> 00:30:44,560
Speaker 5: estate investment trust file bankruptcy file bankruptcy two years ago.

543
00:30:44,960 --> 00:30:48,880
Speaker 5: So malls are suffering because they're still change from regular

544
00:30:49,160 --> 00:30:52,840
Speaker 5: brick and mortar retail to more e commerce. I would

545
00:30:52,920 --> 00:30:56,120
Speaker 5: say the trend is going to stay the same. It's

546
00:30:56,160 --> 00:30:59,200
Speaker 5: going to be an upward trend towards more restructuring, more

547
00:30:59,240 --> 00:31:03,560
Speaker 5: bankruptcies future because of the macroeconomic issues and the microeconomic

548
00:31:03,640 --> 00:31:05,040
Speaker 5: issues that are facing the company.

549
00:31:06,040 --> 00:31:08,959
Speaker 2: Thanks for being on the show. That's Joseph A Costa,

550
00:31:09,040 --> 00:31:11,760
Speaker 2: a partner at Dorsey and Whitney. And that's it for

551
00:31:11,800 --> 00:31:14,440
Speaker 2: this edition of The Bloomberg Law Show. Remember you can

552
00:31:14,480 --> 00:31:17,760
Speaker 2: always get the latest legal news on our Bloomberg Law podcasts.

553
00:31:18,000 --> 00:31:21,000
Speaker 2: You can find them on Apple Podcasts, Spotify, and at

554
00:31:21,160 --> 00:31:26,280
Speaker 2: www dot Bloomberg dot com, slash podcast Slash Law, And.

555
00:31:26,280 --> 00:31:28,120
Speaker 1: Remember to tune into The Bloomberg.

556
00:31:27,720 --> 00:31:31,160
Speaker 2: Law Show every weeknight at ten pm Wall Street Time.

557
00:31:31,720 --> 00:31:34,400
Speaker 2: I'm June Grosso and you're listening to Bloomberg