Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Tuesday, April 29. In today's briefing, big Wall Street banks found a graceful exit from $13 billlion in loans tied to Elon Musk's buyout of Twitter that had looked unsellable only months ago.

Wall Street banks sell final slug of Elon Musk’s X debt. A group of Wall Street’s biggest banks have finally dug themselves out of a $13 billion quagmire that Elon Musk created.

On Monday, banks sold the final slug of the debt they lent for Musk’s takeover of Twitter in 2022 at 98 cents on the dollar, according to people familiar with the matter.

The sale was a long time coming. In April 2022, Morgan Stanley, Bank of America and five other banks agreed to lend the money to help Musk buy Twitter. By the summer of 2024, the X deal was considered the worst buyout banks had agreed to finance since the 2008 financial crisis.

Everything turned with the election of Donald Trump and the rise of Musk as a crucial Trump ally, catalyzing a frenzy among investors to get a slice of Musk Inc.

Cleary Gottlieb taps Gibson Dunn’s Brody for restructuring group. Josh Brody has joined Cleary Gottlieb Steen & Hamilton’s restructuring group as a partner in New York. He joins after working for five years as a partner in Gibson Dunn’s restructuring practice.

“It was just a great opportunity to help grow what is already a thriving practice,” Brody said in an interview. “It checked all the boxes.”

In recent years, Brody has advised lenders on out-of-court restructurings like AMC Entertainment and Elevate Textiles. He has also advised ad hoc groups of lenders in the chapter 11 cases of craft retailer Joann and specialty pharmaceutical company Endo.

Brody joins Cleary as more distressed companies are restructuring out of court. In response, major law firms are adding talent that has experience in liability management exercises and other out-of-court transactions.

“The market has changed,” Brody said. “I don’t think the big chapter 11 cases are a thing of the past, but I don’t think they’ll be as predominant as they were. Identifying the opportunities and being there for clients in whatever shape the restructuring is going to take is what we want to do.” —Alicia McElhaney

Talc supplier Imerys hits snag on way to bankruptcy plan. Imerys Talc America and Cyprus Mines have hit a roadblock on their way to potentially becoming the first major chapter 11 proceeding to win court approval to resolve mass talc liabilities.

Imerys on Monday was on the fifth day of a confirmation hearing before Judge Laurie Selber Silverstein in the U.S. Bankruptcy Court in Wilmington, Del., in hopes of securing court approval for a compensation plan for thousands of talc claims. The Imerys case is being jointly heard with the 2021 bankruptcy of Cyprus Mines, another reorganizing talc business that earlier settled a dispute with Imerys.

The companies filed for bankruptcy to address both current and future claims and lawsuits alleging their talc caused illnesses. The settlements that form the foundation of their plan total more than $1 billion, including at least $505 million from Johnson & Johnson.

But Imerys and Cyprus lawyers said they wanted to adjourn the proceedings as they continue to try to resolve differences about how foreign claims would be treated.

Cyprus lawyer Luke Sizemore told Silverstein that the plan can be changed without having to send it out again for a vote, and that the confirmation proceedings should be adjourned to a later date, making it more cost-effective since the record would be kept open. He said the goal was to file a new plan by late May. Other parties said the court should deny the plan.

Linda Richenderfer, a representative for the U.S. Trustee, a bankruptcy watchdog, said she was “dumbfounded” by the twist of events deep into a confirmation hearing. She said professional fees in the case already exceed $250 million. 

Silverstein said she would consider the requests on whether to adjourn the confirmation proceedings or deny confirmation. –Becky Yerak

More U.S. businesses could face insolvency in the near term. More businesses in the U.S. are likely to encounter financial distress in the near term as interest rates are relatively high and credit conditions are restrictive, analysts at Zaye Capital Markets say in a note. The analysts cite DataArbor and S&P Global data which show U.S. bankruptcy filings increased to 691 fillings in 2024, the highest level since 2010. "The delayed effects of monetary policy tightening are still rippling through the economy, revealing the depth of strain in these industries," the analysts say. –Miriam Mukuru

Deep-pocketed investors make startups a target for hackers. Most early-stage ventures simply don’t have the cash to cover damage control after a hack. That can include hefty costs for forensic investigations, customer alerts, regulatory compliance and legal fees. Factoring in lost business, the toll of a cyberattack can skyrocket to well over $1 million for a startup, lawyers and investors say. A data breach can also damage a startup’s reputation, making fundraising efforts a challenge—and leaving early investors with flat shares.

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