Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Thursday, May 8. In today's briefing, the Justice Department's bankruptcy watchdog raised concerns that financial adviser BRG may have a conflict of interest after a ransomware attack compromised data in at least 10 bankruptcy cases involving sex-abuse victims. Rite Aid received court approval to fast-track the sale of its pharmacy assets as part of its second bankruptcy in two years, aiming to maintain prescription services while auctioning assets to qualified buyers despite objections from government agencies. And health and wellness company WeightWatchers filed for bankruptcy after facing a mounting debt burden that offering weight-loss drugs couldn’t cure.

The Justice Department's bankruptcy division raised conflict-of-interest concerns around financial adviser BRG following a ransomware incident that affected the firm's work for sex-abuse victims in at least 10 pending bankruptcy cases.

The Office of the U.S. Trustee, a civil watchdog within the DoJ, requested information from BRG on Tuesday on its handling of the data breach, including an explanation of why it "does not now have a conflict of interest with its constituents in each of the affected cases that should result in BRG’s disqualification and disgorgement or reduction of compensation."

BRG filed public notices last week about the data breach, saying that it detected suspicious activity on its network and subsequently "reached a settlement with the threat actors," who told the firm that any stolen data had been deleted. BRG said in the notices that data associated with at least 10 bankruptcy cases involving Catholic dioceses or religious orders had been exfiltrated.

BRG said it was working to determine if the stolen data included personally identifiable information and had notified the FBI.

The U.S. Trustee's letter said that BRG's notices "raised more questions than it answered about what transpired and what BRG has done and intends to do going forward to remediate the breach in each case." Government lawyers also asked whether BRG itself would cover the costs of the breach investigation and ransom payment and whether it had violated confidentiality orders issued in bankruptcy court.

—Andrew Scurria

Rite Aid on Wednesday received court approval for a process to quickly sell its pharmacy assets despite objections from government agencies.

The Philadelphia-based chain appeared before Judge Michael Kaplan of the U.S. Bankruptcy Court in Trenton, N.J., following its second bankruptcy filing in less than two years.

Alice Eaton, a lawyer for Rite Aid, said the chain’s top priority under its repeat bankruptcy is to continue filling prescriptions while conducting a quick and orderly sale process of its pharmacy assets, including prescriptions, to qualified purchasers. Rite Aid serves eight million customers through roughly 1,300 stores across 15 states, dispensing two million prescriptions every week, Eaton said. 

Rite Aid proposed an expedited sale process for its pharmacy assets, with the bid deadline set for Tuesday. An auction could be held on Wednesday if necessary. The marketing process has been ongoing since March, and more than 15 parties are preparing for their bids, Eaton said. The remaining assets would be sold in the second phase of the process, running from late May into June, she said.

Kimberly Nelson, a lawyer with the Federal Trade Commission, objected to the proposal, saying that the commission hadn’t reviewed it because it had no advance notice. The Justice Department’s civil division overseeing bankruptcies also raised concerns, noting that the sale of customer information should involve a consumer privacy ombudsman.

Kaplan approved the sale process, saying that he recognizes the urgency.

“We are addressing healthcare needs,” Kaplan said, adding that the court is going to help facilitate the process to ensure “continuity for the benefit of customers.”

Following its emergence from a first bankruptcy in August last year with fewer store locations, Rite Aid quickly faced new hurdles. Inability to fully stock shelves with high-margin household essentials and other products resulted in declining sales, the company said, and its diminished liquidity ultimately led to the second filing.

—Akiko Matsuda

Shares of WeightWatchers International Inc. plunged Wednesday after the health and wellness company known as WeightWatchers filed for bankruptcy, facing a mounting debt burden that offering weight-loss drugs couldn’t cure.

The filing comes about a month after worries of bankruptcy surfaced, and despite a large shareholder’s position that a filing would make little sense.

WeightWatchers said Tuesday that it has filed motions with the bankruptcy court in Delaware that would allow it to continue operating its business, including paying its employees, vendors and suppliers.

The stock sank 32.5% in afternoon trading, paring earlier intraday losses of as much as 51.9%.

In a statement, WeightWatchers said that its reorganization plan will be confirmed in approximately 40 days and that it expects to emerge as a publicly traded company. The company remains fully operational during the reorganization process and there will be no impact on members, it said.

WeightWatchers has entered into an agreement with lenders and noteholders to significantly reduce its debt, the company said, adding that its actions will eliminate $1.15 billion of debt from its balance sheet. As of March 29, 2025, the company had $1.62 billion of total debt, according to a 10-Q filing that accompanied WW’s first-quarter results, released after market close Tuesday.

“Our existing debt has been a significant burden on the business for many years and has resulted in approximately $100 million of annual interest payments in each of the last two years,” WW Chief Executive Tara Comonte said during a conference call to discuss the results late Tuesday. “This will reduce our long-term debt obligations from $1.6 billion as we stand today to $465 million moving forward with maturities also extending to 2030.” She added that the company’s anticipated interest payments will be reduced by half, to approximately $50 million annually. 

                                                                                                            —James Rogers

Carvana said profit and revenue rose in the first quarter, boosted by higher car sales.

The online used-car seller on Wednesday posted a profit of $373 million, or $1.51 a share, compared with $49 million, or 23 cents a share, a year earlier.

Quarterly earnings of $1.51 a share topped analyst expectations for earnings of 57 cents a share, according to FactSet.

Revenue jumped 38% to $4.23 billion. Analysts expected sales of $4 billion.

The company said it sold 133,898 retail units in the recent quarter, up 46% from the prior year.

Chief Executive Ernie Garcia said the company is well positioned for future quarters, noting it has "very clear visibility to even stronger financial performance, much larger scales, and even better customer experiences."

For the second quarter, Carvana said it expects a sequential increase in both retail units sold and adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization.

The company remains on track to deliver what it called significant growth in both retail units sold and adjusted Ebitda in 2025.

Carvana noted that new or increased tariffs, as well as changes in the prices of new and used vehicles, could affect its forward-looking statements.

—Connor Hart

The Federal Reserve warned that the economy faced growing risks of higher unemployment and higher inflation due to tariff increases when officials agreed to hold interest rates steady on Wednesday.

“If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” Fed Chair Jerome Powell said at a news conference.

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