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Russia Poised to Default; Celsius Adds Restructuring Advisor; Juul Gets Reprieve
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Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Monday, June 27. Russia is poised to default on its foreign debt for the first time in more than a century. A federal appeals court offered Juul Labs Inc. a much-needed reprieve by delaying the FDA's ban to sell its products in the U.S. And Celsius Network LLC added Alvarez & Marsal to its advisory roster to help with the crypto lender's possible bankruptcy preparation.
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Russia’s economy, which the country’s central bank has sought to bolster against sanctions, isn’t expected to feel immediate ripple effects from any default.
PHOTO: MAXIM SHEMETOV/REUTERS
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Sanctions push Russia near first foreign default since Bolshevik revolution. Russia was poised to default on its foreign debt for the first time since 1918, pushed into delinquency not for lack of money but because of punishing Western sanctions over its invasion of Ukraine.
Russia was likely to miss payments on two foreign-currency bonds late Sunday, according to holders of the bonds who had yet to see funds deposited. The day marks the elapse of a 30-day grace period since the country was due to pay the equivalent of $100 million in dollars and euros to bondholders.
The default has been long in coming since the West all but unplugged Russia from the global financial system, creating payment obstacles Moscow couldn’t overcome. It wasn’t expected to cause any immediate ripple effects in markets or Russia’s economy. Russian bonds have traded for pennies on the dollar since days after the invasion, a sign investors believed default was probable.
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The FDA said that Juul hadn’t submitted sufficient evidence that its devices were safe.
PHOTO: CRAIG MITCHELLDYER/ASSOCIATED PRESS
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Appeals court delays FDA’s ban on Juul e-cigarettes. A federal appeals court on Friday granted Juul Labs Inc. a temporary stay of the Food and Drug Administration’s order for the vaping company to pull its e-cigarettes off the U.S. market.
A panel of judges from the U.S. Court of Appeals for the D.C. Circuit on Friday afternoon granted Juul’s request to delay the FDA’s ban, according to court documents. The temporary stay gives the court time to hear arguments and wasn’t a ruling on the merits of the case, the judges wrote.
In addition to fighting the FDA’s order, Juul has been working with its legal advisers on options that include a possible bankruptcy filing if the company is unable to get relief from the government’s ban, according to people familiar with the matter. The company’s counsel, Kirkland & Ellis is advising on the contingency plans, the people said.
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Celsius Network added consultants from advisory firm Alvarez & Marsal after bringing on law firm Akin Gump.
PHOTO: BENJAMIN GIRETTE/BLOOMBERG NEWS
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Celsius Network taps more advisers to prepare for potential bankruptcy. Celsius Network LLC has hired restructuring consultants from advisory firm Alvarez & Marsal to advise on a possible bankruptcy filing, according to people familiar with the matter, as the crypto lending platform contends with the recent collapse in digital currencies.
Celsius, which said it had $11.8 billion in assets as of May and has 1.7 million users, froze withdrawals, swaps, and transfers earlier this month due to extreme market volatility. The value of its assets has fallen from about $25 billion in October. The company also engaged law firm Akin Gump Strauss Hauer & Feld LLP to advise on possible restructuring options, The Wall Street Journal reported earlier this month.
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Beginning July 1, WSJ Pro Bankruptcy will discontinue the PDF version of our newsletter. The emailed newsletter will be delivered as usual, with click-through links to access every article. The emailed version includes more features, including bankruptcy case updates, industry moves and Q&As, and we would like all of our readers to enjoy the full experience.
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Gulf Coast Health Care LLC, 1 p.m. ET: The Pensacola, Fla.-based long-term care facilities operator has a hearing about a settlement with Zurich American Insurance Co. Gulf Coast filed for bankruptcy last October saying its resident occupancy levels dropped caused by the Covid-19 pandemic.
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Stephen Ehrlich, CEO and co-founder of Voyager Digital, a company in which Sam Bankman-Fried’s Alameda Research has acquired a big ownership stake.
PHOTO: JOE RAEDLE/GETTY IMAGES
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Crypto exchange FTX in talks to acquire stake in BlockFi. Crypto billionaire Sam Bankman-Fried has become a lender of last resort to his beleaguered industry. He may end up owning large chunks of it as well.
Mr. Bankman-Fried’s crypto exchange, FTX, is in talks to acquire a stake in BlockFi, a crypto lender that FTX gave a $250 million credit line this week, people familiar with the matter said. His other company, Alameda Research, also acquired a big ownership stake in Canadian crypto broker Voyager Digital Ltd.
Earlier this month, Alameda said it extended two credit lines, one for $200 million in cash and stablecoins, and another for 15,000 bitcoins, to Voyager.
Discussions between BlockFi and FTX are continuing, and no equity agreement has been reached, the people familiar said.
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Rising rates, tech pullback pummel convertible bonds. The collapse of a pandemic-era boom in bonds that can turn into stocks is punishing investors and pressuring some fast-growing companies to start delivering profits.
New sales of so-called convertible bonds have all but dried up, and the ICE BofA U.S. Convertible Index has slid about 20%, roughly matching the S&P 500.
Ultralow interest rates on benchmark government bonds, soaring valuations for growth stocks and heightened volatility all made convertible bonds especially attractive in recent years. This year, though, has marked a complete reversal. Few investments have delivered positive returns this year, as investors have struggled with the implications of stubbornly high inflation and rapidly rising interest rates.
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‘We may be reaching a tipping point,’ the Bank for International Settlements says.
PHOTO: ARND WIEGMANN/REUTERS
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Central banks should raise rates sharply or risk high-inflation era, BIS warns. From Sydney to Washington to Zurich, major central banks have stepped up the pace of interest-rate increases in recent weeks, reflecting concerns that inflation isn’t retreating as expected.
It might not be enough.
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The world’s central banks must raise interest rates sharply, even if it significantly hurts growth, the institution known as the central banks’ central bank warned on Sunday. If they don’t, the world risks a 1970s-style inflationary spiral, the Bank for International Settlements said in its annual report. Even if they do, the global economy could face a toxic combination of low or negative growth and high inflation, known as stagflation, it said.
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San Francisco Fed President Mary Daly says she is optimistic efforts to combat inflation will follow a successful 1990s precedent.
PHOTO: ANN SAPHIR/REUTERS
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Fed’s Daly is prepared to back another 0.75 percentage point rate hike. A Federal Reserve official said the central bank needs to raise interest rates to levels designed to slow economic growth and combat inflation, and that those levels will depend on factors outside of the Fed’s control.
San Francisco Fed President Mary Daly said Friday she was prepared to support another rate increase of 0.75 percentage point at the central bank’s next meeting, on July 26-27, to counter inflation, which is at a 40-year high. Several other Fed officials endorsed such a move over the past week.
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“We need to move expeditiously to get there."
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— Mary Daly, San Francisco Fed President
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Credit Suisse is set to receive overdue payments from Bluestone Resources. (Bloomberg)
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