Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Wednesday, March 15.

Creditors of Silicon Valley Bank’s parent company have formed a group in anticipation of a potential bankruptcy filing, through which they hope to profit from a sale of the collapsed firm’s private-wealth and other units, sources told The Wall Street Journal. 

Diamond Sports Group, regional sports broadcasting unit of Sinclair Broadcast Group, filed for bankruptcy after struggling to service its debt and keep paying professional sports teams for the broadcast rights as consumers cancel cable subscriptions to shift toward streaming.

And AMC Entertainment Holdings' shareholders approved for the company to sell new common stock, a financial lifeline for the movie-theater chain as it continues to lose money because of low cinema attendance.

Silicon Valley Bank creditors organize. The investor group, which is being advised by PJT Partners Inc., includes Centerbridge Partners LP, Davidson Kempner Capital Management LP and Pacific Investment Management Co., or Pimco, the people said.

Most members bought parent SVB Financial Group’s bonds coming into the weekend as they traded down to around 30 cents on the dollar, the people said. The group now holds a sizable chunk of SVB Financial’s $3.4 billion face value of bonds.

It wants the parent company to file for bankruptcy and then auction off its nonbank businesses through a court-supervised sale process, the people said. SVB Financial Group said on Monday that its board had appointed a restructuring committee to explore strategic alternatives. It hasn’t said whether it plans to file for bankruptcy.

If SVB Financial’s assets fetch a high enough valuation in any such auction, the bondholder group could profit. When a company’s assets are sold through bankruptcy, the proceeds often flow to its creditors.

• DoJ, SEC investigates SVB. The separate probes are in their preliminary phases and may not lead to charges or allegations of wrongdoing. The investigations are also examining stock sales that SVB Financial’s officers made days before the bank failed. 
• Real-estate investor run on Signature Bank a factor in its demise. A sudden surge in the number of New York City real-estate investors yanking money out of Signature Bank last week played a significant role in the bank’s abrupt collapse. according to building owners and state regulators.
• Are taxpayers on the hook? Does the government support amount to a bailout and whether taxpayer funds are at risk.

Sinclair Sports unit files bankruptcy. Diamond Sports Group LLC enters chapter 11 aiming to renegotiate its broadcast contracts with teams and to restructure its more than $8 billion of total debt stemming from Sinclair’s 2019 deal to purchase the business from Walt Disney Co.

Diamond is the local broadcaster of about half the teams in the MLB and NBA, and about a third of NHL teams. Diamond faced high fixed costs under its broadcast contracts that have become uneconomical for the company as viewers cancel cable subscriptions amid a broader shift toward streaming.

In response to that shift, Diamond has been working on pivoting to a more streaming-focused direct-to-consumer model. The company has reached deals for local-streaming rights with five MLB teams in its baseball markets, and is working on acquiring the streaming rights for the remaining nine teams, WSJ has reported. 

AMC won approval to sell more stock. Shareholders voted to increase the number of common shares that AMC can sell, an important tool for the company to stay afloat and potentially weather a downturn in the cinema industry that has pushed some competitors into bankruptcy.

The shareholder vote also authorized a 10-for-1 reverse stock split and will likely allow AMC to convert its Ape preferred units into common shares. The Ape units closed at $1.62, down 6%, after having rallied earlier in the day, while AMC common shares fell 15% to close at $4.64.

Bed Bath & Beyond salvages fundraising deal. Bed Bath & Beyond Inc. said on Tuesday it has reached a new agreement with investors that will allow the distressed retailer to get another $100 million in funding, even though its share price has sunk.

The agreement with hedge fund Hudson Bay Capital Management LP reduces the share-price threshold the retailer needs to maintain as part of an equity offering deal to $1 from $1.25 until April 3, the company said.

The lower threshold will allow the company to collect an additional $100 million by selling equity warrants to Hudson Bay and other investors, bringing the total amount Bed Bath & Beyond has raised since last month to $460 million. At the time, the company had been on the verge of bankruptcy after having missed interest payments before it inked the equity offering.

Hudson Bay, along with some other investors, provided $225 million to Bed Bath & Beyond last month as the first installment of the complex equity deal, involving a mix of warrants for preferred convertible and common shares.

Boxed in talks with lenders for bankruptcy sale. Grocery courier Boxed Inc. said Tuesday it might file for bankruptcy as it continues to explore a possible sale of the business less than two years after going public through a merger with a special-purpose acquisition company, or SPAC.

The e-commerce company specializing in household staples and pantry items said in a securities filing that it is actively soliciting proposals for the sale of all or most of its assets to improve its liquidity position. Boxed went public in 2021 by merging with a SPAC at a time when the popularity of such blank-check companies was exploding.

West Virginia Gov. Jim Justice puts family coal business up for sale. West Virginia Gov. Jim Justice wants to sell his family’s coal business, according to his lawyer and other people familiar with the matter, a move that would help resolve substantial debts in advance of a possible challenge for the U.S. Senate seat held by centrist Democrat Joe Manchin.

Mr. Justice, a Republican in his second term as governor, owns a sprawling empire of coal mines, processing facilities, agricultural interests and the landmark Greenbrier resort in West Virginia. But he has endured financial difficulties in recent years, made worse after he and his family members took out $850 million in personally backed loans from the now-collapsed firm Greensill Capital.

Mr. Justice is expected to make a decision soon about whether to run for the seat held by Mr. Manchin, who hasn’t said if he will run for re-election and hasn’t ruled out a run for president instead in 2024. Mr. Manchin’s seat is a prime target for Republicans and could help determine control of the chamber in the next election. Former President Donald Trump won the state by 39 percentage points in the 2020 presidential election.

Credit Suisse Finds Material Weaknesses. Credit Suisse Group AG said it had found material weaknesses in its financial reporting over the past two years because of ineffective internal controls, the latest setback in its efforts to move past a series of costly blunders.

The bank’s management, including Chief Executive Ulrich Körner and Chief Financial Officer Dixit Joshi, who both started in their jobs in 2022, concluded that the controls weren’t effective, Credit Suisse said in its annual report. The weaknesses meant that controls around 2021 financial reporting also weren’t effective.

Despite the lapses, Credit Suisse said its financial statements “fairly present, in all material respects, the group’s consolidated financial condition.”

Credit Suisse had to delay its annual report last week because of last-minute questions from the U.S. Securities and Exchange Commission around earlier cash flow statements, which the bank had revised in its 2021 annual report for 2019 and 2020.

DoJ sues Rite Aid. Rite Aid Corp. knowingly filled unlawful prescriptions for controlled substances, ignoring red flags and helping fuel the country’s opioid epidemic, the Justice Department alleged in a lawsuit.

The department filed the complaint against the pharmacy chain Monday in federal court in Cleveland, joining an existing whistleblower lawsuit filed in Ohio in October 2019.

It alleges that Rite Aid’s pharmacists filled prescriptions “with obvious red flags” over a five-year period from May 2014 through June 2019, and that the company intentionally deleted notes about prescribers who were deemed suspicious.

Washington townhouse linked to FTX customer funds back on the market. A Capitol Hill townhouse that FTX’s new management believes was bought with the bankrupt cryptocurrency exchange firm’s customer funds is back on the market on Tuesday, asking for $3.239 million.

The new asking is $50,000 less than the price in early February, when the seller took the Capitol Hill property off the market after WSJ Pro Bankruptcy contacted the listing agent. Devon Fox, who handled the listing, said at that time that the seller pulled it as a show of good faith.

Property records show the four-bedroom, 4,100-square-foot property is owned by Guarding Against Pandemics, a nonprofit organization founded by Mr. Bankman-Fried’s brother Gabriel. FTX’s newly appointed management team said in a January court filing that Guarding Against Pandemics was funded by FTX founder Sam Bankman-Fried and that the organization purchased a multimillion-dollar property using what the company believes are misappropriated customer funds.

When the listing was pulled last month, a representative for Guarding Against Pandemics told WSJ Pro Bankruptcy that Gabriel Bankman-Fried was no longer part of the organization. The representative on Tuesday declined to comment on why the property is back on the market. — Akiko Matsuda

BlockFi and SBF investment vehicle call cease-fire. Crypto lender BlockFi Inc. has temporarily halted its effort to strip Sam Bankman-Fried’s offshore investment vehicle of chapter 11 protections.

The cease-fire came after the bankruptcy judge overseeing the Emergent Fidelity Technologies Ltd. case expressed reluctance to dismiss the proceedings. Judge John Dorsey in the U.S. Bankruptcy Court in Wilmington, Del., said at a Tuesday hearing that he didn’t want to make a ruling that could affect the ownership of Robinhood Markets Inc. shares. Those assets have been seized by the federal government in connection with a criminal case against Mr. Bankman-Fried, former FTX chief executive.

BlockFi had sought to dismiss the bankruptcy of Emergent, which Mr. Bankman-Fried used to buy a 7.6% Robinhood stake. BlockFi has staked a claim to the shares, which are Emergent's only assets, as collateral for $600 million in loans made to Mr. Bankman-Fried’s crypto trading firm, Alameda Research.

Judge Dorsey said criminal forfeiture proceedings should play out before a bankruptcy court plays a role in determining who has rights to the shares.

BlockFi then agreed to withdraw its request to dismiss the Emergent bankruptcy, but reserved its right to refile it if negotiations don’t yield a deal. – Becky Yerak

BlockFi wants bankruptcy judge to pause suits against executives. The bankrupt cryptocurrency lender filed a lawsuit Monday requesting Judge Michael Kaplan of the U.S. Bankruptcy Court in Trenton, N.J. extend the chapter 11 stay pausing litigation against the company to current and former directors and officers.

Bankrupt companies often seek to extend its pause on lawsuits to its directors and officers, though such a request could be opposed by litigants. BlockFi is seeking to extend its litigation pause to its BlockFi CEO Zac Prince, COO Flori Marquez, CFO Amit Cheela, among others.

BlockFi said two proposed investor class actions accusing the lender of selling unregistered securities could distract its management team and therefore hinder the company’s effort to restructure in chapter 11. The company said it also has indemnification agreements with BlockFi executives that would require the lender to cover defense costs and other defense costs if the complaints are allowed to move forward.

“These chapter 11 cases are proceeding at a rapid pace, and the debtors need their officers and directors focused on the restructuring, not on defending multiple putative class action lawsuits,” BlockFi said. – Jonathan Randles

Sex abuse victims to seek dismissal of Long Island N.Y. diocese’s chapter 11 case. Sex abuse victims intend to ask a bankruptcy judge to dismiss the chapter 11 case of the Roman Catholic Diocese of Rockville Centre, on suburban Long Island, said James Stang, a lawyer representing the official group of survivors in the case at a hearing on Tuesday.

Lawyers for the sex abuse victims have yet to file court papers asking the Judge to rule on their request. Mediation talks between the Diocese, its parishes and the abuse plaintiffs that started in 2021 fell apart in recent months.

Plaintiffs are seeking a settlement of $280 million in cash from the Diocese, its parishes, and other Rockville Centre entities, while the Diocese has offered roughly $100 million less. If the bankruptcy court grants the victims’ request to dismiss the case, the Rockville Diocese and its parishes may be exposed to lawsuits from hundreds of plaintiffs.

For years religious organizations and other institutions facing massive sex abuse lawsuits have sought chapter 11 as a way to make one-time payouts to victims and put legal liabilities behind them. – Soma Biswas

Judge rules Pennsylvania city Chester eligible to reorganize in bankruptcy. A bankruptcy judge ruled Tuesday that the chapter 9 bankruptcy case filed by the Pennsylvania city of Chester is eligible to proceed in court, rejecting an objection from the city’s biggest bond holder that argued the city is ineligible for municipal bankruptcy.

Judge Ashely Chan of the U.S. Bankruptcy Court in Philadelphia said in her ruling that the city “satisfies all the statutory requirements” for a municipality to restructure under bankruptcy.  

Preston Hollow Community Capital LLC, which holds municipal bonds issued by Chester in 2017 with the initial principal amount of $19.2 million, has argued that the city failed to engage in the good-faith negotiations required before a municipality can access the protections of chapter 9 bankruptcy. But Judge Chan disagreed, saying that the record shows that the city made efforts to negotiate with its creditors, including Preston Hollow, before filing for bankruptcy in November. — Akiko Matsuda

Fed to consider tougher rules for midsize banks. The Federal Reserve is rethinking a number of its own rules related to midsize banks following the collapse of two lenders, potentially extending restrictions that currently only apply to the biggest Wall Street firms.

A raft of tougher capital and liquidity requirements are under review, as well as steps to beef up annual “stress tests” that assess banks’ ability to weather a hypothetical recession, according to a person familiar with the latest thinking among U.S. regulators. The rules could target firms with between $100 billion to $250 billion in assets, which at present escape some of the toughest requirements.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corp. late Sunday rolled out emergency assistance for banks and said depositors would be made whole after the failures of Silicon Valley Bank and Signature Bank. The move was meant to calm customers worried about the safety of their uninsured deposits following the collapse of Silicon Valley Bank last week.

But they disagree on many other fronts. Democrats want to look at tightening regulations on midsize banks they say are too loose, while Republicans are pointing the finger at Democratic spending as a root cause of the bank’s weakness. These disagreements mean that any bipartisan legislation to get ahead of potential future bank problems faces an uphill fight.

U.S. inflation cooled in February. Inflation eased in February but remained stubbornly high, presenting a challenge for the Federal Reserve as it confronts how to slow the economy with higher interest rates at the same time it moves to stem banking problems.

The consumer-price index, a closely watched inflation gauge, rose 6% in February from a year earlier, down from a 6.4% gain the prior month, the Labor Department said. It was the smallest increase since September 2021. When excluding volatile food and energy costs, prices advanced a slightly slower 5.5%. Economists view so-called core prices as a better indicator of future inflation.

Monthly data showed price pressures persisted in many corners of the economy. Core prices increased by a seasonally adjusted 0.5% in February, the largest monthly gain in five months. Shelter costs rose 0.8% over the month, matching the largest monthly gain since the 1980s.

• Feb. retail sales to show consumer strength. A report on February on retail sales will show whether Americans pulled back on spending after a strong start to the year, aided by unseasonably warm weather and a strong labor market. The department is scheduled to release February figures for spending at 8:30 a.m. ET Wednesday.
• Fed’s tightening plans collide with SVB fallout. The collapses of Silicon Valley Bank and Signature Bank give Federal Reserve policy makers two good reasons to hold off on raising rates when they meet next week. But the latest run of economic data can only serve to remind them why, until last week anyway, they planned to keep raising rates.

Share your tips, suggestions and feedback with the WSJ Pro Bankruptcy team: Soma Biswas; Alexander Gladstone; Jodi Xu Klein; Akiko Matsuda; Jonathan Randles; Alexander Saeedy; Andrew Scurria; Becky Yerak. 

Follow us on Twitter: @SomaBisWSJ; @gladstonea; @jodixu; @AskAkiko; @Sparkyrandles; @ajsaeedy; @AndrewScurria; @beckyyerak.