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Ukraine Eurobond Holders Tap Advisers; Parler's Ex-Parent Fails; Gemini Users to Be Made Whole
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Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Wednesday, April 17. In today's briefing, holders of Ukraine's Eurobonds said they have appointed Weil Gotshal & Manges and PJT Partners to assist with the debt restructuring talks at the request of the Ukrainian government. The former parent of Parler, the social network popular among conservatives when former President Donald Trump was kicked off Facebook and Twitter, now X, around the time of the 2021 U.S. Capitol attack, has filed for bankruptcy.
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Ukraine's Foreign Bondholders Organize at Request of Government
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A group of holders of Ukraine's foreign currency bonds say they have organized and hired legal counsel and a financial adviser at the request of the Ukrainian government.
The holders of the country's Eurobonds said they have appointed Weil Gotshal & Manges and PJT Partners to assist with the debt restructuring talks, according to a Tuesday announcement.
Ukraine will almost certainly default on its foreign currency debt and the nation is also likely to wrap up debt restructuring talks with private creditors by mid-year, according to a March report by S&P Global. The ratings firm last month cut the country's foreign currency debt rating to CC from CCC, in anticipation of the default and restructuring talks.
Ukraine's private creditors agreed to a two-year freeze on debt payments when Russia invaded the country in 2022. The nation faces the prospect of depleting funds to run its government within months if aid from the U.S. and Europe doesn't come through.
—Soma Biswas
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Earlier: Ukraine will run out of money within months and be forced to take painful economic measures to keep the government running if aid from the U.S. or Europe doesn’t come through, according to economists and Ukrainian officials.
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Parler drew conservative and libertarian fans during former President Trump’s last year in office. A Parler spokesperson said the app now is live on an invite-only basis as the new platform is in beta testing. PHOTO: OLIVIER DOULIERY/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Ex-Owner of Parler Social-Media App Files for Chapter 11 Bankruptcy
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The former parent of Parler, the social network popular among conservatives when former President Donald Trump was kicked off major social-media platforms around the time of the 2021 U.S. Capitol attack, has filed for bankruptcy.
Nashville, Tenn.,-based Parlement Technologies sought protection from creditors Monday in the U.S. Bankruptcy Court in Wilmington, Del., with assets and liabilities of $10 million to $50 million.
Parler’s former Chief Executive John Matze, who was fired in early 2021, was listed as its biggest unsecured creditor with a $10 million claim, which Parlement disputes. Matze has since started a new social platform, Hedgehog.
The fortunes of Parler waned after Trump was reinstated on Facebook and Twitter, now X. As part of a 2022 restructuring, Parler created a new parent company, Parlement, and set out to sell Parler, saying it wanted to focus on providing cloud and other infrastructure services to online businesses.
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Gemini Customers to Reunite With Digital Assets Held in Genesis Bankruptcy
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A bankruptcy judge on Tuesday approved a settlement between cryptocurrency exchange Gemini Trust and bankrupt Genesis Global that will return more than $2 billion of digital assets to roughly 232,000 Gemini Trust customers.
Judge Sean Lane of the U.S. Bankruptcy Court in White Plains, N.Y., approved the settlement, praising that the deal “materially advances the case in a significant way.”
The Gemini customers lost access to their cryptocurrencies in November 2022 when Genesis suspended withdrawal from the Earn investment program, under which Gemini customers lent their digital assets to Genesis in exchange for interest payments. Genesis sought chapter 11 protection in January 2023, and these assets have been frozen in bankruptcy.
Under the settlement, Gemini customers will receive 100% of their assets in their original form. The first 97% of the assets are expected to be paid in late May or early June, and the remaining 3% will be distributed when Digital Currency Group pays back what it owes to its subsidiary Genesis, said Anson Frelinghuysen, a Gemini lawyer, during the hearing. The judge asked a DCG lawyer if he had any comment, and the lawyer replied that he had nothing further to add.
The settlement is independent from the approval of Genesis’s chapter 11 exit plan, which is now under Judge Lane’s consideration.
—Akiko Matsuda
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BowFlex Bankruptcy Auction Yields No Better Bids
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A bankruptcy court approved the sale of substantially all of the assets of BowFlex to specialty fitness retailer Johnson Health Tech for $37.5 million after no better bid emerged for the bankrupt home-fitness company. Taiwan's Johnson last month agreed to act as the stalking horse bidder in the court-supervised auction as BowFlex filed for chapter 11 bankruptcy, with BowFlex stating at the time that multiple parties had indicated an interest in bidding. However, BowFlex said in an SEC filing that it received no competing qualifying offers during a marketing and sale process. The sale is slated to close next week.
—Colin Kellaher
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Regional Bank Stocks Fall As Earnings Kick Off With PNC, M&T
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Shares of regional banks fell after some of the larger players reported double-digit profit declines in the first quarter.
PNC Financial said net income fell 22% from a year earlier to $1.2 billion, or $3.10 a share. Analysts polled by FactSet expected $3.01 a share. At M&T Bank, net income dropped by a quarter to $505 million, the bank said Monday. That amounted to $3.02 a share, slightly above the $3.01 that analysts forecasted.
Banks are broadly under pressure from higher rates, which cut into profits because they have to pay more interest on deposits, especially at big-but-not-huge, midsize and smaller banks. A key profitability metric called net interest income fell 9% at PNC and 8% at M&T.
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China’s Punishment for People With Bad Debts: No Fast Trains or Nice Hotels
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People across China are being weighed down by their debts and a system that penalizes them for not paying the money back.
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Beijing is cracking down on delinquent debtors by seizing their salaries or restricting them from getting government jobs, as well as curbing their access to high-speed trains and air travel. Many are forbidden from buying expensive insurance policies and told they aren’t allowed to go on vacation or stay in nice hotels. Authorities can detain them if they don’t comply.
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The number of people on a publicly available government delinquency blacklist has jumped by nearly 50% since late 2019 to 8.3 million today. Courts can put people on the blacklist when they don’t fulfill judgments against them to pay money back or are deemed to be not cooperating with legal proceedings.
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Global Corporate Defaults Slow in March, But Still High Historically
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Global defaults fell to eight in March from 15 in February, but are still above 10-year averages, S&P Global Ratings said in a report. Across the globe, corporate defaults stand at 37, "three fewer than at this time last year but still well above the 10-year average of 27," according to S&P. Europe is the only region where year-to-date defaults are above their 2023 pace. "The quarterly rise primarily reflects companies needing to restructure their debt obligations, with the media and entertainment and consumer product sectors accounting for about 36% of total European defaults," S&P Global Ratings credit analyst Ekaterina Tolstova said.
—Stephen Nakrosis
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Federal Reserve Chair Jerome Powell said recent data haven’t given the central bank greater confidence on inflation. PHOTO: SAMUEL CORUM/BLOOMBERG NEWS
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Powell Dials Back Expectations on Rate Cuts
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Federal Reserve Chair Jerome Powell said firm inflation during the first quarter had introduced new uncertainty over whether the central bank would be able to lower interest rates this year without signs of an economic slowdown.
His remarks indicated a clear shift in the Fed’s outlook following a third consecutive month of stronger-than-anticipated inflation readings, which appears to have derailed hopes that the central bank might be able to lower interest rates pre-emptively. Officials had previously said they were looking for greater confidence that inflation was returning to their target and were optimistic another month or two of data might meet that standard.
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