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Russia Debt Window Closes; J&J Judge Urges Trust in Bankruptcy Process
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Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Wednesday, May 25. The U.S. exemption for Russia to pay its offshore debt expires today and it isn't getting extended, pushing the Kremlin closer to defaulting on its foreign liabilities. J&J and its talc claimants were asked to "trust the process" by a bankruptcy judge in order to move the case forward.
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Much of the economic pain that a default can bring has already happened in Russia due to the broad raft of sanctions imposed since it invaded Ukraine.
PHOTO: YURI KOCHETKOV/SHUTTERSTOCK
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Treasury to block U.S. investors from receiving Russian debt payments. The Treasury Department moved to cut off Russia’s ability to make payments on its dollar-denominated sovereign debt, putting Russia on a path toward defaulting on its foreign debts this summer and deepening the country’s economic isolation after its invasion of Ukraine.
Since imposing a raft of sanctions on Russia this year, the U.S. had maintained an exemption allowing U.S. banks and investors to process and receive payments on existing Russian bonds. The Treasury said Tuesday it would allow the exemption to expire on Wednesday.
Russia has managed to stay current on around $2.5 billion worth of foreign debt payments since the conflict in Ukraine began, largely by relying on that exemption and using unsanctioned Russian banks to send payments.
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J&J talc bankruptcy judge urges lawyers to 'trust the process.' The New Jersey bankruptcy judge overseeing the chapter 11 of a Johnson & Johnson talc subsidiary urged lawyers sparring in the case to "trust the process" at the outset of court-ordered settlement discussions.
Judge Michael Kaplan of the U.S. Bankruptcy Court in Trenton, N.J., said Tuesday that he was told by one of the court-appointed mediators that discussions weren't as far along as he would like, though some progress has been made. Judge Kaplan said he is going to follow a phrase popular with Philadelphia sports teams: trust the process. "They have that phrase and they keep watching losing years, year-after-year," Judge Kaplan said. "I also have a trust in the process, in mediation. I don't plan to have a losing season." Judge Kaplan, who agreed in February to let LTL proceed with the bankruptcy, has urged parties to have good-faith discussions with mediators tasked with attempting to settle the case. – Jonathan Randles
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Bankrupt Smartphone Startup Hoyos Wants Internal Investigation. Hoyos Integrity Corp., a security-focused smartphone startup that is trying to reorganize in chapter 11 bankruptcy, wants to bring in an outside party to investigate "allegations of malfeasance," a lawyer for the Florida-based company says.
During a hearing Tuesday at the U.S. Bankruptcy Court in Wilmington, Del., Hoyos lawyer Raymond Lemisch said there had been "discord" among management and the board of directors. A third party could help determine whether the allegations had merit, he said, without elaborating.
Hoyos directors when it filed for bankruptcy in April included Gary Cohn, a former top economic adviser to President Donald Trump. – Becky Yerak
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96 Wythe Acquisition, 9 a.m. ET: Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., will hear a motion for the appointment of a chapter 11 trustee filed by Benefit Street Partners against the hotel in Williamsburg, Brooklyn.
Guo Wengui, 10 a.m. ET: U.S. Bankruptcy Judge Julie Manning will consider the dismissal of the case proposed by the debtor, who also goes by Ho Wan Kwok. Mr. Guo said he was no long able to afford the legal costs.
The Boy Scouts of America, 2 p.m. ET: Judge Laurie Selber Silverstein will hear motions including whether to grant an extension for the debtor to remove civil actions ahead of the confirmation. The hearing will take place at the U.S. Bankruptcy Court in Wilmington, Del.
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Ukrainian President Volodymyr Zelensky spoke Tuesday at the World Economic Forum in Davos, Switzerland.
PHOTO: WORLD ECONOMIC FORUM/ZUMA PRESS
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Ukraine-Russia war is fueling triple crisis in poor nations. Crises in food, fuel and finance caused or worsened by the war in Ukraine threaten to stoke unrest in poorer countries and push dozens of them into default, global business and humanitarian leaders warned this week at the annual gathering of the World Economic Forum.
The three interrelated crises—caused or worsened by the war in Ukraine—have come into focus during this week’s meeting of the World Economic Forum in Davos, making it one of the gloomier annual gatherings in its more than 50 years.
High inflation and interest rates could push more than 70 countries into default, according to Achim Steiner, administrator of the United Nations Development Program. They would follow Sri Lanka, which recently became the first Asian country to default on its debt this century amid protests that turned violent and led to the collapse of the government.
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“For many developing economies, there simply is no money left in the kitty.”
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— Achim Steiner, administrator of the United Nations Development Program
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New York state Assemblywoman Linda Rosenthal speaking at a rally in support of the Adult Survivors Act in 2020.
PHOTO: SCOTT HEINS/GETTY IMAGES
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New York to suspend limit on adult sex-abuse cases for a year. New York will temporarily suspend its civil statute of limitations for adult sexual abuse starting in November under a law signed Tuesday by Gov. Kathy Hochul.
The Adult Survivors Act will open a one-year window during which people who say they were sexually abused as adults can file claims against their alleged attackers—regardless of when they were abused.
Advocates for the new law said it is necessary because survivors of sexual abuse often require years to process their experience and are then barred from bringing claims. Several states, including New York and California, have temporarily suspended the civil statutes of limitation for child sex-abuse claims. The moves prompted thousands of lawsuits against people and the institutions that employed them—including churches, schools and social organizations.
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A factory in Corsico, near Milan, in Italy. PHOTO: ANTONIO CALANNI/ASSOCIATED PRESS
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High inflation weighs on U.S., global economies. Growth in the U.S. and global economies slowed in May as high inflation and rising interest rates dented demand, business surveys said Tuesday.
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In the U.S., data firm S&P Global said its composite purchasing-managers index—which measures activity in both the manufacturing and services sectors—was 53.8 in May, down from 56.0 in April and the weakest rate of growth in four months. Separately, S&P Global said its index for the eurozone’s services and manufacturing sectors fell to 54.9 in May from 55.8 in April.
A reading above 50.0 points to an expansion in activity, while a figure below that threshold points to a contraction.
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Goldman Sachs expects more China real estate defaults, switches to bear case. (CNBC)
Destiny USA, a New York mega mall, sees valuation plunge 28%. (Bloomberg)
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