Below is our initial take on recent bankruptcy-related developments:
The Washington-based casino and card-room operator filed for Chapter 11 bankruptcy in the Southern District of Texas on Monday.
S&K Take: RunItOneTime LLC (great name) f/k/a Maverick Gaming, filed in the SD Tex. on Monday, July 14. The company specializes in acquiring undervalued gaming assets (i.e. lots of card rooms, not a terribly lucrative business), amassing 26 operating properties and 9 non-operating properties. The Debtors enter bankruptcy with a TSA backed by its CEO and prepetition lenders, which will see the company’s core assets sold in a section 363 sale. The TSA is a bit complicated in that regard—some assets have stalking horses and some don’t. The TSA also does not yet have the support of Blue Owl, which is the debtors’ landlord under a master lease and the largest unsecured creditor. The case will be funded by a $7.5 million new money Dip, which will roll $15 million of prepetition debt. If Blue Owl gets on board, this might be smooth sailing.
Last Tuesday, Linqto—an investment platform that enabled users to access shares of privately held companies—filed for Chapter 11 bankruptcy, citing “serious defects” in its corporate formation and structure.
S&K Take: This one is a little more interesting, mostly because of the debtors’ business. The idea behind Linqto was to give investors access to shares of private companies that they could not access otherwise. Essentially, Linqto would buy the shares, hold those in an investment vehicle, and issue shares of that vehicle to investors. This, unfortunately, resulted in “extensive and serious” securities law violations, and the company operated under an “improper” structure. Or so an internal investigation concluded. Probably would have wanted to think the whole securities thing through on the front end. Anyway, the debtors are funding their bankruptcy with a $60 million DIP from Sandton Capital, and they have stated that the company may use bankruptcy to resume operations under a compliant structure. The creditor dynamic is interesting—there are only a handful of traditional GUCs, but 13,000 investors that purchased securities from the debtors who are far more significant. Will there be issues around the characterization of those claims? Remains to be seen. There is a lot to unpack—a class action against the former Ds and Os was already filed, and a shareholder has moved to transfer the case to Delaware (probably a smart play). I imagine we will be discussing this one again.
