By: Donald L Swanson
“within three (3) business days of termination of the mediation, the Debtors shall publicly disclose the terms of the last offers extended by each of the Mediation Parties, respectively.”[Fn. 1]
Whoever heard of such a thing—a requirement that the “last offers” of the mediating parties be publicly disclosed?
And this requirement is in a “consensual” mediation order entered in the Genesis Global Holdco, LLC, bankruptcy.[Fn. 2]
Here’s the context.[Fn. 3]
Genesis Global Holdco, LLC, (“Debtor”) describes its business as providing “lending and borrowing services for digital assets and fiat currency primarily to and from institutional and high net worth individual customers.”
Debtor files its voluntary bankruptcy for this declared purpose: “to maximize value for creditors” and “restructure” Debtor’s balance sheet, which includes “approximately $5.1 billion of total liabilities.”
Debtor describes the reason for its financial problems as the “tremendous dislocation” in the digital assets industry, including:
- the collapse, in May 2022, of LUNA and TerraUSD;
- liquidation proceedings initiated shortly thereafter for the digital asset hedge fund Three Arrows Capital Ltd.;
- bankruptcy filings by Celsius Network LLC and Voyager Digital Holdings, Inc., in July 2022; and
- more recent bankruptcy filings by FTX Trading Ltd. and Alameda Research Ltd.
Such drastic market shifts have decreased investor confidence in the digital asset markets. And that, in turn, has adversely and severely impaired Debtor’s business.
In particular, as the FTX situation unfolded, Debtor experienced unprecedented withdrawals, leading Debtor to pause all lending and borrowing on November 16, 2022.
Then, on January 19, 2023, Debtor files its voluntary Chapter 11 bankruptcy Petition.
Negotiations & Mediation Request[Fn. 4]
Debtor says it has been in extensive negotiations with its creditors, since November 2022, toward reaching a value-maximizing solution to Debtor’s financial problems.
Such efforts result in an agreement in principle with various creditors and creditor groups, memorialized in a Restructuring Term Sheet, establishing a framework for continued negotiations.
In such efforts, Debtor determines that the assistance of a mediator is needed in negotiationing the amount, form, timing and other terms and conditions of financial contribution to Debtors’ reorganization plan.
Debtor files its motion requesting mediation, contending that:
- mediation may help the parties get past the impediments to a consensual bankruptcy plan;
- a mediation session should be scheduled immediately, with a proposed termination date of thirty days thereafter;
- the appointment as mediator of a sitting bankruptcy judge from the Southern District of New York would be appropriate; and
- each of the proposed mediation parties will participate in the mediation.
The result is an agreed mediation order containing the public disclosure of final mediation positions noted above.
It’s in the context described above that the proposed mediation parties agree that their final mediation proposals are to be made public.
It would be interesting to hear about the discussions and arguments that lead up to and result in such an arrangement.
Footnote 1. The emphasis is added. This quotation is a confidentiality-exception provision in an “Order Appointing Mediator,” entered May 1, 2023, in the case of Genesis Global Holdco, LLC, Case No. 23-10063 in the Southern New York Bankruptcy Court (Doc. 279, par. 6, at 3). Here’s how such paragraph 6 reads (emphasis added):
“ . . . all (a) discussions among any of the Mediation Parties . . . , (b) any mediation statements . . . and any documents or information provided to the Mediator or the Mediation Parties in the course of the mediation, and (c) correspondence, draft resolutions, offers, and counteroffers produced for or as a result of the mediation shall be strictly confidential and shall not be admissible for any purpose . . . , and no person or party participating in the mediation . . . shall in any way disclose to any non-party or to any court . . . any such discussion, mediation statement, other document or information . . . ; provided, however, that, unless otherwise agreed among the Mediation Parties, within three (3) business days of termination of the mediation, the Debtors shall publicly disclose the terms of the last offers extended by each of the Mediation Parties, respectively.”
Footnote 2. Doc. 278 in the Genesis Global bankruptcy is a “Notice of Filing of Proposed Consensual Order Appointing Mediator” that attaches a copy of the “Order Appointing Mediator.” Such Order “incorporates changes to the proposed form of order . . . that have been agreed upon by the Mediation Parties,” and the “shall publicly disclose” language quoted above is one of the changes “that have been agreed upon by the Mediation Parties.”
Footnote 3. The “context” information in this article is taken from Debtor’s filing at Doc. 17 in the Genesis Global bankruptcy titled, “Declaration . . . In Support of First Day Motions . . . ”
Footnote 4. The “Debtor’s Negotiations and Mediation Request” information in this article is taken from Debtor’s filing at Doc. 252 in the Genesis Global bankruptcy titled, “Debtors’ Motion for Appointment of a Mediator.”
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