💥Vashe Zdorov'ye💥
Updates on Nikola Corporation and Stoli Group (USA) LLC
We’re going to spare you the long macro overview this morning. Now that President Trump has shown some flex on tariffs, relative calm is settling in and the S&P 500 barely moved an inch yesterday. The VIX, as just one indicator, is back down to 30 (yet, to be clear, it remains +9 or up ~47% on the month).
Still, the word “relative” is doing some heavy lifting. Check out, for instance, the NY Fed’s survey of regional manufacturers. Or the fact that this 👇 is even happening:
And this 👇 is happening:
We’re hardly out of the woods yet: more volatility is likely in store as the administration attempts to work its magic across the globe. But they’re confident. For what it’s worth, Secretary Bessent went on record saying that “the VIX spiked and has likely peaked.”
In the absence of major macro news so far this week (knock on wood), we’re going to revisit two situations from earlier this year. Let’s dig in ⬇️.
🚛Update: Nikola Corporation🚛
You’ll recall that back on February 19, 2025, Phoenix-based Nikola Corporation ($NKLA) and 9 affiliates (collectively, the “debtors”) filed chapter 11 bankruptcy cases in the District of Delaware (Judge Horan) — the latest and greatest deSPAC sh*tco in the electric vehicle space to soil a bankruptcy docket. We wrote about the filing here (and the piece subsumes a lot of previous pre-BK coverage):
In a nutshell, the debtors filed sans DIP and stalking horse, planning to use cash on hand to fund an expedited and Houlihan Lokey Inc. ($HLI)-run sale process in chapter. And that’s where we left off.
Eight days later, the US Trustee appointed a seven-member official committee of unsecured creditors (featuring bankruptcy alum, Proterra Powered LLC!),* which, in turn, opted to, for reasons, 🤷♀️, spend a whole bunch of money on a robust bankruptcy professional roster including (i) lead counsel Morrison & Foerster LLP (“MoFo”)(Lorenzo Marinuzzi, Doug Mannal, Benjamin Butterfield, Theresa Foudy, Raff Ferraioli), (ii) local counsel, Morris James LLP (Eric Monzo, Brya Keilson, Siena Cerra), (iii) financial advisor, FTI Consulting Inc. ($FCN)(Michael Cordasco), and (iv) investment banker, Ducera Partners LLC (Michael Genereux).** Putting aside whether it was necessary to have such a full stack, an otherwise active UCC is par for the course in a case like this and we’re sure the debtors and debtors’ counsel, Pillsbury Winthrop LLP (“Pillsbury”), were ready for a lot of back and forth.
You know what’s not par for the course and likely something Pillsbury was not ready for? This 👇:
That’s right. As you probably saw, President Trump pardoned Nikola’s founder Trevor Milton, who had been convicted in ‘22 on multiple counts of misleading investors in Nikola. In case you didn’t click-through, Mr. Milton posted (and re-posted on X):
Today I was issued a full and unconditional pardon by @realdonaldtrump himself. He called me personally to tell me.
This pardon is not just about me—it’s about every American who has been railroaded by the government, and unfortunately, that’s a lot of people. It is no wonder why trust and confidence in the Justice Department has eroded to nothing ... I saw firsthand the tactics they use to guarantee convictions. I am incredibly grateful to President Trump for his courage in standing up for what is right and for granting me this sacred pardon of innocence.
X’s Community Notes be like …
… and sh*t all over him:
The Twitterati got in on the fun too:
Indeed, according to Axios, Milton and his wife made over $1.8mm in contributions last October to President Trump’s campaign. For its part, The New York Times reported that Mr. Milton had donated $2.85mm to Republican campaigns since ‘16. Good to know the going rate for a pardon these days!
Interestingly, shortly before Mr. Milton’s widespread victory lap, on March 20, 2025, an entity called ISSO LLC (“ISSO”), represented by Fennemore Craig PC (Gerald Shelley) and Ashby & Geddes PA (Ricardo Palacio), emerged out of nowhere to file a Notice of Appearance in the cases, 🤔. About a week and a half later and at the 11th hour prior to the bid deadline, a motion from ISSO to allow for inspection of the debtors’ Coolidge, Arizona, facility (the “facility”) without restrictions landed on the docket (the “inspection motion”). The inspection motion was originally under seal but we learned that while the debtors had, at some point, agreed, after consent with the UCC, to allow ISSO some access to the facility, the parties couldn’t agree on certain limitations and ultimately the debtors turned around and, pursuant to their business judgment, barred a “principal” of ISSO from conducting a site visit entirely. ISSO completely redacted the name of said principal from the motion but we end up getting some clues during an emergency April 2, 2025, hearing on the inspection motion.***
Here’s Pillsbury Winthrop Shaw Pittman LLP’s Joshua Morse, on behalf of the debtors, objecting to the inspection motion:
“The last thing the debtors want is for a sale process to be hijacked at the last minute by a potential bidder such as ISSO for an ulterior motive. Why do we have so much concern? The principal of ISSO is directly adverse to the debtors in a number of ways, including the following. The ISSO principal is involved in pending class action litigation against Nikola through which he is actively seeking discovery against Nikola and current and former Nikola officers, directors, and employees. The ISSO principal is subject to a nearly $100 million arbitration award for violating his fiduciary duties of loyalty and good faith to Nikola that the debtors have spent almost 18 months attempting to collect.”
So. Much. Cloak. And. Dagger. Who was this mysterious “principal”?!
Mr. Morse continued:
“The ISSO principle has a history of violating agreements with the company. The ISSO principal has repeatedly violated his separation agreement with the company by posting disparaging remarks about the company….”
Ok, fine, the name was redacted and nobody was name-dropping but this was kind of a hint:
And this:
LOL, yeah, sure, bro, the BK had nothing to do with a former founder convicted of fraud and has everything to do with current management. 🙄
Back to Mr. Morse for the kicker:
“There's good reason for the debtors, again, in the exercise of their business judgment to believe that the ISSO's principle involvement here pushing for a site visit, allowing himself to be there, is nothing more than a publicity stunt. He's been very public about attempting to rehabilitate his reputation. Notably, he's planning on what we understand to release a documentary, which he says absolves him of any liability against the company, including this $100 million arbitration award. He also continues to make claims, as recently as last week on social media and in a press release, that the company management framed him in this wrongdoing, as well as continuing to make disparaging claims against company management and employees.”
That documentary sh*t is 100% real by the way. A trailer for the feature film is out there (346k views!):
Btw, call us crazy, but it actually looks kinda … good, 🫣.
Doesn’t matter.
Judge Horan — not a fan of crappy self-produced “cinema” (distributed directly on YouTube, lol) — wasn’t having any of it and after hearing support from MoFo’s Lorenzo Marinuzzi of the debtors’ stated position,**** denied the inspection motion, saying:
“I think it takes a lot for a court to overcome or to second guess, I should say, the business judgment of the debtors. And I see no reason here why their business judgment should be second guessed. It's an appropriate exercise of it to set these conditions.”
And so ends Trevor Milton’s Nikola saga, not with a bang, but a sad whimper of desperation.
The debtors continued on with their auction on April 7, 2025, and filed a notice of successful bidder on April 10, 2025. Lucid USA II, Inc.’s ($LCID)(“Lucid Motors”) $30mm bid won the debtors’ manufacturing facility in Coolidge, AZ, related equipment/inventory, and two headquarter leases.***** Lucid Motors’ $30mm bid includes a $17mm cash portion and the assumption of liabilities.******
The debtors were able to get the sale approved at an April 11, 2025, hearing and move on to some leftover assets, namely, inventory related to the fuel cell trucks and the HYLA hydrogen refueling business.
Mr. Milton left the bankruptcy process — much like many do — in a foul mood:
Bruh. We know what’s next: a self-interested documentary.
*Other members, if you care, and we’re not sure why you would other than to know who got duped into engaging in a full RX employment act, include Antara Capital LP, Hexagon Purus GmbH, duotec de Norteaamérica S de RL de CV, Fiedler Group, Aztek Technologies S.A. DE C.V., and STORE Master Funding XXXII LLC.
**There are no fee applications on file as of the time of this writing nor any monthly operating reports that reflect the professional fee burn. We cannot wait to see how much “value” was added to this process, especially considering this is a direct dollar-for-dollar “value” transfer from the pockets of general unsecured creditors to professionals given the lack of secured debt.
***An unredacted version of the motion has since hit the docket, removing what little mystery Mr. Milton left from his Xeets.
****ISSO’s counsel Mr. Shelley, of course, made an impassioned case before Judge Horan, vouching for the sincerity of his client, the “principal,” and arguing that prohibiting him from a site visit would chill bidding; he said he believed his client is engaging in an “entirely genuine process” and that he hasn’t seen “anything except a serious interested bidding party.” A lawyer as character witness, basically! Compelling!! And risky AF!!! Mr. Morse, smelling a troll from a mile away, responded, “…based on our experience with the ISO principal, Mr. Shelley's indication that he has the ability to control the ISO principal's behavior is fanciful at best.” Mr. Shelley must not be on X.
*****The debtors also sold their 20% equity interest and convertible notes in Wabash Valley Resources LLC for $1.125mm to Midwest Infrastructure Partners and Philipp Brothers Fertilizer LLC. Wabash Valley Resources operates an ammonia fertilizer and hydrogen production plant in Indiana.
******$7mm in cash will be set aside in a “Battery Obligations Fund” for a period of 20 weeks to satisfy costs associated with the National Highway Traffic Safety Administration’s recall of Nikola’s BEV truck battery packs. Lucid Motors will also be extending offers of employment to at least 300 of the debtors’ employees.
🍸Update: Stoli Group (USA) LLC🍸
No doubt y’all recall that Stoli Group (USA) LLC (“Stoli”) and Kentucky Owl LLC (“KO”), and together with Stoli, the “debtors”) filed bankruptcy cases in the Northern District of Texas (Judge Everett) back on November 27, 2024. In case you browned out, kick back with your bev of choice and refresh yourself here:
Since then, the debtors’ cases have caused our poor Johnny to go through a case of the debtors’ product. We’ll tackle the update chronologically, but if you need to spare your liver, the short of it is that the parties are doing their part to support the paper industry before finding consensual resolutions on the courthouse steps. Otherwise, read on, and if you’re down for a game, take a shot every time a motion hits the docket.
The debtors’ first day hearing occurred a couple hours after we published that piece ☝️ on December 3, 2024. In spite of not having obtained consent from secured lender Fifth Third Bank NA (“Fifth Third”) to use cash collateral, the debtors were able to get through the hearing relatively unscathed by agreeing to punt the carveout of professional fees to a final hearing, with pros taking the risk of derailment in the interim.
A few weeks later, on December 23, 2024, the US Trustee appointed an official committee of unsecured creditors (the “UCC”), which turned around and hired Brown Rudnick LLP (“Brown Rudnick”) (Robert Stark, Bennett Silverberg, Jeffrey Jonas, Steven Levine, Tristan Axelrod, Matthew Sawyer).* And while we won’t blame you if you immediately thought that retention precipitated the coming litigation, for once …
For its part, this Brown Rudnick-led UCC has only filed a handful of docs. The lit-fest honors instead go to Fifth Third and Vladimir Putin’s Federal Treasury Enterprise Sojuzplodoimport and OAO Moscow Distillery Cristall (the Russian collective, “FTE”), represented by Quinn Emanuel Urquhart & Sullivan, LLP (Patricia Tomasco, Anastasia Fernands, Marc Greenwald, Ari Wugalter, Valentina Liu Jessica Rose, Alain Jaquet). On December 26, 2024, FTE fired in an objection to the debtors’ cash collateral motion, with this to say:
“Since 2014, Debtor Stoli Group (USA), LLC (‘Stoli USA’) has infringed on FTE’s ownership of the STOLICHNAYA Trademarks by importing, advertising. Distributing, and/or selling vodka bearing STOLICHNAYA Trademarks in the United States. Stoli USA’s trademark violations, which continue undeterred after the filing of this Chapter 11 Case (as defined below), have caused substantial damages to the Objectors. Indeed, Stoli Group’s liability for its trademark infringements potentially exceeds $2 billion. For their part, the Debtors bear responsibility for lost profits damages in the millions of dollars per month.
Accordingly, the Debtors’ Motion suffers from two fundamental flaws: first, the Debtors’ proposed DIP Budget fails to include any accruals for the ongoing lost-profits damages for infringement from the Debtors’ continued, illegal use of the STOLICHNAYA Trademarks, and, second, the Debtors purport to grant liens or affirm liens on the STOLICHNAYA Trademarks that the Debtors do not own. The Debtors Motion reflects a ‘whistle by the graveyard’ approach to its continuing infringement and lack of ownership of the STOLICHNAYA Trademarks, pretending to have full control over and capacity to alienate property they do not own.”
The debtors obvi dispute that, but to avoid trading blows with the Russian government, as well as address Fifth Third’s still-pending first day objection, the parties submitted, and the court granted, a second interim order that maintained the status quo and pushed the final hearing out to January 10, 2025. But a few days before that, on January 7, 2025, Fifth Third filed a new objection on account of Stoli’s intention to continue paying its non-debtor parent S.P.I. (Cyprus) Spirits Ltd. (“SPI”) for shipping products despite owing “the Debtors tens of millions of dollars.”
So, on January 10, 2025,** (i) the debtors kicked out the hearing another week to January 17, 2025 to make time to negotiate a consensual outcome, and (ii) FTE returned the favor, lol, by tossing in a motion for payment of an administrative expense claim “in the millions of dollars” (an easy and smooth first shot down).
The debtors and FTE ultimately resolved the admin claim motion by agreeing to lift the stay to let pending-SDNY, trademark-ownership litigation resume,*** and the debtors brokered a deal on cash collateral by agreeing to limit (i) payments to SPI to the extent of the value of goods delivered postpetition and (ii) replacement liens to estate-owned property,**** with the court entering the final order on January 17, 2025.
But don’t worry, a lot more decidedly-unnecessary bickering ensued. About a month later, on February 25, 2025, the debtors filed an emergency motion to continue using cash collateral (you didn’t miss the two in the footnotes did you?, fourth shot), which the UCC joined, after Fifth Third asserted events of default had occurred due to the debtors temporarily exceeding a disbursement variance threshold by $27.4k, “less than 2% of the Debtors’ total operating disbursements.” Because the payment was a simple timing issue – the debtors were back in compliance the next week – and was made to KO-secured creditor Bardstown Bourbon Company, LLC (“BBC”)***** for “storage of Debtor Kentucky Owl’s whiskey barrels,” preserving Fifth Third’s own collateral, Fifth Third backed the eff off and withdrew the default notice. All was well again… for another week.
On March 5, 2025, the debtors filed a cookie-cutter motion to extend their exclusive periods to file and solicit a chapter 11 plan (pyaht 5) and, a day later, on March 6, 2025, graced the court with yet another emergency motion to keep on using cash collateral (quick, rough turnaround, we know, but throw back your 6th) because, even though they weren’t liquid enough to pay Fifth Third’s interest and lender fees, they asserted it was nevertheless adequately protected on account of a collateral equity cushion. The debtors and Fifth Third, again, hashed that one out, this time by reallocating budget-contemplated payments to Fifth Third in the coming weeks.
On March 28, 2025, ANOTHER g-ddamn emergency motion landed on Judge Everett’s lap (lucky number 7) …
… because the agreed period to use cash collateral was set to expire three days later on March 31. And on that fateful date, Fifth Third objected to both the debtors’ exclusivity and cash collateral motions.
By this point, you’re probably close to blacking out, but the exclusivity argument is straightforward enough to follow – Fifth Third beefed with the extension with respect to KO because it had decided to liquidate after first selling off nearly 33,000 barrels of bourbon with a ~$37mm book value. Given that the entity wouldn’t be reorganizing, Fifth Third wanted to work with storage-provider BBC on a plan of liquidation to orderly bury it. We won’t opine on whether the debtors could have prevailed there, but they saved us a few moments of reading yet more paper by abandoning the KO relief entirely and signing up for a shorter extension for Stoli, which reduced the filing and solicitation exclusivity asks from June 25, 2025 and August 24, 2025, respectively, to April 29, 2025 and June 28, 2025.
On cash collateral, Fifth Third deduced from the debtors’ sh*tty, manual reporting – which as a reminder stems from having been hacked by Vlad back in August ‘24 – that it paid SPI at least $1.8mm more in the first 7 weeks of the bankruptcy than it received in product and also improperly paid $628k to non-debtor affiliate Louisiana Spirits, LLC (“LS”) for bourbon that LS didn’t own and which payment LS had not remitted back to Stoli. As an alternative outcome, Fifth Third also begged the court to emergency-appoint a chapter 11 trustee or convert the cases to chapter 7 (the “trustee/conversion relief”) (we’re counting this, have your 8th and last … ps, anyone seen Johnny?).
On April 1 and 2, 2025, the court then held a two-day, ung-dly long 8.5 hour trial, at which Judge Everett made clear that he wasn’t interested in entertaining the trustee/conversion relief on practically zero notice and CEO Chris Cadwell testified extensively about the debtors’ mishaps, pointing his finger for their many foot-faults and follies at Mr. Putin’s hack and the debtors’ still-underway process of getting their accounting system fully restored (which they expect to be “running in the course of the next couple of weeks”). Stoli founder and Russia-designated-“extremist” Yuri Shefler even took a short break from banging Russian hotties to file a response with the court giving Fifth Third a 🖕. But the whole thing ended up being a two-day waste of judicial time because the parties reached agreement once more on cash collateral usage, with SPI ponying up a $1mm unsecured, subordinated loan to fund the company.
The next hearing is slated for April 29, 2025, at which the court will consider the trustee/conversion relief, but based on how these cases have gone to date, g-d only knows how many emergency motions will be filed before then. If you made it this far, you might as well have a celebratory 9th before you go slam a few glasses of water.
*The UCC’s members are Los Angeles Dodgers LLC, Fold 7 Limited, and the National Alcohol Beverage Control Association. Beyond Brown Rudnick, its advisors are Kane Russell Coleman Logan PC (Joseph Coleman, John Kane, JaKayla DaBera) as legal counsel and M3 Advisory Partners, LP (Robert Winning) as financial advisor.
**A day prior, on January 9, 2025, the debtors requested emergency relief to pay critical vendors $1.5mm ($750k) (numero dos). FTE objected to that one too because it purportedly suffered “from a lack of transparency regarding the identity of the Trade Claimants.” However, it wasn’t lost on anyone that FTE was only present to “thwart and obstruct the Debtors’ reorganization efforts” and strongarm vendors into ruining the debtors’ business, so the court overruled the objection, finding that the debtors’ sharing of commercially sensitive info with Fifth Third, the UCC, and the UST sufficed.
***The debtors made good on that by filing an agreed lift-stay motion on April 4, 2025 (three).
****That latter addition resolved FTE’s cash collateral objection, but c’mon, y’all, debtors can’t encumber sh*t they don’t own anyway.
*****BBC is represented by Kirkland & Ellis LLP (Matthew Fagen, Robert Jacobson) and Gray Reed (Jason Brookner, Aaron Kaufman, Amber Carson).
📚Updated List of Resources!📚
We have recently updated our compiled list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. We’ve added:
No More Tears: The Dark Secrets of Johnson & Johnson by Gardiner Harris.
How Not to Invest by Barry Ritholtz.
We also did some research on talked-about books covering the topic of trade and these are some books that came highly recommended (caveat: we have not read them so caveat emptor!):
Why Politicians Lie About Trade by Dmitry Grozoubinski.
Trade Wars are Class Wars by Michael Klein and Michael Pettis.
Misadventures of the Most Favored Nations by Paul Blustein.
Kicking Away the Ladder: Development Strategy in Historical Perspective by Ha-Joon Chang.
No Trade is Free by Robert Lighthizer.
📤 Notice📤
Aaron David (Principal) joined Apollo Global Management from GoldenTree Asset Management.
Barry Jones (Managing Director) joined SierraConstellation Partners from Parallel.
Diane Massey (Senior Director of Finance) joined SierraConstellation Partners from Warner Bros.
Scott Cockerham (Senior Managing Director) joined FTI Consulting Inc. from Camin Cargo Control Inc.
🍾Congratulations to…🍾
Brandon Aebersold on his promotion to Co-Head of Restructuring in North America at Rothschild & Co.
Kelley Drye & Warren LLP (Jason Adams, Eric Wilson, Maeghan McLoughlin, Steven Yachik) and Stinson LLP (Nicholas Zluticky, Zachary Hemenway, Miranda Swift) for securing the legal mandate on behalf of the official committee of unsecured creditors in the 23andMe Holding Co. chapter 11 bankruptcy cases.
Marcelo Messer on his promotion to Co-Head of Restructuring in North America at Rothschild & Co.
McDermott Will & Emery LLP (Charles Gibbs, Marcus Helt, Grayson Williams, Darren Azman) for securing the legal mandate on behalf of the official committee of unsecured creditors in the Plenty Unlimited Texas LLC chapter 11 bankruptcy cases.
Pachulski Stang Ziehl & Jones LLP (Bradford Sandler, Cia Mackle, Maxim Litvak, James Walker, Paul Labov) for securing the legal mandate on behalf of the official committee of unsecured creditors in the AFH Air Pros LLC chapter 11 bankruptcy cases.