Calpine, New Century, Coudert, Ownit: Bankruptcy
Power producer Calpine Corp. said in bankruptcy court yesterday that it still intends to file a plan by June 20 when its exclusive right to propose a reorganization will end.
While Calpine says it hopes the plan will meet with approval from as many creditor groups as possible, the company's lawyer said, ``We harbor no illusions that full or even partial consensus will be easy.''
Calpine also hopes to resolve enough claims so some value will remain in the plan for existing shareholders.
Separately, Calpine was authorized yesterday to cure the defaults and assume the lease for 110-megawatt cogeneration plant that supplies power to John F. Kennedy International Airport in New York. Assumption became feasible when the price of natural gas decreased and the rate paid for the power increased.
Calpine stock closed yesterday at $3.70 a share, up 17 cents. The highest closing price since Calpine's Dec. 20, 2005, Chapter 11 filing was $3.97 a share on April 25, 2007.
With 92 power plants in 21 states producing 26,500 megawatts when the reorganization began, Calpine generated enough power for 20 million homes. Since filing, Calpine has sold or closed 20 percent of the plants.
The petition by San Jose, California-based Calpine listed assets of $26.6 billion, before Calpine wrote down the assets by $7.1 billion.
The case is In re Calpine Corp., 05-60200, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Northwest Airlines Emerging With B1, B+ Credit Ratings
Northwest Airlines Corp., the fifth-biggest U.S. carrier, is emerging from almost 21 months in reorganization today with a B+ corporate rating from Standard & Poor's and its equivalent, B1, from Moody's Investors Service Inc.
Moody's said May 29 that Northwest used Chapter 11 to reduce operating costs to a level ``now lower than most other network carriers.'' As a result of reorganization, the average age of the airline's fleet is 10.3 years, compared with 17.6 years before reorganization.
S&P said last week that Northwest is now ``among the most profitable U.S. carriers'' as a result of a lower cost structure ``mostly due to labor concessions.''
Moody's calculates that Eagan, Minnesota-based Northwest will have adjusted debt of $11.3 billion.
In its last monthly operating statement filed with the bankruptcy court, Northwest reported an $8 million net profit for April. For the month, operating profit was $80 million.
A U.S. bankruptcy judge in New York approved Northwest's Chapter 11 plan May 18. Unsecured creditors will receive stock for their claims, expected to total between $8.2 billion and $8.8 billion when all disputed claims are resolved.
Northwest predicted that the stock will represent a recovery for unsecured creditors between 66 percent and 83 percent.
The case is In re Northwest Airlines Corp., 05-17930, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
New Century May Charge $1,000 to Permit Senior Lien Foreclosure
New Century Financial Corp. is the first company in Chapter 11 to put a price tag on removing the so-called automatic stay.
The price is $1,000, with a discount for volume.
For permission to foreclose a New Century second mortgage, the holder of a first mortgage must pay $1,000, as the result of approval given yesterday by the U.S. Bankruptcy Judge in Delaware.
For $10,000, a first lien mortgage holder can foreclose an unlimited number of New Century subordinate mortgages.
The so-called ``automatic stay'' prohibits anyone from filing legal proceedings against a company in reorganization without permission from the bankruptcy court. New Century originated thousands of subprime second mortgages. When the first mortgage on one of the properties goes into default, the holder of the first mortgage couldn't foreclose New Century's second mortgage without approval from the bankruptcy court removing the automatic stay.
To prevent being ``inundated with motions to lift the automatic stay,'' New Century proposed charging $1,000 for the right to foreclose if it did not cure the defaults in 45 days.
Other mortgage lenders like Countrywide Home Loans, Inc. called the $1,000 fee ``egregious.''
Lenders worried they would pay hundreds of thousands of dollars were mollified when the bankruptcy court yesterday allowed a mortgage holder to pay New Century $10,000 for the right to foreclose multiple mortgages.
Once the country's second-largest subprime lender, New Century was responsible for $60 billion in home loans in 2006. The company generated $220 billion since inception.
The case is In re New Century TRS Holdings Inc., 07-10416, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Coudert Wins Chance to Challenge $85 Million Malpractice Claim
Coudert Brothers LLP, one of the world's leading law firms before filing to liquidate in Chapter 11, got permission from the U.S. Bankruptcy Court in New York to attempt to dismiss an $85 million malpractice suit.
The case, brought by former client Statek Corp., has been frozen since the firm sought bankruptcy court protection in 2006. A U.S. bankruptcy judge yesterday said Coudert can file papers asking a U.S. district court to throw out the suit. Statek's claim is the largest in the bankruptcy case.
Solely for the purpose of voting on the reorganization plan, Coudert agreed yesterday that Statek can vote a $3 million unsecured claim and a $50 million insured claim. Coudert's insurance coverage is capped at $50 million.
If Coudert fails to get the Statek case thrown out, the suit will again be frozen.
A hearing seeking court approval of Coudert's disclosure statement, which describes its proposed liquidating plan to creditors, is set for June 15.
The case is In re Coudert Brothers LLP, 06-12226, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Ownit and Committee Disagree Over CEO's Salary
Bankrupt companies and their creditors' committees might disagree over bonuses for the chief executives, but they seldom dispute base salaries in the mid to low six figures. The subprime lender Ownit Mortgage Solutions Inc. is the exception to the rule.
The official creditors' committee opposes the $300,000 salary for Ownit's Chief Executive Officer William Dallas. Ownit says in a court filing that the opposition stems from ``some inexplicable personal animus'' against Dallas.
Ownit argues that the base salary is only $150,000, leaving another $150,000 as a performance bonus. The company points out that his pre-bankruptcy base salary was $500,000 with a $750,000 bonus.
The salary would never be paid in cash but would count against the loans that Dallas owes Ownit.
The committee in rebuttal contends that Dallas is not required to work full time for Ownit.
The U.S. Bankruptcy Court in Delaware is scheduled to sort out the dispute at a June 7 hearing.
Agoura Hills, California-based Ownit was the country's eleventh largest sub-prime home mortgage lender on filing a Chapter 11 petition in late December when it began liquidating. The company made $5.5 billion in loans during the first half of 2006 and $8.3 billion in 2005.
Ownit had halted operations earlier in December after the warehouse lender shut down financing and froze Ownit's funds.
The case is In re Ownit Mortgage Solutions Inc., 06-12579, U.S. Bankruptcy Court, Central District of California (San Fernando Valley).
Royal Cordage Rope Maker Files Chapter 11 in North Carolina
Rope manufacturer Royal Cordage Corp. from Stanley, North Carolina filed a Chapter 11 petition May 29 in the U.S. Bankruptcy Court in Charlotte.
The filing listed a plant and 19 acres of land worth $2.2 million securing $2.7 million in mortgage debt. Total listed debt is $5.2 million.
The secured creditors include General Electric Capital Corp.
The case is In re Royal Cordage Corp., 07-31102, U.S. Bankruptcy Court, Western District of North Carolina (Charlotte).
Goodyear Tire Loses $1.4 Million Dana Claim for Late Filing
Goodyear Tire & Rubber Co. learned an expensive lesson yesterday when Bankruptcy Judge Burton Lifland in New York threw out a $1.4 million claim against auto parts maker Dana Corp. that was filed after the deadline.
One of the creditor-friendly reforms in the October 2005 amendments to the bankruptcy law included a new provision allowing suppliers to be paid in full for ``goods'' received within 20 days before the bankruptcy filing.
Goodyear inexplicably missed the deadline for filing the claim. Dana's records showed that notices about the last day for filing the claim was sent to the proper address.
Although Dana is yet to file a plan and is months away from emerging from chapter 11, Lifland wouldn't cut Goodyear any slack. For a $1.4 million claim that would have been paid in full, Goodyear won't be paid a dime.
Separately, Dana filed the April operating report showing a $170 million net loss for the month. The operating loss was $120 million, including $142 million in ``realignment charges.''
Year to date, the net loss is $262 million. The operating loss for the first four months of 2007 is $165 million, including $161 million in ``realignment charges.''
Dana and two unions have been negotiating contract concessions facing today's deadline when the bankruptcy judge is scheduled to decide whether the company may impose lower wages and benefits on members of the United Auto Workers and the United Steelworkers unions. Last month, the two sides asked the judge to extend the deadline on the last day.
Toledo, Ohio-based Dana began the Chapter 11 reorganization in March 2006, listing assets of $7.9 billion and debt totaling $6.8 billion.
The case is In re Dana Corp., 06-10354, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Portions of Dura Management Bonuses Cut by Judge
The U.S. Bankruptcy Judge in Delaware upheld objections by the United Auto Workers Union to parts of the $2 million incentive program proposed for senior managers at auto component manufacturer Dura Automotive Systems Inc.
The bankruptcy judge disallowed bonuses for delivering a business plan to creditors and for preparing a Chapter 11 reorganization plan. Instead, senior executives can earn $1.25 million if the company meets performance targets.
Separately, Dura won an extension of its exclusive right to file a plan through September 30. No one objected.
Rochester Hills, Michigan-based Dura is a combination of 19 companies acquired between 1994 and 2003. The Chapter 11 petition last September listed $2 billion in assets and debt of $1.7 billion.
The case is In re Dura Automotive Systems Inc., 06-11202, U.S. Bankruptcy Court, District of Delaware.
Stonepath Group Resolves Dispute Over Involuntary Petition
Stonepath Group Inc. has reached agreement with the petitioning creditors who filed an involuntary Chapter 7 petition against the company early this month.
The creditors were not owed money by Stonepath. The debt was owed by a non-filed Stonepath subsidiary named MGR Inc.
Everyone has agreed, subject to approval by the U.S. Bankruptcy Court in Delaware where the involuntary petition was filed, that the Chapter 7 petition in Delaware will be dismissed.
Instead, MGR will go into a Chapter 7 liquidation in Minnesota.
The petitioning creditors contended that ``Stonepath's management has completely abandoned it'' while the company was taken over by secured creditor Mass Financial Corp.
Stonepath calls itself a ``non-asset-based third-party logistics'' services provider.
The case being dismissed is In re Stonepath Corp., No. 07- 10634, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Junk Bond Spread at 2.42 Percent; Down from 10 Percent in 2002
The spread between U.S. Treasury securities and junk bonds shrank to 2.42 percent on May 29, according to Merrill Lynch & Co.'s high-yield index.
In 2002, the spread was almost 10 percent.
The current spread is half the five year average.
Several insurance companies objected to approval of the Chapter 11 plan for auto parts maker Collins & Aikman Corp. in advance of the June 5 confirmation hearing when the U.S. Bankruptcy Judge in Detroit will be asked to approve the reorganization. The insurance companies say their policies shouldn't be sold to companies buying Collins & Aikman businesses. At the June 5 hearing, the bankruptcy court is also being asked to approve the $134 million sale of the carpet and acoustics business and the $68 million sale of part of the North American plastics business. Collins & Aikman, the maker of auto instrument panels, doors and trim used in 90 percent of the autos sold in the U.S., began the Chapter 11 reorganization just over two years ago. The case is In re Collins & Aikman, 05-55927, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
U.S. Energy Biogas Corp., whose payment-in-full Chapter 11 plan was approved in a May 24 confirmation order, reported a $4.7 million net loss in April. The subsidiary of power-plant operator U.S. Energy Systems Inc. filed to reorganize in late November, 2006, listing assets of $161 million and debt of $155 million. The parent, based in White Plains, New York, was not in reorganization. The case is In re U.S. Energy Biogas Corp., 06- 12827, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
The exclusive right of Global Home Products LLC to file a plan was extended to August 3. Controlled by an affiliate of Cerberus Capital Management, Global home sold its Anchor Hocking glassware business for $75 million cash and $20 million in assumed debt after previously being authorized to sell its WearEver brands including Mirro, Regal and AirBake. Before that the Burnes Group picture framing business went for $33.5 million. Created in 2004 from a $310 million acquisition of the Anchor Hocking, Burnes Group and WearEver businesses from Newell Rubbermaid, Global Home filed for Chapter 11 reorganization in April 2006. The case is In re Global Home Products LLC, 06-10340, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Liquidating hotel operator Arlington Hospitality Inc. has an agreement to settle $43 million in claims by PMC Commercial Trust for $200,000. After filing the chapter 11 in September, 2005, Arlington sold its assets to Sunburst Hotel Holding, Inc. and SJB Equities, Inc. for $9.6 million cash and $22.8 million in debt assumption. The petition listed assets of $99 million and $94 million in debt. Arlington and affiliates owned or leased 36 AmeriHost Inns. The case is In re Arlington Hospitality Inc., 05- 51848, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).
W.R. Grace & Co. reported a $2.8 million net loss in its April operating statement filed with the U.S. Bankruptcy Court in Delaware where the specialty chemical manufacturer and 61 subsidiaries filed Chapter 11 petitions in April 2001 to deal with asbestos claims. The case is In re W.R. Grace & Co., 01- 01139, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Australian Bankruptcy Rate Doubles from Last Year
Australians are declaring bankruptcy this year at a rate twice last year's, according to a report in the Courier Mail citing testimony at a government hearing from the head of the Insolvency and Trustee Service Australia.
Filings are running 30,000 a year now, contrasted to 13,000 10 or 15 years ago, the story said.
Chile's GasAtacama Near Bankruptcy Thanks to Scarce Natural Gas
GasAtacama SA, a Chilean utility and natural gas pipeline, is near bankruptcy by losing upwards of $500,000 a day from purchasing more expensive diesel fuel for generators to replace natural gas no longer available from Argentina.
The company is in negotiations with its mining customers over rate increases. The customers include Chile's state-owned Codelco, the world's biggest copper producer.
Argentina, the supplier of most of Chile's natural gas, is cutting exports to satisfy demand at home.