Solutia, Delphi, Dana, Calpine, Marcal: Bankruptcy

(Corrects date of approval request in Fred Goldman item in story published July 3.)

Solutia Inc., the producer of nylon and acrylic fibers, received three objections to the approval of the disclosure statement explaining the plan filed May 16 offering unsecured creditors an 85 percent recovery while canceling existing stock and giving the former parent Monsanto Co. (MON) 20 percent of the new equity.

The official stockholders' committee and the ad hoc committee of holders of the unsecured notes of 2027 and 2037 agree that the court should not approve the disclosure statement and send the plan out for a vote until the U.S. Bankruptcy Judge has decided at a September 5 hearing whether she will approve the settlement with Monsanto providing the foundation for the plan. On a different theme, the indenture trustee for the holders of the secured notes of 2009 contends that the plan cannot be confirmed because Solutia is not in reality proposing to pay the notes in full.

The ad hoc unsecured noteholders' committee argued in its June 28 court filing that the disclosure statement should contain information revealed at the hearing in September about the Monsanto settlement. The ad hoc committee quotes statements that Bankruptcy Judge Prudence Carter Beatty made in Court suggesting that the settlement hearing should be held first.

The official equity committee argues in its June 28 filing that the disclosure statement ``misleadingly portrays'' the Monsanto settlement because ``most of the burden of the legacy liabilities will remain Solutia's.'' The stockholders also contend that the Solutia ``deliberately undervalued'' the company to permit wiping out the existing equity. They say that ``a half-hearted sales process'' indicates the company would have an enterprise value of at least $3.2 billion.

The indenture trustee for the secured noteholders says that Solutia ``elected to breach the peace and declare war'' by contending that the claim of $223 million should be reduced to take into account unamortized ``original issue discount.'' Bank of New York, as indenture trustee, says the plan improperly denies the holders their right to vote because it does not propose to pay them in full.

The hearing for approval of the disclosure statement is scheduled for July 10. Beatty ruled May 18 that she would not approve the plan, even if creditors vote in favor, if she does not separately approve the settlement with Monsanto.

Solutia says that unsecured creditors whose claims should total around $350 million will receive 34.1 percent of the new stock to realize a recovery around 85 percent. The noteholders who are unsecured as result of Beatty's May 1 decision are to receive 44.1 percent of the new stock for their $455 million in claims giving them the same 85 percent recovery as other unsecured creditors.

Monsanto is to have 20 percent of the new stock plus repayment in full for all expenses above $50 million in environmental cleanup at sites where Monsanto and Solutia share responsibility.

Solutia, based in St. Louis like Monsanto, filed its Chapter 11 reorganization petition in December 2003, listing assets of $2.85 billion against debt totaling $3.22 billion.

The case is In re Solutia Inc., No. 03-17949, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Auto Updates

Delphi Schedules Hearing to Approve UAW Settlement

Delphi Corp., the world's largest auto parts maker, will ask the U.S. Bankruptcy Court on July 19 to give its formal blessing to the new collective bargaining agreement that the members of the United Automobile Workers union ratified last week.

The contract opens the door to emerging from Chapter 11 by permitting Delphi to lower wages while closing or selling all but eight of its 29 plants in the U.S.

Delphi said in its filing that it's negotiating with the two other largest unions and could have agreements ready for court approval at an August 16 hearing.

Separately, Delphi received approval for sale procedures relating to its brake parts business in Saltillo, Mexico. The so-called stalking-horse bid of $15 million comes from Robert Bosch LLC and Frenados Mexicanos SA de CV. The plant supplies both Bosch and General Motors Corp.

If a higher bid is submitted by the July 10 deadline, a July 17 auction will precede the July 19 sale approval hearing.

The world's largest auto parts maker is intending to emerge from reorganization before the year's end.

The case is In re Delphi Corp., No. 05-44481, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Dana and Unions Ask for Short Delay on Wage Ruling

As they have done three times before, Dana Corp. and its two unions waited until the last day to ask that U.S. Bankruptcy Judge Burton Lifland in New York hold off ruling on whether Dana can cut workers' salaries and trim benefits.

This time, they asked four a four day extension of the deadline to July 6.

Dana, the United Auto Workers and the United Steelworkers unions concluded the trial April 3 on Dana's request for authority throw out collective bargaining agreements. Until they asked him not to rule, Lifland originally was required to decide by the end of April or Dana would have been allowed to lower wages on its own. The last extension of two weeks was made on June 15.

The Toledo, Ohio-based axel and frame manufacturer started the Chapter 11 reorganization in March 2006, listing assets of $7.9 billion and $6.8 billion in debt.

The case is In re Dana Corp., 06-10354, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Sunroof Maker ASC Asks for Approval of Financing

Although auto sunroof maker ASC Inc. sold the bulk of its assets for $14.7 million, the company is asking for approval of financing to continue running the remaining business, a facility in Lansing, Michigan that supplies parts for out-of-production autos and generated $39 million in revenue in 2006.

The sale produced $3 million after paying off one secured lender. Financing is required, ASC told the bankruptcy court, because another secured lender would not permit use of the excess funds.

The funding will come from a pre-petition subordinated lender with liens on all of the assets.

ASC's Chapter 11 petition listed assets of $31.3 million against debt totaling $50.8 million, including a $9.8 million loan from Comerica Bank secured by all of the assets.

When the Chapter 11 case began, Southgate, Michigan-based ASC had three operating plants after shutting down seven facilities.

The case is In re ASC Inc., No. 07-48680, U.S. Bankruptcy Court, Eastern District Michigan (Detroit).

Other Updates

Fred Goldman Settles to Receive O.J. Simpson Book Rights

Frederic Goldman settled with the bankruptcy trustee for Lorraine Brooke Associates Inc. and will receive the rights to the book ``If I Did It'' in which O.J. Simpson explained how he might have murdered his ex-wife Nicole Brown Simpson and Goldman's son Ronald.

The trustee will transfer the book rights to Goldman who in turn will pay the trustee 10 percent of first $4 million in proceeds from the sale of the book. On a sliding scale, the trustee will receive 5 percent up to $20 million, allowing Goldman to retain everything over $20 million.

The trustee is asking the U.S. Bankruptcy Court in Miami, Florida to approve the settlement before July 14.

The bankruptcy trustee will also transfer the Harper Collins book contract to Goldman. The publisher decided not to publish the book in view of the ensuing controversy.

Goldman obtained a $38 million civil judgment against Simpson for the wrongful death of his son. The state court in California previously ruled that Goldman should have the rights to the book, thus allowing Goldman to lodge a $38 million secured claim against Lorraine Brooke Associates.

The debtor Lorraine Brooke Associates objected to the claim. The bankruptcy judge upheld it. The settlement outlined in papers filed yesterday in the Miami bankruptcy court settles the $38 million secured claim.

The bankruptcy court had also previously decided that Simpson's transfer of the books rights to Lorraine Brooke Associates was a fraud. The company was supposedly owned by Simpson's children. The bankruptcy judge ruled that the judgment was also good against Lorraine Brooke Associates.

The trustee retains the right to bring copyright infringement and violation of the automatic stay claims against the web site tmz.com for the unauthorized publication of the book on the internet in June. The trustee previously said that tmz.com is a subsidiary of New York-based Time Warner Inc. (TWX)

Lorraine Brooke Associates filed a Chapter 7 liquidating bankruptcy petition in April in Miami. Early on, the bankruptcy judge denied a request by the company to switch the case from a Chapter 7 liquidation to Chapter 11.

The case is In re Lorraine Brooke Associates, 07-12641, U.S. Bankruptcy Court, Southern District of Florida (Miami).

Giant Eagle Makes $20 Million offer for Le-Nature's Plant

Supermarket operator Giant Eagle Inc. has a $20 million contract to buy the Latrobe, Pennsylvania, bottling plant from the Chapter 11 trustee for Le-Nature's Inc.

The trustee is asking the U.S. Bankruptcy Court in Pittsburgh to hold a hearing on July 17 to settle on auction procedures. The trustee proposes having other bids by Aug. 6 and a sale approval hearing on Aug. 9.

The trustee said he has been negotiating with other potential buyers although Pittsburgh-based Giant Eagle is the only one so far willing to sign a contract.

The state court custodian appointed for Le-Nature's began the Chapter 11 reorganization in early November in Pittsburgh. A Chapter 11 trustee took over in January.

Recently, most of the activity in the case has centered around disputes between Wachovia Bank N.A., the agent for the lender group, and hedge funds that bought the bank debt in the secondary market after Le-Nature's financial problems became public knowledge.

The case is In re Le-Nature's, Inc., No. 06-25454, U.S. Bankruptcy Court, Western District Pennsylvania (Pittsburgh).

Ronco May Have $10 Million Offer for All Assets

Representatives of gadget marketer Ronco Corp. will appear in bankruptcy court July 9, seeking approval of sale procedures and may or may not propose nominating Marlin Equity Partner LLC as the so-called stalking horse with a $10 million purchase offer for substantially all of the company's assets.

Ronco has a non-binding letter of intent with Marlin, which is still performing due diligence.

If Marlin does not sign a contract by the July 9 hearing, Ronco says it may designate someone else as a stalking horse who would receive a breakup fee if outbid at the ensuing auction. If no one is under contract by the hearing, Ronco said in its June 28 court filing that it will go ahead with an auction anyway.

July 9 is also the date for the hearing in the U.S. Bankruptcy Court in Woodland Hills, California for approval of financing from the pre-petition lender Laurus Master Fund Ltd. that unsecured creditors oppose.

Ron Popeil sold the company in 2005 for $40 million cash and a $16 million note. Popeil and his father made the company famous by marketing the Pocket Fisherman and Veg-O-Matic.

Simi Valley, California-based Ronco filed its Chapter 11 petition on June 15, listing debt totaling $32.7 million and assets of $13.9 million. The consumer and kitchen products marketer said from the outset it would sell its assets quickly.

The case is In re Ronco Corp., 07-12000, U.S. Bankruptcy Court for the Central District of California (San Fernando Valley).

Calpine Sues to Recover Former Subsidiary Rosetta

Calpine Corp. (CPN), the power producer, sued its former subsidiary Rosetta Resources Inc. claiming the spinoff less than six months before Calpine's Chapter 11 filing was a fraudulent transfer because the $1.05 billion price was inadequate.

Rosetta owned all of Calpine's oil and gas assets located California, South Texas, the Gulf of Mexico, and the Rocky Mountains. Calpine contends in its June 29 lawsuit that the price was too low because the company was itself engaged in a ``desperate efforts to stave off bankruptcy'' and Rosetta managers, who were part of the buyout group, withheld information about the extent of proved reserves.

Calpine noted in its papers that bankers who gave a fairness opinion based their conclusions ``principally'' on information the Rosetta managers supplied and refused to say whether the price represented ``fair market value.''

Calpine is looking to recover either the properties themselves or their value.

Rosetta said in a statement last week that there was ``no basis in law or fact'' for Calpine's lawsuit.

Calpine filed a reorganization plan on June 20 that could pay unsecured creditors in full. The plan may provide some recovery for existing shareholders depending on the valuation given to the reorganized company and the extent of the reduction in claims.

Calpine generated enough power for 20 million homes with its 92 power plants in 21 states that were producing 26,500 megawatts when the reorganization began in December 2005. Later, Calpine sold or closed 20 percent of the plants and wrote the assets down by $7.1 billion.

Listing assets of $26.6 billion, Calpine's was the largest Chapter 11 filing in 2005 measured by assets.

The case is In re Calpine Corp., 05-60200, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Marcal Looks to Quickly Toss Out Federal Environmental Claim

Having filed a reorganization plan last week that could pay unsecured creditors up to 52 percent, Marcal Paper Mills Inc. is asking the U.S. Bankruptcy Court in Newark, New Jersey to hold a hearing on July 13 and throw out the $946 million claim filed by federal environmental regulators.

Marcal says that the claim will interfere with its ability to emerge from reorganization because the government is attempting to saddle Marcal with the entire cost of cleaning up the Diamond Alkali Superfund Site on the Passaic River in New Jersey.

Marcal says in its court filing that it had not discharged any effluent into the river for 40 years and never had dumped any of the hazardous substances mentioned in the government's claim.

Separately, the bankruptcy court yesterday allowed Marcal to pay fees to Merrill Lynch in connection with a commitment for $110 million in exit financing, to consist of a $95 million term loan and a $15 million revolving credit. Merrill Lynch is a minority passive investor in Bloomberg LP, the parent of Bloomberg News.

In return for an investment of more than $11.5 million, Apollo Capital Management L.P. and the Marcalus family who now control the company will have all of the new stock after completing the reorganization.

The hearing to consider approving the disclosure statement approving the plan is on the calendar for July 27.

The manufacturer of toilet paper, kitchen towels, napkins and facial tissue filed its Chapter 11 petition late last November, blaming energy costs that rose 40 percent in twelve months. The schedules listed asset of $178.6 million against $178.9 million in debt.

The case is In re Marcal Paper Mills, Inc., No. 06-21886, U.S. Bankruptcy Court, District of New Jersey (Newark).

Interstate Bakeries to Auction Two Plants

In Chapter 11 for almost three years, Interstate Bakeries Corp. is looking to auction two surplus plants.

A 190,000 square foot plant on nearly 19 acres in Charlotte, North Carolina has a buyer for $2 million. The second plant, with nearly 47,000 square feet under roof on a 1.55 acre parcel in Worcester, Massachusetts, has a stalking horse buyer at $850,000.

Anyone intending to top the existing bids must to submit offers by July 10, followed by a July 13 auction and a July 18 sale approval hearing.

Kansas City, Missouri-based Interstate is the country's largest wholesale baker and distributor of fresh delivered bread and snack cakes. The brand names include Wonder, Hostess, Merita, Dolly Madison, Drake's, and Butternut.

The case is In re Interstate Bakeries Corp., 04-45814, U.S. Bankruptcy Court, Western District of Missouri (Kansas City).

Prepack News

Bally Total Fitness Has $292 Million Financing Commitment

Gym operator Bally Total Fitness Holding Corp. (BLLY) announced yesterday that it has a commitment for $292 million in secured loans to fund its upcoming prepackaged reorganization where creditors will vote on the plan before the Chapter 11 petition is filed.

The new loans, to consist of a $242 million term loan and a $50 million revolving credit, will pay off existing secured financing and will convert on completion of the reorganization into loans with maturities of more than five years.

Morgan Stanley Senior Funding Inc. is the lead arranger and bookrunner.

Bally began soliciting votes on the reorganization last week. Votes are due by July 27, unless Bally extends the deadline. Bally said it already has 80 percent of the subordinated notes in favor and 63 percent of the senior notes committed to vote ``yes.'' Bankruptcy laws requires a favorable two-thirds vote.

Chicago-based Bally's has more than 375 locations in 26 states and several foreign countries under the names Bally Total Fitness and Bally Sports Clubs.

The company was spun off nine years ago from Bally Entertainment Corp.

New Filings

Lajitas Resorts in Texas Big Bend Files to Reorganize

Lajitas Resorts Ltd., owner of a 92 room, 25,000 acre resort on the Rio Grand River in West Texas near Big Bend National Park, filed a Chapter 11 petition yesterday in Midland, Texas, along with three affiliates to stop the foreclosure of a $13.3 million mortgage scheduled for today.

The project goes by the name ``Lajitas the Ultimate Hideout.'' The facility features a golf course, spa, and gourmet dining, the owners say.

The company says it had a commitment for a new $25 million mortgage that it could not close in time to avoid filing the Chapter 11 petition.

The largest unsecured creditor is the Internal Revenue Service with a claim for $267,000 in payroll taxes. The company has not yet filed a list of its assets and debts.

The case is In re Lajitas Resorts Ltd., No. 07-70143, U.S. Bankruptcy Court, Western District of Texas (Midland).

Pharmaceutical Maker Inyx USA Files in Delaware

Pharmaceutical developer Inyx USA Inc. and an affiliate filed bare-bones Chapter 11 petitions yesterday in Delaware, listing debts and assets both exceeding $1 million.

The filing contained no lists of assets and debts and, as yet, none of the usual first day requests to the bankruptcy judge for various forms of relief.

The company develops, makes and markets prescription and over-the-counter aerosol pharmaceuticals.

Revenue for the parent Inyx Inc. (IYXI) in the nine months ended last September 30 was almost $60 million, resulting in a $16 million net loss for the period. The company did not file its 2006 annual report as a result of questionable accounting controls.

The stock of the New York-based parent Inyx Inc. lost 85 percent of its value in yesterday's trading, closing at 35 cents a share, down $2.09.

The case is In re Inyx USA Inc., No 07-10888, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Oregon Housing Developer PJM Fairview Files in Portland

An Oregon housing developer named PJM Fairview LLC filed a reorganization petition on June 25 in Portland, listing assets of $52 million against $32.8 million in debt. The assets include 242 acres in Salem, Oregon, bought last year for $21 million.

The Chapter 11 filing was designed to halt the foreclosure of mortgages totaling $20.8 million that were scheduled for June 26.

The case is PJM Fairview LLC, No. 07-32513, U.S. Bankruptcy Court, District of Oregon (Portland).

Reclaimed Wood Dealer M. Fine Files to Reorganize in Brooklyn

M. Fine Lumber Co. Inc., a lumber yard on Metropolitan Avenue in Brooklyn, New York, filed a reorganization petition in Brooklyn on June 29 saying it was forced into bankruptcy by restricted credit from the lender that depressed sales.

A court filing says that a new lender willing to pay off the $1 million in secured debt would make the loan only after a Chapter 11 petition in view of $309,000 in tax liens on the property.

The petition listed assets of $1.6 million and debt totaling $3.8 million.

The company specializes in reclaimed wood.

The case is In re M. Fine Lumber Co. Inc., No. 07-43529, U.S. Bankruptcy Court, Eastern District New York (Brooklyn).

Ann Arbor Convenience Store Owner Optima Oil Files in Detroit

A convenience store owner from Ann Arbor, Michigan named Optima Oil Enterprises Inc. filed a June 29 Chapter 11 petition in the Detroit, listing a $5.2 million debt to its secured lender Citizen's Bank.

The case is In re Optima Oil Enterprises Inc., No. 07-52701, U.S. Bankruptcy Court, Eastern District Michigan (Detroit).

Briefly Noted

Tweeter Home Entertainment Group Inc., the liquidating 153 store consumer electronics retailer, received final approval of $60 million in financing provided by General Electric Capital Corp. Tweeter has a $38 million offer for all of the assets from Schultze Asset Management LLC. The auction will be held July 10. Canton, Massachusetts-based Tweeter filed a Chapter 11 petition on June 12, listing assets of $259 million and debt totaling $190 million. The case is in re Tweeter Home Entertainment Group, Inc., 07-10787, in U.S. Bankruptcy Court, District of Delaware (Wilmington).

Having filed a major rewriting of its reorganization plan last week, New Jersey home builder Kara Homes Inc. pushed back the hearing for approval of the disclosure statement from July 6 to July 19. The disclosure statement is intended to contain sufficient information so creditors will know whether to vote for or against the plan. Kara's new plan would have a 9 percent dividend for unsecured creditors. East Brunswick, New Jersey-based Kara and its affiliates began their reorganizations last October, listing assets of $350 million and debt totaling $297 million. The case is In re Kara Homes, Inc., No. 06-19626, U.S. Bankruptcy Court, District of New Jersey (Trenton).

Despite filing a liquidating plan in late April providing for unsecured creditors with $41 million in claims to be paid after secured and priority claims are paid in full, Delta Mills Inc. is asking the U.S. Bankruptcy Court in Delaware to prohibit anyone else from proposing a plan before September 14 while it works with the official creditors' committee ``to reserve certain outstanding issues.'' Fountain Inn, South Carolina-based Delta originally intended to sell the business as a going concern. When no bids arrived by the October 25 deadline, Delta shut down operations and began selling off the assets. The Chapter 11 case is In re Delta Mills, Inc., No. 06-11144, U.S. Bankruptcy Court, District of Delaware (Wilmington).

The U.S. Bankruptcy Court in Corpus Christi, Texas allowed Arizona copper mine-owner Asarco LLC (AR) to sell a 7 acre parcel of improved property in Salt Lake City, Utah for $2,276,000 after the price rose from $2.2 million at auction June 20. Phoenix, Arizona-based Asarco filed to reorganize under Chapter 11 in August 2005 to resolve asbestos claims. Grupo Mexico SA de CV acquired Asarco for $1.2 billion in stock six years ago. The Chapter 11 case is In re Asarco LLC, 05-21207, U.S. Bankruptcy Court, Southern District of Texas (Corpus Christi).

Downgrade

Manor Care Downgraded on Carlyle Group Acquisition

On the announcement that Carlyle Group has an agreement to acquire Manor Care Inc. in a transaction valued at $6.3 billion, Standard & Poor's took away investment grade status from Manor Care with a four notch downgrade from BBB- to B+. The rating agency warned that it may lower the rating yet again after studying the details of the transaction.

Moody's Investors Service did not lower its investment grade Baa3 rating but put Manor Care on review for a possible downgrade.

Toledo, Ohio-based Manor Care has more than 500 long-term care facilities.

To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net.

To contact the editor responsible for this story: Patrick Oster at poster@bloomberg.net.

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