Calpine, Asarco, Delphi, NYRA, Collins: Bankruptcy
Bankruptcy Judge Burton Lifland denied requests by the bondholders for their own official committee and for an examiner.
Lifland said appointing an examiner now could result in delay and ``jeopardize all the debtors' cases.''
To read Bloomberg coverage of yesterday's hearing, click here.
A former Calpine subsidiary, Rosetta Resources Inc., failed in its effort at having the bankruptcy judge throw out a lawsuit Calpine began in June claiming Rosetta's spinoff less than six months before the Chapter 11 filing was fraudulent because the $1.05 billion price was too low.
Lifland ruled in an opinion handed down yesterday it's too soon to throw out the suit because Calpine's allegations at this stage must be taken as true. Lifland said Calpine may be able to hold off dismissal later by showing at trial that creditors will benefit through success in the lawsuit.
Rosetta owns oil and gas assets that belonged to Calpine.
Creditors are voting on Calpine's reorganization plan coming to bankruptcy court for approval at a confirmation hearing beginning Dec. 17. Calpine for now says the plan will pay unsecured creditors between 95 percent and 100 percent, with $1.94 a share left for existing stockholders.
Calpine's Chapter 11 filing in December 2005 was the largest that year, measured by assets totaling $26.6 billion. At the beginning of the reorganization, San Jose, California-based Calpine's 92 power plants in 21 states were producing 26,500 megawatts, or enough power for 20 million homes. Calpine today has 24,000 megawatts of capacity in 18 states.
The case is In re Calpine Corp., 05-60200, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Court Refuses to Dismiss Asarco Suit against Grupo Mexico Unit
Grupo Mexico SAB de CV, the parent of Arizona copper miner Asarco LLC, still has hope a U.S. district judge in Brownsville, Texas, will throw out at least part of the lawsuit Asarco filed in February.
The suit charges Grupo Mexico with fraudulently taking away Asarco's 54 percent ownership of Peruvian copper mine company Southern Copper Corp. and giving it to another Grupo Mexico unit before Asarco's Chapter 11 filing in August 2005.
In a 50-page opinion on Oct. 12, Judge Andrew Hanen refused to throw out any part of the complaint, including claims for fraudulent transfer, conspiracy and violation of fiduciary duty. The judge also said Asarco might be able to prove it's entitled to punitive damages.
While Hanen decided the law of the state of Arizona should govern claims based on conspiracy, he found Arizona law on the subject to be ``nonexistent.''
In an Oct. 23 letter to the lawyers for both sides, Hanen said he will ask the Supreme Court of Arizona to tell him what Arizona law is on conspiracy claims of the type Asarco is making against the Grupo Mexico unit.
Hanen said that he might still throw out the conspiracy claims depending on what the Arizona Supreme Court tells him about state law.
In some lawsuits in federal courts, judges are obligated to follow state law.
Hanen said he would give the lawyers time to comment and send his request to the Arizona court after Oct. 30.
Asarco filed to reorganize more than two years ago to deal with asbestos claims.
The Chapter 11 case is In re Asarco LLC, 05-21207, U.S. Bankruptcy Court, Southern District of Texas (Corpus Christi). The lawsuit is Asarco LLC v. Americas Mining Corp., 07-00018, U.S. District Court, Southern District Texas (Brownsville).
NYRA Files New Plan to Emerge from Chapter 11 by Dec. 31
New York Racing Association Inc., the operator of the three thoroughbred racetracks in New York state, filed an amended reorganization plan and disclosure statement on Oct. 23 based on the decision in early September by New York Governor Eliot Spitzer granting NYRA a 30-year extension of the franchise to operate the tracks.
The agreement between NYRA and the governor requires approval of the Chapter 11 plan by the end of the year. The agreement also must be approved by the New York Legislature.
Without the new agreement, NYRA's franchise to operate the track is to expire at the end of the year.
The agreement calls for NYRA to give up claims it owns the tracks and give title to the state. In return, the state will provide as much as $75 million cash, an amount that may pay unsecured creditors in full. In future years, NYRA will give the state the net revenue from racing. NYRA will become a not-for- profit corporation overseen by the state attorney general.
A company yet to be selected will install and operate video lottery terminals at the tracks. A portion of the revenue from the terminals will be used for capital expenses and costs of operating the tracks.
NYRA is asking the U.S. Bankruptcy Court in New York to approve the disclosure statement at a Nov. 20 hearing. When the disclosure statement explaining the plan is approved, creditors can vote.
Three weeks after NYRA's Chapter 11 filing last November, New York State's Ad Hoc Committee on the Future of Racing selected Excelsior Racing Associates to take over the racetracks when NYRA's franchise was to expire Dec. 31. Spitzer, sworn in as governor in January, decided early this year to review the decision and required all the applicants, including NYRA, to submit new proposals in April.
Lawsuits in bankruptcy between state regulators and NYRA were on hold while the state decided who would operate the tracks beginning next year. The state was asking the bankruptcy court to dismiss the bankruptcy case while NYRA was contending the state had no right to take away the tracks.
NYRA held the franchise to operate Aqueduct, Belmont, and Saratoga since 1955. The Chapter 11 petition listed assets of $153 million and debt totaling $310 million.
The case is In re The New York Racing Association Inc., 06- 12618, U.S. Bankruptcy Court, Southern District New York (Manhattan).
SCO Has Offer to Sell Unix Business for Up to $36 Million
SCO Group Inc., a software developer from Lindon, Utah, whose claim to ownership of the Unix operating system was denied in August by a federal judge, intends to auction its assets on Dec. 4 if anyone submits a bid higher than the offer from York Capital Management.
To acquire SCO's Unix business, New York-based York is offering $10 million cash, $10 million to fund litigation against Novell Inc. and International Business Machines Corp., 20 percent from recoveries in litigation up to $10 million, and $6 million under a revenue-sharing agreement.
To comply with deadlines in the York offer, the U.S. Bankruptcy Court in Delaware will hold a Nov. 6 hearing to set up auction and sale procedures. SCO wants any other bids filed five days before a Dec. 4 auction, followed by a Dec. 5 sale approval hearing.
A federal court ruled in August that Waltham, Massachusetts- based Novell, not SCO, owns copyrights for the Unix operating system. After the ruling, SCO conceded that much of its lawsuit against Armonk, New York-based IBM should be dropped.
After filing in Chapter 11 on Sept. 14, SCO and an affiliate filed schedules listing combined assets of $14.2 million and debt totaling $5.2 million.
The case is In re SCO Group Inc., 07-11337, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Fee Examiner Reports Professionals Late in Spotting Trouble
The fee examiner for liquidated auto-parts maker Collins & Aikman Corp. issued her report concluding that the company's professionals should have recognized two months earlier how the business plan wasn't achievable and liquidation was necessary.
As a result of the delay, the fee examiner concluded in her Oct. 22 report that the pre-bankruptcy lenders made a smaller recovery because they were funding professional costs that were unnecessarily higher as a result of the delay in moving to sell the businesses.
Before releasing her report, the examiner negotiated settlements with three professional firms. The company's bankruptcy counsel, Kirkland & Ellis LLP, agreed to reduce fees by $1 million.
Lazard Freres & Co., the company's investment bankers, agreed to reduce their fees by approximately $500,000, according to Lazard spokeswoman Judi Mackey, while Davis Polk & Wardwell, counsel for the audit committee, reached a tentative settlement whose terms were not yet disclosed.
The fee examiner said there was a two-month delay in the summer of 2006 by the professionals in realizing that liquidation was necessary. Where the business plan projected $265 million in earnings before interest, taxes, depreciation and amortization, the actual cash flow was only $105.5 million.
Southfield, Michigan-based Collins & Aikman won approval of its liquidating Chapter 11 plan in a July 18 confirmation order. The plan called for selling all the plants to pay off $913 million in secured claims while creating a trust that will bring lawsuits to generate a distribution toward $539 million in unsecured debt.
The case is In re Collins & Aikman, 05-55927, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
Auction Set for Wetco's Church's Fried Chicken Locations
Wetco Restaurant Group LLC, the holder of franchises to operate 30 Church's Chicken restaurants in Louisiana and Tennessee, will learn at a Nov. 19 auction whether anyone will top the offer from the franchiser, Church's Fried Chicken Inc., to buy 20 of the locations for $5.5 million cash and a credit bid for $5 million in debt.
Under sale procedures approved yesterday by the bankruptcy court, other bids are due Nov. 16. The hearing to approve the sale will be held Nov. 20.
Wetco filed under Chapter 11 on Sept. 28 admitting it was ``not in a position to reorganize.'' The franchiser already had signed up to buy the locations.
The petition listed assets of $3.8 million and debt totaling $15.3 million. GE Capital Franchise Finance has a $5.4 million secured claim.
Wetco said annual sales were around $14 million. Currently, 22 locations are operating. Church's system has 1,600 restaurants in 18 countries generating $1 billion in annual revenue.
The case is In re Wetco Restaurant Group LLC, 07-51169, U.S. Bankruptcy Court, Western District Louisiana (Lafayette- Opelousas).
Sea Containers Looks for $1.5 Million to Pay Possible Lenders
Saying it intends to file a reorganization plan ``in the near term,'' Sea Containers Ltd. is asking for authority to pay each potential exit-financing lender $500,000 to offset the cost of conducting due diligence. Sea Containers wants permission to spend $1.5 million total on prospective lenders' expenses in connection with developing an exit-financing commitment.
Sea Containers said in its Oct. 23 bankruptcy court filing that it already has indications of interest from Dune Capital LP and Caspian Capital Partners LP, two lenders in the existing secured credit.
The two prospective lenders won't proceed with discussions, Sea Containers said, unless they're reimbursed. The two will be treated as one lender and receive $500,000 between them.
Sea Contains is asking the U.S. Bankruptcy Court in Delaware to hold a Nov. 7 hearing on the request.
With more than 100 subsidiaries not in bankruptcy making up most of the ongoing cargo container business, Sea Containers previously operated ferries in Europe. The reorganization begun last October was one of the three largest Chapter 11 filings in 2006, listing $1.7 billion in assets and debt totaling $1.6 billion. Operations are mostly in the U.K. and executive offices are in London.
The case is In re Sea Containers LTD, 06-11156, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Georgia Land-Owner Facing Bank's Request to Foreclose
Ram-Mar Development Inc., the owner of 32 acres in Dawson County, Georgia, will face Integrity Bank at a Nov. 15 hearing when the lender asks the U.S. Bankruptcy Court in Atlanta either to throw out the case or allow foreclosure.
The bank says the company has no source of income and filed the Oct. 1 Chapter 11 petition to halt foreclosure of a $12.2 million mortgage.
Ram-Mar listed assets of $17 million and debt totaling $13.5 million.
The case is In re Ram-Mar Development Inc., 07-76067, U.S. Bankruptcy Court, Northern District Georgia (Atlanta).
Labor Department Says Delphi Mishandled Workers' Saving Plan
Delphi Corp., the auto-parts maker, disagrees with the U.S. Labor Department about whether the company properly corrected a mistake in handling some of the funds in Delphi's defined contribution savings plan for salaried employees.
Delphi admits making the mistake as the plan's administrator by allowing dividends on stock of General Motors Corp. to be reinvested in the stock rather than in an income fund. Delphi says it properly compensated workers for the mistake while the Labor Department says Delphi ``sought to discourage participants from correcting their accounts, knowing the result would be a smaller payout for participants and a larger savings for itself.''
The Labor Department says the mistake cost workers more than $3 million. The U.S. Bankruptcy Court in New York will conduct a Nov. 8 hearing to decide whether the Labor Department's unsecured claim should be allowed or thrown out.
Nov. 8 will also have Delphi in bankruptcy court pursuing approval of the disclosure statement explaining the reorganization plan designed to pay creditors in full with a combination of cash and stock. The hearing was put off twice after commencing Oct. 3. Delphi says it is using the adjournments to work on $7.1 billion in exit financing and discuss changes in the plan with creditors.
The world's largest auto-parts maker when it began bankruptcy reorganization in October 2005, Delphi listed assets of $4 billion against $19.1 billion in debt in its amended schedules of property and liabilities.
The case is In re Delphi Corp., 05-44481, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Trustee Taking Over 1031 Tax Group After Reorganization Failed
A Chapter 11 trustee will take over 1031 Tax Group LLC, the ``qualified intermediary'' for avoiding capital gains taxes whose financing for a full payment reorganization plan fell apart earlier this month.
Bankruptcy Judge Martin Glenn wrote a 10-page opinion granting the request for a Chapter 11 trustee even though the motion by the U.S. Trustee was supported by the official creditors' committee and not opposed by the company.
The written opinion gave Glenn, the newest appointment to the bankruptcy bench in New York, the opportunity to say that Edward Okun, 1031's former chief executive, ``has proven that he is unreliable (or worse).'' Glenn also observed how some creditors not on the official committee ``seem intent on objecting to anything,'' even if there are ``possible benefits to the estate.''
Until the Chapter 11 trustee takes over, Glenn held off approving an Oct. 11 agreement where Okun and his wife agreed to turn over ``substantially all of their material assets'' for the benefit of 1031's creditors.
To read other Bloomberg coverage of 1031, click here.
Customers claim that Okun caused 1031 to loan $130 million improperly to other companies he controlled. 1031 was in business to facilitate ``deferred like-kind property exchanges.''
The Chapter 11 filing in mid-May by Richmond, Virginia-based 1031 listed assets of $154.6 million.
The case is In re The 1031 Tax Group LLC, 07-11448, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Sales of existing homes in September fell 8 percent to an annual rate of 5.04 million, according to a report yesterday from the National Association of Realtors.
With the inventory of unsold homes at 4.4 million, the current stock represents a 10.4 months' supply, the highest since records were first kept in 1999.
To read Bloomberg coverage of the report, click here.
Homebuilder Tousa Downgraded on Financial Uncertainty
Finding ``uncertainty regarding the company's ability to fully meet its financial obligations,'' Standard & Poor's again lowered the ratings of Tousa, Inc., the Hollywood, Florida-based homebuilder.
The corporate rating is down two more pegs to CCC-, while the senior unsecured, subordinated, and second-lien debt ratings are all now CC. The first-lien credit has become CCC rated, also a two-notch demotion.
S&P previously downgraded in July.
The corporate rating from Moody's Investors Service is currently Caa2, one level higher, after a July downgrade.
Tousa is two-thirds owned by Technical Olympic SA. Tousa's subsidiaries include Newmark Homes LP. Tousa's revenue for the six months ended June 30 was $1.1 billion.
Quigley Co. Inc., a non-operating subsidiary of Pfizer Inc., received tentative approval of the disclosure statement explaining the Chapter 11 plan giving it and Pfizer releases from asbestos claims. While turning down arguments from claimants opposing the disclosure statement, the bankruptcy judge said they could be raised again at the confirmation hearing for approval of the plan. The objectors said that Pfizer was buying votes by having paid half of an agreed settlement before the bankruptcy to claimants who would wait to receive the other half in the reorganization plan. The claimants who didn't settle before bankruptcy claimed they are being treated differently and should have been voting in a different class. Quigley began the reorganization in September 2004 to deal with 500,000 asbestos claims against itself and its parent. The case is In re Quigley Co. Inc., 04-15739, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.