5 New Filings, Chrysler, General Growth: Bankruptcy

Stock Building Supply Holdings LLC, a building-materials supplier based in Raleigh, North Carolina, filed under Chapter 11 yesterday in Delaware to complete a transaction in which private equity investor Gores Group LLC receives 51 percent ownership as part of a reorganization plan to pay all creditors in full except current owner Wolseley Plc.

For majority control of the company, Los Angeles-based Gores will invest $75 million in preferred equity and provide a $125 million revolving credit line and $100 million in secured financing for the Chapter 11 case.

Stock currently operates 200 outlets in 26 states, generating $3.5 billion in revenue for the fiscal year ended July 31. The operating loss for the year was $744 million.

Court papers say Gores would not have acquired control without using Chapter 11 to “significantly reduce lease expenses for closed locations” while eliminating $700 million in loans owed to Wolseley.

The company filed a Chapter 11 plan and explanatory disclosure statement along with the petition. The plan calls for terminating about 210 leases where operations are being shut down. Other locations also may close, court papers say.

Wolseley, a plumbing, heating and building-materials distributor based in the U.K., has operations in 27 countries producing more than $25 billion in annual revenue.

Gores and Stock may be intending to use Chapter 11 so landlords with rejected leases will have damage claims limited to three years’ rent under bankruptcy law.

To read other Bloomberg coverage, click here.

The case is In re Stock Building Supply Holdings LLC, 09- 11554, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Other New Filings

Crunch Fitness Files for Sale to Owner Angelo, Gordon

Crunch Fitness, a chain of 19 high-end fitness clubs, filed a Chapter 11 petition yesterday in New York along with an agreement to sell the business to affiliates of Angelo, Gordon & Co., whose investment groups bought the chain from Bally Total Fitness Holding Corp. in 2006 and purchased the first-lien debt in late 2008.

Angelo, Gordon proposes to buy the business in exchange for some $46 million in secured debt. They want the bankruptcy court to require other bids by June 25, with an auction on June 30 to permit sale approval by July 2.

At the first-day hearing yesterday, U.S. Bankruptcy Judge Robert Gerber characterized aspects of the reorganization as “one of the most outrageous provisions I’ve seen in 40 years of practicing law.” The judge also said the court papers didn’t fully disclose the objective of selling the business to an insider.

“You are proposing a sale to yourselves under the rubric of calling it a credit bid to another party -- and would use the DIP to wipe out another party,” Gerber said, citing about $10 million in debt owed to unsecured creditors, most of which are New York real estate owners and landlords.

Gerber at another time said, “The secured lenders want to rent the courthouse.”

To read Bloomberg coverage of the hearing, click here.

The petition listed assets of $104 million against $102 million in total liabilities. Debt includes $56.7 million on a first-lien loan now mostly owned by Angelo, Gordon affiliates. There is a second-lien credit for another $22.7 million.

The clubs, with 73,000 members, are located in New York, Chicago, Los Angeles and Rock Creek, Maryland.

Financial problems go back to the 2006 acquisition when Crunch says Bally “materially misrepresented the number of active members.” The dispute went into litigation before Bally filed for Chapter 11 relief. Bally was out of Chapter 11 for 14 months before filing bankruptcy a second time in December.

Crunch acquired 25 clubs from Bally and five from other operators. Crunch generated $84.5 million in revenue in 2008 and an operating loss of $11.2 million.

A court filing says bankruptcy was required to divest “certain unprofitable club locations” having “overpriced long-term leases.”

The Angelo, Gordon parties agreed to provide as much as $6 million in financing for the reorganization. The bankruptcy judge yesterday approved $1 million in interim borrowing on revised terms.

To read other Bloomberg coverage, click here.

The case is In re AGT Crunch Acquisition LLC, 09-12889, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Promotional Product Maker Norwood Files in Delaware

Norwood Promotional Products Holdings Inc. filed a Chapter 11 petition on May 5 in Delaware to sell the business for $132 million. The price includes $101 million in cash plus the assumption of debt.

The company said in court papers that it’s the second- largest promotional products supplier in the U.S., not including apparel. Assets are $150 million while debt totals $295 million.

Indianapolis-based Norwood was forced into Chapter 11 by $175 million in debt maturing in the next 10 months, the effects of the recession and a flood that caused $17 million in damages at a plant. Norwood has been owned by its lenders since a 2004 debt restructuring.

Debt includes $165 million on secured credit facilities owed by the operating company and $127 million owed at the holding company level. Sales were $132 million last year.

The reorganization is to be financed with $30 million borrowed from Wachovia Bank NA.

If the bankruptcy court agrees with the proposed schedule, other bids would be due by June 16, followed by an auction on June 18 and a hearing on June 19 for approval of the sale.

To read other Bloomberg coverage, click here.

The case is Norwood Promotional Products Holdings Inc., 09- 11547, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Crucible Materials, New York Steelmaker, Files in Delaware

Crucible Materials Corp., a Syracuse, New York-based steelmaker for the auto and aerospace industries, filed a Chapter 11 petition yesterday in Delaware intended either for reorganization or liquidation.

The petition says assets and debt both exceed $100 million. Debt includes $64.5 million owed to the secured lenders, which are willing to provide as much as $69.4 million in financing for the Chapter 11 effort. The so-called DIP financing will decrease in amount after May 29.

Crucible, owned by its 1,000 employees, operates two plants and 12 regional service centers.

The case is In re Crucible Materials Corp., 09-11582, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Bachrach, Men’s Wear Retailer, Files in New York

Bachrach Acquisition LLC, a New York-based operator of 40 men’s clothing stores in 13 states, filed a Chapter 11 petition yesterday in New York saying assets and debt are both less than $50 million.

Wells Fargo Bank NA, owed $6.2 million, was listed as having the largest secured claim. It is secured by all assets.

Simon Property Group, owed $1.2 million, was listed as having the largest unsecured claim.

To read Bloomberg coverage, click here.

The case is In re Bachrach Acquisition LLC, 09-12918, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Other Updates

Non-TARP Chrysler Lenders Disclose Identities, Holdings

The group that called itself the non-TARP lenders and unsuccessfully opposed the motion by Chrysler LLC for approval of sale procedures is made up of OppenheimerFunds Inc., Stairway Capital Management LP, Group G Capital Partners LLC, Schultze Asset Management LLC, Arrow Distressed Securities Fund, Group G Partners LP and Foxhill Opportunity Master Fund LP.

The disclosure was made yesterday in a court filing demanded the previous day by U.S. Bankruptcy Judge Arthur J. Gonzalez.

The lenders, who derived their name by not having received government bailout money under the Troubled Assets Relief Program, wanted their identities to remain secret even though bankruptcy law requires disclosure of the membership of groups working collectively in a reorganization. They argued unsuccessfully to the bankruptcy judge that they had been the target of death threats.

There are now nine members in the group, including affiliates, while previously there were 20. A lawyer for the group said all will lose money on their investments if $6.9 billion in secured debt receives the proposed $2 billion. The face amount of the group’s secured claims is $295 million.

Deducing that “new” Chrysler won’t continue benefits for non-union retirees, a group of retirees filed a motion asking the bankruptcy judge to appoint an official committee to represent their interests. To read Bloomberg coverage, click here.

Gonzalez approved procedures in which any competing offers are due May 20, with an auction and hearing for approval of the sale on May 27.

Under the government-sponsored program, Chrysler assets are to be transferred to a new company in which Italy’s Fiat SpA initially would hold a 20 percent stake. Fiat’s holding can rise to 35 percent and ultimately to 51 percent.

The U.S. government is to receive 8 percent of the new stock in return for providing a $6 billion secured loan to the new company after the sale. A trust to provide health-care benefits for retirees would hold 55 percent of the shares.

The government also is providing a $4.5 billion loan for the reorganization. The judge approved an interim $1.4 billion loan.

Cerberus Capital Management LP and a group of investors acquired Chrysler from Daimler AG in August 2007 for $7.4 billion. Cerberus and Daimler will have no ownership of new Chrysler.

Chrysler, the smallest U.S. automaker, listed assets for $39.3 billion and debt totaling $55.2 billion. Revenue in 2008 was $48.5 billion.

The case is In re Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Pilgrim’s Pride to Sell Louisiana Plant to Foster Farms

Pilgrim’s Pride Corp., the world’s largest chicken processor, has a contract to sell a processing plant in Farmerville, Louisiana, for $80 million along with two hatcheries and a feed mill.

The buyer is competitor Foster Farms.

The plant is one of three that Pilgrim’s Pride said it was closing. At a hearing today, the company will ask the bankruptcy judge to require other bids by May 15, hold an auction on May 18 and conduct a May 19 hearing for approval of the sale.

Pilgrim’s Pride announced in March that it had a buyer at $80 million.

To read other Bloomberg coverage, click here.

Pittsburg, Texas-based Pilgrim’s Pride filed under Chapter 11 in December, listing assets of $3.75 billion and debt of $2.72 billion. In 2007 it completed a $1.1 billion, debt financed acquisition of Gold Kist Inc., the country’s third- largest poultry producer. Previously, it purchased the chicken business from ConAgra Foods Inc.

The case is In re Pilgrim’s Pride Corp., 08-45664, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).

Journal Express Scheduled for June 25 Plan Confirmation

Journal Register Co., the newspaper publisher that filed under Chapter 11 in February, has an approved disclosure statement explaining the reorganization plan that was revised to placate unsecured creditors.

The confirmation hearing for approval of the plan will take place on June 25.

The plan gives all of the new stock and $225 million in new term loans to the pre-bankruptcy secured lenders owed $695 million. The company said the distribution is worth 42 percent for the lenders.

Unsecured creditors with some $27.1 million in claims are to recover 9.2 percent under the amended plan. Existing stock will be canceled.

The petition listed assets of $596 million and debt totaling $737 million as of Nov. 30, including $692 million in secured debt.

Yardley, Pennsylvania-based Journal Register has 20 daily newspapers and 159 non-daily publications in smaller towns in Connecticut, Pennsylvania, New York, Ohio, and Michigan.

The case is In re Journal Register Co., 09-10769, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Watch List

Default by Integra is ‘Imminent,’ Says Moody’s

Integra Telecom Inc., a competitive local exchange carrier from Portland, Oregon, is in discussions with creditors on a restructuring that would reduce debt by half, Moody’s Investors Service said in a report yesterday.

Moody’s expects an “imminent default” from a restructuring either out-of-court or through a bankruptcy filing.

Integra’s debt has been increasing as a result of the $280 million note issue that allows paying interest with more notes.

Integra owed $1.2 billion for borrowed money in September, according to Standard & Poor’s.

J.G. Wentworth Has ‘High Probability of Default,’ Moody’s Says

J.G. Wentworth LLC, a purchaser of deferred payments such s structured settlements and annuities, has a “high probability of default,” Moody’s Investors Service said in a report yesterday.

In its previous report in February, Moody’s said Wentworth had little availability on its lines of credit and was encountering obstacles in securitizing receivables.

Moody’s lowered the rating to C, the last rank above default.

Wentworth, from Bryn Mawr, Pennsylvania, had assets of $420 million at Sept. 30. By Dec. 31, assets declined to $236 million, Moody’s said.

The company was acquired by private-equity investor JLL Partners Inc.

Exchange Offer News

Six Flags Commences Exchange Offer

Yesterday Six Flags Inc., the world’s second-largest amusement park operator, announced the commencement of an exchange offer where debt holders can exchange their securities for 95 percent of the stock.

The company also said it won’t make a June 1 interest payment. To read the Six Flags statement, click here.

If the offer doesn’t succeed in garnering 95 percent acceptances, Six Flags said that its options include filing a prepackaged Chapter 11 reorganization.

Six Flags reported a $113 million net loss last year on revenue of $1 billion. Income from operations was $144 million. Interest expense was $179 million.

New York-based Six Flags has 20 theme parks across the U.S.

Briefly Noted

Auto-parts maker Delphi Corp. is in bankruptcy court today asking for approval of an amendment to an agreement with its lenders putting off until May 21 the deadline for reaching agreement with former parent General Motors Corp. on financial assistance permitting the auto parts maker to exit Chapter 11. The prior deadline passed on May 4. To read Bloomberg coverage, click here. Delphi has said that its business may not now be worth enough to cover outstanding liabilities arising during the reorganization plus the secured debt funding the Chapter 11 case. It couldn’t implement the reorganization plan the court approved in January 2008 because investors led by Appaloosa Management LP wouldn’t make a $2.55 billion equity investment called for in their commitment. Troy, Michigan-based Delphi began the Chapter 11 reorganization in October 2005. The annual report for 2008 has assets for $10.3 billion against total liabilities of $24.6 billion. Revenue in 2008 was $18.1 billion. The case is In re Delphi Corp., 05-44481, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Publisher and distributor Source Interlink Cos. stands to be in and out of Chapter 11 in just over one month. The company filed for reorganization on April 27 and prevailed on the bankruptcy judge in Delaware to schedule a May 28 confirmation hearing for approval of the plan negotiated and voted on before the petition was filed. The plan reduces debt by $1 billion and provides $400 million in new liquidity. For a complete description of the plan and changes in the capital structure, click here to read this column from April 28. The petition listed assets of $2.4 billion and debt totaling $2 billion. Annual revenue is $2.4 billion. Motor Trend and Soap Opera Digest are among the magazines in the publishing division. Bonita Springs, Florida-based Source publishes 75 magazines and 90 related web sites. It is also distributes CDs and DVDs in the U.S. The case is Source Interlink Companies Inc., 09-11424, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Shopping mall owner General Growth Properties Inc. has $400 million in new financing to increase and replace the $375 million currently available from William Ackman’s Pershing Square Capital Management LP. The new lenders include Farallon Capital Management LLC and Luxor Capital Group. To read Bloomberg coverage, click here. The Chapter 11 filing by General Growth and its affiliates on April 16 was the largest real estate bankruptcy in U.S. history. The balance sheet of Chicago- based General Growth had assets of $29.6 billion and $27.3 billion in total liabilities as of Dec. 31. It owns some 200 shopping mall properties. The case is In re General Growth, 09-11977, Bankruptcy Court, U.S. District Court, Southern District of New York (Manhattan).

Aloha Airlines Inc., the liquidated airline, was authorized by the bankruptcy judge to pay $5.5 million in damages for failing to safeguard employee pension plans by investing in its own stock. To read Bloomberg coverage, click here. Aloha filed for Chapter 11 reorganization in March 2008, shut down passenger operations 10 days later and converted the Chapter 11 case to a liquidation in Chapter 7 in April 2008, bringing on the appointment of a Chapter 7 trustee. The Chapter 11 filing was Aloha’s second, occurring 25 months after emerging from a previous reorganization. The new Aloha Chapter 11 case is In re Aloha Airlines Inc., 08-00337, U.S. Bankruptcy Court, District of Hawaii (Honolulu).


Weyerhaeuser Loses Investment Grade on Industry Conditions

Weyerhaeuser Co. lost investment-grade status yesterday when Moody’s Investors Service lowered the senior unsecured debt by two notches to Ba1, the highest junk grade.

Although Moody’s doesn’t expect conditions in the forest products industry will improve enough in the “near term” to “materially reduce the company’s expected cash burn levels,” the credit-rating company said Weyerhaeuser has “the liquidity to weather the current industry conditions.”

The Federal Way, Washington-based company has $1.8 billion cash, although half the $2.2 billion undrawn credit facility matures in the next year, according to Moody’s.

It is the second-largest timberland owner in North America.

Eroding Cash, Cohr Downgraded to CCC+ by Moody’s

Cohr Holdings Inc., a provider of health-care equipment- maintenance services doing business as Masterplan Inc., slipped one notch lower yesterday on the Standard & Poor’s scale to a CCC+ corporate rating.

S&P said that Cohr’s erosion of cash, although “mainly due to one-time items,” was more than expected.

S&P had previously downgraded in June 2008.

Cohr was acquired in a leveraged buyout by Berkshire Partners LLC. It has no debt maturities until 2012.

Newly Opened Red Hawk Casino Lowered to Caa1 by Moody’s

Although the Red Hawk Casino near Sacramento, California, only opened in December, it already received a downgrade.

The corporate rating was lowered yesterday by one grade to a Caa1 corporate rating by Moody’s Investors Service.

The casino is owned by the Shingle Springs Tribal Gaming Authority, an unincorporated governmental authority belonging to the Shingle Springs Band of Miwok Indians.

Still Having Integration Issues, FairPoint Lowered to B3

FairPoint Communications Inc., a communications services provider, saw its corporate rating slip two spaces yesterday to B3 in view of what Moody’s Investors Service sees as a “high default probability.”

Charlotte, North Carolina-based FairPoint continues having difficulty integrating the New England business purchased last year from Verizon Communications Inc.

Moody’s says cash generation has trailed expectations.

FairPoint is the eighth-largest wireline telecommunications provider in the U.S. It has 1.4 million access lines, mostly in rural areas or small to medium-sized towns.

The stock rose 22 cents yesterday to $1.58 in New York Stock Exchange trading. The two-year high was $19.17 on Sept. 21, 2007.

Announcing Operating Loss, Mueller Water Downgraded by S&P

When Mueller Water Products Inc. announced that a 20 percent decline in sales resulted in an operating loss for the quarter, Standard & Poor’s reacted by issuing a two-notch downgrade lowering the corporate rating to B.

Mueller is a supplier of infrastructure and flow control products for water systems and waste treatment plants. It has $1 billion in debt, according to S&P.

The new rating from S&P matches the downgrade issued in February by Moody’s Investors Service.

Mueller is being affected by lower residential and commercial construction.

The Atlanta-based company generated $1.8 billion revenue in 2008.

Mueller fell 30 cents yesterday to $4.70 in New York Stock Exchange trading. The two-year high was $19.35 on June 22, 2007.

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

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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