BankUnited, Mahalo, Asarco, Hartmarx: Bankruptcy

BankUnited Financial Corp., the holding company whose bank was taken over by regulators on May 21, filed for Chapter 11 protection the next day in Miami, listing assets of $37.7 million against debt totaling $560 million.

The bank failure, the largest this year, cost the Federal Deposit Insurance Corp. $4.9 billion. The banking business was sold by the FDIC to an investor group including Blackstone Group LP, Centerbridge Capital Partners LLC, WL Ross & Co. and Carlyle Group. The bank had deposits of $8.6 billion and $12.8 billion in assets.

Debt of the Coral Gables, Florida-based holding company includes $120 million in convertible senior notes, $12.5 million of junior subordinated debentures, $184 million in mandatorily convertible senior notes known as HiMeds, and $237 million in trust preferred securities.

The buyout group invested $900 million in the bank which reopened on May 22 under new ownership although under the old name. The bank failure was the 34th this year. There were 25 failures in 2008.

The case is In re BankUnited Financial Corp., 09-19940, U.S. Bankruptcy Court, Southern District Florida (Miami).

Other New Filing

Oklahoma Oil Producer Mahalo Files in Okmulgee to Sell

Mahalo Energy (USA) Inc., an independent oil and gas exploration and production company, filed a Chapter 11 petition on May 21 in Okmulgee, Oklahoma, with a contract for the sale of the assets to secured lenders Ableco Finance LLC and Wells Fargo Foothill LLC.

The lenders, who say they are owed $73 million, are offering $2 million in secured financing to sustain operations during the Chapter 11 effort.

The sale contract provides for the lenders to receive the assets in exchange for up to $73 million in debt plus $350,000 cash. The agreement requires having the bankruptcy court approve sales procedures within 18 days, with an auction not more than 30 days later and completion of the sale 30 days after that.

In addition to the secured debt, the company owes $22 million to the Calgary, Alberta-based parent plus $11 million to trade suppliers and other unsecured creditors.

Mahalo has 300 producing wells in Oklahoma plus 60,000 acres of gas-bearing shale formations.

Mahalo first violated the secured loan agreement in September when production from the wells fells short. The bankruptcy was also precipitated by the fall in energy prices.

The petition listed debt at $113 million while the value of the assets was shown as “uncertain.”

The case is In re Mahalo Energy (USA) Inc., 09-80795, U.S. Bankruptcy Court, Eastern District Oklahoma (Okmulgee).

Default

Atrium Cos. Parent Misses Payment, Signs Up Forbearance

ACIH Inc., the parent holding company for Atrium Cos., signed a forbearance agreement with lenders and didn’t make a payment due May 11.

The company said in a statement that it will use the breathing space to work out a “restructuring of the capital structure.

Atrium’s debt includes a $334.5 million secured term loan, a $45.5 million secured revolving credit, and $232 million in subordinated notes.

Atrium is a Dallas-based manufacturer of aluminum and vinyl windows. Revenue was $665 million for a year ended in September.

Updates

Harbinger Files Full Payment Plan for Asarco

Three plans are now on the table to reorganize Arizona copper producer Asarco LLC. The newest was filed May 21 by Harbinger Capital Partners Master Fund I Ltd. Harbinger says its plan should pay all creditors in full, including asbestos claimants.

Harbinger will buy Asarco’s business for $500 million cash while allowing creditors to continue lawsuits against Asarco’s parent Grupo Mexico SAB and Sterlite Industries (India) Ltd.

To proceed with its plan, New York-based Harbinger filed a motion asking the bankruptcy judge to terminate Asarco’s exclusive right to file a plan. The bankruptcy judge scheduled a hearing for today on the exclusivity motion.

Harbinger says its plan is superior to Asarco’s because it gives creditors a larger recovery by allowing continuation of the lawsuit against Sterlite. Harbinger believes its plan beats out Grupo Mexico’s because the parent’s plan has defects that preclude confirmation.

Harbinger and Citigroup Global Markets Inc., who say they together own two-thirds of Asarco’s bonds and debentures, will vote against the Grupo Mexico plan to render confirmation impossible. Harbinger believes that Asarco’s union will support its plan.

The lawsuits that would continue under the Harbinger plan include the lawsuit against Grupo Mexico where a district judge in Texas ruled in April that Asarco could collect damages arising from Asarco’s fraudulent transfer of its 54 percent ownership in a Peruvian copper mine named Southern Copper Corp. The lawsuit is worth $6.87 million, according to Harbinger’s motion.

The lawsuit against Sterlite, for failing to complete a court-approved acquisition at a higher price last year, has a value of $3 billion, according to Harbinger.

The bankruptcy judge already approved the disclosure statement explaining Asarco’s plan. The judge said he would consider having one disclosure statement explaining both Asarco’s and Grupo Mexico’s plan. Harbinger wrote an addendum to be added to Asarco’s disclosure statement explaining its plan.

To finance its plan, Asarco intends to sell the business to Sterlite for $1.1 billion cash and a non-interest bearing nine- year note for $600 million. To retain ownership of Asarco, Grupo Mexico’s competing plan filed May 15 calls for the parent to contribute $1.3 billion cash and a note for $250 million.

Grupo Mexico acquired Asarco for $1.2 billion in stock in 1999 and lost control in December 2005 when the bankruptcy judge set up a board of three, giving Grupo Mexico only one seat. Phoenix-based Asarco filed under Chapter 11 in August 2005 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).

Pilgrim’s Pride Completes Foster Farms Sale, Repays DIP Credit

Pilgrim’s Pride Corp., the world’s largest chicken producer, completed the sale of a processing plant in Farmerville, Louisiana. The final price was $72.3 million, lower than the originally announced $80 million, because of inventory adjustments.

The buyer, Foster Farms, also acquired two hatcheries and a feed mill.

Pilgrim’s Pride said in a statement last week that it has fully repaid the $450 million financing for the Chapter 11 reorganization. Proceeds from the Foster Farms sale are being held for use in operations.

Pittsburg, Texas-based Pilgrim’s Pride filed under Chapter 11 in December listing assets of $3.75 billion and debt of $2.72 billion. It became the industry’s largest through the 2007 acquisition of Gold Kist, Inc., the country’s third-largest poultry producer, and from buying 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).

Hartmarx Lines Up Buyers for $119 Million Sale of Business

Hartmarx Corp., the Chicago-based men’s suit maker that filed for bankruptcy reorganization in January, has a contract for the sale of the business for $119 million and the prospect of more.

The buyers, Emerisque Brands U.K. Ltd. and SKNL North America Ltd., will pay $70.5 million cash, assume $33.5 million in debt, and give the sellers a junior secured note for $15 million.

Hartmarx arranged a June 1 hearing where the bankruptcy judge in Chicago will set up procedures for an auction to learn whether there’s a better offer. Hartmarx wants other bids by June 25, an auction on June 30, and a hearing to approve the sale on July 9.

Before signing the contract on May 21, three bidders were in the running, according to court papers. Two were financial investors and one was a so-called strategic buyer from the industry. Emerisque is a U.K. based private-equity investor. Hartmarx says the other potential purchasers are continuing to perform financial investigations.

The Hartmarx petition listed assets of $483 million and debt totaling $261 million as of Oct. 9. Debt at filing included $114 million on a revolving credit, $15.5 million in industrial revenue bonds, $12 million in mortgages, and $70 million owing to trade suppliers.

Manufacturing is performed in the company’s own facilities and by contractors. The brand names include Hart Schaffner Marx and Hickey Freeman.

The case is In re Hartmarx Corp., 09-02046, U.S. District Court, Northern District Illinois (Chicago).

UAW Opposes Bonuses for Tropicana Atlantic City Executives

The United Auto Workers union is opposing almost $1.2 million in bonuses proposed for the top 24 executives of the subsidiary of Tropicana Entertainment LLC that owns the casino in Atlantic City, New Jersey.

Where the casino contends they are permissible incentive bonuses related to a sale of the property, the union argues the payments would be prohibited retention bonuses earned merely by staying with the organization. Congress changed bankruptcy law in 2005 to preclude retention bonuses for executives of bankrupt companies.

In papers opposing the bonuses, the union noted how it was unable to negotiate a contract with the casino’s conservator who didn’t wish to impose a labor contract on whoever buys the operation.

The issue will be hashed out at a hearing tomorrow in U.S. Bankruptcy Court in Camden, New Jersey, where the casino filed its Chapter 11 at the end of April after state gaming regulators approved a contract for Carl Icahn and other secured creditors to buy the property in exchange for $200 million in debt.

While its sister casinos were in Chapter 11 since May 2008, the Atlantic City property was being operated profitably outside of bankruptcy by the conservator appointed by a New Jersey state court.

When the buyer was lined up, the Chapter 11 filing for the New Jersey property was needed to cleanse the casino of debt and test whether there are higher offers.

Companion Chapter 11 plans for Tropicana entities were confirmed by the bankruptcy court in Delaware in early May, one year to the day after filing in Chapter 11. State gaming regulators must approve before the plans can be implemented.

New Jersey state regulators revoked the gaming license for the Atlantic City property in late 2007 and gave control to a conservator, starting a process that ended with the companies filing under Chapter 11.

Aside from Las Vegas and Atlantic City, Tropicana’s other casinos are in Evansville, Indiana; Vicksburg, Mississippi; Baton Rouge, Louisiana; Greenville, Mississippi; and Laughlin and Lake Tahoe, Nevada. Debt includes $960 million in subordinated notes, $1.3 billion secured by a first lien on most of the assets except the Las Vegas casino where there’s effectively a second lien, and a $440 million secured loan with a first lien on the Las Vegas property.

The case is In re Tropicana Entertainment LLC, 08-10856, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Lenders Succeed in Changing Sale Procedures for Norwood

Norwood Promotional Products Holdings Inc. received approval for sale procedures at a May 21 bankruptcy court hearing although auction rules were modified in response to objections by the secured lenders.

Norwood filed for bankruptcy reorganization on May 5 with a contract in hand to sell the business for $132 million, including $101 million cash plus the assumption of debt.

The secured lenders argued the proposed procedures interfered with their right to make a so-called credit bid where they would purchase assets in exchange for debt rather than paying cash.

As sale procedures were approved by the bankruptcy judge in Delaware, the lenders aren’t compelled to bid cash and need not make a cash deposit. If they are the high bidders and fail to complete the transaction, the amount of the deposit will be subtracted from the secured debt.

Where Norwood was intending to pay the so-called stalking- horse a combination of $3.9 million in breakup fees and expense reimbursement if it’s outbid at auction, the combination of the two won’t exceed $3.3 million as approved by the judge.

The auction and sale schedule is what Norwood wanted. Other bids are due by June 16, followed by an auction on June 18 and a hearing on June 19 for approval of the sale.

Norwood already has interim approval for what eventually will be a $30 million loan from Wachovia Bank NA. The final hearing on financing will be held June 1.

Indianapolis-based Norwood is the second-largest promotional products supplier in the U.S., apparel excluded. Assets are $150 million while debt totals $295 million.

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

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

LandAmerica Sells Home Warranty Business for $12.2 Million

LandAmerica Financial Group Inc., the owner of what had been the third-largest group of title insurance companies in the U.S., sold the home warranty and inspection businesses to the so-called stalking horse Buyers Protection Group Inc. for $12.2 million. The price rose $2.2 million at auction.

LandAmerica filed papers last week asking the bankruptcy judge to approve a bonus program for 17 employees, including 13 non-officers.

The maximum cost would be $500,000, if targets are met. The average is $20,000 per worker, the motion explains. LandAmerica says it needs incentives to keep workers from leaving before the remaining assets are sold, businesses wound down, and claims resolved.

After filing under Chapter 11 in November, LandAmerica sold the title companies to Fidelity National in December. The title companies themselves were not in bankruptcy.

LandAmerica’s petition listed $3.3 billion in assets against debt totaling $2.9 billion, including assets and liabilities of the insurance companies not in bankruptcy.

Glen Allen, Virginia-based LandAmerica said its own liabilities exceed $650 million and include $100 million on a revolving credit plus $375 million in senior and convertible notes.

The case is LandAmerica Financial Group, 08-35994, U.S. Bankruptcy Court, Eastern District Virginia (Richmond).

Bank Failures

Illinois Bank Failures Raise Year’s Total to 36

Two banks in Illinois were taken over by regulators on May 22, in the process costing the insurance fund of the Federal Deposit Insurance Corp. an estimated $279 million.

The failed banks were Strategic Capital Bank in Champaign and Citizens National Bank in Macomb. Their deposits were transferred to other banks. Together, their assets were almost $1 billion.

The failures brought the total this year to 36, compared with 25 in all of 2008.

To read other Bloomberg coverage, click here.

Briefly Noted

Motor-home maker Monaco Coach Corp. was authorized by the bankruptcy court on May 22 to sell most of the business for $52 million to truckmaker Navistar International Corp. The assets going to Warrenville, Illinois-based Navistar include plants in Indiana and Oregon together with trademarks and intellectual property. The sale excludes five so-called resort properties. Monaco filed for Chapter 11 reorganization in March. It sells motor homes under the brand names Monaco, Holiday Rambler, Safari and Beaver. The Coburg, Oregon-based company listed assets of $442 million against debt totaling $209 million. Revenue in 2007 was $1.29 billion. For the first 11 months of 2008, sales were $690 million. The case is In re Monaco Coach Corp., 09-10750, U.S. Bankruptcy Court, District of Delaware (Wilmington).

S&K Famous Brands Inc. is using Gordon Brothers Retail Partners LLC to close all remaining stores in going-out-of- business sales. S&K closed 78 stores before the Chapter 11 filing in February, leaving 136 locations. Early in the case, 30 more stores were closed. The bankruptcy judge last week authorized sales at the remaining locations. There were no going-concern bidders at the auction. The petition listed assets of $41.4 million against debt totaling $35.5 million. Liabilities include $7.5 million owing to the secured lender Wells Fargo Retail Finance LLC. Another $13 million is owing to trade suppliers, a court filing says. The case is In re S&K Famous Inc., 09-30805, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond).

Interlake Material Handling Inc., having sold most of the business for $30 million to Mecalux SA, Spain’s largest maker of warehouse equipment, has a contract to sell a remaining operation to a buyer that includes two company officials for $3.2 million, including $900,000 cash. The business being sold provides lighting maintenance, fixture installation, and safety installations for retailers and distributors. There will be an auction. Interlake was the largest manufacturer of heavy-duty steel storage racks in the U.S. It filed under Chapter 11 in January. Revenue in the last fiscal year was $302 million. The senior secured lender banks are owed $36 million while the debt to junior secured creditors is $11.6 million. Unsecured trade suppliers are owed another $30.1 million, according to a company court filing. The case is In re Interlake Material Handling Inc., 09-10019, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Downgrades

Casino Owner Boyd Gaming Lowered to B1 Corporate by Moody’s

Casino operator Boyd Gaming Corp. received a one-notch downgrade May 22 from Moody’s Investors Service that took the corporate peg to B1 while the senior subordinated notes became B3.

Moody’s was responding to “weak gaming demand trends in the Las Vegas Locals market.” Moody’s previously downgraded in October.

Las Vegas-based Boyd has 15 casinos in Nevada, Mississippi, Illinois, Louisiana, and Indiana plus a 50 percent joint venture interest in the Borgata casino in Atlantic City. Net revenue is around $2 billion annually.

Heavy Equipment Maker Terex Downgraded on Market Conditions

Terex Corp., a manufacturer of large off-road trucks and heavy equipment, was downgraded on May 22 to a BB- corporate rating by Standard & Poor’s to match the demotion issued in March by Moody’s Investors Service.

S&P’s action was based on the effects of the “continued weak end-market conditions.”

First quarter revenue for the Westport, Connecticut-based company was $1.3 billion, compared with $2.36 billion in the same period of 2008. The first quarter net loss was $74.9 million. The first quarter of 2008 had a $163.3 million net profit.

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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