Lyondell, Chrysler, Hawkeye, Lexington, Saratoga, Black Crow: Bankruptcy

U.S. Bankruptcy Judge Robert E. Gerber said his docket is “stressed to the breaking point” with cases such as Lyondell Chemical Co.

Consequently, Gerber told Lyondell to take its litigation over a real estate tax assessment for a refinery in Houston to a Texas state court. Gerber said bankruptcy law gives him the ability, though not the obligation, to decide the assessment dispute, and he elected to have the state court do the work.

Gerber said a Texas judge may be more familiar with valuing refineries. He also said it was unrealistic to expect he could conduct a valuation trial in two days. The judge has more weighty Lyondell matters on his trial calendar, such as a contested confirmation hearing and disputes over the pre- bankruptcy leveraged buyout.

In sending the dispute to the Texas court, Gerber noted that Lyondell creditors have $20 billion in claims. The dispute over the refinery assessment involves about $10 million in taxes.

Gerber deferred to the state court, over protest from Lyondell, because the amount in dispute was “not so large as to prevent the debtors from reorganizing.”

Financing for Lyondell’s reorganization plan is composed of a backstopped $2.8 billion equity-rights offering, plus $5 billion in debt financing via an asset-backed facility, a note offering and a term loan. To read about Lyondell’s reorganization plan and the underlying settlement with the unsecured creditors’ committee, click here and see the Lyondell item in the March 9 Bloomberg bankruptcy report.

Lyondell and affiliate Equistar Chemicals LP, together making up the third-largest independent chemical producer, filed under Chapter 11 in January 2009, listing assets of $33.8 billion and debt totaling $30.3 billion. Parent company LyondellBasell Industries AF filed under Chapter 11 last April.

The case is Lyondell Chemical Co., 09-10023, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Updates

Old Chrysler Confirms Liquidating Chapter 11 Plan

Old Chrysler, now formally named Old Carco LLC, confirmed its liquidating plan yesterday in Manhattan bankruptcy court, almost a year after the Chapter 11 filing.

The plan was overwhelmingly accepted, with more than 99 percent in dollar amount of first-lien creditors and over 98 percent of general unsecured creditors voting “yes.” To read Bloomberg coverage of the hearing, click here.

Old Chrysler’s liquidating Chapter 11 plan has nothing for unsecured creditors other than proceeds, if any, from a lawsuit against former owner Daimler AG, and then only if the recovery exceeds $25 million. Even then, creditors’ recoveries would be reduced by the expense of reconciling their claims and the cost of the suit. The plan gives nothing to the U.S. government on the $4 billion TARP loan from January 2008.

The creditors wouldn’t even have had the Daimler suit without the settlement in November, when the U.S. government agreed to release its lien on the suit being prosecuted by the creditors’ committee.

The plan gives first-lien secured creditors the proceeds from their collateral.

The government’s $4 billion loan under the Troubled Asset Relief Program turned out to be worth nothing because the security was a valueless third-lien on most of old Chrysler’s properties. The loan failed to help Chrysler to avoid bankruptcy.

The creditors’ suit against Daimler, begun in August, contends the former owner stripped out Chrysler’s most valuable assets just before the 2007 sale to Cerberus Capital Management LP.

After filing under Chapter 11 on April 30, 2009, old Chrysler sold the business in June to the new company 20 percent-owned by Italy’s Fiat SpA. The petition listed assets of $39.3 billion and debt totaling $55.2 billion.

A trust to provide health benefits for Chrysler workers owns 55 percent of new Chrysler. The U.S. government owns 8 percent while Canadian governmental units have 2 percent.

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

Tribune Examiner Official, to File Report by July 12

The bankruptcy judge signed an order yesterday formally calling for the U.S. Trustee to name an examiner to perform an examination of newspaper publisher Tribune Co.

The examiner, whose report is due by July 12, will investigate whether the $13.8 billion leveraged buyout led by Sam Zell in December 2007 included fraudulent transfers because operating subsidiaries pledged their assets for new loans and didn’t receive equal value in return.

The bankruptcy judge also charged the examiner with investigating whether the indenture trustee for $1.2 billion in exchangeable subordinated notes violated the so-called automatic stay by filing suit in March against secured lenders who financed the LBO.

The suit is based on a theory known as equitable subordination. If the suit succeeds, the lenders, although secured, would be paid after the subordinated debt. The defendants in the suit include JPMorgan Chase Bank NA, Merrill Lynch Capital Corp., Citibank NA and Morgan Stanley & Co.

The lenders want the indenture trustee held in contempt for violating the automatic stay.

The examiner also will look into whether the indenture trustee disclosed information in the complaint that was required to remain confidential.

The bankruptcy judge will hold a status conference on May 10 to consider the examiner’s work plan and estimated expenses.

Tribune filed a proposed Chapter 11 plan on April 12 to implement a settlement negotiated with some creditors. Before the plan was filed, holders of $3.6 billion in pre-bankruptcy secured debt announced their opposition to the plan and the settlement. To read about the plan, the settlement, and the parties’ arguments, click here to see the April 13 Bloomberg bankruptcy report.

Tribune is the second-largest newspaper publisher in the U.S. The company listed $13 billion in debt for borrowed money and assets of $7.6 billion in the Chapter 11 reorganization begun in December 2008. It owns the Chicago Tribune, Los Angeles Times, six other newspapers and 23 television stations.

The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Citadel Says Aurelius Violated Stock Purchase Limits

Citadel Broadcasting Corp. filed a motion in bankruptcy court saying that affiliates of Aurelius Capital Management LP bought 16.7 million shares, in the process violating a court order prohibiting anyone from acquiring more than 12 million shares without permission from the company.

Citadel, a Las Vegas-based owner of 224 radio stations, filed a prepackaged Chapter 11 petition in January. As companies often do, Citadel immediately had the bankruptcy court enter an order prohibiting the acquisition of large blocks of stock that would result in a change of control, and in the process cause the possible loss of tax-loss carryforwards.

In its April 16 emergency motion, Citadel says that Aurelius violated the order on acquiring more than 12 million shares. Citadel wants the bankruptcy court to declare that the stock purchases were void from the outset. The bankruptcy court also should compel Aurelius to sell the stock within 15 trading days, Citadel says.

Should Aurelius sell any stock for a price in excess of the basis, it should donate the profit to a charity, according to the motion.

The confirmation hearing for approval of Citadel’s plan is set for May 12. To read about the plan, click here for the March 16 Bloomberg bankruptcy report.

Citadel, which operates in more than 50 markets, filed the original version of the plan on Feb. 3 to carry out an agreement negotiated before the Chapter 11 filing in December. The secured lenders and the creditors’ committee support the plan following a settlement improving treatment of unsecured creditors.

Citadel and subsidiaries listed assets of $1.4 billion against debt totaling $2.46 billion. Citadel is the third- largest radio-station owner in the U.S., with 166 FM and 58 AM stations, and distributes programming to 4,000 stations.

The case is Citadel Broadcasting Corp., 09-17442, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Decision on Hawkeye Prepacked Plan May Come in May

Hawkeye Renewables LLC, the owner of two ethanol plants, may hear in May whether the bankruptcy judge will approve the prepackaged reorganization that began Dec. 21.

The plan would give ownership to first-lien lenders. It was opposed by second-lien lenders at three days of confirmation hearings that concluded March 12.

The bankruptcy judge told the contending parties to submit post-trial papers by April 30.

In the meantime, Hawkeye is asking the bankruptcy judge to extend the exclusive right to propose a Chapter 11 plan until June 19. The so-called exclusivity hearing will take place May 11.

Hawkeye, which is controlled by affiliates of Thomas H. Lee Partners LP, reported sales of $39.9 million in February, resulting in a $1.6 million operating profit and a $3.5 million net loss. The interest expense in the month was $5 million.

To read details of the plan, click here and see the Hawkeye item in the Dec. 22 Bloomberg daily bankruptcy report.

Hawkeye, based in Ames, Iowa, owes $593 million on the first-lien credit and $168 million on the second-lien facility. Hawkeye had $720 million in debt at the end of 2008 and generated $584 million in revenue that year. The plants can produce 225 million gallons a year.

The case is In re Hawkeye Renewables LLC, 09-14461, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Lexington Precision Files Amended Reorganization Plan

Lexington Precision Corp., a manufacturer of rubber components for autos and medical devices, filed an amended Chapter 11 plan and disclosure statement saying its reorganization will be funded partly by the sale of $22 million in stock, at $10 a share, to Commercial Finance Services 407 LLC.

The official creditors’ committee and secured lenders are proposing a competing plan. A hearing hasn’t yet been set for approval of the disclosure statements covering the two plans.

The company plan would reduce debt by more than $50 million while giving holders of senior subordinated notes an estimated 51 percent recovery. Subordinated-note holders, owed $34.2 million in principal, would elect to take 51 percent in cash or swap for stock, exchanging about $20 of debt for each new share.

General unsecured creditors are to be paid 80 percent, with 8 percent in cash on implementation of the plan. The remainder is to be paid 8.6 percent in cash at each of the ensuing nine quarters.

Asbestos claims are to be paid in full with insurance proceeds. If insurance is insufficient, the remainder will be paid over time like general unsecured creditors.

Secured debt under the company’s plan is to be paid in full through revised credit agreements. In January, secured lenders withdrew a separate reorganization plan they were proposing.

Lexington filed under Chapter 11 in April 2008 after workout negotiations failed with an ad hoc committee of holders of the senior subordinated notes. The detailed lists of assets and debt show property with a value of $42 million against liabilities totaling $41.3 million, including $36.4 million in secured claims.

Sales in 2008 were $88.5 million. New York-based Lexington has three plants and more than 650 workers.

The case is In re Lexington Precision Corp., No. 08-11153, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Saratoga Confirms Reorganization Plan for Second Time

Saratoga Resources Inc., an oil and natural-gas exploration and production company, confirmed a reorganization plan for a second time.

Saratoga was unable to implement the plan approved in a December confirmation order. After the first-lien debt was sold, the bankruptcy judge in Lafayette, Louisiana, was able to sign a confirmation order on April 19 for a revised plan.

The first plan didn’t work as a result of disputes over documents reinstating first-lien debt owing to Macquarie Bank Ltd. After the original confirmation was revoked, Macquarie sold the debt to Wayzata Investment Partners LLC, the second-lien lender on a $97.5 million credit.

Saratoga said that none of the changes from the original plan were adverse. Under the revised plan, a $5.5 million payment on the first-lien claim of $23.5 million will be made on emergence from Chapter 11. The rest will pay interest and mature in April 2012.

Monthly payments will be made until maturity in April 2012 on the $127.5 million owing to Wayzata on the second-lien debt.

General unsecured creditors are to be paid in full, and shareholders retain their interest unless there is an inability to refinance the debt in 2012.

The Austin, Texas-based company in its petition listed assets of $169 million against debt totaling $111 million.

Harvest Oil & Gas LLC and Harvest Group LLC, which Saratoga acquired in July 2008, are also covered by the plan.

The case is In re Harvest Oil & Gas LLC, 09-50397, U.S. Bankruptcy Court, Western District of Louisiana (Lafayette).

Black Crow-GECC Dispute Enters New Phase on Fees

The reorganization of Black Crow Media Group LLC is dominated by disputes between the closely held owner of 22 radio stations and secured lender General Electric Capital Corp., owed $38.9 million.

Two days after the Chapter 11 filing in January, Stamford, Connecticut-based GECC filed a motion to dismiss the case. The lender followed up with a motion to modify the so-called automatic stay so it could foreclose the business.

The bankruptcy judge denied both motions this month while approving $1.5 million in financing that GECC opposed.

Undeterred, GECC filed a lawsuit on April 16 asking the bankruptcy judge to declare that it has valid security interests in cash and accounts receivable.

The complaint also served to warn Black Crow’s professionals that GECC later may attempt to force them to disgorge more than $200,000 in retainers they received just before the Chapter 11 filing. GECC wants the judge to rule that the lender maintained a valid security interest in the cash used to pay retainers.

Black Crow, based in Daytona Beach, Florida, filed for Chapter 11 protection two days before a hearing in U.S. district court for the appointment of a receiver following default on the term loans and revolving credit owing to GECC.

Black Crow’s stations are in five markets in Florida, Alabama, Georgia and Tennessee. In addition to the GECC debt, another $6 million is owing to unsecured creditors.

Black Crow had revenue of $12.9 million last year, a 23 percent decline from 2008.

The case is In re Black Crow Media Group LLC, 10-00172, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).

Pacific Energy’s Exclusivity Extended to July 2

Pacific Energy Resources Ltd., an oil and natural-gas exploration and development company, sold the bulk of the assets in Alaska and off the California coast and was granted an extension until July 2 of the exclusive right to file a liquidating Chapter 11 plan.

The company said it needed additional time to “assess the viability of a liquidating plan.”

The bankruptcy judge also gave the official creditors’ committee authority to file so-called preference suits. The committee said there may be $30 million in recoverable preferences, which are payments Pacific Energy made on overdue debts within 90 days of the Chapter 11 filing.

The committee was also given permission to settle preference claims. If a claim being settled is small enough, the committee can settle on its own, without approval from anyone else.

In buying California assets in exchange for debt, secured lenders gave up $12.8 million to be used in winding up the business. The California producing properties are nine miles (14 kilometers) offshore from Huntington Beach and include a pipeline running from the wells to the shore.

The company originally intended to abandon the Alaska properties. After succeeding in winning an abandonment order, the order was partly revoked, allowing the properties to be sold.

At the outset of bankruptcy, Pacific Energy owed $452 million to secured creditors who made first- and second-lien loans enabling acquisition of the properties in 2006 and 2007.

The company owed another $31.7 million on subordinated notes, plus the equivalent of a $25.2 million secured claim owing to an affiliate of Chevron Corp., the operator of the California properties. Revenue in 2008 was $226.2 million.

The case is In re Pacific Energy Resources Ltd., 09-10785, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Ritz Camera Confirms Liquidating Chapter 11 Plan

Ritz Camera Centers Inc. won approval of a liquidating Chapter 11 plan proposed by the company and the official creditor’s committee. The bankruptcy judge signed a confirmation order yesterday, according to court files.

The disclosure statement told unsecured creditors they could expect a return of between 4 percent and 14 percent.

After filing under Chapter 11 in February 2009, Ritz generated $40 million by selling all 129 Boater’s World Marine Centers. A group including the company’s chief executive officer paid $16.25 million in cash and a $7.8 million note in July to buy at least 163 of the remaining 375 camera stores. Later, Ritz sold a $4 million account receivable for $1.5 million to an owner of the company that owed the debt.

The 800 locations at filing made Ritz the largest chain of camera stores in the U.S.

Debt of Beltsville, Maryland-based Ritz was originally listed as including $54.5 million on a secured revolving credit agreement with Wachovia Bank NA serving as agent. There was also $13.1 million owing on subordinated debentures. The petition said that assets and debt were both less than $500 million.

The case is In re RCC Liquidating Corp., 09-10617, U.S. Bankruptcy Court, District of Delaware (Wilmington).

White Energy’s Profits Shrink in Three-Month Period

White Energy Inc., the owner of three ethanol plants, must have been behind in filing operating reports. The three monthly reports filed this week show a combined $131.8 million in sales for the months December through February.

Net income in the period was $10.1 million. Gross profit in the three-month period totaled $15.6 million.

February was the weakest month, with $39.4 million in sales generating $452,000 in net income.

The company’s reorganization plan, negotiated largely before the Chapter 11 filing in May, would give secured lenders owed $308 million almost all of the new stock. To read details, click here and look for the White Energy item in the Dec. 17 Bloomberg bankruptcy report.

The plan was due for consideration at an April 21 confirmation hearing. The hearing will be put back to a date to be selected by the court, according to the docket.

The door is open to a competing plan because the bankruptcy judge in December terminated the company’s exclusive right to propose a reorganization. White Energy’s owner, Columbus Nova Ethanol Holdings LLC, had a competing plan before it was withdrawn in February.

The White Energy plants have a combined capacity of producing 240 million gallons of ethanol a year, making it one of the 10 largest ethanol producers in the U.S. and the second- largest gluten maker. Two plants are in Texas, with the third in Kansas.

White Energy spent $323 million building the Texas plants. The principal debt is $294 million owing to secured lenders, the Dallas-based company said when entering Chapter 11.

The case is In re White Energy Holding Co., 09-11601, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Briefly Noted

Philadelphia Newspapers Given Short Exclusivity

The bankruptcy judge at a hearing yesterday gave Philadelphia Newspapers LLC an interim extension until April 30 of the exclusive right to propose a Chapter 11 plan. The extension carries the company beyond the April 27 auction where secured lenders vow to bid cash, now that the federal circuit court of appeals ruled that they didn’t have a right under bankruptcy law to bid their secured claims rather than cash. To read Bloomberg coverage on the hearing, click here. The auction is to decide who has the best offer for the business. The publisher of the Philadelphia Inquirer and Philadelphia Daily News plans to sell the business to a group led by Bruce E. Toll, vice chairman of homebuilder Toll Brothers Inc., absent a higher offer. The newspapers began the Chapter 11 reorganization in February 2009 in their hometown after defaulting on a term loan and revolving credit totaling $296.6 million and on $98.5 million in subordinated notes. The filing says assets and debt are both less than $500 million.

The case in bankruptcy court is In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District Pennsylvania (Philadelphia). The appeal in the district court was In re Philadelphia Newspapers LLC, 09-mc-178, U.S. District Court, Eastern District Pennsylvania (Philadelphia). In the circuit court, the appeal was In re Philadelphia Newspapers LLC, 09-4266, 3rd U.S. Circuit Court of Appeals (Philadelphia).

Barzel to Decide If Liquidating Plan Is ‘Feasible’

Barzel Industries Inc., a steel processor and manufacturer, for a second time seeks an extension of the exclusive right to propose a liquidating Chapter 11 plan. The company said it would use the additional time to determine whether “a liquidating plan is feasible or not.” The hearing will be held May 12. Barzel sold the assets in November and made a settlement where secured lenders received a release of claims in return for giving up $800,000 from sale proceeds. Chriscott USA Inc., based in Norwood, Massachusetts, bought most of the assets for $75 million. Barzel had 15 facilities. Its petition listed assets of $366 million against debt totaling $385 million, including $315 million on senior secured notes. Another $18.4 million was owing on an asset-backed loan with a first lien on accounts receivable.

The case is In Barzel Industries Inc., 09-13204, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Gems TV Cash Declining to $19.2 Million by July 2

Gems TV (USA) Ltd., the television retailer of gemstone jewelry products that filed under Chapter 11 on April 5, filed a cash-flow projection showing that cash would top out last week at about $24.6 million. Cash is expected to decline to $19.2 million by July 2. The petition said assets are less than $50 million while debt is expected to exceed $100 million. The Reno, Nevada-based company shut down before the Chapter 11 filing and intends to sell the assets.

The case is In re Gems TV (USA) Ltd., 10-11158, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Atrium Sets Financing Guidelines for Exit Loan

Atrium Corp., a Dallas-based manufacturer of aluminum and vinyl windows, set initial pricing guidelines on the new debt to provide part of the financing to exit bankruptcy. To read Bloomberg coverage, click here. In March, the bankruptcy court approved a $169.2 million investment to buy 92.5 percent of the equity upon Atrium’s exit from Chapter 11 with a confirmed reorganization plan. The confirmation hearing for approval of the Chapter 11 plan, negotiated before the bankruptcy filing in January, is set for April 28. For more on the financing and Atrium’s plan, click here for the March 23 Bloomberg bankruptcy report. The company’s Canadian affiliate simultaneously filed for protection from creditors in the Superior Court of Justice in Toronto under the Companies’ Creditors Arrangement Act. Affiliates also filed under Chapter 11 in Delaware.

The case is In re Atrium Corp., 10-10150, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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

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