Almatis, GM, Visteon, General Growth, U.S. Concrete, Lehman: Bankruptcy

Almatis BV, a producer of specialty alumina products, filed a prepackaged Chapter 11 reorganization early this morning in New York where senior secured creditors led by an affiliate of Oaktree Capital Management LLC will take ownership in exchange for debt.

The plan, accepted by the required majorities of creditors before this morning’s filing, will reduce bank debt to $415 million from $1.05 billion. The new debt will consist of a $273 million senior credit and a $137 million junior credit.

Almatis, based in Rotterdam, intends to emerge quickly from Chapter 11 by having the bankruptcy judge hold one hearing, first to approve the adequacy of disclosure materials, then moving immediately into a confirmation hearing for approval of the reorganization plan.

Almatis began defaulting on senior debt in June. Although the petition listed assets of $1.53 billion, Almatis said a valuation by Moelis & Co. puts the company’s worth at $540 million. The Moelis valuation is $140 million less than first- lien debt.

Total debt of $1.3 billion includes $681 million on first- lien obligations, $77.7 million on second-lien debt and $200.6 million on mezzanine debt. There is junior mezzanine debt of $80.6 million, plus trade debt of $20 million.

The plan has options for the holders of first-lien debt. For an estimated 87 percent recovery, lenders may receive 6.5 percent in cash and 80 percent in new debt, plus stock. In the second option, estimated to be worth 78 percent, first-lien creditors can have 45 percent in new debt plus a larger allowance of new stock.

Los Angeles-based Oaktree, which has 46 percent of the first-lien debt, selected the option with more stock so it will have control of the reorganized company.

The plan gives second-lien creditors a projected 2.2 percent recovery by receiving warrants for 3 percent of the equity value above a valuation of $325 million.

Mezzanine lenders, for a 0.5 percent recovery, will receive warrants for 2 percent of the equity value above a valuation of $400 million.

General unsecured creditors will be paid in full.

Almatis was purchased from Alcoa Inc. in 2004 by Rhone Capital LLC and Ontario Teachers’ Pension Plan Board. Dubai International Capital LLC bought the business in 2007 for $1.2 billion. It has operations in six countries. Four of nine plants are in the U.S.

Almatis said in a court filing that it decided that bankruptcy laws in the U.S. were better suited to implementing the reorganization than laws in Germany or the Netherlands.

Revenue in 2009 was $400 million. For 2010, projected revenue is $534 million.

The case is In re Almatis BV, 10-12308, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Updates

General Motors Sale Upheld in 83-Page Appeal Opinion

The sale of old General Motors Corp. in July to a new company 61 percent-owned by the U.S. government was upheld in an 83-page opinion on April 27 by U.S. District Judge Robert W. Sweet in New York.

Oliver Addison Parker, a lawyer who owned unsecured bonds, brought the appeal. Parker, who represented himself, wasn’t seeking to overturn the sale. Instead, he only wanted Sweet to find defects in the sale and order that his bonds be paid in full.

Sweet didn’t buy any of Parker’s arguments. For starters, Sweet dismissed the appeal as moot because Parker sought no stay pending appeal and there was a “comprehensive change in circumstances” when the sale was carried out. Consequently, Sweet said there was no ability to grant effective relief on appeal even if the sale was defective.

Sweet also analyzed a multitude of other alleged defects and found none of Parker’s arguments to have merit.

To read Sweet’s opinion, click here.

Other unsuccessful efforts were made at stopping the sale that the bankruptcy judge in Manhattan approved on July 5. Personal-injury claimants unsuccessfully sought to stay the sale pending appeal. Their stay motions in the bankruptcy court and district court were both denied, allowing the sale to be carried out.

What remains of old GM after the sale is now formally named Motors Liquidation Co. In return for selling the desirable assets, it took back 10 percent of the stock of the new company plus warrants for 15 percent. The warrants are to have value when and if the new company is sufficiently profitable to raise the company’s value to specified levels.

Old GM began the largest manufacturing reorganization in history by filing under Chapter 11 on June 1. The sale was completed on July 10. GM listed assets of $82.3 billion against debt totaling $172.8 billion.

The case is In re Motors Liquidation Co., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Visteon Is in ‘Final Stages’ on Toggle Plan Negotiations

Visteon Corp. is in “what may be the final stages of negotiations” on a so-called toggle plan, the auto-parts maker said in an April 28 motion to extend the exclusive right to propose an reorganization until June 29.

Visteon filed a revised plan in March where secured lenders would have 85 percent of the new equity, leaving 15 percent for unsecured bondholders. Fleshing out previous hints about the toggle plan, Visteon said in the so-called exclusivity motion that it would abandon the March plan if unsecured noteholders produce $1.25 billion in cash to backstop a rights offering financing an alternative plan where bondholders could take home 95 percent of the new equity.

Visteon said secured lenders are “understandably skeptical” about bondholders’ ability to produce the required cash. Right now, negotiations on the toggle plan involve the designation of “an ultimate outside date” by which noteholders must come up with the cash or support the plan where secured lenders take most of the new equity.

Creditors aren’t the only constituencies involved in plan discussions. Visteon said it signed confidentiality agreements with two groups of shareholders enabling them to obtain confidential financial information from which to craft an alternative where current stockholders aren’t wiped out.

The hearing on the exclusivity motion, Visteon’s third, will be held May 12.

Visteon’s plan from March includes predicted recoveries between 19 percent and 57 percent for unsecured creditors who would have received nothing on $1.3 billion in claims under the prior version of the plan filed in December. For details about the March plan, where secured lenders owed $1.63 billion are to have 85 percent of the stock, click here for the March 16 Bloomberg bankruptcy report.

Visteon filed for reorganization in May 2009, listing assets of $4.6 billion against debt totaling $5.3 billion. Sales in 2008 were $9.5 billion, including $3.1 billion to Ford Motor Co. Visteon was spun off from Ford in 2000.

Visteon, based in Van Buren Township, Michigan, at the outset owed $2.7 billion for borrowed money, including $1.5 billion on a secured term loan, $862 million on unsecured bonds and $214 million on other debt obligations.

The case is In re Visteon Corp., 09-11786, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Bi-Lo Confirms Plan, Lone Star Retains Ownership

Supermarket operator Bi-Lo LLC has an approved reorganization plan with the bankruptcy judge’s signature yesterday on a confirmation order.

Confirming the plan was made possible by a settlement between the creditors’ committee, the term-loan lenders and Lone Star Funds, Bi-Lo’s owner. The lenders and the committee agreed to withdraw their competing plan after the settlement.

The Bi-Lo plan is funded by a new $150 million equity investment from Dallas-based Lone Star, a new $200 million term loan and a new $150 million working capital loan.

The term-loan lenders, owed $260 million not including interest, are receiving $260 million cash, for a 94.5 percent recovery, according to the disclosure statement.

Unsecured creditors, with claims of $65 million to $85 million, will divide $40 million, for an estimated recovery between 44 and 58 percent. If the business is sold within six months for more than $175 million, they receive another $4 million.

Bi-Lo, based in Greenville, South Carolina, filed under Chapter 11 in March 2009 with maturity looming on the $260 million term loan. The 207 currently-operating stores are in South Carolina, North Carolina, Georgia and Tennessee.

Lone Star Funds bought the business in 2005 from Royal Ahold NV, a Netherlands-based supermarket operator. Lone Star also owns Bruno’s Supermarkets LLC, a chain of 66 supermarkets that filed under Chapter 11 in February 2009 in Birmingham, Alabama.

The case is In re Bi-Lo LLC, 09-02140, U.S. Bankruptcy Court, District of South Carolina (Spartanburg).

Court Mostly Approves Dreier Creditors’ Settlement

The bankruptcy trustees for convicted lawyer Marc Dreier and the firm he founded, Dreier LLP, received the bankruptcy court’s approval yesterday for a settlement with the U.S. government deciding which assets will go to the trustees and which will go to the government under the criminal forfeiture resulting from Marc Dreier’s guilty plea.

Although there is overlap between creditors of the bankrupt estate and defrauded investors who will receive forfeited assets from the government, the differences prompted several objections which U.S. Bankruptcy Judge Stuart M. Bernstein rejected, with one exception.

In addition to the settlement with the government slicing up assets recovered in Marc Dreier’s Ponzi scheme, there was a separate settlement between the trustees and GSO Capital Partners LP, an affiliate of Blackstone Group LP.

GSO, based in New York, invested $165 million in what it thought were notes issued by the Dreier firm’s clients. It turned out that the notes were fraudulent. GSO was repaid more than $193 million by the Drier firm, including $62.6 million within 90 days of the bankruptcy filing.

Some creditors opposed the settlement, where GSO is to receive a release of claims by the trustee and third parties in return for paying $9.5 million to the two trustees and allowing the government to seize $30.9 million through forfeiture. The objectors claimed it was improper to let GSO off the hook for 94 percent of what it invested when other hedge funds face lawsuits from the trustees and suffered more from the fraud.

In his 42-page opinion on April 28, Bernstein turned down the objections to the GSO settlement, except with regard to the limitation on third-party suits against GSO. Following a recent decision from the 2nd U.S. Circuit Court of Appeals in Manhattan, Bernstein said it was beyond the bankruptcy court’s jurisdiction to bar third-party lawsuits against GSO where plaintiffs would bring suit “unrelated to their status as creditors” of Dreier.

As an example, Bernstein said he didn’t have power to stop a suit by “investors who have claims against GSO sounding in negligence,” such as those “based upon GSO’s decision to purchase” fraudulent notes from Dreier.

Dreier sent the parties back to redraft the settlement so the prohibition against third-party suits doesn’t exceed the bankruptcy court’s power.

Bernstein based his decision in major part on the 2nd Circuit opinion in March called Chubb Indemnity Insurance Co. v. Travelers Casualty & Surety Co. To read about the decision, click here for the March 23 Bloomberg bankruptcy report and look under the heading Advance Sheets.

Marc Dreier pleaded guilty in May 2009 to charges of money laundering, conspiracy, securities fraud and wire fraud in a scheme that cost victims $400 million, prosecutors alleged. He was also ordered to make $387 million in restitution.

The firm he founded once had 250 lawyers. It is being liquidated in bankruptcy court under a Chapter 11 case begun in December 2008. Dreier himself is now in a Chapter 7 liquidation.

The Chapter 11 case for the firm is In re Dreier LLP, 08- 15051, U.S. Bankruptcy Court, Southern District New York (Manhattan). The criminal case is U.S. v. Dreier, 08-mag-2676, U.S. District Court, Southern District of New York (Manhattan). The civil case is SEC v. Dreier, 08-cv-10617, U.S. District Court, Southern District of New York (Manhattan). Dreier’s individual Chapter 7 case is 09-10371, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

General Growth Confirms Plan for Two Las Vegas Malls

Shopping-center owner General Growth Properties Inc. confirmed Chapter 11 plans yesterday for two malls in Las Vegas where $896 million in mortgage loans were restructured. Yesterday’s were the eighth batch of property-level confirmations since December.

With the newly approved plans, General Growth has court authority to restructure about $14.8 billion in mortgages, representing 107 of the company’s 108 mortgage loans, the company said in a statement.

The two properties whose plans were approved yesterday were the Fashion Show Mall with $646 million in mortgages and Shoppes at Palazzo, with a $250 million mortgage. Both are in Las Vegas. To read other Bloomberg coverage of the hearing, click here.

General Growth is scheduled for a hearing on May 5 for the bankruptcy judge in New York to approve a process for selecting investors to provide equity and debt financing required for implementing a Chapter 11 plan for the holding company.

For a rundown on the offers from Simon Property Group Inc., Brookfield Asset Management Inc. and others, click here for the April 23 Bloomberg daily bankruptcy report.

General Growth began the largest real-estate reorganization in history by filing under Chapter 11 last April. The books of Chicago-based General Growth had assets of $29.6 billion and total liabilities of $27.3 billion as of Dec. 31, 2008. The company owns or manages more than 200 shopping-mall properties.

The case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Judge Stops City’s Suit against Majestic Star Casinos

The city of Gary, Indiana, cannot proceed with a lawsuit in state court against officers and directors of casino operator Majestic Star Casino LLC, the bankruptcy judge in Delaware ruled in a seven-page opinion on April 28.

The suit arose from a long-standing dispute regarding development agreements covering Majestic Star’s two riverboat casinos in Gary. The company contends the city violated its obligations to develop property at the site, thereby relieving the casinos of the obligation to make payments based on gaming revenue.

The dispute was in arbitration when Majestic Star filed under Chapter 11 in November. The casinos contended that the city sued the officers and directors in state court because they knew any action against the company itself would violate the so- called automatic stay.

U.S. Bankruptcy Judge Kevin Gross ruled that the state- court suit was a violation of the automatic stay in bankruptcy even though the company itself wasn’t a defendant. He said that the suit at bottom is an effort by the city to gain control of funds that are in Majestic Star’s possession. He said the money also may be collateral for secured lenders’ claims.

Gross rejected the city’s argument that the suit was a permitted enforcement of police or regulatory powers. The judge said he “firmly disagrees” because the suit instead is an effort to protect the city’s “pecuniary or financial interest.”

Majestic Star has four casinos, plus hotels with 806 rooms serving the two riverboat casinos in Gary, Indiana. The other casinos are in Tunica, Mississippi, and Black Hawk, Colorado.

Debt includes $79.3 million owing on the senior secured credit facility, with Wells Fargo Capital Finance Inc. as agent. Senior secured noteholders with a second lien are owed $300 million. Majestic Star owes $200 million on unsecured senior notes and $63.5 million on discount notes. Assets were $406 million and debt was $750 million in the quarterly report for the period ended June 30.

The case is In re Majestic Star Casino LLC, 09-14136, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Prepack Filing

U.S. Concrete Files Prepack, Sub Debt Becoming Equity

U.S. Concrete Inc., one of the 10 largest producer of ready-mixed concrete in the U.S., filed a prepackaged Chapter 11 case yesterday in Delaware designed to reduce debt by $285 million through conversion of 8.325 percent subordinated notes into the new equity.

Under the plan negotiated with holders of 80 percent of the subordinated debt, existing shareholders are to receive warrants for 15 percent of the new stock. Half of the warrants are exercisable when the new equity is worth $285 million. The remainder will have value if the equity value is $335 million.

Unsecured creditors are to be paid in full.

The Houston-based company didn’t make an April 1 interest payment on the subordinated notes.

The reorganization, which the company hopes to complete within 90 days, will be financed with an $80 million loan. More than 40 subsidiaries filed in Chapter 11 along with the parent.

The so-called lockup agreement with noteholders requires filing the reorganization plan within 10 days, approval of a disclosure statement no more than 40 days after the plan is filed, and approval of the plan within 60 days of approval of the disclosure statement.

U.S. Concrete said in March that it had begun discussions on a “permanent restructuring” with lenders and holders of subordinated notes. To read other Bloomberg coverage, click here.

Financial difficulties stemmed from the decline in construction that resulted in a 29 percent plunge in sales in 2009 compared with 2008. Last year, revenue was $534.5 million. The company reported a 2009 net loss of $88.2 million.

The company disclosed in February that it secured an additional $5 million of liquidity from lenders and amended the credit agreement so there wouldn’t have been a default until April 30 for missing the interest on the senior subordinated notes.

The Chapter 11 petition listed assets of $389 million and debt of $399 million. Liabilities include $40 million on a pre- bankruptcy secured credit facility where JPMorgan Chase Bank NA serves as agent. The lenders are providing the financing for the reorganization. There is another $17.9 million on undrawn letters of credit.

U.S. Concrete’s balance sheet on Dec. 31 listed assets of $392.4 million and liabilities totaling $402.5 million. It has 125 fixed and 11 portable plants serving markets in California, New Jersey, Texas and Michigan.

The case is In re U.S. concrete Inc., 10-11407, U.S. Bankruptcy Court, District of Delaware (Wilmington).

New Filing

Developer Files for Columbia, Missouri, Project

Bristol Development Group LLC, owner of an undeveloped tract of 225 acres in Columbia, Missouri, filed a Chapter 11 petition yesterday to halt foreclosure.

Evidently anticipating bankruptcy, the secured lender Bank of America NA already filed a motion asking for modification of the so-called automatic stay so the foreclosure can proceed. The bank is owed almost $10.9 million.

The bank says the project was intended to become a mixed- use development with 500 residential units, plus more than 1 million square feet of office and retail space. Ground is yet to be broken, the bank says.

The case is In re Bristol Development Group LLC, 10-20914, U.S. Bankruptcy Court, Western District of Missouri (Jefferson City).

Briefly Noted

Mesa Air Has Loss in March on Reorganization Costs

Regional airline Mesa Air Group Inc. reported a $2.3 million net loss in March on $73.1 million in revenue. Operating income for the month was $1.6 million.

Reorganizations items were $4.5 million, and interest expense was $1.4 million. Cash declined in the month by $24.6 million, ending March at $54.1 million. Since the outset of the reorganization, the cumulative net loss is $2 million on revenue of $201 million.

Mesa, based in Phoenix, filed under Chapter 11 in January with a fleet of 178 aircraft and was operating 130 with 700 daily departures serving 127 cities in 41 states, Canada and Mexico. Revenue in 2009 was $968 million.

Mesa listed assets of $976 million against debt totaling $869 million. Liabilities included $393 million on loans secured by 24 owned aircraft, $26 million on three note issues and $33.6 million secured by 20 other aircraft. In addition, there is $1.62 billion in potential liability on aircraft leases. Mesa operates regional aircraft under code-sharing agreements with US Airways Group Inc., UAL Corp.’s United Airlines and Delta Air Lines Inc.

The case is In re Mesa Air Group Inc., 10-10018, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Former Lehman CFO Ian Lowitt Called as Witness

Lehman Brothers Holdings Inc. called Ian Lowitt, its former chief financial officer, as a witness yesterday on the fourth day of a trial on Lehman’s complaint claiming that Barclays Plc took $11 billion more in assets than it was entitled to receive on buying the brokerage business one week after the Chapter 11 filing on Sept. 15, 2008. Before the sale, Barclays offered Lowitt a $4.5 million signing bonus to stay on board after the acquisition. To read Bloomberg coverage, click here.

The Lehman holding company filed under Chapter 11 in New York on Sept. 15, 2008, and sold office buildings and the North American investment-banking business to Barclays one week later. The Lehman brokerage operations went into liquidation on Sept. 19, 2008, in the same court. The brokerage is in the control of a trustee appointed under the Securities Investor Protection Act.

The Lehman holding company Chapter 11 case is In re Lehman Brothers Holdings Inc., 08-13555, while the liquidation proceeding under the Securities Investor Protection Act for the brokerage operation is Securities Investors Protection Corp. v. Lehman Brothers Inc., 08-01420, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Advance Sheets

BVI Liquidators Have No Power Over Reserve Fund

A district judge in New York ruled that Caribbean liquidators have no right to participate in the U.S. liquidation of a fund that had its assets and operations in the U.S., even though the fund was incorporated abroad.

The case, decided April 28 by U.S. District Judge Paul G. Gardephe in New York, involved Reserve International Liquidity Fund Ltd., which the court described as a “much smaller sister fund of the Reserve Primary Fund.” The Reserve funds were money-market funds driven out of business by their investments in debt obligations owing by Lehman Brothers Holdings Inc.

Although the Reserve international fund had distributed most of its assets to investors, it commenced a declaratory judgment action in U.S. district court in New York to authorize distribution of remaining assets.

Investors in the fund, who didn’t like the proposed distribution scheme in the U.S., initiated a liquidation in the British Virgins Islands, where the fund was incorporated. The BVI liquidators sought to participate in the declaratory judgment action in Gardephe’s court and contended they supplanted the fund’s managers.

Gardephe disagreed, saying the “liquidators do not have standing to assume the position of the Fund’s board in this action.”

To have any authority to be heard in a court in the U.S., Gardephe ruled that the liquidators were obliged to commence a Chapter 15 petition in a U.S. bankruptcy court and have the proceedings in the BVI court declared to be either a “foreign main” or “foreign non-main” proceeding. They did neither.

Gardephe held that the liquidators cannot avoid Chapter 15 requirements for obtaining recognition of a foreign bankruptcy by claiming to supplant management. As evidence that the BVI liquidators would fail should they filed in Chapter 15, Gardephe pointed to the cases of two funds affiliated with Bear Stearns Cos.

Gardephe noted how the bankruptcy and district courts in New York ruled that the liquidation of the Bear Stearns funds in the Cayman Islands didn’t qualify for recognition in Chapter 15 as either a foreign main or non-main proceeding. Gardephe said the same fate would befall the BVI liquidators because the fund’s only connection with the island was its incorporation there.

As a result, Gardephe is allowing the declaratory judgment action to proceed in New York and determine how the remaining assets should be distributed to investors.

The case is Reserve International Liquidity Fund Ltd., 09- 9021, U.S. District Court, Southern District New York (Manhattan).

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

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