Brown Publishing, US Fidelis, Parking Co., Tribune, Six Flags: Bankruptcy

Brown Publishing Co., publisher of the largest-circulation local newspaper on eastern Long Island, filed Chapter 11 petitions for itself and affiliates on April 30 in Central Islip, New York.

Closely held Brown, based in Cincinnati, listed assets of $94 million against debt totaling $104.6 million. First-lien lenders are owed $70.2 million on a revolving credit and term loan. Court papers say the book value of the lenders’ collateral is $94.9 million. Second-lien lenders are owed $24.3 million.

Brown publishes 15 daily, 32 weekly, 11 business and 41 free publications. There are also 51 websites. Seventy-eight of the publications are in Ohio. The business publications are in seven states.

Brown publishes Dan’s Papers, the weekly newspaper with the largest circulation in the area of eastern Long Island, New York, known as the Hamptons. Brown also publishes the Montauk Pioneer, which it calls the official newspaper of Montauk, New York.

A court filing by Chief Executive Officer Roy Brown said that Chapter 11 became necessary because an out-of-court workout proved impossible.

The company has a commitment for a $2.5 million credit to finance the reorganization. A $1 million loan is to be available on an interims basis. The parties are working on definitive loan documents, court papers say.

Unsecured creditors with the two largest claims are newsprint suppliers affiliated with AbitibiBowater Inc. and White Birch Paper Co. Both are themselves in Chapter 11 reorganization.

The case is In re Brown Publishing Co., 10-73295, U.S. Bankruptcy Court, Eastern District of New York (Central Islip).

Updates

International Aluminum Wipes Out Mezzanine Debt

Noteholders of International Aluminum Corp. failed to prevent their claims from being extinguished without payment when the bankruptcy judge on April 30 signed a confirmation order approving the Chapter 11 plan.

Although the bankruptcy judge in Delaware didn’t agree with the estimated value of the reorganized business of manufacturing aluminum and vinyl products for home and commercial construction, she nonetheless concluded that the company isn’t worth enough even to pay secured creditors in full on the $145 million owing on the first-lien term loan and revolving credit.

U.S. Bankruptcy Judge Mary F. Walrath took evidence from the parties’ valuation experts and concluded that the enterprise value of the reorganized company is no more than $73 million. Including cash on hand at confirmation, Walrath estimated distributable value not to exceed $110 million.

The noteholders did succeed in trimming back releases given to third parties. Walrath didn’t require creditors to give releases to officers, directors, and others just for voting in favor of the plan.

The plan gives excess cash to senior secured creditors, along with $38 million in secured notes and all of the new stock other than equity reserved for management. The disclosure statement projected a 64.2 percent to 73.7 percent recovery by senior creditors.

Holders of $45 million in subordinated mezzanine loans receive nothing under the plan while other unsecured creditors are being paid in full. A majority on the creditors’ committee are mezzanine lenders whose debt is being wiped out under the prepackaged reorganization plan.

The company is changing its name to International Architectural Group LLC.

IAC filed under Chapter 11 on Jan. 4, already having support for the plan from holders of 72 percent of the first- lien debt.

The company has 21 facilities throughout the U.S. Assets were listed at $198 million with debt totaling $217 million on Nov. 30. Revenue for a year ended in November was $177 million.

The company was acquired in April 2007 by Genstar Capital LLC in a $228 million transaction. Carlyle Mezzanine Partners LP held $22.3 million of the mezzanine debt, according to a court filing. Affiliates in Canada didn’t file.

The case is In re International Aluminum Corp., 10-10003, U.S. Bankruptcy Court, District of Delaware (Wilmington).

US Fidelis Sues Owners to Recover $101 Million

US Fidelis Inc., a marketer of automobile service contracts now under the control of a chief restructuring officer, sued the brothers who own the company to recover $101 million that was “wrongfully and improperly appropriated” from it, the lawsuit says.

In the complaint filed last week in U.S. Bankruptcy Court in St. Louis, the company alleges that “millions upon millions of dollars in miscellaneous payments were made” to brothers Cory and Darain Atkinson, who together own US Fidelis. The complaint says the payments were for the brothers’ “own personal benefit, and not for any legitimate business purpose.”

In describing the business, the complaint says that policy cancellations in 2009 were $114.6 million, compared with revenue of $264 million in 2008. The lawsuit says it “should have been obvious” to the brothers that “operating cash flows would no longer cover present cancellation and refund liabilities.” The company “never established cash reserves dedicated to satisfying potential refund obligations,” the complaint says.

The Missouri Attorney General has a motion pending for the appointment of a Chapter 11 trustee. A hearing on the motion is currently set for May 26.

The company stopped writing new business in December and filed for reorganization on March 1. The petition by the Wentzville, Missouri-based company claimed assets are $74.4 million against debt totaling $25.8 million, including $14.5 million owing to a secured creditor.

The case is In re US Fidelis Inc., 10-41902, U.S. Bankruptcy Court, Eastern District Missouri (St. Louis).

Parking Co. Brings $141 Million at Bankruptcy Auction

Parking Co. of America Airports LLC, the operator of 31 off-airport parking facilities, held an auction last week where the price rose 26 percent to $141 million. The winning bidder was Commercial Finance Services 2907 Inc., a court filing says.

The opening bid at auction, $111.5 million, came from Bainbridge ZKS-Corinthian Holdings LLC, which had signed a contract before the Chapter 11 filing in January.

A combined hearing will be held May 14 for approval of the sale and confirmation of the Chapter 11 plan. The plan was made possible by a settlement with the unsecured creditors’ committee where at least $2.825 million is earmarked for them from the sale. Before taking the price increase into consideration, the original carve out was projected to give unsecured creditors a 25 percent recovery on their $8.9 million in claims.

The liquidating Chapter 11 plan calls for secured lenders on the term loan, owed $199.5 million, to collect 49 percent from the sale of their collateral, again before taking the price increase into consideration.

The PCAA companies have parking lots near 20 major airports, including seven of the 10 largest in the U.S. Operations are under the names AviStar, FastTrack, and SkyPark. PCAA owns 70 percent of the facilities where it operates.

Assets were on the books for $94 million on Sept. 30 when debt totaled $233 million. For nine months ended in September, revenue was $51 million. For 2008, revenue was $75 million.

The case is In re PCAA Parent LLC, 10-10250, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Kenneth N. Klee to Be Examiner for Tribune Co.

Kenneth N. Klee was named as the examiner for newspaper publisher Tribune Co.

The bankruptcy judge on April 20 called for an examiner to be appointed who would 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 allegedly didn’t receive equal value in return.

The appointment was made by the U.S. Trustee and is subject to approval by the bankruptcy judge. Klee is a bankruptcy lawyer and a partner in the firm Klee, Tuchin, Bogdanoff & Stern LLP in Los Angeles.

The bankruptcy judge in Delaware previously said the examiner is to file his report by July 12. He is also to look into 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. In addition, Klee must investigate whether the indenture trustee disclosed information in the complaint that was required to remain confidential.

The bankruptcy judge scheduled a status conference for May 10 to review 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. It listed $13 billion in debt for borrowed money and assets of $7.6 billion in the Chapter 11 reorganization begun in December 2008. The company 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).

Six Flags Confirmation Order Signed Approving Reorganization

The bankruptcy judge signed a confirmation order on April 30 formally approving the reorganization plan for theme-park operator Six Flags Inc.

The plan was changed at the last minute to resolve objections from operating company bondholders who were claiming the right to be paid a so-called make-whole penalty for the early repayment of debt.

As a result of the settlement, some of the holding company noteholders are making $69.5 million available so the payment to the operating company bondholders will be increased to $470 million, representing full payment of principal and interest, in addition to the compromise for the make-whole premium. To read details on the plan before the final change, click here for the April 5 Bloomberg bankruptcy report.

The Six Flags Chapter 11 petition in June listed assets of $2.9 billion against debt totaling $3.4 billion, including an $850 million secured term loan and a $243 million revolving credit. New York-based Six Flags filed under Chapter 11 with 20 theme parks, including 18 in the U.S. The parks have 800 rides, including 120 roller coasters.

The case is Premier International Holdings Inc., 09-12019, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Colonial, FDIC Disputes Coming to a Head on May 26

Colonial BancGroup Inc., the holding company that filed under Chapter 11 in August after the bank subsidiary was taken over by the Federal Deposit Insurance Corp., is bringing one of the main disputes with the FDIC to a head in bankruptcy court on May 26.

In November, the FDIC demanded that it be recognized as having a $1 billion priority claim against the holding company for failure to remedy a capital deficiency. Alternatively, the FDIC wants the case converted to liquidation in Chapter 7.

The holding company filed a motion last week contending there are no disputed facts and it’s entitled to summary judgment dismissing the claim based on the capital deficiency. The company and the creditors’ committee take the position that the statutory requirements for the capital deficiency priority claim haven’t been satisfied.

In bankruptcy law, a priority claim is one that must be paid in full before unsecured creditors receive anything and the company can emerge from Chapter 11.

Colonial has been on the offensive lately against the FDIC. In March, Colonial sued the FDIC in bankruptcy court, claiming that the bank holding company has the right to receive tax refunds. Colonial and the FDIC previously agreed to hold tax refunds in a segregated account until ownership is decided.

There are still more disputes between the holding company and the FDIC. From the outset of the bankruptcy, there have been disagreement over the validity of three secured claims. The FDIC is claiming a security interest in several bank accounts at Branch Banking & Trust Co. holding $38.4 million. The BB&T contends it has a security interest in the same accounts. Alabama taxing authorities are claiming $7 million.

The Colonial holding company, based in Montgomery, Alabama, listed assets of $45 million against debt of $380 million when it filed for bankruptcy protection.

Colonial provided loans to mortgage loan originators to tide them over until mortgages could be packaged and sold to investors in securitizations. The holding company was being investigated with regard to accounting practices and the warehouse loan operation.

The case is In re Colonial BancGroup Inc, 09-32303, U.S. Bankruptcy Court, Middle District of Alabama (Montgomery).

Gems TV to Auction Non-Inventory Assets by May 18

Gems TV (USA) Ltd., a television retailer of gemstone jewelry products, intends to hold an auction by May 18 for the sale of most of the assets other than inventory and the Gems TV trademark.

The first bid at auction, $3.7 million, is to come from Zalemark Holding Co. The buyer is taking other trademarks and customer lists.

The bankruptcy judge scheduled a hearing on May 5 to consider approving auction and sale procedures. Gems TV wants other bids by May 17. The hearing for approval of the sale is set for May 19.

Reno, Nevada-based Gems TV shut down the business before filing under Chapter 11 on April 5. The petition said assets are less than $50 million while debt is expected to exceed $100 million.

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

Escada Sets June 8 Confirmation on Liquidating Plan

Escada USA has a June 8 confirmation hearing for approval of the liquidating Chapter 11 plan. The bankruptcy judge approved the explanatory disclosure statement on April 29.

The disclosure statement says that unsecured creditors with claims of $370 million are expected to receive 3 percent to 8 percent. Tax claims of $2.9 million must be paid in full.

The U.S. business was sold for $6 million to an affiliate of the Mittal Family Trusts. In December, the same buyer bought the parent, German luxury apparel maker Escada AG.

Escada USA filed under Chapter 11 with 27 retail and outlet stores in the U.S. It also distributed through specialty retailers like Saks Fifth Avenue and Neiman Marcus.

Escada’s definitive lists of assets and debt show property on the books for $51.2 million and liabilities totaling $361.5 million. Debt included $14.2 million in priority claims, with the balance representing unsecured claims. The Escada companies filed for reorganization in Germany and the U.S. in August.

The case is In re EUSA Liquidating Inc., 09-15008, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Magic Brands Proposes Bonus Program for Executives

Magic Brands LLC, the parent of the Fuddruckers and Koo Koo Roo restaurant brands, is proposing a bonus program for the four top executives and seven other officers.

If a sale of the business brings more than $49 million, the group would share the maximum aggregate bonus pool of $1.66 million. The amount of the bonuses depends on the price the business fetches at auction.

Magic Brands is asking the bankruptcy judge to schedule a hearing on May 17 to consider approving the bonus program.

There will be a May 10 hearing for the bankruptcy judge to decide on procedures for auction and sale. The company filed under Chapter 11 on April with a contract for sale to Travistock Group for $24 million.

After 24 locations close, Austin, Texas-based Magic Brands will have more than 85 company-owned Fuddruckers locations in operation in 11 states. There are 13 Koo Koo Roo stores in California. Of the company-operated locations, 70 stores are leased and the remainder owned.

The petition says assets are less than $10 million while debt is less than $50 million.

The Koo Koo Roo stores were in bankruptcy previously. Owned by Prandium Inc., they were sold to Magic Brands through Chapter 11 in 2004.

The 135 Fuddruckers stores in 32 states owned by franchisees are not in the bankruptcy.

The case is In re Magic Brands LLC, 10-11310, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Osberg New Publisher for Philadelphia Inquirer, Daily News

Greg Osberg, a former publisher of Newsweek magazine, is to be the new publisher of the Philadelphia Inquirer and Philadelphia Daily News after secured lenders won the auction last week for Philadelphia Newspapers LLC. To read other Bloomberg coverage, click here.

Although it looks as though the newspapers themselves will be sold, the bankruptcy judge at an April 30 hearing gave the newspapers’ current owner the exclusive right to propose a Chapter 11 plan until May 11, thus affording time for revisions to the plan incorporating results of the auction.

A hearing for approval of the sale is set for May 25.

The lenders’ winning bid was worth $139 million, according to a statement by a company lawyer at the hearing. To read Bloomberg coverage of the hearing, click here.

The newspapers commenced 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 of Pennsylvania (Philadelphia).

New Filings

Middlebrook, Pharmaceutical Maker, Files in Delaware

Middlebrook Pharmaceuticals Inc., a developer of antibiotics from Westlake, Texas, filed a Chapter 11 petition on April 30 in Delaware, listing assets of $42.2 million against debt totaling $29.1 million.

The company has a proprietary system called Pulsys for delivering drugs in rapid bursts. Middlebrook markets Moxatag, also known as amoxicillin, using the Pulsys technology. It also markets Keflex, or cephalexin.

Middlebrook said in a court filing that its products “have not yet gained wide market acceptance among physicians.” The company has cumulative losses of $299 million, including a net loss of $62.3 million in 2009. Revenue in 2009 was $14.8 million.

Middlebrook has no secured or bank debt. It financed the business through private placements with equity investors.

The case is In re Middlebrook Pharmaceuticals Inc., 10- 11485, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Georgia Landfill Methane Plant Files in New Orleans

Worthmore Renewable Solutions LLC and Winder Renewable Methane LLC filed Chapter 11 petitions on April 30 in New Orleans.

They own a plant in Winder, Georgia, that converts methane from the Speedway Oak Grove Landfill into pipeline quality natural gas. The gas is sold under contract to the Municipal Gas Authority of Georgia.

Court papers say the companies have operated at a loss since inception in 2006.

The companies filed for reorganization after the secured lender served notices of default.

The case is Worthmore Renewable Solutions LLC, 10-11488, U.S. Bankruptcy Court, Eastern District Louisiana (New Orleans).

Briefly Noted

Barclays Admits Importance in Showing Gain on Lehman

In the fifth day of trial where Lehman Brothers Holdings Inc. is trying to prove that Barclays Plc took $11 billion more in assets than it was entitled to receive, Barclays’s global general counsel testified that it was of “great importance” to show a gain on the acquisition. To read Bloomberg coverage of the trial, 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 controlled by a trustee named 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 New York (Manhattan).

Shareholder Appealing Magna Plan Confirmation

Twenty-five shareholders of Magna Entertainment Corp. are appealing approval of the reorganization plan for the racetrack owner. The appeal was filed April 29, the same day the bankruptcy judge in Delaware formally approved the plan by signing a confirmation order. The shareholders together own nearly 280,000 shares. For details on the plan, click here to see the April 27 Bloomberg daily bankruptcy report. In the Chapter 11 petition in March, Magna listed assets of $1.05 billion and $959 million in debt. Liabilities include $500 million in senior and junior secured financings and $255 million in subordinated notes. Trade debt is about $10 million, a court paper said.

The case is In re Magna Entertainment Corp., 09-10720, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Lyondell Consummates Plan, Exits Chapter 11 Reorganization

Chemical producer Lyondell Chemical Co. implemented the Chapter 11 reorganization plan on April 30 that the bankruptcy judge approved one week earlier in a confirmation order. The company said it hopes the new stock will be listed by the third quarter on the New York Stock Exchange. To read details on the plan, click here for the April 26 Bloomberg bankruptcy report. To read other Bloomberg coverage on plan consummation, click here. Lyondell and affiliate Equistar Chemicals LP together are the third-largest independent producer of chemicals. They filed under Chapter 11 in January 2009, listing assets of $33.8 billion and debt totaling $30.3 billion. The parent LyondellBasell Industries AF filed under Chapter 11 in April 2009. Including the parent and European subsidiaries, the assets were $40 billion in September 2008.

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

Atrium from Dallas Implements Reorganization Plan

Atrium Corp., a Dallas-based manufacturer of aluminum and vinyl windows, implemented the Chapter 11 plan on April 30 that the bankruptcy court approved two days earlier. To see the company statement, click here. Existing investors Kenner & Co. and Golden Gate Capital Corp. retained 92.5 percent of the equity by making new investments. For details on the plan, click here for the April 29 Bloomberg bankruptcy report. Debt included $383 million on a first-lien term loan and revolving credit and $268 million in senior subordinated notes. In addition, there were $4.6 million in notes at the parent holding company ACIH Inc. The companies’ 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).

Bank Failures

Seven Banks Fail, Including Three in Puerto Rico

Seven banks were closed by regulators on April 30, including three in Puerto Rico. The failure of the Puerto Rican banks will cost the Federal Deposit Insurance Corp. $5.3 billion.

Taking all seven together, the loss for the FDIC is $7.3 billion.

The largest bank in Puerto Rico taken over was Western Bank, whose operations were transferred to Banco Popular of Puerto Rico.

The other failed banks were in Washington State, Missouri and Michigan.

To read Bloomberg coverage, click here.

The new failures bring the year’s total to 64. There were 140 bank failures in 2009, five times more than 2008. The failures in 2009 were the most since 1992 when 179 institutions were taken over by regulators.

Advance Sheets

Non-Working, Non-Bankrupt Spouses at Issue in Tax Refund Case

When a spouse who earned all the family’s income files bankruptcy, is a non-bankrupt spouse entitled to half of a tax refund in Massachusetts?

The U.S. Court of Appeals in Boston was given the question on appeal from a ruling where a bankruptcy judge decided that the non-bankrupt, non-working spouse was entitled to half a $95,000 federal tax refund.

The 1st Circuit in Boston said in an April 29 ruling that the case turns on Massachusetts law. Because there are no court rulings in Massachusetts nor any state laws directly answering the issue, the 1st Circuit sent the underlying question to the Supreme Judicial Court of Massachusetts.

The SJC is the highest court in the state court system in Massachusetts.

The case is Hundley v. Marsh (In re Hundley), 09-1899, 1st U.S. Circuit Court of Appeals (Boston).

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

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