Neff Corp., a closely held equipment- rental company with 63 branches in 14 U.S. states, began a prepackaged Chapter 11 reorganization yesterday in New York, with holders of $90 million on a first-lien term loan to own most of the new equity.
The plan, which is designed to reduce debt by more than $400 million, is supported by Wayzata Investment Partners LLC and Apollo Capital Management, who together have more than 67 percent of the first-lien debt. Other investors or buyers will have an opportunity to submit better offers.
Based in Miami, Neff has assets of $299 million and debt of $609 million, according to the disclosure statement explaining the plan. Funded debt totals $580 million. Revenue in 2009 was $192 million.
The Chapter 11 case is to be funded with $175 million in financing that will pay off the existing $153 million revolving credit. The so-called DIP loan will continue after the reorganization is completed.
The plan is financed in part by a fully backstopped $119 million equity-rights offering. Except for the portion earmarked for second-lien creditors, the first-lien holders may participate in the rights offering.
The reorganization plan calls for the first-lien lenders, owed $90 million, to receive all of the new equity except that resulting from the rights offering and the distribution to second-lien creditors.
First-lien creditors, except those who are sponsors of the plan, have the option of being paid in full in cash. Under either option, the first lien is to be paid in full, according to the disclosure statement.
Second-lien creditors, owed $298.5 million on a term loan, are to have a predicted 3 percent recovery by splitting up $10 million cash or receiving 5.6 percent of the equity. The $35.9 million in unsecured senior notes and the $1.1 million in general unsecured creditors are to receive a 1 percent recovery.
Neff asked the bankruptcy court to approve auction procedures testing whether there is a better offer for financing a reorganization. The company wants competing bids submitted by July 26. Neff is projecting a confirmation hearing for approval of the Chapter 11 plan on Aug. 25.
The first-lien debt was created in a December 2008 exchange offer for senior unsecured notes that originally totaled $230 million. The offer swapped 85 percent of the 10 percent senior unsecured notes of 2015 for the first-lien term loan at 45 percent discount from the face amount of the existing notes.
The case is In re Neff Corp., 10-12610, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Great American Guarantees $62.3 Million for Movie Gallery
Movie Gallery Inc. intends to liquidate in its second bankruptcy by using an affiliate of Great American Group Inc. as agent to sell inventory at its remaining 1,028 video-rental stores, unless a better offer surfaces.
Great American, based in Cincinnati, is guaranteeing Movie Gallery will recover at least $62.3 million. There will be a May 19 hearing where the U.S. Bankruptcy Court in Richmond, Virginia, will approve procedures for testing the market for a better offer from another liquidator.
Once sale proceeds exceed the guarantee plus a 3 percent fee for Great American, Movie Gallery and Great American will equally split the next 2 percent. For all excess sale proceeds, Movie Gallery will receive 70 percent, with 30 percent for Great American.
After surviving less than two years outside bankruptcy, Movie Gallery decided to liquidate as part of a settlement. Under the agreement, the unsecured creditors’ committee will give up claims against pre-bankruptcy secured lenders in return for $5 million to be put into trust for unsecured creditors under a liquidating Chapter 11 plan. The secured lenders will waive deficiency claims so they won’t dilute the pool for unsecured creditors.
Movie Gallery had approximately 2,600 stores in operation on filing under Chapter 11 again in February. Since then, more than 1,400 closed, while another 270 that are nearly liquidated.
At the outset of the Chapter 11 case, debt included $100 million on a secured revolving credit, $394 million on a first- lien facility, and $146 million in claims held by second-lien creditors.
Movie Gallery operates under the names Movie Gallery, Hollywood Video and Game Crazy. It had 3,490 stores before the first bankruptcy, which culminated in a confirmed Chapter 11 plan in May 2007. For details on the second filing, click here.
The new case is In re Movie Gallery Inc., 10-30696, U.S. Bankruptcy Court, Eastern District Virginia (Richmond). The prior case is In re Movie Gallery Inc., 07-33849, in the same court.
Old GM Says Claims Reduced by $120 Billion
Old General Motors Corp., now formally named Motors Liquidation Co., has already reduced filed claims by $120 billion, the company said in asking for a third extension of the exclusive right to propose a Chapter 11 plan.
Old GM said that claims and assets still must be analyzed before a Chapter 11 plan can be fully negotiated. The company said it’s already held discussions on a plan with the official committee representing asbestos claimants and with the representative for so-called future asbestos claimants.
Originally, 70,000 claims were filed for $274 billion, old GM said. The company wants so-called exclusivity extended to Sept. 27. The exclusivity hearing is set for May 27.
Old GM sold the core business in exchange for 10 percent of the stock of the new company plus warrants for 15 percent. The warrants are to have value if the new company is sufficiently profitable to raise the company’s value to specified levels.
The new GM is 60.8 percent owned by the U.S. government. 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).
Committee Opposes Bustup Fee for Fuddruckers Sale
Magic Brands LLC, the parent of the Fuddruckers and Koo Koo Roo restaurant brands, doesn’t need to offer a so-called breakup fee in selling the assets at auction, the official creditors’ committee said in a May 14 bankruptcy court filing.
Until a $41 million offer surfaced, Magic Brands believed that the first bid at auction would be $40 million from Travistock Group. Now that Fidelity Newport Holdings LLC and American Blue Ribbon Holdings LLC are willing to pay $1 million more without a breakup fee, the committee told the bankruptcy judge there is no reason for authorizing a so-called bustup fee.
A group representing two-thirds of Fuddruckers franchisees is also opposed to approving a breakup fee, for the same reason. In addition, the franchisees argue there is no proof that Travistock has the capacity or experience to carry out Magic Brands’ responsibilities as franchiser.
The bankruptcy court is holding a hearing today to approve auction and sale procedures.
The sale needs to be completed quickly because Magic Brands filed projections with the bankruptcy court showing that cash would be almost exhausted in July.
After closing 24 stores, 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 aren’t in the bankruptcy.
The case is In re Magic Brands LLC, 10-11310, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Some Spansion Stock Distribution Held Up Briefly
Although Spansion Technology Inc. implemented the Chapter 11 reorganization plan one week ago, a district judge granted holders of exchangeable notes a stay until tomorrow of the distribution of stock to holders of senior notes and exchangeable debentures.
In consummating the plan last week, the bankruptcy judge permitted stock to be sold to participants in the rights offering. The district judge will hold a hearing tomorrow for a longer stay on the distribution of the remainder of the stock pending completion of the appeal.
The bankruptcy judge approved the plan in an April 16 confirmation order. Holders of convertible notes appealed.
The plan would reduce debt to less than $480 million from $1.5 billion. Spansion, a manufacturer of flash memory semiconductors, has $230 million in cash after consummating the plan, the company said in a statement. To read about the plan, click here for the Dec. 31 Bloomberg bankruptcy report.
Before filing under Chapter 11 in March 2009, Sunnyvale, California-based Spansion hadn’t reported a profit since being spun off by Advanced Micro Devices Inc. in 2005. It had a $352 million net loss during the first three quarters of 2008 on revenue of $1.8 billion.
The case is Spansion Inc., 09-10690, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Biovest Files Plan, Parent Accentia’s Plan Due Later
Biovest International Inc., a majority-owned subsidiary of Accentia Biopharmaceuticals Inc., filed a Chapter 11 plan on May 14 where shareholders will retain stock, although diluted, and the company will work on commercialization of BiovaxID, a personalized cancer vaccine for some types of non-Hodgkin’s lymphoma.
The disclosure statement wasn’t yet filed. The company issued a statement saying Accentia will file a separate plan with both companies intending to emerge “simultaneously” from reorganization “this summer.”
The Biovest plan calls for the $3 million in financing for the Chapter 11 case to be converted into a two-year note at 16 percent interest with a first lien on assets.
The $24.9 million in pre-bankruptcy secured claims will be converted to a two-year second-lien note with 8 percent interest paid at maturity. The lenders will have another second-lien note for $7.3 million with 8 percent interest paid at maturity in three years.
The lenders are Laurus Master Fund Ltd. and Valens Offshore funds.
Biovest has the right to convert the lenders’ debt into common stock at 90 percent of the average closing price in 10 days before conversion. In return for the lenders’ pre- bankruptcy warrants, they will receive 10 percent of the new stock. In addition, they will be given a 6.25 percent perpetual royalty on product sales in return for pre-bankruptcy royalty rights.
Accentia’s $12 million in secured claims will convert into 17.6 million new shares. The 2008 secured debentures will be exchanged for a third-lien term loan maturing in 40 months. Holders of the debentures have the right to convert to common stock.
Unsecured creditors have the option of being paid in full with interest 40 months after the plan is implemented. Instead, the holders can convert to a non-interest bearing note maturing in two years.
The Accentia and Biovest companies are developing drugs to treat blood cancers and autoimmune diseases such as multiple sclerosis. They filed under Chapter 11 in November 2008 in Tampa, Florida, saying at the time they intended to pay all creditors in full.
Accentia listed assets of $134.9 million against debt totaling $77.6 million.
The case is In re Accentia Biopharmaceuticals Inc., 08- 17795, U.S. Bankruptcy Court, Middle District of Florida (Tampa).
Taylor-Wharton Selling Cylinders Business in June
Taylor-Wharton International LLC, a manufacturer of propane and cryogenic pressure tanks, valves and gauges, will conduct an auction on June 3 to learn if anyone will beat an $11 million offer for the cylinders business known as TWI Cylinders LLC. The initial offer will come from Norris Cylinder Co.
The company also began the process of having the bankruptcy court terminate three labor agreements with the United Steelworkers union. Both actions are designed to enable confirmation of the reorganization plan worked out before the Chapter 11 filing in November.
Last week the bankruptcy court in Delaware approved sale procedures requiring other bids for the cylinders business by June 1. The hearing on the motion to terminate the union contracts is currently scheduled for May 25.
Last week Taylor-Wharton received approval for a settlement with Harsco Corp., which sold the business to the current owners in November 2007 in a $340 million transaction. Harsco’s $31.9 million claim was settled in return for approval of a $23.2 million unsecured claim. Part of the claim related to termination of the lease for a building in Harrisburg, Pennsylvania.
To read about Taylor-Wharton’s proposed reorganization plan, click here to see the Jan. 12 Bloomberg daily bankruptcy report.
Mechanicsburg, Pennsylvania-based Taylor-Wharton at the outset of Chapter 11 had 11 facilities in the U.S. and six abroad. Revenue of $404 million in 2008 was estimated by the company to shrink to $237 million 2009.
The case is In re Taylor-Wharton International LLC, 09- 14089, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Chem Rx Has Temporary Cash Use, Must Have CRO
Chem Rx Corp., the third-largest provider of institutional pharmacy services in the U.S., filed under Chapter 11 on May 11 and was given temporary authority by the bankruptcy judge on May 14 to use cash representing collateral for secured lenders. As a condition to the use of cash, the company must continue to employ a chief restructuring officer acceptable to the lenders.
The final hearing on the use of cash is scheduled for May 27.
Chem Rx was forced into bankruptcy when the first-lien lenders sued to tie up the Long Beach, New York-based company’s income. The $103 million in first-lien debt was in default since early 2009. Other debt includes $37 million owing on a second- lien and $8.3 million in subordinated debt owing to affiliates of insiders. CIBC World Markets Corp. is agent for the lenders on the first- and second-lien loans.
The petition listed assets of $170 million against debt totaling $178 million.
The case is In re Chem Rx Corp., 10-11567, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Saratoga Resources Consummates Confirmed Chapter 11 Plan
Saratoga Resources Inc., an independent oil and gas exploration and production company, implemented the reorganization plan on May 14 that the bankruptcy judge approved in an April 19 confirmation order.
The company was unable to consummate the first plan that the judge in Lafayette, Louisiana, confirmed. After the first- lien debt was sold, the second plan worked out.
Under the revised plan, a $5.5 million payment on the first-lien claim of $23.5 million was made on emergence from Chapter 11. The remainder will pay interest and mature in April 2012. On the $127.5 million owing on the second-lien debt, monthly payments will be made until maturity in April 2012.
General unsecured creditors are 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 Louisiana (Lafayette).
Prisoner Tries to Intervene in Pilgrim’s Pride Case
An inmate in a federal penitentiary named Jonathan Lee Riches has latched onto another target, chicken producer Pilgrim’s Pride Corp., which emerged from bankruptcy reorganization at the end of December.
Riches, who claims he’s also known as Bernard Madoff, is appealing denial of his motion to intervene in the Pilgrim’s Pride bankruptcy. Riches says in his latest filing on May 6 that Pilgrim’s Pride “continues to serve us uncooked tainted chicken in prison, in which we got food poisoning from.”
He also says there are videotapes of company employees engaging in “chicken pornography.”
Riches is an experienced litigator. In denying a motion to intervene in the Madoff case, U.S. Bankruptcy Judge Burton R. Lifland said that Riches has filed more than a thousand lawsuits in federal district courts.
Riches is currently incarcerated at the Federal Medical Center in Lexington, Kentucky. His release date is March 2012, according to the Federal Bureau of Prisons website.
A spokesman for Pilgrim’s Pride didn’t return a call seeking comment.
Parking Co. Has Approved Sale and Confirmed Plan
The bankruptcy judge told Parking Co. of America Airports LLC at a May 14 confirmation hearing that she will sign an order approving the Chapter 11 plan.
The judge also approved the sale of the assets for $141 million to Commercial Finance Services 2907 Inc., which won the auction by increasing the price 26 percent. Parking Co. operates 31 off-airport parking facilities.
The plan incorporates a settlement where unsecured creditors with $8.9 million in claims will receive at least $2.825 million, before taking the price increase into consideration.
Secured lenders are owed $199.5 million on a term loan. To read other Bloomberg coverage of the confirmation hearing, click here.
The PCAA companies filed under Chapter 11 in late January with parking lots near 20 major airports, including seven of the 10 largest in the U.S. They operate under the names AviStar, FastTrack and SkyPark. PCAA owns 70 percent of the facilities.
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).
McKean County, Pennsylvania, Landfill Files for Sale
Rustick LLC, the owner of a landfill in McKean County, Pennsylvania, filed a Chapter 11 petition on May 13 in Erie, Pennsylvania, intending to sell the property.
Rustick also filed a Chapter 11 plan and explanatory disclosure statement where sale proceeds would be distributed according to priorities in bankruptcy law. No buyer is yet under contract.
Secured debt was listed for $39.3 million alongside $27.4 million in unsecured claims. The assets were shown for $29.9 million.
Liabilities include $10.4 million on taxable bonds and $10.9 million on tax-exempt bonds. There is also a $20.9 million subordinated note and a $2.5 million note payable to an insider.
A bankruptcy court filing blames financial problems on the recession, which resulted in a “significant reduction in waste generation rates.” The company also spent $4 million in litigating and settling with a former part owner.
The landfill was purchased in 2005 for $17 million.
The case is In re Rustick LLC, 10-10902, U.S. Bankruptcy Court, Western District of Pennsylvania (Erie).
R&G, San Juan Bank Holding Company, Files Chapter 11
R&G Financial Corp., a bank holding company, filed a Chapter 11 petition on May 14 in San Juan, Puerto Rico, two weeks after the bank subsidiary was taken over by the Federal Deposit Insurance Corp.
The petition listed assets of $40.2 million and debt totaling $420.7 million.
The bank subsidiary’s deposits were transferred to another bank. The FDIC said the failure will cost the insurance fund $1.23 billion.
To read Bloomberg coverage, click here.
R&G’s filing was a so-called bare-bones petition unaccompanied by the motions and requests for relief ordinarily filed on the first day in a major Chapter 11 case.
The case is In re R&G Financial Corp. (10-04124-11), U.S. Bankruptcy Court, District of Puerto Rico (Old San Juan).
Union for Traditional Judaism Files in White Plains
Union for Traditional Judaism, a not-for-profit organization that trains and places rabbis, filed a Chapter 11 petition on May 14 in White Plains, New York, to facilitate sale of its facility in Teaneck, New Jersey.
In addition to training rabbis, the Union says in a court filing that it “supports and encourages traditional Jewish practices among individuals.”
A court filing says there is a $1.45 million cash offer to purchase the Teaneck facility. The Union says that a sale has been blocked by litigation with Netivot Shalom, a congregation that uses part of the facility.
The Union says it intends on using the bankruptcy court to force a sale of the property.
The petition says assets and debt are both more than $1 million.
The case is In re Union for Traditional Judaism, 10-22958, U.S. Bankruptcy Court, Southern District New York (White Plains).
Financial Reform Won’t Prevent Second Lehman, Poll Finds
AlixPartners LLC released a poll today where 91 percent of restructuring professionals don’t believe regulatory reform will prevent another bankruptcy like Lehman Brothers Holdings Inc.
Sixty-three percent of participants in the poll expect a sovereign debt default in 2010 or 2011 while 90 percent say a “major U.S. municipality” will default in the same years.
Ninety-eight percent of respondents predict that corporate bankruptcies in 2010 will be “mostly” for companies with $1 billion or less in assets.
The survey was conducted last week among 91 bankruptcy lawyers, bankers, fund managers and restructuring professionals.
Sawgrass Resorts has $996,000 EBITDA in March
The owner of the Sawgrass Marriott Resort in Ponte Vedra Beach, Florida, reported an $827,000 net loss in March on total revenue of $4.4 million. Net operating income in the month was $1.04 million. Earnings before interest, taxes, depreciation, and amortization was $996,000 while interest expense was $1.3 million. The resort is asking for an extension of the right to use cash representing collateral for $193 million owing to secured creditor Goldman Sachs Mortgage Co. Existing cash-use authority expires May 28. Goldman Sachs has a motion seeking permission to foreclose scheduled for hearing on June 21. The first hearing on cash use will be May 25. The resort filed under Chapter 11 on March 1 in Jacksonville, Florida, saying assets and debt both exceed $100 million.
The case is In re RQB Resort LP, 10-01596, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
Four Bank Failures Bring Year’s Total to 72
Four more banks failed on May 14, costing the Federal Deposit Insurance Corp. $301.7 million. The failing banks were in Illinois, Georgia, Michigan and Missouri. Deposits at the failing banks were transferred other institutions.
To read Bloomberg coverage, click here.
The new failures bring the year’s total to 72. 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.
Individuals Cannot Exercise State’s Regulatory Powers
When a hospital is closing under supervision of state health regulators, a lawsuit by private plaintiffs in state court to block the closing is a violation of the so-called automatic stay, a bankruptcy judge in New York ruled on May 14 in the Chapter 11 case of St. Vincent Catholic Medical Centers.
The hospital filed under Chapter 11 in April and secured approval from the bankruptcy judge to continue closing pursuant to an agreement worked out with the state Department of Health. Individuals who didn’t want the hospital to close sued the Health Department in state court a week after bankruptcy. The hospital was not named as a party in the state-court suit.
In terms of violating the automatic stay, U.S. Bankruptcy Judge Cecelia Morris said it was an inconsequential “technicality” that the hospital was not a defendant in the state-court suit. Using the state judge to force the Health Department into keeping the hospital open was an attempt to “exercise control over property of the estate,” the judge said. The suit was therefore a violation of the automatic stay that prohibits lawsuits against bankrupts or actions attempting to control the debtor or its property.
Even though the Health Department could use regulatory powers to keep the hospital open, Morris said an individual cannot cloak itself in regulatory powers by using a state court.
Morris also said that the plaintiffs in the state suit lacked standing to file a motion in bankruptcy court seeking a modification of the automatic stay. She said that the plaintiffs were neither creditors nor parties in interest and thus lacked the right to participate in the bankruptcy case.
St. Vincent’s flagship facility is a 727-bed acute care hospital in Manhattan’s Greenwich Village. It is in Chapter 11 a second time.
The new case is In re Saint Vincent Catholic Medical Centers of New York, 10-11963, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The prior case was In re Saint Vincent Catholic Medical Centers of New York, 05-14945, in the same court.
Pre-Bankruptcy Claims Become ‘New’ Debt in Reorganization Plan
A creditor didn’t violate the injunction contained in a confirmed Chapter 11 plan by drawing down a letter of credit securing an obligation to make payments under the plan, Chief Judge Edith H. Jones from the 5th U.S. Circuit Court of Appeals in New Orleans ruled in a May 13 opinion reversing the lower courts.
The case involved a letter of credit that the reorganized company posted to insure post-confirmation payments owing to a creditor who supplied services both before and after the Chapter 11 plan was approved.
Although the company was current on payment for services after emerging from Chapter 11, it defaulted on payments owing under the plan. When the creditor drew the letter of credit to collect on the plan payments, the bankruptcy judge ruled that drawing on the letter of credit was a violation of the injunction in the plan prohibiting action to collect pre- bankruptcy debt. The district court affirmed.
Writing for a panel of three judges, Jones reversed. She reasoned that the old debt was extinguished by plan confirmation. It was replaced by a new obligation owing under the plan.
Since the creditor was not collecting an old obligation, there was no violation of the injunction in the confirmed plan.
The case is Electric Reliability Council of Texas Inc. v. May (In re Texas Commercial Energy), 08-40890, 5th U.S. Circuit Court of Appeals (New Orleans).