WaMu, Orleans, Trump Entertainment, Station, Trident, Gems TV: Bankruptcy

Washington Mutual Inc. filed a revised reorganization plan yesterday in anticipation of tomorrow’s hearing on the explanatory disclosure statement. The modified plan is based on an amended proposal for a global settlement with the Federal Deposit Insurance Corp., JPMorgan Chase & Co. and creditor groups.

When the global settlement was originally announced on March 12, the FDIC was not on board. Later, the FDIC formally rejected the compromise, although negotiations continued, the disclosure statement says. The revised settlement agreement remains a “proposed compromise,” according to the disclosure statement.

“Negotiations to reach a definitive global settlement are continuing,” said David Barr, a FDIC spokesman, said in an interview. Last week, the FDIC filed an objection to approval of the disclosure statement, noting there was no definitive global settlement.

The settlement is designed to end disputes with New York- based JPMorgan over who is entitled to $4 billion of WaMu’s money that was on deposit at WaMu’s bank subsidiary when the bank was taken over by regulators and sold to JPMorgan.

In notable changes from the prior version, the revised disclosure statement says that WaMu’s share of $5.4 to $5.8 billion in tax refunds will now be $2.3 billion to $2.6 billion, rather than $1.8 billion to $2 billion in the prior version. The FDIC is now to receive $850 million from some of the tax refunds, in the latest proposed compromise.

The new settlement would give the $4 billion to WaMu while JPMorgan, the Federal Deposit Insurance Corp. and WaMu share tax refunds.

The plan still would create a liquidating trust to distribute approximately $7 billion to creditors.

Senior and subordinated noteholders and general unsecured creditors, who may receive full payment in cash under the plan, have the option of taking stock in reorganized WaMu. Holders of preferred stock could see a recovery up to 1 percent through the plan, according to the disclosure statement.

The disclosure statement says that senior notes total $4.13 billion while $1.67 billion is owing on subordinated notes. The preferred securities are $766 million.

The plan includes a backstopped $50 million equity rights offering where holders of the so-called PIERS preferred securities can buy stock in the ongoing WaMu business. The WaMu businesses to continue are WMI Investment Corp. and WM Mortgage Reinsurance Company.

The WaMu holding company filed under Chapter 11 in September 2008, one day after the bank subsidiary was taken over. The bank was the sixth-largest depository and credit-card issuer in the U.S. and the largest bank failure in the country’s history. The holding company filed formal lists of assets and debt showing property with a total value of $4.485 billion against liabilities of $7.832 billion.

The holding company Chapter 11 case is Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Updates

Judge Says He Will Confirm Citadel Broadcasting Plan

Citadel Broadcasting Corp., a Las Vegas-based owner of 224 radio stations, came out on top in the contested confirmation hearing when the bankruptcy judge said yesterday that he will sign an order approving the Chapter 11 plan. Citadel prevailed over objecting shareholders who claimed they shouldn’t we wiped out because the reorganized company is worth more than the company says.

Bankruptcy Judge Burton R. Lifland found Citadel’s valuation witness credible and ruled that one of the valuation witnesses for shareholders didn’t quality as an expert. To read Bloomberg coverage of yesterday’s confirmation hearing, click here.

With operations in more than 50 markets, Citadel filed a prepackaged Chapter 11 petition in January. The creditors’ committee supported the plan after a settlement improving treatment of unsecured creditors.

As revised, secured creditors are expected to recover 82 percent on the $1.88 billion secured portion of their claims totaling $2.14 billion. Secured creditors will receive a new $762.5 million term loan plus 90 percent of the new common stock. In addition, they receive excess cash above what’s needed for working capital.

Unsecured creditors can expect a 36 percent recovery on their claims. The class is to receive $36 million cash plus 10 percent of the new common stock. The class of unsecured creditors includes general unsecured creditors with claims estimated to total $343.5 million plus $276 million in deficiency claims of secured creditors.

The revised disclosure statement says that the value of the stock and other property distributed under the plan is estimated to be worth $1.625 billion for a midpoint value. The value of the reorganized company is said to range between $1.46 billion and $1.71 billion.

Citadel and subsidiaries listed assets of $1.4 billion against debt totaling $2.46 billion. It is the third-largest radio station owner in the U.S., with 166 FM and 58 AM stations. The 24 stations in large markets were acquired in a June 2007 merger transaction with the Walt Disney Co. where Disney shareholders received 57.5 percent of Citadel’s stock and Disney received $1.35 billion cash. Citadel also distributes programming to 4,000 stations. The plan originally was negotiated with holders of 60 percent of the senior debt.

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

Delta Free to Drop Mesa Operating Regional Flights

Regional airline Mesa Air Group Inc. may have lost the battle with Delta Air Lines Inc. over Delta’s right to cancel the contract where Mesa was flying 22 aircraft as Delta Connection.

When Delta attempted to terminate the contract for substandard performance, Mesa won a preliminary injunction from a U.S. district judge in Georgia in June 2008. Mesa argued that it was unable to complete the required 95 percent of flights on account of bad weather.

The district judge dissolved the injunction yesterday, concluding that the contract with Delta didn’t make allowance for bad weather in calculating whether the required number of flights were completed, Mesa said in a statement yesterday. Mesa said it’s reviewing its options regarding appeal.

Mesa 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 is now operating 99 aircraft, with 580 daily flights serving 104 cities.

Phoenix-based Mesa listed assets of $976 million against debt totaling $869 million. Liabilities include $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. Mesa’s subsidiary in Hawaii, go! Mokulele, didn’t file.

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

Movie Gallery Sees Liquidating Plan Filed by June 21

Movie Gallery Inc., now liquidating in its second venture into Chapter 11, has agreement with what it called “major stakeholders” to file a liquidating plan by June 21 and implement the plan by Dec. 8. The company is seeking an extension of the exclusive right to file a Chapter 11 plan until July 31. If there’s an objection to the exclusivity motion, the hearing will be May 27.

Absent a higher offer, Great American Group Inc. will be the agent for closing the last 1,028 video-rental stores under an agreement with a $62.3 million guarantee.

Less than two years after the prior bankruptcy, Movie Gallery filed again in Chapter 11. It decided this month to liquidate under a settlement where the unsecured creditors’ committee will give up claims against pre-bankruptcy secured lenders in return for $5 million placed in trust for unsecured creditors under a liquidating Chapter 11 plan. Movie Gallery had approximately 2,600 stores in operation on filing under Chapter 11 again in February. Since then, more than 1,400 closed, plus another 270 that are almost liquidated.

At the outset of the new 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.

Starwood Make Bid for Extended Stay, Auction May 27

Extended Stay Inc., an operator of more than 680 long-term lodging properties in 44 states, confirmed through a lawyer yesterday that Starwood Capital Group LLC made a preliminary bid by yesterday’s deadline to top the so-called stalking horse offer from Centerbridge Partners LP and Paulson & Co. With another bid, Extended Stay hopes for a successful auction on May 27 where the winner will acquire the hotel operator under a Chapter 11 plan.

To read Bloomberg coverage, click here.

Extended Stay scheduled a June 17 hearing for approval of the disclosure statement describing the reorganization plan reflecting the outcome of the May 27 auction. Extended Stay hopes for a confirmation hearing for approval of the plan on July 20. To read about the bidding so far, click here for the April 26 Bloomberg bankruptcy report.

Extended Stay’s Chapter 11 petition in June 2009 listed assets of $7.1 billion against debt totaling $7.6 billion, including $4.1 billion in mortgage loans and $3.3 billion in 10 different mezzanine loans.

Based in Spartanburg, South Carolina, Extended Stay says it’s the largest operator of midpriced extended stay hotels in the U.S. The properties are almost all managed by HVM LLC, an affiliate that didn’t file in Chapter 11.

The case is In re Extended Stay Inc., 09-13764, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Middlebrook Signs Victory for $17.1 Million Sale

Middlebrook Pharmaceuticals Inc., a developer of antibiotics from Westlake, Texas, signed a contract to sell the assets for $17.1 million to Victory Pharma Inc.

At a hearing on June 7, Middlebrook will have the bankruptcy judge establish auction and sale rules testing whether there’s a higher offer. Middlebrook wants to hold an auction between July 19 and July 23, with a hearing for approval of the sale around July 28.

Middlebrook filed under Chapter 11 on April 30 in Delaware, listing assets of $42.2 million against debt totaling $29.1 million. It has no secured or bank debt. It financed the business through private placements with equity investors.

The assets includes 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.

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

Orleans Continuing to Consider Alternatives to Sale

Orleans Homebuilders Inc., a home and condominium builder operating in seven states, filed a motion asking for an extension of the exclusive right to propose a Chapter 11 plan until Sept. 27. The hearing on the so-called exclusivity motion will take place June 2.

Orleans filed for bankruptcy reorganization intending to sell the assets for $170 million to NVR Inc. unless it received a higher offer at auction. Saying it wanted time to consider “other options,” Orleans pushed the hearing back to May 21 for approval of auction and sale procedures.

The exclusivity motion says Orleans is continuing to “consider strategic alternatives.” Previously, Orleans said in a statement that an internal reorganization rather than a sale “may represent a better outcome.”

The Chapter 11 filing on March 1 by Bensalem, Pennsylvania- based Orleans resulted from the maturity of a revolving credit in February. At maturity, approximately $325 million was owing to the banks, not including $15 million on letters of credit. The March 31 balance sheet listed assets of $591 million against total liabilities of $560 million.

The case is In re Orleans Homebuilders Inc., 10-10684, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Icahn Wants Appeal Stay of Trump Entertainment Plan

Carl Icahn, the loser in the battle to take over casino owner Trump Entertainment Resorts Inc., filed an appeal on the last day from the May 7 confirmation order of the bankruptcy judge in Camden, New Jersey, approving the Chapter 11 plan. Icahn is also asking the judge to prevent implementation of the plan until the appeal is resolved.

Icahn wants the bankruptcy judge to hold a hearing by May 21 on the motion for a stay pending appeal.

Icahn contends that U.S. Bankruptcy Judge Judith H. Wizmur made a mistake when she concluded that the reorganized casinos can make payments on $350 million in secured debt that will remain after bankruptcy. Icahn believes the company won’t have enough cash “to survive beyond a few months.”

Icahn also believes the bankruptcy judge made a mistake in picking the interest rate to be paid on secured debt after the plan is implemented. To read other Bloomberg coverage, click here.

The company and holders of 8.5 percent senior notes proposed the winning plan. For details on the judge’s ruling turning down Icahn’s plan, click here for the April 13 Bloomberg bankruptcy report.

Trump Entertainment, the owner of three casinos in Atlantic City, filed for Chapter 11 reorganization a second time in February 2009. The new petition listed consolidated assets of $2.06 billion against debt totaling $1.74 billion. Listed liabilities included $1.25 billion in second-lien notes, $489 million in first-lien bank debt, $33.2 million in trade debt, and $6 million in liabilities on leases, according to a court filing. The companies own the Trump Taj Mahal Casino Resort, the Trump Plaza Hotel and Casino, and the Trump Marina Hotel Casino. The new filing came less than four years after emerging from a prior bankruptcy reorganization.

The case is In re TCI 2 Holdings LLC, 09-13654, U.S. Bankruptcy Court, District of New Jersey (Camden).

Watch List

National Coal Loses $5.8 Million, Debt Exceeds Assets

National Coal Corp., a bituminous coal producer based in Knoxville, Tennessee, reported a $5.8 million net loss in the first quarter on revenue of $16.2 million, a decline of 19.1 percent from the same quarter in 2009.

The tonnage of coal shipped was off 27.5 percent from the 2009 first quarter.

National Coal’s assets are $51.2 million while liabilities are $68.7 million, according to its balance sheet.

The company said the financial statements have a qualification regarding the ability to continue as a going concern. To remain in business, the company said it needs additional equity or a refinancing of existing debt.

The stock fell about 2 cents yesterday to 43 cents on the Nasdaq Stock Market.

Briefly Noted

Station Casinos Revenue Down 11.8% in First Quarter

Casino operator Station Casinos Inc. reported a $53.5 million net loss for the quarter ended March 31, compared with a $33.7 million loss in the same period last year. Net revenue in the quarter was $249.4 million, an 11.8 percent decline from the first quarter of 2009.

A hearing is scheduled to resume on May 27 for approval of sale procedures accompanying an agreement underpinning a modified reorganization plan from April where a group including current owners Frank and Lorenzo Fertitta would make the first bid of $772 million to take control of substantially all of the businesses. The new proposal wraps in a plan filed in March for some of the casinos. Two days of hearings were held early this month.

Station Casinos filed under Chapter 11 in July. It has 13 properties in Las Vegas plus five joint ventures. It also operates casinos for American Indian tribes. Station’s debt was the result of a leveraged buyout in November 2007 by Fertitta Colony Partners LLC.

The case is In Re Station Casinos Inc., 09-52477, U.S. Bankruptcy Court, District of Nevada (Reno).

Trident Hunts for $410 Million Exit Term Loan

Trident Resources Corp., an independent natural gas production and development company focusing on coal-bed methane, is negotiating for a $410 million term loan to provide some of the financing to exit bankruptcy reorganization. To read Bloomberg coverage, click here.

Trident has a June 15 confirmation hearing for approval of a Chapter 11 plan funded in part by a fully backstopped $255 million equity rights offering. For details on the plan, click here to see the May 10 Bloomberg bankruptcy report. The companies filed for reorganization in September in the U.S. and Canada.

The case is In re Trident Resources Corp., 09-13150, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Equipment Renter Neff Has Interim $35 Million Loan

Neff Corp., a closely owned equipment rental concern with 63 branches in 14 states, was given interim authorization yesterday to borrow $35 million from a $175 million loan promised for the prepackaged reorganization that began May 16 in New York. To read about the first-day hearing, click here. For details on the company’s finances and the plan, click here for the May 17 Bloomberg bankruptcy report. The plan would reduce debt by more than $400 million while giving most of the new equity to first-lien lenders owed $90 million on a term loan. Court papers said assets of the Miami-based company are $299 million while debt is $609 million.

The case is In re Neff Corp., 10-12610, U.S. Bankruptcy Court, Southern District New York (Manhattan).

U.S. Concrete Settles Drivers’ Suit for $1.5 Million

U.S. Concrete Inc., one of the 10 largest producers of ready-mixed concrete in the U.S., hammered out a settlement of three class-action suits in which truck drivers alleged violations of California wage and hours laws. If approved by the bankruptcy judge at a June 3 hearing, the suits will be settled in return for $1.5 million payment to a settlement trust, less attorneys’ fees.

The Houston-based company has a June 3 hearing for approval of the disclosure statement explaining the prepackaged reorganization plan negotiated before the Chapter 11 filing on April 21. For details on the plan, which reduces debt by $285 million through conversion of 8.325 percent subordinated notes into the new equity, click here for the April 30 Bloomberg bankruptcy report.

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. 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).

Point Blank Has Bonus Program for 20 Executives

Point Blank Solutions Inc., a manufacturer of soft body armor for the military and law enforcement, is proposing a bonus program where 20 executives could share $381,000 if the assets are sold or a Chapter 11 plan is confirmed by March 31, 2011. The hearing for approval of the bonuses is scheduled for June 10.

Point Blank, which filed under Chapter 11 on April 14, has a plant and head office in Pompano Beach, Florida, and a second plant in Jacksboro, Tennessee. Revenue in 2009 was more than $153 million. The petition listed assets of $64 million against debt totaling $68.5 million. Debt includes a $10.5 million secured loan to be paid off by the financing. Point Blank said it also owes $28.2 million to trade suppliers.

Three former officers were indicted on charges of securities fraud. The company said it received a so-called Wells Notice in August where securities regulators said they intended to bring civil injunctive actions.

The case is In re Point Blank Solutions Inc., 10-11255, U.S. Bankruptcy Court, District of Delaware.

Gems TV Proposes Bonuses for Top Two Officers

Gems TV (USA) Ltd., a television retailer of gemstone jewelry products, is proposing a bonus program that would allow the top two officers to split $50,000 if a Chapter 11 plan is confirmed by Aug. 15. If confirmation does not occur before Oct. 15, there would be no bonus, except under a separate program awarding the two executives 2 percent of asset sale proceeds exceeding $14.5 million. If the sale brings $19.5 million, the bonus pool would be $130,000.

Gems TV has a first bid of $3.7 million for most of the assets other than inventory. The company is also attempting to sell the remaining $4.5 million of inventory. There will be an auction on June 2 for the non-inventory assets. The hearing for approval of the sale is set for June 3. The assets in the auction exclude inventory and the Gems TV trademark.

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).

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

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