Trident Resources Corp. brought a nine-month reorganization to fruition yesterday when the bankruptcy judge signed a confirmation order approving the Chapter 11 plan for the independent natural gas production and development company. The plan was unopposed.
The plan, funded in part by a backstopped equity rights offering up to $255 million, allows for senior and junior secured lenders to own the new stock. Originally, the rights offering was $200 million.
Under the 2006 credit agreement, lenders will receive 40 percent of the stock plus the right to purchase an additional 45 percent in the rights offering, on account of their $422 million in claims.
Creditors with $137 million in claims under the 2007 credit agreement can purchase 15 percent of the stock in the rights offering.
Unsecured creditors and existing stockholders receive nothing under the plan.
The rights offering gives the reorganized company an implied equity value of $425 million, according to the disclosure statement. The implied enterprise value is $772 million.
There will be $380 million in debt on emergence from bankruptcy, compared with funded debt of $1.2 billion before bankruptcy.
For implementation of the U.S. reorganization, a companion restructuring of Canadian affiliates must be approved by the Court of Queen’s Bench in Calgary under the Companies’ Creditors Arrangement Act.
The companies filed for reorganization in September in the U.S. and Canada. Trident focuses on coal-bed methane.
The case is In re Trident Resources Corp., 09-13150, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Fifth Third May Pursue Ahmed Zayat on Debt Guarantee
When the stables filed under Chapter 11 in February in New Jersey, the Cincinnati-based bank had a lawsuit already pending in U.S. district court in Lexington, Kentucky, attempting to recover a $34.5 million loan. In the same suit, the bank also was attempting to collect the debt from Ahmed Zayat on his guarantee.
The district judge in Kentucky stayed the lawsuit as a result of the bankruptcy filing by the stables. The bank responded by filing a motion to lift the stay so it could continue suing Ahmed Zayat on his guarantee.
In a ruling on June 14, the district judge in Kentucky allowed the bank to continue suing Ahmed Zayat on the guarantee. He argued unsuccessfully that the guarantee suit should remain in limbo until there’s resolution of a suit the stables filed in bankruptcy court accusing Fifth Third of predatory lending practices.
The district judge in Kentucky invited Ahmed Zayat to file counterclaims in her court alleging the same allegedly predatory practices.
It remains to be seen whether the stables will attempt to have the New Jersey bankruptcy judge stop the district court suit.
Creditors are voting on the stables’ reorganization plan in advance of a July 15 confirmation hearing. The plan calls for paying creditors in full over time, allowing Ahmed Zayat to retain ownership. Because the bank isn’t to be paid under the bankruptcy plan in accordance with the pre-bankruptcy loan agreement, it remains to be seen whether confirming the plan and paying the bank in full over time will result in a voluntary or involuntary halt of the lawsuit on Ahmed Zayat’s personal guarantee.
The plan calls for bringing the bank’s interest current when the plan becomes effective. The principal owing on the loan will be paid in installments through the end of 2014.
Unsecured creditors, with $1.2 million in claims, are to be paid in full without interest over two years.
Amend Zayat said he personally invested $40 million in the business.
The stables, based in Hackensack, New Jersey, filed under Chapter 11 in February in Newark. At the time, the bank was seeking the appointment of a receiver.
The stables have more than 200 horses, representing collateral for bank. The horses are valued at $37 million, according an appraisal cited in a court paper. Revenue in 2009 was $21 million.
The suit on the guarantee is Fifth Third Bank v. Zayat Stables LLC, 09-401, U.S. District Court, Eastern District of Kentucky (Lexington). The Chapter 11 case is In re Zayat Stables LLC, 10-13130, U.S. Bankruptcy Court, District of New Jersey (Newark).
RPM, Asbestos Claimants Face August Trial Over Lawsuits
Asbestos claimants agreed with RPM International Inc. to hold a trial on Aug. 9 to decide whether the bankruptcy court will continue to enjoin lawsuits against RPM and affiliates that aren’t in Chapter 11.
Two of RMP’s non-operating subsidiaries, Specialty Products Holding Corp. and Bondex International Inc., filed under Chapter 11 on May 31 and immediately asked the bankruptcy judge to stop suits against the non-bankrupt affiliates which are claimed not to be directly liable on asbestos claims.
The judge granted a temporary injunction and was to hold a hearing yesterday for continuation of the halt against suits. Rather than fight yesterday, the parties decided to schedule pre-trial discovery and arrange for resolution of the dispute at the Aug. 9 hearing. In the meantime, the halt will continue on suits against the entire family of companies.
Asbestos claimants will file their briefs on July 16. The companies will submit their papers on July 29.
Specialty Products and Bondex sought Chapter 11 relief to deal with 10,000 asbestos claims. The companies are aiming for a resolution to the reorganization where the non-bankrupt affiliates may make a contribution to an asbestos claimants’ fund, allowing a Chapter 11 plan to absolve the entire family of companies from liability on personal-injury claims.
Non-bankrupt subsidiaries of Specialty Product generate about $330 million in annual revenue. Bondex, which is no longer operating, is a Specialty Products subsidiary that is chiefly responsible for asbestos claims from a company acquired in 1966 named Reardon Co.
RPM, based in Medina, Ohio, had consolidated assets of $3.34 billion and liabilities of $2.13 billion as of Feb. 28. The Specialty Products and Bondex Chapter 11 petitions both said assets and debt exceed $100 million.
The case is In re Specialty Products Holding Corp., 10- 11780, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Anaverde, California Developer, Wins Approval of Plan
Anaverde LLC, the developer of a master-planned community in Palmdale, California, secured approval of the Chapter 11 plan when the bankruptcy judge in Delaware signed a confirmation order on June 14.
The plan allows existing owners to buy back the business. There were no competing bids submitted at auction.
The plan gives the secured lender, Cadim Note Inc., approximately $11.8 million plus 25 percent of proceeds above $26 million if the property is resold within two years. The lender is owed $63.9 million.
The disclosure statement said that the lender could recover up to 16.4 percent. The lender carved out $350,000 cash for unsecured creditors.
San Francisco-based Anaverde discovered a spur of the San Andreas Fault under the property before the Chapter 11 filing in January. The project, the second phase of a development, was to have 3,500 lots. The property was partially graded. No homes were constructed.
Papers together with the petition listed the assets for $25.2 million against debt totaling $65.1 million.
The case is In re Anaverde LLC, 10-10113, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Movie Gallery Selling DVDs, Video Games for $8 Million
Movie Gallery Inc., which is closing its last 1,028 movie- rental stores, is selling the inventory at the distribution center in Nashville, Tennessee, in two sales totaling over $8 million.
VPD IV Inc. is under contract to buy some 1.2 million Blu- ray and DVD movies for $5.06 million. COKeM International Ltd. will take the video games and related accessories for $3.03 million.
In both cases, Movie Gallery will accept higher offers, although without holding a formal auction. The hearing for approval of the sales is set for June 24.
Movie Gallery had approximately 2,600 stores in operation on filing under Chapter 11 again in February. The new filing came less than two years after the previous bankruptcy reorganization. When the new case began, 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.
Great American Group Inc. won the right to close the last 1,028 stores by guaranteeing $74.2 million.
Movie Gallery operates under the names Movie Gallery, Hollywood Video, and Game Crazy. It had 3,490 stores before the first bankruptcy, which concluded with 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.
Chemtura Reports $2 Million Net Profit in May
Specialty chemical maker Chemtura Corp. reported a $3 million operating profit and a $2 million net profit in May on net sales of $209 million.
Chemtura said in May it planned to file a reorganization plan by tomorrow that would pay creditors nearly in full and might include a distribution for shareholders. In court yesterday, the company said it hopes to have environmental claims settled with state authorities by mid-July. For Bloomberg coverage on the hearing, click here.
The creditors’ committee is suing Chemtura’s lenders based on a theory that a security interest given within three months of bankruptcy on inventory and other assets was a preference the bankruptcy judge can void. In addition, the committee wants to recover $6 million in payments that were also preferences. The committee claims the banks’ collateral only covers a $46.1 million loan, not loans totaling $139.2 million.
The Chapter 11 petition in March 2009 by Middlebury, Connecticut-based Chemtura listed assets of $3.06 billion against debt totaling $2.6 billion, including $1.02 billion owing on three issues of notes and debentures. Sales in 2008 of $3.5 billion declined to $2.5 billion in 2009. The subsidiaries outside of the U.S. didn’t file.
The case is Chemtura Corp., 09-11233, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Corus Bankshares Files, Bank Taken Over in September
Corus Bankshares Inc., the holding company whose bank was taken over by regulators in September, filed a Chapter 11 petition yesterday in Chicago, listing assets of $314.1 million against debt totaling $532.9 million.
Corus said in March that Chapter 11 or liquidation were among the alternatives under consideration. Corus said at the time that it expects to have tax refund claims totaling $260 million. Corus promised to oppose efforts by the Federal Deposit Insurance Corp. to receive cash for the bank subsidiary’s portion of the tax refunds.
Corus contended that the FDIC is in the same position as other unsecured creditors of the holding company and that the tax refund should be shared.
The Corus bank had 80 branches and $7 billion in deposits that were transferred to MB Financial Inc. in a transaction estimated at the time of the September takeover to cost the FDIC $1.7 billion.
The case is In re Corus Bankshares Inc., 10-26881, U.S. Bankruptcy Court, Northern District Illinois (Chicago).
Retailer Loehmann’s Hires Three Financial Advisers
Loehmann’s Inc., a discount retailer with more than 60 stores, hired three financial advisory firms with experience in turnarounds and bankruptcy reorganizations. The firms are AlixPartners LLP, Perella Weinberg Partners and Clear Thinking Group LLC, according to people with knowledge of the situation.
To read Bloomberg coverage, click here.
The Bronx, New York-based company is owned indirectly by Istithmar PJSC, an investment firm owned by the government of Dubai.
Loehmann’s emerged from a 14-month Chapter 11 reorganization with a confirmed plan in September 2000. At the time, it operated 44 stores in 17 states.
May Claim Trades Miss April Record, SecondMarket Says
Claim trades reported to the country’s bankruptcy courts in May totaled $3.3 billion in face amount, short of the record $3.65 billion in April, according to SecondMarket Inc. which began keeping records in January 2008.
With $3 billion of traded claims, Lehman Brothers Holdings Inc. was responsible for the bulk of activity. The Lehman transfers were 237 in number, more than twice the second most actively traded, Smurfit-Stone Container Corp., with 130 trades.
In dollar amount, old General Motors Corp. was in second place with $141.7 million of traded claims.
Reported claim trades exceeded $3 billion in three months over the last year, says SecondMarket, which calls itself the largest secondary market for illiquid assets.
In May claims were traded in 47 separate bankruptcy cases, compared with 62 cases in April.
Visteon, Texas Rangers Hearings End Without Decisions
Yesterday’s hearings in the reorganizations of auto-parts maker Visteon Corp. and the Texas Rangers professional baseball team ended without rulings from the judges. In the Visteon case, the judge said he would issue a ruling at a hearing tomorrow on whether he will approve the disclosure statement. The Rangers judge is deciding if he can proceed to a confirmation hearing in July and approve the reorganization plan without a vote of creditors.
For a discussion of the issues in both the Visteon and Rangers cases, click here to see the first two items in yesterday’s Bloomberg bankruptcy report.
Strauss Auto Has Vote Exclusivity Extended to July 26
Because Strauss Discount Auto won’t have an approved Chapter 11 plan at the previously scheduled June 21 confirmation hearing, the auto-parts retailer sought and received an extension until July 26 of the exclusive right to solicit acceptances on a reorganization plan.
The company said it needs to change the plan that promised to pay 65 percent to unsecured creditors with claims aggregating $18.7 million. If the group doesn’t recover at least 45 percent, creditors would have ended up owning all the new stock. If the 45 percent threshold is met, Chief Executive Officer Glenn Langsberg was to have an option to buy all the stock for $300,000.
A suit is pending against the former Japanese owner, Autobacs Seven Co. Autobacs has a $44 million claim that creditors are hoping to have disallowed or subordinated.
Strauss Auto is in Chapter 11 a third time. The stores are in New York, New Jersey and Pennsylvania. The new petition in February 2009 listed assets of $75 million against debt totaling $72 million. Debt initially was shown to include $44 million listed as owing to the parent under loan agreements, $9.6 million owing to suppliers, and $12 million in debt owing to landlords and other unsecured creditors.
There were 86 stores and no secured debt when the Chapter 11 case began. Twenty stores were closed.
The new case is In re Autobacs Strauss Inc., 09-10358, U.S. Bankruptcy Court, District of Delaware (Wilmington). The prior case was In re 1945 Route 23 Associates, 06-17474, U.S. Bankruptcy Court, District of New Jersey (Newark).
Bondholders Seek to Block Tribune Plan at the FCC
Newspaper publisher Tribune Co. shouldn’t be allowed to transfer broadcast licenses, bondholders told the Federal Communications Commission. Creditors are voting on Tribune’s reorganization plan in anticipation of an Aug. 16 confirmation hearing. To read Bloomberg coverage, click here.
The plan, filed in April, would implement a settlement negotiated with some creditors. It is opposed by holders of $3.6 billion in pre-bankruptcy secured debt who announced their opposition even before the settlement was formally disclosed. To read about the plan, the proposed settlement, and the parties’ arguments, click here for 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. It owns the Chicago Tribune, Los Angeles Times, six other newspapers and 23 television stations.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District Delaware (Wilmington).
Spheris Has Exclusive Plan Rights Until September 1
Spheris Inc., a transcriber of medical dictation for doctors and hospitals, was granted its request and received an extension of the exclusive right to propose a reorganization plan until Sept. 1. The hearing for approval of the disclosure statement explaining the liquidating Chapter 11 plan is set for July 13. The papers don’t say how much creditors can expect.
Now formally named SP Wind Down Inc., Spheris sold the business for $98.83 million cash and a note that it sold for $13.77 million. At Jan. 31, secured lenders were owed $75.6 million. Unsecured claims consist largely of $125 million owing on subordinated notes. Franklin, Tennessee-based Spheris listed assets of $61 million against debt totaling $225 million, including $75.6 million on a senior secured credit and $125 million on subordinated notes. For nine months ended in September, revenue was $120 million.
The case is In re SP Wind Down Inc., 10-10352, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Pennsylvania’s Tyrone Hospital Confirms Reorganization Plan
Tyrone Hospital from Blair County, Pennsylvania, is set to emerge from reorganization after almost four years. It filed under Chapter 11 in September 2006 and will stay in business with a Chapter 11 plan confirmed May 10. Unsecured creditors are being paid $1 million.
The case is In re Tyrone Hospital, 06-70759, U.S. Bankruptcy Court, Western District of Pennsylvania (Johnstown).
Texas Rangers, Visteon, Extended Stay: Audio
Texas Rangers, Visteon Corp., Extended Stay Inc., and Medical Staffing Network Holdings Inc. are the bankruptcy cases covered in the latest bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com.
To listen, click here.
SEC Receivership May Block Involuntary Bankruptcy
In a receivership initiated by the Securities and Exchange Commission, a federal court may properly prohibit creditors from filing an involuntary bankruptcy petition, a panel of the U.S. Court of Appeals in Manhattan ruled yesterday.
The case involved the receivership of Wextrust Capital LLC, which was alleged to be a $255 million Ponzi scheme. Although prohibiting an involuntary bankruptcy filing by creditors, the U.S. district judge said the SEC receiver could put Wextrust in Chapter 11. If he did, the receiver would continue in control in the Chapter 11 case.
The 2nd Circuit in New York ruled that an injunction prohibiting bankruptcy should be “sparsely exercised.” Still, creditors, according to the appeals court, have no “absolute right” to file a bankruptcy petition. In that regard, the 2nd Circuit lined up with the Courts of Appeal for the 6th and 9th Circuits.
The opinion, written by Circuit Judge Rosemary S. Pooler, said that “the receivership accomplishes what bankruptcy would.”
Although the receiver would continue in control akin to a trustee or debtor-in-possession were the receiver to decide on using Chapter 11, the appeals court said that creditors could attempt to oust the receiver once bankruptcy began.
The case is International Ad-Hoc Committee of Wextrust Creditors v. Securities and Exchange Commission, 09-0234, U.S. 2nd Circuit Court of Appeals (Manhattan).
Bankruptcy Trustee’s Suit Fails Against Bank Officers
When a bank is taken over by regulators, only the Federal Deposit Insurance Corp. has the right to sue bank officers and directors, the 11th U.S. Circuit Court of Appeals in Atlanta ruled on June 14. The appeals court also established standards that must be met before a suit against holding company officers can survive.
The bankruptcy trustee for a bank holding company filed a lawsuit against the officers and directors of both the bank and the holding company. The circuit court sustained a motion to dismiss the entire complaint.
With regard to the suit against bank officers, the 11th Circuit interpreted the Financial Institutions Reform, Recovery and Enforcement Act of 1989 to mean that only the FDIC has the right to sue for mismanagement that harmed the bank.
To reach the result, the circuit court said that the holding company bankruptcy trustee was suing as the shareholder of the bank. As a shareholder, the trustee’s only remedy was to file a so-called derivative suit. In turn, FIRREA bestows the FDIC with the sole right to bring derivative suits. A derivative suit is one where someone sues on behalf of the company itself, in substance asserting claims that belong to the company.
The 11th Circuit also dismissed the suit against holding company officers even though the complaint said they allowed the bank to engage in “unsound practices.” The allegations by themselves were not enough to sustain a complaint, the appeals court ruled.
The court said that the complaint might have survived had the trustee alleged, for instance, that the holding company officers failed to tell the board about mismanagement at the bank.
The case is Lubin v. Skow, 10-01155, 11th U.S. Circuit Court of Appeals (Atlanta)