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Texas Rangers, AbitibiBowater, Strauss, Garlock, Crucible: Bankruptcy
The Texas Rangers’ reorganization plan can’t be approved at the scheduled July 9 confirmation hearing without changes that restore rights of secured lenders owed $525 million, the bankruptcy judge said in a 28-page opinion yesterday.
The professional baseball club filed for bankruptcy reorganization on May 24 in Fort Worth, Texas, with a Chapter 11 plan that claimed to pay everyone in full and to permit no one to vote. In his opinion yesterday, U.S. Bankruptcy Judge Michael Lynn disagreed with the basic premise by concluding that the proposed reorganization adversely affects both equity owners and lenders.
Because he decided both classes are adversely affected, Lynn said bankruptcy law requires that both be given the right to vote
In a defeat for the lenders, Lynn said that under their loan documents they don’t have the power to veto the sale. He said it’s possible in bankruptcy to cut off the veto right while still allowing the plan to be confirmed over the lenders’ objections.
The Rangers contend the plan doesn’t impair the lenders because it pays them $75 million plus interest, the most the lenders are entitled to collect from the team. The judge nonetheless found the plan defective because it would cut off some of the lenders’ rights against affiliates of the owners who are liable for the entire $525 million owing to the lenders. The team is ultimately controlled by Texas businessman Thomas O. Hicks.
Lynn said the plan could be amended to restore all of the lenders rights’ to take action against the team’s affiliates in the future. Once amended, Lynn said the lenders would no longer be adversely impacted by the plan and would lose the right to vote by being paid the entire $75 million owing by the team.
Lynn reached a different conclusion with regard to the equity holders, which are general and limited partnerships controlled by Hicks. The lenders filed involuntary Chapter 11 petitions against the limited and general partners on May 28.
Although the partnerships supported the plan before bankruptcy, Lynn said they are entitled to vote now because the team modified the plan to their disadvantage after bankruptcy.
Now that involuntary petitions are outstanding against the partnership owners, Lynn said they can’t vote for the revised plan without his approval in the involuntary Chapter 11 cases.
To vote in favor of the plan on behalf of the partnerships, Lynn said the current owners must properly fulfill their “fiduciary” duties to creditors of the partnerships, which include the lenders. The partnerships guaranteed the $525 million debt.
The Rangers, in the end, face two roadblocks to confirming a plan using the so-called cramdown process if the lenders remain opposed. First, they must revise the plan so the lenders retain all their rights in the future against Hicks and affiliates. Second, it appears as though Lynn will end up holding a hearing in the bankruptcy cases of the partnerships to determine if the buyout offer is the highest or best offer to acquire the team.
Before bankruptcy, a group including current team President Nolan Ryan, agreed to buy the Rangers in a transaction valued at $575 million.
Lynn already appointed another bankruptcy judge in Fort Worth, Texas as a mediator between the lenders and the team. Lynn previously said there should be a chief restructuring officer for the partnerships. In court yesterday, it was revealed that William K. Snyder will be the CRO. Snyder, an independent third party, can give Lynn his opinion about whether the sale to the Ryan group represents the highest or best offer for the team.
Snyder, from CRG Partners Group LLC, was the examiner in the reorganization of Mirant Corp. and the CRO for Pilgrim’s Pride Corp. Both cases ended with 100 percent payment to all creditors. Both case successfully reorganized in Lynn’s court.
A revision to the disclosure statement the Rangers filed last week says that the lenders ultimately would be paid a total of $256 million, including the initial $75 million plus the surplus left over from the sale price after creditors are paid. The surplus would go to the lenders because they have a security interest in the limited and general partners that own the team.
The Rangers moved to Texas from Washington in 1972. The team defaulted on payments owing to the lenders in March 2009.
The partnership that owns the team, Texas Rangers Baseball Partners, said in its petition that the assets and debt are both less than $500 million.
The case is In re Texas Rangers Baseball Partners, 10- 43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
Updates
Abitibi Auction Tomorrow on $500 Million Financing
AbitibiBowater Inc., the largest newsprint maker in North America, received approval from the bankruptcy judge to conduct an auction tomorrow to test whether there is a better offer to provide $500 million in backstopped debt financing as part of the reorganization plan for exiting Chapter 11.
Other bids are due today. The hearing for approval of the sale will occur June 25.
Aurelius Capital Management LP and Contrarian Capital Management LLC unsuccessfully opposed approval of the financing commitment. They argued that the company has enough cash on its own to confirm a plan and shouldn’t incur the expense of a rights offering.
The rights offering is integrated with the revised reorganization plan that AbitibiBowater filed in late May along with a disclosure statement telling creditors of each of the more than 30 affiliated companies how much they stand to recover. The hearing for approval of the disclosure statement is scheduled for July 7. For details of the plan, click here for the May 25 Bloomberg bankruptcy report.
AbitibiBowater was formed in October 2007 through a merger between Montreal-based Abitibi-Consolidated Inc. and Greenville, South Carolina-based Bowater Inc. Abitibi is a producer of newsprint, uncoated mechanical paper and lumber. Bowater also makes newsprint, along with papers, bleached kraft pulp and lumber.
The Montreal-based company began reorganizing with 24 pulp and paper mills, plus 30 wood-product plants. Revenue in 2008 was $6.8 billion. In Chapter 11 petitions filed in April 2009, the combined AbitibiBowater companies listed assets of $9.9 billion and debt totaling $8.8 billion as of September 2008.
The case is AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Strauss Auto’s New Plan Sets July 13 Disclosure Date
Auto-parts retailer Strauss Discount Auto revised the reorganization plan and scheduled a hearing on July 13 for approval of the explanatory disclosure statement. The bankruptcy judge in Delaware denied a motion for an expedited hearing.
Once the disclosure statement is approved, creditors can vote on the newest iteration of the plan that gives them all of the new stock plus a second-lien note for $8.5 million.
Strauss Auto disclosed in May that it wouldn’t attempt to confirm the prior version of the plan, even though the bankruptcy judge had approved the disclosure statement. The previous plan would have given Chief Executive Officer Glenn Langsberg an option to buy all the stock for $300,000 if unsecured creditors recover 45 percent within a specified time.
The company’s former owner, Japan-based Autobacs Seven Co., opposed the prior plan and contended it wasn’t confirmable because it would have allowed equity holders to retain stock when objecting creditors weren’t fully paid.
The new plan is more simple than the predecessor. Now, unsecured creditors in two classes with some $18.7 million in claims are predicted to have a 45 percent recovery by receiving all the new stock plus the $8.5 million note, assuming total victory in a lawsuit against Autobacs and its $44 million claim.
If the fight with Autobacs ends in failure, the draft disclosure statement tells unsecured creditors they should see less than 14 percent plus the new stock. The suit represents unsecured creditors’ efforts to disallow or subordinate the former owner’s claim.
Confirmation of the plan is to be financed with $10 million in exit financing. The disclosure statement says there isn’t yet a commitment from a lender.
Confirmation of the plan is conditioned on approval of an employment agreement with Langsberg.
The current bankruptcy reorganization is Strauss Auto’s third. 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 new 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).
Sea Launch Plan Up for July 27 Confirmation Hearing
Sea Launch Co., a provider of heavy-lift satellite launch services, returns to bankruptcy court on July 27 for a confirmation hearing to approve the reorganization plan.
The bankruptcy judge in Delaware approved the explanatory disclosure statement on June 21. Russia’s S.P. Korolev Rocket & Space Corp. Energia will acquire between 85 percent and 95 percent of the stock through the plan, with the difference depending on whether other creditor classes accept it. The reorganization is to be financed by a $140 million equity commitment and $200 million in debt financing.
Unsecured customers and suppliers owed some $120 million are in line for a recovery of about 17.5 percent if they vote for the plan. Investors Boeing Co. and Norway’s Aker Maritime Finance AS, if they are found to have valid claims, will take home 5 percent of the stock for the estimated $1.76 billion they are owed.
Sea Launch filed a motion for an extension of the exclusive right to propose a reorganization. If granted at a July 12 hearing, the new plan deadline would be Sept. 12.
Sea Launch filed for Chapter 11 reorganization in June 2009 to stop attempts by Hughes Network Systems LLC to collect a $52 million arbitration award in connection with a canceled launch contract following a failed launching in 2007.
Sea Launch was formed by an affiliate of Chicago-based Boeing along with industry investors from Norway, Russia and Ukraine. At the outset of the Chapter 11 case, debt included $476 million owing on several loan agreements plus $761 million to Boeing and Aker. In addition, investors were owed $119 million resulting from cost overruns in the late 1990s.
Most of the company’s launches are made from a semi- submersible platform stationed at the equator.
The case is Sea Launch Co. LLC, 09-12153, U.S. Bankruptcy Court, District of Delaware (Wilmington).
EnPro Has Preliminary Injunctions on Asbestos Suits
EnPro Industries Inc. continues to achieve the results intended when subsidiary Garlock Sealing Technologies LLC filed under Chapter 11 on June 5.
U.S. Bankruptcy Judge George R. Hodges in Charlotte, North Carolina, signed a preliminary injunction on June 21 stopping asbestos lawsuits not only against Garlock and the two affiliates in bankruptcy but also halting suits against the parent EnPro and 65 affiliates not in bankruptcy.
The new injunction will last until confirmation of a Chapter 11 plan dealing with present and future asbestos claims.
There were no objections to the injunctions. The judge temporarily stopped suits against the entire family of companies on June 7.
Garlock, a Palmyra, New York-based gasket maker, filed in Chapter 11 to deal with the last 100,000 asbestos claims. Non- bankrupt affiliates are defendants on 30,000 claims. The company said it intends to pay all creditors in full, including asbestos claimants. There is $194 million of insurance remaining.
Garlock, which had sales of $113 million in 2009, was spending $100 million a year to settle and defend asbestos claims.
EnPro had assets of $1.33 billion and total liabilities of $923.5 million on the March 31 balance sheet. EnPro’s $99 million in net income included $5.6 million of income from continuing operations for the first quarter.
EnPro makes engineered products, including diesel and natural-gas engines. It has 44 plants in the U.S. plus operations in 10 other countries.
The case is In re Garlock Sealing Technologies LLC, 10- 31607, U.S. Bankruptcy Court, Western District of North Carolina (Charlotte).
Crucible Plan Confirmation off Until August 9
Crucible Materials Corp., a steelmaker for the auto and aerospace industries, is allowing the creditors’ committee to bring lawsuits until a trust takes over the responsibility under a liquidating Chapter 11 plan.
The confirmation hearing for approval of the plan was pushed back to Aug. 9. The disclosure statement for the plan was approved in April.
From four asset sales, Crucible generated $14.4 million after secured lenders were fully paid on $64.5 million in claims outstanding at the outset of the Chapter case. When the disclosure statement was filed, Crucible had $25.2 million cash on hand, including excess sale proceeds.
The disclosure statement doesn’t say how much unsecured creditors might recover. It does say that unsecured claims against Crucible Materials may be as much as $400 million while unsecured claims against affiliate Crucible Development Corp. might total $300 million.
Crucible sold most of the assets to three buyers in September for $52 million and sold the remainder in January for $13.2 million.
Crucible filed under Chapter 11 in May 2009, listing assets of $163 million against $130 million in debt. Crucible Development’s schedules showed assets at $17 million against debt totaling $70 million. Syracuse, New York-based Crucible, owned by its 1,000 employees, went into bankruptcy court with two plants and 12 regional service centers.
The case is In re Crucible Materials Corp., 09-11582, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Briefly Noted
Cynergy’s Plan Exclusivity Extended Until July 30
Former credit-card processor Cynergy Data LLC won a third extension of the exclusive right to propose a Chapter 11 plan. The new deadline is July 30. Cynergy says it’s close to settling a dispute with secured lenders that has delayed the case from the outset.
Cynergy sold the business for $81 million to private-equity investor ComVest Group. The price included $14 million in subordinated debt payable by the purchaser. Long Island City, New York-based Cynergy processed $10 billion in credit charges annually for 80,000 merchants before the Chapter 11 filing in September. The petition listed assets of $110 million against debt totaling $186 million. Debt includes $39.8 million owing on a first-lien credit and $80.1 million on a junior secured credit. There is also $9 million owing by an affiliate that Cynergy guaranteed.
The case is In re Liquidation Co. LLC, 09-13038, 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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