The bankruptcy judge put the Texas Rangers baseball club and its secured lenders under greater pressure to settle yesterday, signing an order compelling mediation over the reorganization plan and how much the lenders receive.
U.S. Bankruptcy Judge Michael Lynn in Fort Worth, Texas, told the contending parties to begin the mediation on July 16. The confirmation hearing for approval of the team’s Chapter 11 plan, which had been on the calendar for July 9, was pushed back to July 22.
Lynn prohibited both sides from conducting investigations in preparation for the confirmation hearing until the mediation is terminated by the mediator.
Lynn named U.S. Bankruptcy Judge Russell F. Nelms as the mediator. Nelms is the other bankruptcy judge in Fort Worth. Lynn directed the creditors’ committee to participate in the mediation along with the team and the lenders.
Lynn said he is requiring the parties to talk settlement because he “understands that additional time for mediation could possibly lead to the proposal of a consensual plan in this case.”
Lynn handed down an opinion on June 22 that put pressure on both sides to settle. The opinion was adverse to the Rangers because Lynn concluded that the lenders and the equity holders have the right to vote.
The opinion went against the lenders in drawing a roadmap for how the team could confirm a modified plan over the lenders’ objection.
The lenders are owed $525 million, although they are entitled to collect only $75 million from the team.
The Rangers’ plan is to be financed by a sale of the team in a $575 million transaction to a group including incumbent team President Nolan Ryan, a former major league pitcher and member of the Hall of Fame.
To read details of Lynn’s June 22 decision, click here for the June 23 Bloomberg bankruptcy report.
The Rangers’ revised disclosure statement 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 from Washington to Texas in 1972. The team defaulted on payments owing to the lenders in March 2009. Michael Rochelle, a brother of reporter Bill Rochelle, is a lawyer for an agent for the lenders.
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
Neenah Has Approval for $135 Million Exit Financing
Although Neenah Foundry Co. didn’t go ahead at yesterday’s hearing to confirm the reorganization plan, the producer of cast-iron manhole covers and sewer grates was authorized on June 23 to sign commitment agreements, pay fees and grant indemnification to lenders providing $135 million in financing to kick in when the plan becomes effective.
The confirmation hearing for approval of the plan was pushed back to July 6, and the time for voting on the plan was extended to July 2.
Bank of America NA will provide a $75 million revolving credit once the plan becomes effective. Golden Tree Asset Management LP and MacKay Shields LLC are to be the lenders on a $60 million term loan.
Neenah’s plan was negotiated before the Chapter 11 filing in February with holders of 55 percent of secured notes and all the subordinated notes. For details on the plan, click here to see the April 29 Bloomberg bankruptcy report. Neenah, based in the Wisconsin town of the same name, reported a $150 million net loss for the Sept. 30 fiscal year on sales of $333 million.
The case is In re Neenah Enterprises Inc., 10-10360, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Circuit City, Creditors’ Committee Mediating on Plan Details
Circuit City Stores Inc. and the official creditors’ committee were directed by the bankruptcy judge to mediate their disputes so there can be a liquidating Chapter 11 plan on which both sides agree.
U.S. Bankruptcy Judge Kevin R. Huennekens in Richmond, Virginia, told the company and the committee to complete mediation in 30 days and report to him at a July 22 status conference.
Circuit City and the committee jointly filed a liquidating plan last August for the former 721-store electronics retailer. They were never able to agree on who would control the liquidating trust to be created under the plan. At loggerheads, the committee this month filed its own version of the plan and liquidating trust documents.
Not liking the committee version, Circuit City sought mediation, which Huennekens mandated at a hearing yesterday.
In addition to the dispute over the liquidating trust, the plan couldn’t be confirmed in view of outstanding Canadian tax claims.
All except about $5 million to $20 million in secured claims already have been paid in full with proceeds from store liquidations. Unsecured creditors with claims ranging from $1.8 billion to $2 billion were estimated to have a recovery ranging between nothing and 13.5 percent, according to the explanatory disclosure statement for the joint plan.
Circuit City filed under Chapter 11 in November 2008 in its hometown of Richmond, listing assets of $3.4 billion and debt totaling $2.3 billion as of Aug. 31, 2008. Papers originally listed $898 million owing to the secured revolving credit lenders. Unsecured trade suppliers were owed another $650 million at the outset, the company said in a court filing.
The case is In re Circuit City Stores Inc., 08-35653, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond).
Zayat Stables, Fifth Third Settle on Reorganization Plan
Zayat Stables LLC and the secured lender Fifth Third Bank reached a settlement that should permit approval of the stables’ reorganization plan at the scheduled July 15 confirmation hearing.
The settlement modifies the Cincinnati-based bank’s treatment under the plan. Other creditors aren’t adversely affected, Zayat say in court papers. Approval will be considered at a hearing in bankruptcy court on June 30.
The settlement, if approved, ends all disputes between the stables and the bank, including lawsuits where Zayat claimed Fifth Third engaged in “predatory lending” practices.
In the revised plan, the bank’s loan will be fully paid by the end of 2014. The current principal balance of $28.2 million will be paid down by at least $3.23 million to $4 million a year, with a balloon payment due at the end of 2014. Going forward, interest will be three percentage points higher than the London interbank borrowed rate.
The bank will also share in part of the proceeds from the sale of horses, with payments applied against the annual minimums. Accrued interest of $623,000 will be paid June 30.
Unsecured creditors are voting on the plan, which will pay them in full over two years without interest. Ahmed Zayat is to retain ownership. The bank was suing Zayat on a personal guarantee.
The stables, based in Hackensack, New Jersey, filed under Chapter 11 in February in Newark, New Jersey. The stables have more than 200 horses representing collateral for the bank. Revenue in 2009 was $21 million.
The case is In re Zayat Stables LLC, 10-13130, U.S. Bankruptcy Court, District of New Jersey (Newark).
Neff Committee, U.S. Trustee Oppose Debtor Initiatives
With unsecured creditors slated for a 1 percent recovery under the Chapter 11 plan, it’s no surprise that the official creditors’ committee opposes initiatives by Neff Corp., a closely held equipment-rental company that began a prepackaged reorganization on May 16.
The committee is objecting to final approval for a $175 million financing package, saying less than $18 million represents fresh cash. The remainder entails converting pre- bankruptcy secured debt into an obligation of the company in Chapter 11.
The committee is also opposing an executive bonus program. The committee says that the bonuses improperly lock the executives into pursuit of the plan negotiated before bankruptcy. For details on the bonus proposal, click here for the May 28 Bloomberg bankruptcy report.
The U.S. Trustee is opposing the proposed terms for hiring financial advisers. The Justice Department’s watchdog in bankruptcy says the professionals wouldn’t even have liability for gross negligence or willful misconduct. In addition, they aren’t required to exercise so-called fiduciary duties and may subcontract work without court approval.
The committee takes issue with the terms of the $175 million loan because it provides for paying professional expenses and giving new liens to first-lien lenders covering existing debt where the collateral is worth less than the loan.
The committee says it’s even more improper to give so- called adequate protection for second-lien debt when the junior loan appears “to be wholly out of the money according to the debtors’ valuation.”
Neff has a July 12 hearing for approval of a disclosure statement explaining the Chapter 11 plan designed to reduce debt by more than $400 million. The plan would give most of the new equity to first-lien lenders owed $90 million on a term loan. For details on the company’s finances and the plan, click here for the May 17 Bloomberg bankruptcy report.
Miami-based Neff, with 63 branches in 14 states, listed assets of $299 million and debt totaling $609 million.
The case is In re Neff Corp., 10-12610, U.S. Bankruptcy Court, Southern District of New York Manhattan).
Samara Completes Purchase of WorldSpace Satellites
When WorldSpace Inc. first won court approval to sell the two geostationary satellites to a company controlled by its chief executive officer, Noah Samara, the buyer defaulted on the $28 million contract.
The second time around, another Samara company completed the acquisition under a $5.5 million contract, WorldSpace said in a statement yesterday.
The sale to Samara came to fruition after WorldSpace was unable to agree on a sale to Liberty Satellite Radio LLC, which had been financing the Chapter 11 case.
The Chapter 11 petition filed in October 2008 listed assets of $307 million and debt totaling $309 million. Debt includes $36.1 million on senior secured notes and $53.1 million on convertible debt. WorldSpace has two geostationary satellites serving 170,000 paying customers in 10 countries outside of the U.S.
The case is In re WorldSpace Inc., 08-12412, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Midway’s $1 Million Settlement With Redstone Approved
Midway Games Inc. was given authorization by the bankruptcy judge for a settlement where the creditors’ committee compromised a lawsuit by agreeing to take $1 million for dropping remaining claims against the company’s owner, Sumner Redstone, and companies he controls.
Midway Games confirmed its liquidating Chapter 11 plan on May 21. It had been the owner and developer of “Mortal Kombat” and other video games. The settlement generates more cash for distribution to creditors who were told before the compromise that they could recover 16.5 percent. Unsecured creditors of subsidiaries are in line for 25 percent.
The creditors’ committee was mostly unsuccessful in its lawsuit against Redstone and his companies. Originally, they argued that Redstone caused a “disastrous and ill-advised” $90 million transaction in February 2008 that saddled Midway with $70 million in new debt it “had no ability to satisfy.”
The bankruptcy judge in late January dismissed most of the claims.
Midway sold assets to generate $43 million in cash, leaving no substantial secured claims unpaid. Most of the assets were purchased in July 2009 by a subsidiary of New York-based Time Warner Inc. for $33 million plus accounts receivable.
Chicago-based Midway filed under Chapter 11 in February 2009, listing assets of $168 million and debt of $281 million. Including foreign subsidiaries not in bankruptcy, the asset and liability totals were $178 million and $337 million.
Midway’s debt originally included $150 million in convertible notes, $29 million on a secured term loan and revolving credit, $40 million on a secured loan facility and $20 million on a subordinated loan. Unsecured claims by suppliers totaled $96 million, the company said in a court filing at the outset.
The case is In re Midway Games Inc., 09-10465, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Age Refining Consents to Having Trustee Appointed
Age Refining Inc., a refiner of jet fuel and diesel products, agreed to have a trustee appointed in Chapter 11 case. Financing for the reorganization was extended until Sept. 30 or the sale of the business, whichever comes first.
The unsecured creditors’ committee and the primary secured lender, JPMorgan Chase Bank NA, sought a trustee to replace management. The committee and the lender say they have “lost faith in the ability of the debtor’s management.”
A fire at the refinery in early May shut down operations, cut off revenue, and precluded an auction where the refinery would have been sold.
The appointment of a trustee allows any creditor to file a Chapter 11 plan. Age already had filed its own version of a plan.
Age filed for reorganization in February in San Antonio, where the refinery is located. The formal lists of assets and debt show properties with a value of $134.9 million against liabilities totaling $104.6 million. Debt includes $69.8 million in secured claims.
At the outset of the Chapter 11 case, Age said debt included $29.6 million owing on a construction loan to New York- based JPMorgan. The bank is also agent for a $50 million revolving credit that was undrawn at the outset of the reorganization. Letters of credit totaling $26.6 million were undrawn when the Chapter 11 petition was filed.
The case is In re Age Refining Inc., 10-50501, U.S. Bankruptcy Court, Western District of Texas (San Antonio).
Twin River Racino’s Plan Confirmed by Rhode Island Judge
The bankruptcy judge ruled in favor of approving the reorganization plan for UTGR Inc. at a June 23 confirmation hearing in Providence, Rhode Island. The order formally confirming the plan awaits the judge’s signature.
UTGR operates the Twin River racetrack-casino in Lincoln, Rhode Island. Confirmation was made possible when the state adopted legislation required to implement the reorganization. The new law allows UTGR to halt dog racing and operate 24 hours a day, seven days a week.
The plan carries out a settlement reached in January where unsecured creditors should have a 65 percent recovery rather than 5 percent. First-lien creditors owed $415 million are to take home an estimated 89 percent by receiving all the new stock plus a $300 million secured note. The plan was negotiated in part before the Chapter 11 filing last June.
Second-lien creditors, owed $145 million, are to receive half of sale proceeds between $475 million and $575 million if the facility is sold within three years. They will receive 75 percent of sale proceeds above $575 million.
The formal lists of creditors showed debt of $568 million, with $564 million secured. Revenue in 2008 was $410 million. Most revenue comes from slot machines. The current owners acquired the operation in 2005 for $470 million and spent $220 million on improvements.
Twin River competes with casinos in Connecticut. It was owned by a joint venture between Kerzner International Ltd., Starwood Capital Group LLC and Waterford Group LLC. The current owners gave up control under a provision in the pre-bankruptcy agreement.
The case is In re UTGR Inc. d/b/a Twin River, 09-12418, U.S. Bankruptcy Court, District of Rhode Island (Providence).
National Envelope Has Buyer for Hamburg, New York, Plant
National Envelope Corp., the largest closely held envelope- manufacturing company in the U.S., intends to sell a shuttered plant in Hamburg, New York, for $1 million to Grimsview Properties LLC.
The property, on almost six acres, has 88,000 square feet of what NEC calls “operational space.” The plant ceased operating one year ago.
A hearing to approve the sale has been set for July 13.
The company’s lawyer previously said there should be a contract for the sale of the entire business within a few weeks. The loan agreement, where General Electric Capital Corp. is agent for the lenders, requires having a sale agreement by July 2 and approval of sale procedures by July 16.
NEC, based in Uniondale, New York, has 14 manufacturing plants in 11 states, plus three warehouses. Sales in 2009 were $676 million, resulting in a $44.2 million net loss. The petition said assets and debt are both less than $500 million. Liabilities include $74.3 million on a secured term loan, $70.6 million on a secured revolving credit, and $89 million owing on unsecured debts to trade suppliers.
The case is In re NEC Holdings Corp., 10-11890, U.S. Bankruptcy Court, District of Delaware (Wilmington).
New Filings
South Carolina Toll Road Files for Chapter 9 Reorganization
Connector 2000 Association Inc., the not-for-profit owner of a 16-mile toll road in South Carolina, filed a petition for a municipal reorganization under Chapter 9 yesterday in Spartanburg, South Carolina.
As a public benefit corporation under South Carolina law, Connector 2000 says it’s eligible for reorganization in Chapter 9 as a municipality. A court filing says toll revenue from the outset trailed projections and isn’t sufficient to service about $316 million in tax-exempt bonds.
Click here for Bloomberg coverage of the Connector 2000 filing and other municipal reorganizations.
The case is In re Connector 2000 Association Inc., 10- 04467, U.S. Bankruptcy Court, District of South Carolina (Spartanburg).
ClearPoint Files Owing $12.7 Million to ComVest
ClearPoint Business Resources Inc., once a provider of temporary staffing services, filed a Chapter 11 petition on June 23 in Delaware, owing $12.7 million to the secured lender ComVest Capital LLC.
Court papers say the assets are $5.5 million while consolidated debt is $24.5 million. Revenue in 2009 was $5.2 million. ComVest owns 57 percent of the outstanding common stock as the result of exercising warrants.
ClearPoint, based in Chalfont, Pennsylvania, sold most of the business in April to the former chief executive officer for a $4.85 million note. Current revenue is about $30,000 a month in royalties on client contracts and a subcontract fee of $250,000 that ends in December.
The case is In re ClearPoint Business Resources Inc., 10- 12037, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Petroleum & Franchise Files in Bridgeport, Connecticut
Petroleum & Franchise Capital LLC, a finance company that makes loans to petroleum retailers, filed a Chapter 11 petition on June 23 in Bridgeport, Connecticut, saying assets and debt both exceed $50 million.
The Danbury, Connecticut-based company owes $54 million to lender Autobahn Funding Co. The loan was declared in default earlier this month.
PFC offers loans to regional and national retailers for site development, acquisition, remodeling and construction. The website says the company makes loans between $750,000 and $5 million.
The case is In re Petroleum & Franchise Capital LLC, 10- 51467, U.S. Bankruptcy Court, District of Connecticut (Bridgeport).
Involuntary Filing
RBS Files Involuntary Petition Against Lexi Development
Royal Bank of Scotland PLC filed an involuntary Chapter 7 petition on June 23 against Lexi Development Co., an investor in loans secured by real estate.
The London-based bank sued Lexi in U.S. District Court in March when a $20 million loan matured and wasn’t paid.
Lexi, giving an address in South Miami, Florida, said in the district court suit that it foreclosed three properties that have enough value to pay RBS in full.
RBS was the only creditor filing the involuntary petition.
The case is In re Lexi Development Co., 10-12037, U.S. Bankruptcy Court, Southern District of Florida (Miami).
Briefly Noted
Tronox Given Approval to Extend $425 Million Loan
Tronox Inc., the world’s third-largest producer of the white pigment titanium dioxide, was given permission by the judge yesterday to extend $425 million in financing for the reorganization to Sept. 24 from June 24. For Bloomberg coverage of the hearing, click here. The process of brokering a consensual reorganization plan is taking longer than Tronox anticipated. To read about Tronox’s contemplated stand-alone reorganization plan, click here for the Jan. 21 Bloomberg bankruptcy report.
In March, Tronox largely defeated a motion to dismiss a lawsuit in bankruptcy court against former parent Kerr-McGee Corp. and Anadarko Petroleum Corp., which acquired Kerr-McGee for $18.4 billion in August 2006. If successful, the suit would recover environmental remediation costs Tronox was given when spun off from Kerr-McGee in March 2006. The Chapter 11 petition by Tronox in January 2009 listed assets of $1.56 billion against debt totaling $1.22 billion.
The case is In re Tronox Inc., 09-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Philadelphia Newspapers Confirmation Hearing Begins
Philadelphia Newspapers LLC’s confirmation hearing began yesterday. The publisher seeks approval of the reorganization plan and sale of the Philadelphia Inquirer and Philadelphia Daily News to secured lenders who won the auction in April with a bid then said to be worth $139 million. Topics under discussion include union contracts, pension plans and libel suits. The hearing will continue today and may run into next week. To read Bloomberg coverage of the hearing, click here.
The newspapers began their 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 secured lenders lost the major controversy in the case when the federal appeals court ruled they were required to bid cash at auction rather than use the secured debt as currency.
The case in bankruptcy court is In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).
Young Broadcasting Consummates Plan, Lenders Now Own
Young Broadcasting Inc., the owner of 10 television stations, implemented the reorganization plan that the bankruptcy court approved in a May 10 confirmation order, the company said in a statement. Secured lenders owed $338 million took all the new stock, $75 million in a new secured term loan, and warrants. General unsecured creditors divide $1 million cash. For details of the plan and reasons why the judge turned down a competing proposal by the creditors’ committee, click here for the April 20 Bloomberg bankruptcy report.
Young filed under Chapter 11 in February 2009, originally intending to sell the business at auction until there were no acceptable bids. The petition listed assets of $576 million and debt of $980 million. Debt included $337 million on secured term loans and $484 million on subordinated notes.
The case is In re Young Broadcasting Inc., 09-10645, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Daily Podcast
Lehman’s $18.4 Billion, New Appellate Rulings: Audio
Lehman Brothers Holdings Inc. was holding $18.4 billion in cash in its accounts at the end of May. This podcast explores how Lehman stands to generate even more cash in coming weeks. We also examine three important new bankruptcy rulings, including tax claims for aircraft leasing, discovery on prepackaged bankruptcies, and how to avoid waiving a secured claim. To listen, click here.
Watch List
Advantages and Disadvantages for BP Bankruptcy Filing
Regarding BP Plc’s bankruptcy options for dealing with liability arising from the Gulf of Mexico oil well blowout, click here to read commentary by Bloomberg columnist Caroline Baum.
Concrete Grinder Penhall Lowered to CCC- by S&P
Penhall International Corp. received its third downgrade in 13 months from Standard & Poor’s when the corporate peg slipped another two clicks yesterday to CCC-.
S&P said there is an increased chance of violating a loan covenant in the “near term.”
Earlier this month, Moody’s Investors Service said that Penhall Holding Co., the holding company for Penhall International, has “unsustainable” leverage and debt maturities in the next two years. Moody’s predicted that non- residential construction would decline 10 percent this year.
Penhall is the largest U.S. provider of concrete breaking and grinding services. It operates in 18 states with more than 800 pieces of equipment, Moody’s said.
Downgrades
USG Downgraded to Caa1 on Lower Wallboard Volumes
The decline in housing prompted Moody’s Investors Service to lower the corporate rating of USG Corp. by one notch. The corporate grade for one of the world’s largest manufacturers of gypsum wallboard is now Caa1.
Moody’s said that capacity utilization below 50 percent for the last year is not throwing off enough cash to cover interest expense over the “intermediate term.” When cash on hand and borrowing capacity are included, Moody’s said that USG should be able to cover “cash shortfalls over the intermediate term.”
Chicago-based USG reported a $110 million net loss in the first quarter on sales of $716 million. For 2009, there was a $185 million operating loss and a $787 million net loss on sales of $3.24 billion. Revenue was $5.2 billion in 2007 when there was net income of $77 million.
USG closed yesterday at $13.88, down 54 cents in New York Stock Exchange trading. The three-year closing high was $49.59 on July 6, 2007. The three-year low was $4.21 on March 9, 2009.
Symbion, Ambulatory Surgery Provider, Lowered to B3
Symbion Inc., the operator of 53 ambulatory surgery centers, has a B3 corporate rating following yesterday’s one- notch downgrade from Moody’s Investors Service.
Moody’s said the Nashville, Tennessee-based company “will need to access the capital markets or restructure in order to address upcoming cash obligations.”
In addition to the ambulatory surgery facilities, Symbion has four hospitals. It also manages eight surgery centers and one physicians’ network.
Symbion reported a $5.6 million net loss in the first quarter on revenue of $85 million. In 2009, revenue of $347 million resulted in a $22 million net loss.
Symbion was acquired in 2007 by Crestview Partners LP.
To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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