GM, Texas Rangers, Bigler, Movie Gallery, Gloucester, Sumner: Bankruptcy
Weil Gotshal & Manges LLP, chief bankruptcy counsel for old General Motors Corp., was docked almost $140,000 by the fee examiner for time spent reviewing the firm’s own time records. At a hearing tomorrow, the bankruptcy judge will pass on $14.7 million in fee requests by all professionals in the case for the period from Oct. 1 through Jan. 31.
C. Brady Williamson was appointed fee examiner to assist the bankruptcy judge in passing on professional fee awards. During the initial period in GM’s Chapter 11 case from June 1 through Sept. 30, 2009, the examiner noted that New York-based Weil Gotshal racked up 940 hours of time spent by 26 paralegals reviewing the firm’s own time records.
Although the examiner didn’t dock the firm the first time around, on the second fee application he recommended a deduction of $138,400 for 670 hours spent reviewing time records.
The fee examiner said there were fewer than 1,000 pages of time records to review. If one person were to review the time records, the 670 hours would represent almost four months of work at 40 hours a week, the fee examiner said in his court filing last week.
On the second fee application, Weil Gotshal is looking for a total of $6.3 million in fees and expenses. The examiner recommends cutting $194,350, or approximately 3 percent of requested fees. The fee examiner said that the cut on time record review represents 90 percent of all the items found objectionable.
In the first fee application period, Weil Gotshal sought $18.5 million.
Now formally named Motors Liquidation Co., 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 will have value if the new company is profitable enough to raise its value to specified levels. 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, 2009. The sale was completed on July 10, 2009. 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).
Texas Rangers’ Plan May Fail, Bankruptcy Judge Says
The Texas Rangers confirmation hearing for approval of the Chapter 11 plan was restored to the calendar for July 9, although with an admonition from the bankruptcy judge there is a “real risk” the plan will fail.
Believing settlement was achievable, U.S. Bankruptcy Judge Michael Lynn signed an order on June 24 directing the team and the secured lenders to participate in mediation to begin July 16.
He moved the plan confirmation hearing back to July 22 from July 9.
At a June 25 hearing, the buying group told the judge they didn’t want the confirmation hearing delayed. Lynn accommodated their request while warning the buyers, “If you don’t get it confirmed, you guys -- not me, you guys -- decided to push for a decision on July 9, and you’re going to live with whatever decision I reach.”
To read Bloomberg coverage of the June 25 hearing, click here.
Lynn said in a June 22 opinion that the plan couldn’t be confirmed unless the limited and general partnerships that now own the team are allowed to vote again. Because the partnerships are themselves in an involuntary Chapter 11, the judge said that he would have to approve the vote as part of the involuntary cases.
Lynn in his opinion said that voting “yes” or “no” would be governed by whatever is the proper exercise of the partnerships’ fiduciary duties to the partnerships’ creditors, which are principally secured lenders owed $525 million.
The Rangers’ plan would directly pay the lenders only $75 million, the team’s maximum liability for the debt.
The Rangers’ plan would be financed by selling 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.
In the revised disclosure statement, the team says that the lenders ultimately will recover $256 million in total. Aside from $75 million coming directly under the plan, the lenders would recover the remainder from the surplus that spills over to the partnerships after the team’s creditors are fully paid. The lenders have security interests in the partnerships.
To read details of Lynn’s June 22 decision, click here for the June 23 Bloomberg bankruptcy report.
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).
Visteon Schedules for Eight-Day Confirmation in September
The bankruptcy judge scheduled auto-parts maker Visteon Corp. for an eight-day confirmation hearing to begin Sept. 28 when he approved the disclosure statement explaining the reorganization plan.
Creditors can begin voting. The deadline for votes is July 30. Shareholders and some creditors are opposing the plan.
In addition to failing to block approval of the disclosure statement, secured lenders lost a second battle at the June 25 hearing when the bankruptcy judge refused to stay his order from June 17 allowing bondholders to raise $1.25 billion in cash to help finance the reorganization plan. The lenders are appealing approval of the cash-raising program.
To read Bloomberg coverage of the June 25 hearing, click here. To read about Visteon’s plan, click here for the June 15 Bloomberg bankruptcy report.
The newest plan would give shareholders 1.9 percent of the stock if they vote in favor of the reorganization. The remainder of the plan is much the same as before, although the amount of stock received by other constituencies is changed to account for the shareholders’ allocation.
To read about the positions being taken by various parties before the hearing for approval of the disclosure statement, click here for the May 25 Bloomberg bankruptcy report.
Visteon, based in Van Buren Township, Michigan, filed for reorganization in May 2009, listing assets of $4.6 billion against debt totaling $5.3 billion. Sales in 2008 were $9.5 billion, including $3.1 billion to Ford Motor Co. Visteon was spun off from Ford in 2000.
Visteon at the outset owed $2.7 billion for borrowed money, including $1.5 billion on a secured term loan, $862 million on unsecured bonds, and $214 million on other debt obligations.
The case is In re Visteon Corp., 09-11786, U.S. Bankruptcy Court, District of Delaware (Wilmington).
AbitibiBowater Authorized to Lock in $500 Million Financing
AbitibiBowater Inc., the largest newsprint maker in North America, was authorized by the bankruptcy judge to lock in a commitment that will provide $500 million in backstopped debt financing for the reorganization plan.
Aurelius Capital Management LP and Contrarian Capital Management LLC were among creditors that opposed the financing. They say the company has enough cash on its own to confirm a plan.
To read Bloomberg coverage of the June 25 hearing, click here.
The rights offering for the backstopped debt issue is part of 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 could recover. The hearing for approval of the disclosure statement is set 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).
Taylor Bean Committee Wants to Preserve D&O Policy
The creditors’ committee of Taylor Bean & Whitaker Mortgage Corp. is opposing a request by National Union Fire Insurance Co. of Pittsburgh, Pa. to make disbursements for defense costs from the $5 million policy providing directors’ and officers’ liability insurance coverage.
Those who made claims for coverage include Lee Farkas, the former chairman of Taylor Bean, which was once the largest independent mortgage originator in the U.S. Farkas was indicted for concealing mortgage assets that were worthless or losing value and representing them as being securitized and sold into the secondary market.
The committee pointed out that the company itself is an insured under the policy. Unlike situations were only directors and officers may draw on the policy, the committee believes the policy should be left intact so individuals don’t deplete the policy before Taylor Bean can make its own claims.
The hearing on the motion by National Union is set for July 2. Court records indicate that the hearing likely will be pushed back to July 7. National Union is a subsidiary of American International Group Inc.
Taylor Bean filed under Chapter 11 last August, three weeks after federal investigators searched the offices of the Ocala, Florida-based company. The day following the search, the Federal Housing Administration, Ginnie Mae and Freddie Mac prohibited the company from issuing new mortgages and terminated servicing rights. Taylor Bean managed an $80 billion mortgage-servicing portfolio.
After the Chapter 11 filing, Taylor Bean sold 1,046 parcels of repossessed real estate for $81.2 million to Selene Residential Mortgage Opportunity Fund LP. The petition said assets and debt both exceed $1 billion.
The case is Taylor Bean & Whitaker Mortgage Corp., 09- 07047, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
Amegy Bank Buying Most Bigler Assets with Credit Bid
Most of the business of Bigler LP, a diversified petrochemical producer, will be purchased by the secured lender Amegy Bank NA under a Chapter 11 reorganization plan.
Bigler held an auction on June 16. Intercontinental Terminals Co. LLC submitted the high bid of $20.5 million for approximately 180 acres of land. The bankruptcy judge approved the sale to ITC in an order signed on June 24.
Amegy had the high bid for the terminals and petrochemicals business. The bank will purchase the assets in exchange for $38 million of secured debt. Amegy decided to have the sale approved and carried out through confirmation of a Chapter 11 plan.
No buyers were under contract before Houston-based Bigler began the auction process. The Chapter 11 petition listed assets of $233 million against debt totaling $151 million. Liabilities include $67 million owing to secured lender Amegy which has a lien on all assets. Almost $40 million is owing to contractors with liens on the newly completed plant that produces high purity isobutylene.
The new plant began operations in April 2009 and stopped production in August 2009 due to economic conditions. The plant was $40 million over budget in construction. Bigler has production and storage facilities on 271 acres on the Houston Ship Channel.
The case is In re Bigler LP, 09-38188, U.S. Bankruptcy Court, Southern District of Texas (Houston).
Movie Gallery Approved to Sell Video Games, DVDS, Blu-Rays
Movie Gallery Inc. was given approval from the bankruptcy judge last week for two sales of inventory in the Nashville, Tennessee, distribution center that will generate more than $8 million.
The liquidation of the last 1,028 movie-rental stores didn’t dispose of property in the warehouse. VPD IV Inc. is buying some 1.2 million Blu-ray and DVD movies for $5.06 million. COKeM International Ltd. is taking over video games and related accessories for $3.03 million.
Movie Gallery had some 2,600 stores in operation on filing under Chapter 11 again in February. The new filing was 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. liquidated 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.
California Developer Doyle Heaton Confirms Chapter 11 Plan
Doyle Heaton, a real estate developer in the Bay Area around San Francisco, has a confirmed Chapter 11 plan, according to the court docket which says the order was signed in the courtroom last week.
Heaton filed for bankruptcy reorganization in January, saying that most of his projects were worth less than secured debt. Heaton expects to reduce $119 million in claims on personal guarantees to $12 million by working out the projects owned in separate corporations. The disclosure statement said that unsecured creditors could expect a 27.5 percent recovery.
Payments to unsecured creditors are expected to come from Heaton’s 30 percent interest in a project expected to be worth $3.1 million, less a 20 percent success fee Heaton would receive.
The case is In re Doyle D. Heaton and Mary K. Heaton, 10- 40297, U.S. Bankruptcy Court, Northern District California (Oakland).
Saints’ Mark Brunell Files Chapter 11 in Florida
Mark Brunell, the backup quarterback for this year’s Super Bowl-winning New Orleans Saints, filed for Chapter 11 reorganization on June 25 in Jacksonville, Florida, near his $3.1 million home in Ponte Vedra Beach.
Brunell, who is now a free agent, listed assets of $5.52 million and debt totaling $24.7 million. He claims that his home is an exempt asset under Florida’s generous homestead laws. The home is subject to a $2.89 million mortgage that will remain on the house.
His assets include a National Football League annuity for $364,000 and an NFL 401(k) plan worth $628,000. His court filings claim both are exempt from creditors’ claims.
Brunell owns a sport utility vehicle, a rebuilt 1983 Jeep and a Ford F250 pickup truck. Assets include a 2010 Super Bowl ring.
Before the Saints, Brunell played for the Washington Redskins, Jacksonville Jaguars and Green Bay Packers. He was named to the Pro Bowl in 1998 and 2002.
The case is Mark A. Brunell, 10-05550, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
Martin Cadillac of Englewood Cliffs, N.J., Files Chapter 11
Martin Cadillac LLC, the operator of a Cadillac dealership in Englewood Cliffs, New Jersey, filed for Chapter 11 protection on June 25 in Newark to halt collection actions on guarantees to cover debt of a failed affiliate.
Martin had a sister dealership in Yonkers, New York, that went out of business in April. Some of the Yonkers dealership’s creditors have guarantees issued by the New Jersey dealership. The Chapter 11 petition is designed to stop lawsuits and test the validity of the guarantees.
The New Jersey dealership has assets of $18.4 million and liabilities totaling $23.7 million, according to a court filing. Revenue of $72.6 million in 2008 declined to $60.8 million in 2009.
A court paper says that the Chapter 11 filing was prepared in a rush, not affording enough time to complete all the motions and requests for relief that are ordinarily submitted to the judge on the first day of a bankruptcy case.
The case is In re Martin Cadillac LLC, 10-29520, U.S. Bankruptcy Court, District of New Jersey (Newark).
Gloucester Engineering Converts to Chapter 11 Reorganization
Gloucester Engineering Co. Inc., a producer and servicer of plastic film extrusion equipment, put itself into Chapter 11 on June 25 in Boston in response to an involuntary Chapter 7 liquidation petition filed by creditors in late March.
Gloucester, based in the Massachusetts town of the same name, had $41 million revenue in 2009. The company was acquired in October 2007 in a management buyout.
Gloucester arranged $6 million in financing for the Chapter 11 case. The lender is Blue Wolf Capital Fund II LP, according to a court filing.
The case is In re Gloucester Engineering Co. Inc., 10- 12967, U.S. Bankruptcy Court, District of Massachusetts (Boston).
Sumner Regional Hospital Sale Formally Approved
The bankruptcy judge gave formal approval on June 24 for Sumner Regional Health Systems to sell its four non-profit acute-care hospitals in Tennessee to LifePoint Hospitals Inc. for $154.1 million. Sumner, based in Gallatin, Tennessee, listed book assets of $212.7 million and liabilities totaling $180.7 million. Sumner’s flagship facility is the 155-bed Sumner Regional. Debt includes $162 million on two issues of secured tax-exempt revenue bonds sold in 2007 and 2008. The bonds were issued as part of an expansion program.
LifePoint has 48 hospitals in 17 states.
The case is In re Sumner Regional Health Systems, 10-04766, U.S. Bankruptcy Court, Middle District of Tennessee (Nashville).
Texas Rangers, Circuit City, Blockbuster, A&P: Audio
In today’s podcast on the Bloomberg terminal and Bloomberglaw.com, we examine how mediation is used in cases like Texas Rangers and Circuit City Stores Inc. We also take a look at companies on the Watch List, including Blockbuster Inc., Great Atlantic & Pacific Tea Co., and Penhall International Corp. To listen, click here.
Three Takeovers Bring Year’s Bank Failures to 86
Three more banks were taken over by regulators on June 25, bringing the year’s total to 86. The failed institutions were in Florida, Georgia and New Mexico.
The failures will cost the Federal Deposit Insurance Corp. $285 million.
To read Bloomberg coverage, click here.
There were 140 bank failures in 2009, five times more than 2008. If the pace of bank insolvencies continues for the second half of the year, 2010 will have more than 20 percent more bank takeovers than 2009. The failures in 2009 were the most since 1992, when 179 institutions were taken over by regulators.
Chapter 11 Trustee Cuts off Debtor’s Lawyer’s Fees
After a trustee is appointed in a Chapter 11 case, the attorney for the debtor isn’t entitled to compensation from the assets of the estate, a U.S. district judge in Brooklyn, New York, ruled on June 24.
U.S. District Judge Carol Bagley Amon said that the facts were nearly identical with the controlling 2004 Supreme Court decision called Lamie v. U.S. The Supreme Court held in Lamie that counsel for a debtor in Chapter 11 wasn’t entitled to compensation from the estate after the case was converted to Chapter 7.
Amon concluded that the factor cutting off the right to fees was the appointment of a trustee, not conversion of the case to Chapter 7. She said it didn’t matter if the trustee was in Chapter 7 or Chapter 11. It also didn’t matter that the lawyer “played an instrumental role” in achieving a settlement that brought millions of dollars into the estate, Amon said in her opinion.
The lawyer was denied almost $104,000 in fees.
The 5th U.S. Court of Appeals in New Orleans reached the same result in 1998 in a case called In re Pro-Snax Distributors Inc.
The case is Lawrence Morrison PC v. U.S. Trustee, 09-3565, U.S. District Court, Eastern District of New York (Brooklyn).