AbitibiBowater, National Envelope, Lehman, General Growth: Bankruptcy

Subsidiaries of Truvo Luxemburg Sarl, a Belgium-based international publisher of directories, missed a June 1 interest payment on two issues of second-priority notes and filed a Chapter 11 petition early this morning in New York. Truvo has agreement for the holders of 778 million euros ($964 million) of first-priority senior debt to receive the new equity plus 600 million euros in new debt.

Truvo said in a court filing that holders of 70 percent of the first-priority debt support the plan as do 15 percent of the second-priority debt.

Truvo said in court papers that “cash flow cannot support the existing capital structure.” The petition lists assets for 1.04 billion euros against liabilities totaling 1.67 billion euros. As the result of a shift away from print advertising and directories, revenue of 389 million euros in 2007 declined to 302 million euros in 2009.

Debt includes 778 million euros owing on the first-priority debt and 595 million euros outstanding on two issues of second- priority notes. In addition, there is 173 million euros owing on pay-in-kind third-priority notes.

The agreement with the first-priority debt holders to support the plan calls for them to receive the new equity plus 600 million euros in new debt obligations. The new debt is to be composed of 350 million euros in first-lien debt, 100 million euros in second-lien debt, and 150 million euros in pay-in-kind debt.

If the second-priority noteholders accept the plan, they can receive 15 million euros cash plus 5-year warrants for 14 percent of the stock at a 150 million euros strike price. The pay-in-kind debt holders, if they accept and so do the second- priority, will receive warrants for 1 percent of the new equity.

The existing agreement among holders the three tiers of debt provides that the senior lenders can cause the companies to be released from obligations on the subordinate debt in connection with an action to enforce the senior debt.

When Truvo missed the interest payment this month, Moody’s Investors Service predicted that holders of the second-priority debt would see a “very low recovery.”

Truvo is the leading directory publisher in Belgium, Ireland and Romania. Through a joint venture, it is the leading directory publisher in Portugal.

The case is In re Truvo USA LLC, 10-13513, U.S. Bankruptcy Court, Southern District New York (Manhattan).

New Filings

Arrow Files Third Ch11 Petition, Now Liquidating

Arrow Air Inc., the largest cargo airline in Miami, filed in Chapter 11 again late yesterday. The new filing, Arrow’s third, will be a liquidation.

Also known as Arrow Cargo, it was operating 60 flights a week with four leased DC-10-30 and three leased B757-200 aircraft.

Arrow was unsuccessful in finding a buyer despite having received six letters of intent. It halted operation on June 29.

Arrow intends to liquidate while in Chapter 11 and to operate charter flights when possible. A court paper says Arrow intends to file a Chapter 11 plan “relatively soon.”

Arrow was acquired in June 2008 by a fund affiliated with MatlinPatterson Global Advisors. Arrow owes MatlinPatterson funds $72 million on term loans. The principal amount of the secured term loan is $58.5 million and the unsecured loan is $7.8 million.

The petition says the assets are worth less than $50 million while debt exceeds $100 million.

Arrow first filed under Chapter 11 in September 2000, emerging with a confirmed plan in May 2002. It filed again in January 2004. The second reorganization was confirmed in June 2004 with a plan that carried out a change of control to an investor group which reportedly paid $11.5 million to purchase all of the $32 million in secured debt. At the time, it was the country’s fourth-largest air cargo carrier.

The case is In re Arrow Air Inc., 10-28831, U.S. Bankruptcy Court, Southern District Florida (Miami).

SK Hand Tool Files in Chicago for Sale to Ideal Industries

SK Hand Tool Corp., a manufacturer of hand and power tools, filed a Chapter 11 petition on June 29 in Chicago along with a contract for the sale of the business to Ideal Industries Inc.

The price will be $3.25 million unless a higher bid turns up at auction. SK wants the bankruptcy judge to schedule an auction so the hearing for approval of the sale can occur by July 26.

SK owes $9 million to the secured lender Webster Business Credit. The company has a plant in Chicago and a non-operating facility in Defiance Ohio.

SK blamed the filing on the loss of customers, rising labor costs, and the recession.

According to the petition, assets and debt both exceed $10 million.

The case is In re SK Hand Tool Corp., 10-28882, U.S. Bankruptcy Court, Northern District Illinois (Chicago).

Platinum Condo on Biscayne Bay Files Chapter 11 in Miami

The owner of the 22-story Platinum condominium just off Biscayne Bay in Miami filed for Chapter 11 reorganization on June 28.

Court papers say the assets are worth $24.7 million, while debt totals $20.2 million. Mortgages aggregate $19.8 million.

In addition to other real estate properties, the developer of the condominium owns 22 unsold Platinum units.

The case is In re Maysville Inc., 10-28244, U.S. Bankruptcy Court, Southern District Florida (Miami).

Updates

Noteholders Contend Bowater Plan Can’t Be Confirmed

AbitibiBowater Inc., the largest newsprint maker in North America, attracted several objections to the disclosure statement that’s up for approval at a July 7 hearing. If the disclosure statement is approved, creditors may begin voting on the revised plan filed in late April.

Aurelius Capital Management LP and Contrarian Capital Management LLC, holders of unsecured notes issued by Bowater, contend in a 48-page filing on June 29 that the plan can’t be confirmed. The two noteholders say they have a blocking position by their ownership of notes representing more than one-third of unsecured claims against Bowater. The only other creditor classes of Bowater aren’t impaired by the plan and therefore can’t vote.

Aurelius and Contrarian argue that the companies can’t even use the so-called cramdown process because their class isn’t being paid in full and there will be no impaired class voting in favor of the plan. Bankruptcy law doesn’t allow confirmation absent an affirmative vote from one impaired class. A class is impaired if it isn’t paid in full.

The two noteholders also take the disclosure statement to task for not explaining how value was allocated between Abitibi and Bowater. They see the disclosure statement as defective for lacking a liquidation analysis and valuation of the reorganized companies.

The indenture trustee for notes issued by Abitibi similarly believes the disclosure statement shouldn’t be approved until it contains an explanation for how value was allocated between Abitibi and Bowater.

The agent for the secured term loan lenders to Abitibi believe the plan is defective because it cuts off their right to a pre-payment penalty.

Aurelius and Contrarian unsuccessfully objected to approval of a commitment for $500 million in backstopped debt financing for the reorganization plan.

The disclosure statement tells creditors of each of the more than 30 affiliated companies how much they stand to recover. For details about 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).

Cenveo Offers National Envelope Enough to Pay Lenders

Cenveo Corp., although it’s offering $140 million cash, said it’s been “systematically excluded” from the sale process by National Envelope Corp., the largest closely held envelope manufacturing company in the U.S.

In papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware, Cenveo calls itself a “major player in the envelope business.” Cenveo believes its offer is better than a proposal from a private-equity investor who required NEC to sign an agreement prohibiting talks with anyone else.

NEC said in court documents that it signed a letter of intent on June 4 to sell itself to the private equity firm Gores Group LLC.

Cenveo, based in Englewood, Colorado, contends that “dozens of other potential investors” were allowed to conduct a financial investigation while it wasn’t. Consequently, Cenveo wants the bankruptcy judge to compel NEC to produce financial information despite the so-called no-shop agreement.

The price it’s willing to pay is more than NEC’s first-lien debt, Cenveo says.

NEC filed under Chapter 11 on June 10 along with a loan agreement in which the agent, General Electric Capital Corp., 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. Net sales in 2009 were $676 million, resulting in a $44.2 million net loss. The petition says 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).

Neff Committee Wins Some Concessions on Loan, Bonuses

The unsecured creditors’ committee for Neff Corp. was partially successful at a hearing yesterday in the reorganization of the closely owned equipment rental concern.

The committee won some concessions before the court granted approval yesterday for a $175 million financing package. The lenders won’t have liens on lawsuits that might end up being among unsecured creditors’ few assets. The committee will also be able to challenge the validity of the liens.

Neff was also aiming for approval of a bonus program for executives. The committee complained that the bonuses improperly locked the executives into pursuit of the plan negotiated before bankruptcy.

The bankruptcy judge didn’t approve bonuses based on a quick exit from Chapter 11 under the pre-negotiated plan. She did approve bonuses based on Neff’s financial performance. For Bloomberg coverage of yesterday’s hearing, click here.

Neff began the prepackaged reorganization in May and 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 New York (Manhattan).

Angelo Gordon Buys Capmark Mall Loan for $59 Million

Capmark Financial Group Inc. was authorized by the bankruptcy judge on June 29 to sell a $70.4 million matured mortgage loan to Angelo Gordon Real Estate Inc. for $59.2 million.

Before the bankruptcy judge in Delaware set up auction and sale procedures, Angelo Gordon was offering $53 million. With three other bidders in attendance, the auction went through nine rounds of bidding until Angelo Gordon won.

The loan has a mortgage on the Shops at Georgetown Park mall in Washington. Part of the consideration for the purchase is a waiver of $19 million in claims being made by the borrower.

Capmark filed under Chapter 11 in October and since then completed three sales generating more than $1 billion cash. Berkshire Hathaway Inc. and Leucadia National Corp. bought most of the business for $468 million.

Capmark previously said it intends on filing a reorganization plan giving stock to unsecured creditors while reorganizing around its non-bankrupt bank subsidiary which was not sold. Based in Horsham, Pennsylvania, Capmark was called GMAC Commercial Holding Corp. before control was sold in 2006. It had been GMAC’s servicing and mortgage banking business.

KKR & Co., Goldman Sachs Group Inc., Dune Capital Management LP and Five Mile Capital Partners LLC owned 75.4 percent of Capmark following a 2006 acquisition from General Motors Corp. for $1.5 billion cash and repayment of $7.3 billion in debt. Capmark’s debt includes a $1.5 billion term loan secured by all assets except Capmark’s bank’s, $234 million remaining under a bridge loan, a $4.6 billion senior credit, $2.34 billion in notes, and a $250 million junior subordinated debt. The bank had assets of $11.12 billion and deposits of $8.39 billion, according to a court filing.

The case is In re Capmark Financial Group Inc., 09-13684, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Lehman Terminating Out-of-the-Money Derivatives Contracts

Lehman Brothers Holdings Inc. filed papers to terminate derivatives contracts with five counterparties where Lehman currently has a loss on its side of the transactions. Lehman wants the bankruptcy court to reject the agreements as executory contracts, thus fixing the amount of the resulting claims and preventing losses from growing in the future.

Lehman explained in its papers on June 29 how most other counterparties to derivatives transactions already terminated the agreements where the former broker is out of the money. The contracts being terminated are commodity basket options and mortgage-backed securities index derivatives.

The hearing is scheduled for July 14.

Lehman filed a Chapter 11 plan and explanatory disclosure statement. For details on both, click here and here for the April 15 and April 16 Bloomberg bankruptcy reports.

The Lehman holding company filed under Chapter 11 in New York on Sept. 15, 2008, and sold office buildings and the North American investment banking business to London-based Barclays Plc one week later. The Lehman brokerage operations went into liquidation on Sept. 19, 2008, in the same court. The brokerage is in the control of a trustee appointed under the Securities Investor Protection Act.

The Lehman holding company Chapter 11 case is In re Lehman Brothers Holdings Inc., 08-13555, and the liquidation proceeding under the Securities Investor Protection Act for the brokerage operation is Securities Investors Protection Corp. v. Lehman Brothers Inc., 08-01420, both in U.S. Bankruptcy Court, Southern District New York (Manhattan).

General Growth Properties Wants Estimate for Summerlin Claims

General Growth Properties Inc. doesn’t like the idea of using arbitration to determine what former investors in Hughes Corp. should receive in a Chapter 11 plan. The mall owner wants the bankruptcy judge to estimate the investors’ claims and decide how much they should receive on account of their equity interest.

Hughes Corp., some of whose investors include heirs of the late Howard Hughes, owned a 22,500-acre master-planned community outside Las Vegas named Summerlin. General Growth, through a predecessor, acquired Hughes Corp., with the purchase price to be paid over 14 years. For the last payment at the end of 2009, the Hughes investors were to be paid half of the fair market value of the remaining assets, plus other items like excess cash flow.

Rather than being paid in cash, the Hughes investors were to be paid in General Growth stock. They don’t have claims, General Growth contends. Rather, they should be treated like stockholders.

The Hughes investors filed a motion last week asking the bankruptcy judge to send the parties into arbitration under the agreement. General Growth opposes the idea, contending the bankruptcy court should estimate how much the investors are to receive under the reorganization plan as stockholders.

The Hughes investors’ motion for arbitration and General Growth’s motion to estimate the claim are both on the bankruptcy court’s calendar for July 22.

General Growth will file a plan and explanatory disclosure statement by July 9 for the four top-tier companies providing for full payment to all creditors. All the property-owning subsidiaries have already confirmed plans paying their creditors in full. The disclosure statement hearing is to be held in August, with the confirmation hearing for approval of the plan to take place in October.

General Growth began the largest real-estate reorganization in history by filing under Chapter 11 in April 2009. The books of Chicago-based General Growth had assets of $29.6 billion and total liabilities of $27.3 billion as of Dec. 31, 2008. The company owns or manages more than 200 shopping-mall properties.

The case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Oscient Confirms Liquidating Ch11 Plan in Boston

Oscient Pharmaceuticals Corp., a drugmaker from Waltham, Massachusetts, has approval to exit Chapter 11 with the signature of the bankruptcy judge on a June 29 order confirming the Chapter 11 plan.

Unsecured creditors with $78.8 million in claims are slated for a 22.5 percent recovery.

Lupin Ltd. paid $38.6 million to buy Oscient’s Antara cholesterol drug. The Factive bronchitis drug was bought by Cornerstone Therapeutics Inc. for $5 million plus the value of inventory and a 15 percent royalty for five years.

Oscient’s petition listed assets of $174 million and debt of $183 million. Debt included $27.4 million owed on 12 percent senior secured notes, $48.4 million on 12.5 percent senior notes, and $12.7 million to the holders of 3.5 percent convertible notes.

The case is Oscient Pharmaceuticals Corp., 09-16576, U.S. Bankruptcy Court, District of Massachusetts (Boston).

Watch List

Lion Capital’s American Safety Razor May Prepack Plan

American Safety Razor Co., the leading maker of private- label wet-shaving blades, issued a statement yesterday afternoon saying it received a financing proposal from a major financial institution and holders of second-lien debt. The terms weren’t disclosed.

The press release also said that lenders granted waivers of loan covenant violations so discussions on the refinancing could be brought to conclusion.

The statement said nothing about a prepackaged bankruptcy filing. It did say it’s important for the company to insure that trade suppliers be paid in full.

Should discussions with the second-lien creditors not work out, the company said there is a backup proposal from first-lien lenders.

Cedar Knolls, New Jersey-based ASR was acquired for $625 million in July 2006 by London-based Lion Capital LLP.

Although ASR has the largest market share for private-label blades, it has only 8 percent of the market when branded goods are included, according to Moody’s Investors Service. The leader, with 66 percent of the market, is Procter & Gamble Co.’s Gillette products.

Briefly Noted

Smurfit-Stone Container Finishes Plan, Relists Stock

Smurfit-Stone Container Corp., a corrugated container and containerboard maker, is being traded today on the New York Stock Exchange now that the reorganization plan was implemented. The bankruptcy judge confirmed the plan on June 21. Existing common and preferred shareholders between them kept 4.5 percent of the new stock. For details on the plan, click here for the June 22 Bloomberg bankruptcy report. For other Bloomberg coverage, click here.

The Chapter 11 filing in January 2009 by the Chicago-based company listed assets of $7.45 billion and debt of $5.58 billion as of Sept. 30, 2008. Debt at the time included $1.2 billion under secured revolving credit and term-loan agreements, five issues of unsecured notes totaling $2.275 billion, $388 million under an accounts receivable securitization facility, and $284 million owing on tax-exempt bonds.

The case is In re Smurfit-Stone Container Corp., 09-10235, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Trident Resources Consummates Plans in U.S., Canada

Trident Resources Corp., an independent natural gas production and development company, said yesterday that it implemented the reorganization plan that the bankruptcy judge approved in a June 15 confirmation order. Together with a companion reorganization in the Court of Queen’s Bench in Calgary, the company reduced long-term debt from $1.9 billion to $410 million. To read details on the plan, click here for the June 16 Bloomberg bankruptcy report.

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).

Daily Podcast

General Growth, San Diego Hotel, Two Appeal Rulings: Audio

A luxury hotel in San Diego, General Growth, and two significant appellate rulings on bankruptcy are discussed in the latest bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.

Downgrade

Military Gun Maker Colt Defense Downgraded to B2

Colt Defense LLC, a manufacturer of the M4 carbine and M16 rifle for the U.S. and foreign militaries, received a one-notch downgrade yesterday from Moody’s Investors Service, dropping the corporate grade to B2.

The $250 million in senior unsecured notes went to B3.

Although West Hartford, Connecticut-based Colt has a “large cash balance,” Moody’s downgraded on account of the deferral of a large foreign order for the M4. Moody’s is also not sure whether Colt’s M4 will be the “standard issue carbine of the future.”

Advance Sheets

When a Tax Refund Isn’t Part of Bankrupt Estate

For individuals, tax refunds for periods before bankruptcy can sometimes be excluded from the reach of creditors, the 10th U.S. Circuit Court of Appeals in Denver ruled on June 29 with qualifications.

A husband and wife were entitled to a $3,000 tax refund on their 2006 income tax return. They applied the refund to their 2007 taxes.

In ruling on whether the bankrupts were nonetheless required to pay the $3,000 to the bankruptcy trustee, the 10th Circuit referred to tax law saying that the election to apply the refund to future taxes is irrevocable.

The Circuit Court pointed to well-known principles of bankruptcy law saying that a bankruptcy trustee has no greater interest in property than the bankrupt. Thus, the trustee has no power to compel payment of the refund.

The 10th Circuit qualified its ruling by saying that the bankruptcy trustee may be entitled to some or all of the 2006 refund if the bankrupts were entitled to a refund for 2007 taxes. The circuit court said the trustee could receive any portion of a 2007 tax refund “attributable to pre-petition earnings.”

The circuit court said the result it reached was proper from “policy and practicality standpoints.” Requiring the bankrupts to pay the 2006 refund would force them to use exempt assets or post-bankruptcy income.

The case is Weinman v. Graves (In re Graves), 08-1462, 10th U.S. Circuit Court of Appeals (Denver).

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.