Rangers, Tribune, Philadelphia Newspapers, GM, Ciena, Chemtura: Bankruptcy

Blockbuster Inc. didn’t make $42.4 million in amortization and principal payments due yesterday to holders of the 11.75 percent senior secured notes of 2014. Instead, the movie-rental chain reached a forbearance agreement with holders of 70 percent of the secured notes.

Blockbuster said the decision by the noteholders not to declare a default at least until Aug. 13 provides time to “implement a more appropriate capital structure.” Yesterday’s statement said the Dallas-based company is examining “various recapitalization opportunities.”

The senior secured notes last traded at 64 cents on the dollar on June 30, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. To read other Bloomberg coverage, click here.

Competitor Movie Gallery Inc. had some 2,600 stores in operation on filing under Chapter 11 for a second time in February. Creditors decided against reorganizing, so Movie Gallery is liquidating the last 1,028 stores.

Blockbuster reported a $67.1 million net loss for the quarter ended April 4 on revenue of $939.4 million. For the fiscal year ended Jan. 3, the net loss was $569 million.

For the first quarter, the operating loss was $29.4 million. For the fiscal year, the operating loss was $355 million. Revenue last year was $4.06 billion, down from $5.07 billion in the prior year.

The balance sheet is upside down, with assets on the books for $1.32 billion against liabilities totaling $1.69 billion in April.

Blockbuster said in February that it is closing an additional 545 stores this year on top of 347 that were dropped in 2009. Blockbuster had 5,220 company-owned and 1,300 franchised stores as of Jan. 3.

Updates

Texas Rangers Confirmation Delayed for Mediation

The Texas Rangers baseball club decided to mediate rather than rush to a plan-confirmation hearing on July 9 where the bankruptcy judge had warned they might lose.

After the Rangers filed in Chapter 11 on May 24, the confirmation hearing for approval of the reorganization plan was set for July 9. The plan is opposed by secured lenders owed $525 million.

The bankruptcy judge ordered the parties into mediation and delayed the confirmation hearing to July 22. The team’s prospective buyers complained about the delay and prevailed on the judge to move confirmation back to July 9, although the judge warned when he did that there was a “real risk” the plan would fail.

Yesterday, the parties decided to move confirmation back to July 22 so there will be sufficient time for mediation that begins July 6. The mediator is another bankruptcy judge in Fort Worth. The mediation will be conducted at the offices of the chief restructuring officer for the two partnerships that own the team.

The lenders filed involuntary bankruptcy petitions against the two partnership owners. The bankruptcy judge directed the appointment of an independent restructuring officer and tasked him with deciding whether the owners should vote in favor of the Rangers’ reorganization plan.

In yesterday’s order, the restructuring officer was given a July 20 deadline for voting on the plan. If the restructuring officer votes “no,” there may be no voting class in favor of the plan, and it could fail.

The plan is designed to sell the team to a group including team President Nolan Ryan, a former pitcher and member of the baseball Hall of Fame. The transaction is worth $575 million, according to the team. The plan would generate a total of $256 million for the secured lenders, according to the team’s disclosure statement.

The lenders say there is a higher offer. They also contend the sale was structured to divert some of the value to the current owner, Thomas Hicks, when it should go to them.

The Rangers moved to Texas from Washington in 1972. The team defaulted on payments owing to the lenders in March 2009. Michael Rochelle, a brother of Bloomberg reporter Bill Rochelle, is a lawyer for an agent for the lenders. The partnership that owns the team is Texas Rangers Baseball Partners.

The case is In re Texas Rangers Baseball Partners, 10- 43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).

Tribune Confirmation Moved Back Two Weeks to Aug. 30

The schedule for newspaper publisher Tribune Co. was pushed back for two weeks to allow examiner Kenneth N. Klee more time to complete his report.

Klee’s report had been due July 12. At his request, the bankruptcy judge moved the deadline to July 26. The confirmation hearing for approval of the plan, previously set for Aug. 16, is now on the calendar for Aug. 30.

Klee was charged with giving an opinion on the strength of arguments that the $13.8 billion leveraged buyout led by Sam Zell in December 2007 included fraudulent transfers. In addition, Klee will give his conclusions about the remedies or damages creditors might be given were he to find that there were voidable fraudulent transfers making up part of the LBO. Klee isn’t to provide an opinion about the merits of the proposed settlement some creditors oppose.

The voting deadline on the plan was extended to Aug. 6 so that creditors have time to digest Klee’s report.

The plan, filed in April, is opposed by holders of $3.6 billion in pre-bankruptcy 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 of Delaware (Wilmington).

St. Vincent Selling Home Health Biz to North Shore

St. Vincent Catholic Medical Centers, a shuttered 727-bed acute-care hospital in Manhattan’s Greenwich Village, is proposing to sell its certified home health-care agency to North Shore University Hospital for $15 million.

In the event of a higher offer, the hospital will ask the bankruptcy judge at a July 22 hearing to set up sale procedures calling for an auction on Aug. 10. A hearing to approve the sale is tentatively set for Aug. 19.

North Shore, located in Manhasset, New York, already has its own home health-care agency as an adjunct to the 812-bed hospital. It was negotiating to buy the St. Vincent operation before the Chapter 11 filing. North Shore is part of the North Shore-LIJ Health System.

St. Vincent filed under Chapter 11 for a second time in April. The new petition listed assets of $348 million against debt totaling $1.09 billion. The hospital concluded a prior reorganization in July 2007 with a Chapter 11 plan claimed at the time to have a “a realistic chance” of paying all creditors in full.

The prior reorganization left the medical center with more than $1 billion in debt. When the first bankruptcy started in July 2005, St. Vincent had seven operating hospitals. Five were sold.

The main hospital has 941,000 square feet in 10 buildings. The nonprofit hospital, founded in the mid-19th century, is sponsored by the Catholic Diocese of Brooklyn and the Sisters of Charity.

The new case is In re Saint Vincent Catholic Medical Centers of New York, 10-11963, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The prior case was In re Saint Vincent Catholic Medical Centers of New York, 05-14945, in the same court.

Teamsters Pension Fund Appealing Philly Papers Plan

A Teamsters union pension fund is appealing the June 29 confirmation order approving the reorganization and sale of Philadelphia Newspapers LLC, the publisher of the Philadelphia Inquirer and Philadelphia Daily News.

The union pension plan will ask the bankruptcy judge at a July 8 hearing for a stay holding up implementation of the plan and sale until the appeal is completed. The union says the newspapers didn’t follow procedures required by bankruptcy law for cutting off the buyer’s successor liability to the pension plan.

The bankruptcy judge rejected the union’s arguments at the confirmation hearing and ruled that the newspaper’s buyers aren’t required to assume liability on the existing pension plan. For details of the plan, click here for the May 20 Bloomberg bankruptcy report.

The union said it will be irreparably harmed if the sale isn’t held up while the appeal goes ahead. If the sale is completed, the union said the appeal likely will be futile, because bankruptcy law doesn’t allow unraveling a sale unless it was stayed pending appeal.

The newspapers are to be acquired by secured lenders in a $139 million transaction. There is an Aug. 31 deadline for completing the purchase. The buyers say they still need new contracts with the labor unions.

The newspapers began bankruptcy 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 case in bankruptcy court is In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).

Personal-Injury Suits Against New GM Halted by Judge

Six plaintiffs with personal-injury claims against old General Motors Corp. tried to sue new General Motors. The bankruptcy judge stopped the suits against new GM in an order filed yesterday.

When old GM, now formally named Motors Liquidation Co., sold the core business to new GM, personal-injury plaintiffs were precluded by the terms of sale from suing the buyer on account of autos sold before bankruptcy.

When the operations were sold, old GM received 10 percent of the stock of the new company plus warrants for 15 percent. The warrants will be worth something if the new company is profitable enough to raise the company’s 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).

U.S. Concrete Has $2.95 million Net Loss in May

U.S. Concrete Inc., one of the 10 largest producers of ready-mixed concrete in the U.S., reported operating income of $314,000 and a net loss of $2.95 million in May on revenue of $42.1 million.

Interest expense in the month was $3.35 million. The month’s depreciation and amortization totaled $2.2 million.

The prepackaged reorganization plan is scheduled for a three-day confirmation hearing to begin July 23 and continue on July 28 and 29. The plan reduces debt by $285 million through conversion of 8.325 percent subordinated notes into the new equity. Shareholders are opposed, saying they are entitled to more than warrants for 15 percent of the stock. For details on the plan, click here for the April 30 Bloomberg bankruptcy report.

The Chapter 11 petition listed assets of $389 million and debt of $399 million. Liabilities include $40 million on a pre- bankruptcy secured credit facility where JPMorgan Chase Bank NA serves as agent. There is another $17.9 million on undrawn letters of credit. U.S. Concrete’s balance sheet on Dec. 31 listed assets of $392.4 million and liabilities totaling $402.5 million. It has 125 fixed and 11 portable plants serving markets in California, New Jersey, Texas and Michigan.

The case is In re U.S. Concrete Inc., 10-11407, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Chemtura Wants Private Sale of Businesses to Sonneborn

Specialty-chemical maker Chemtura Corp. filed papers to accelerate the sale of the remainder of the sodium sulfonates and oxidized petrolatums businesses to Sonneborn Inc.

Chemtura described in bankruptcy court papers filed June 30 how there was a transaction in 2005 where some sulfonates and petrolatums businesses were transferred to Sonneborn. Those remaining were to be transferred in June 2013.

Chemtura wants the bankruptcy judge to authorize acceleration of the final transfer in return for a $5 million payment by Sonneborn, plus adjustments. Chemtura wants the sale approved without an auction.

A hearing for approval of the sale is set for July 21.

Supported by the creditors’ committee, Chemtura filed a proposed reorganization plan in June designed to pay creditors in full while holding the potential for providing some value to existing shareholders. The plan would reduce debt for borrowed money to about $750 million from $1.3 billion. For details, click here for the June 18 Bloomberg bankruptcy report.

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).

Statistics

Moody’s See Liquidity-Stress Index Turning to Decline

“A long period of improving liquidity for speculative- grade issues may be drawing to a close,” Moody’s Investors Service said yesterday.

The conclusion partially stemmed from nine downgrades of junk-rated companies in June, the most for a month since April 2009, Moody’s said.

Moody’s attributed greater stress on lower-rated companies in part to increasing difficulty in attracting new financing. June saw a “small but clear reversal” in Moody’s index of stress on junk-rated companies.

Although more companies were in the lower junk ratings in June than May, the 11 upgrades in June exceeded the month’s 9 downgrades, Moody’s said.

Briefly Noted

Ciena Settlement Approved, Enables 50% Chapter 11 Plan

Ciena Capital LLC, the creditors’ committee, and the U.S. Small Business Administration received the bankruptcy court’s approval on June 30 for a settlement with Ciena’s parent, Ares Capital Corp., which will fund a 50 percent payment to Ciena’s unsecured creditors. For details, click here for the June 18 Bloomberg bankruptcy report. Formerly the third-largest loan originator for the SBA, Ciena filed under Chapter 11 in September 2008 after the discovery that a Michigan employee was recording fraudulent loans.

Ciena’s formal lists of assets and debt showed assets of $361 million against liabilities totaling $397 million, including $325 million in secured claims.

The Ciena case is In re Ciena Capital LLC, 08-13783, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

South Bay Expressway Has Exclusivity Until Nov. 17

South Bay Expressway LP, the owner of a nine-mile toll road near San Diego, drew no opposition and was granted an extension until Nov. 17 of the exclusive right to propose a reorganization plan, court records show. The expressway said there can’t be a plan to deal with $530 million in secured debt until a court ruling on whether contractors have mechanics’ liens that come ahead of secured lenders.

The toll road opened in November 2007. It owes $340 million on a first-lien construction and term loan plus another $170 million first-lien obligation on a loan provided by the U.S. Department of Transportation. Ownership of the toll road is controlled by affiliates of Sydney-based Macquarie Group Ltd.

The case is In re South Bay Expressway LP, 10-04516, U.S. Bankruptcy Court, Southern District of California (San Diego).

Zayat Stables’ Settlement with Bank Approved by Judge

Zayat Stables LLC and secured lender Fifth Third Bank received bankruptcy court approval for their settlement on June 30. The settlement is designed to permit approval of the stables’ reorganization plan at a July 15 confirmation hearing. Approval of the plan will enable Ahmed Zayat to retain ownership. For details on the settlement and plan, click here for the June 25 Bloomberg bankruptcy report.

The stables, based in Hackensack, New Jersey, filed under Chapter 11 in February in Newark. 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).

Taylor Bean Authorized to Sell Reverse Mortgages

Taylor Bean & Whitaker Mortgage Corp., once the largest independent mortgage originator in the U.S., was authorized by the bankruptcy judge on June 30 to sell 24 reverse mortgages for $1.14 million. The mortgages have a combined principal balance of about $2.7 million.

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. Former Chairman Lee 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 case is Taylor Bean & Whitaker Mortgage Corp., 09- 07047, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).

Remedial (Cyprus) Has More Exclusivity, More Funding

Remedial (Cyprus) Public Co., the owner of two elevated support vessels for the offshore oil and natural gas industry, was granted its request and received an extension until Sept. 15 of the exclusive right to propose a Chapter 11 plan. The judge also approved an increase in financing to $6.5 million from $5 million. The bankruptcy court previously approved the sale of both vessels to secured bondholders owed a net of $177 million. Financing for the Chapter 11 case comes from the bondholders.

Remedial needed Chapter 11 when a restructuring couldn’t be implemented out of court. The two vessels are under construction in China and scheduled for delivery this year. Originally projected to cost $269 million, the price rose to $318 million. The company said that assets were on the books for $157 million with liabilities totaling $237 million. Unsecured creditors are owed $11 million.

The case is In re Remedial (Cyprus) Public Co., 10-10782, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Daily Podcast

Truvo, Arrow Air, 2 New Filings, Abitibi: Audio

European directory publisher Truvo Luxemburg Sarl, cargo airline Arrow Air Inc., two other new filings, and a possible stumbling block to confirmation by AbitibiBowater Inc. are discussed in the latest bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.

Downgrade

Power Producer Dynegy Downgraded to B3 as Ebitda Drops

Dynegy Holdings Inc., a Houston-based power producer, received its second downgrade from Moody’s Investors Service in 15 months.

Moody’s took the corporate peg down another notch yesterday to B3 after the company disclosed that earnings before interest, taxes, depreciation and amortization are running about 30 percent lower this year than last year.

Moody’s also described “substantial negative free cash flow” resulting from “required environmental capital spend on its Midwestern generation fleet.”

The new Moody’s rating lines up with the ding issued in April by Standard & Poor’s.

Dynegy has 12,000 megawatts of electric generating capacity.

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

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