The Texas Rangers professional baseball club was sued yesterday by the group that signed a contract before bankruptcy in late May to buy the team in a transaction valued at $575 million.
The group, including team president Nolan Ryan and sports lawyer Chuck Greenberg, wants the bankruptcy judge in Fort Worth to declare that the Rangers breached the May contract. They contend that the chief restructuring officer for the partnership that owns the team “has improperly caused the debtor to breach the asset purchase agreement and abandon the bidding procedures, threatening a lengthy and damaging bankruptcy.”
While the papers by the erstwhile buyers say the team breached the contract, they blame the actions on William K. Snyder who was appointed by the bankruptcy judge to be the independent chief restructuring officer for the partnership that owns the team.
Snyder was appointed after some of the lenders, owed $525 million, filed an involuntary bankruptcy petition against the partnership owner. Snyder was given responsibility for deciding whether the partnership would vote for or against the team’s Chapter 11 reorganization plan. The bankruptcy judge had decided that the owners were entitled to vote on the plan, although the team originally contended they weren’t.
Snyder early last week supported an auction process where other offers could be made for the team. At the end of the week, Snyder withdrew his support for the auction motion, saying new procedures were needed.
The Ryan-Greenberg group in its papers says they will ask the bankruptcy judge for a temporary injunction forcing the team to go ahead with the original contract from May. Motions of this type are typically heard within a few days after they’re filed.
The buyers’ complaint argues that the team breached the contract by “failing to use commercially reasonable efforts to take all actions necessary or appropriate to consummate the transactions” called for in the agreement. They also contend that Snyder exceeded his “limited authority to vote on the plan” on behalf of the partnership owner. They believe the team violated the contract by soliciting offers and negotiating with other prospective buyers.
The papers filed along with the complaint don’t cite any case-law authority where a pre-bankruptcy contract with a bankrupt company can be enforced before the contract has been approved by the bankruptcy judge.
Secured lenders owed $525 million have opposed the contract with the Ryan-Greenberg group. They believed there would be a higher offer in an auction. They also contend some of the value from the sale was being directed to the team’s ultimate owner, Thomas Hicks, rather than to them as creditors of the team and the partnership owner. The Ryan group’s offer would have given the lenders a recovery of $256 million, according to the team’s disclosure statement.
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 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).
Riviera Files Prepack With Stock and Debt for Lenders
Riviera Holdings Corp., the owner of casinos in Las Vegas and Black Hawk, Colorado, filed a Chapter 11 petition yesterday in Las Vegas together with a reorganization plan where secured lenders will receive new debt and stock.
The plan was negotiated with holders of more than two- thirds of secured debt totaling over $275 million, including a $225 million term loan, unpaid interest, and amounts owing on a swap agreement.
Starwood Capital Group LLC announced in March that it was the leader of a group that bought control of the secured debt.
The proposed disclosure statement accompanying Riviera’s plan doesn’t make a prediction about the percentage recovery the lenders can expect. General unsecured creditors are to be paid in full so long as claims in the class as a whole don’t exceed $3 million.
Rivera owns Riviera Black Hawk Casino in Colorado and the 2,075-room Riviera Hotel & Casino on the north end of the Las Vegas Strip. The company described in a court filing how revenue fell “dramatically” due to the recession, leaving a $24.9 million net loss in 2009 and a $4.5 million net loss in the first quarter of 2010. Riviera defaulted on the secured debt in February 2009.
The plan calls for secured lenders to receive a new $50 million term loan plus 80 percent of the new stock. Lenders who provide $20 million in a so-called new money loan will receive 8 percent of the new stock plus warrants for another 10 percent.
Creditors who provide a $10 million working capital loan are to receive 7 percent of the new stock. The last 5 percent of the new stock goes to the lenders in return for providing a backstop insuring availability of the $30 million in loans.
Existing shareholders are to receive nothing.
The case is In re Riviera Holdings Corp., 10-22910, U.S. Bankruptcy Court, District of Nevada (Las Vegas).
General Growth Files Plan for October Emergence
Mall owner General Growth Properties Inc. filed a Chapter 11 plan and explanatory disclosure statement early this morning to complete the reorganization of the four top-tier companies. Like the property-owning subsidiaries that already confirmed Chapter plans paying their creditors in full on $15 billion in debt, the top-level companies will pay creditors fully while preserving some of the stock for existing shareholders.
A hearing to approve the disclosure statement is scheduled for Aug. 19.
The plan is financed by a commitment from a group led by Brookfield Asset Management Inc. to provide up to $8.55 billion in debt and equity financing. Teacher Retirement System of Texas is committed to buy $500 million of new stock at $10.25 a share.
Agreements with the financing parties allows General Growth to access the capital markets if financing can be obtained at more favorable prices. The company said it intends to file a registration statement and make an offering to the public at or shortly after the emergence from bankruptcy reorganization.
General Growth had been promising to file the plan by July 9. It expects to emerge from reorganization in October and remain the second-largest mall owner in the U.S., with 180 properties in 43 states.
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 case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Creditors’ Panel Doubts Trade Can Block Visteon Plan
The creditors’ committee for auto parts maker Visteon Corp. was rebuffed by the bankruptcy judge yesterday when it attempted to make an accelerated motion to investigate claims that a group of trade suppliers opposed to the reorganization plan holds enough votes to block the unsecured creditor class from having the requisite “yes” vote.
The committee said in papers filed in bankruptcy court on July 9 that the trade suppliers’ claim to holding a so-called blocking position is “highly suspect.” The official creditors’ group believes that the members of the ad hoc committee have only $17 million in claims, far short of the required 33 percent in amount of claims necessary to deliver a negative vote.
The committee alleged in its papers that the claimed blocking position is “beyond lobbying and puffery and rises to the level of unfair chicanery and improper solicitation.”
The official creditors’ committee says there are currently $300 million in unsecured claims entitled to vote. The committee wanted the bankruptcy judge to give them rapid authorization to take sworn testimony from the ad hoc group or demand production of documents verifying how many unsecured creditors pledged to vote against the plan.
The bankruptcy judge yesterday turned down the official committee’s requested for an accelerated hearing on the motion to examine the ad hoc group.
The ad hoc group previously said they had “no” votes by holders of 60 percent of $167 million owing to trade suppliers.
Visteon has a 10-day confirmation hearing scheduled to begin Sept. 28. Shareholders and some creditors are opposing the plan. For details on Visteon’s plan, click here for the June 15 Bloomberg bankruptcy report. For a summary of the positions by various parties before the judge approved the disclosure statement, click here for the May 25 Bloomberg bankruptcy report.
Visteon 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. Van Buren Township, Michigan-based 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).
Neff Corp. Reorganization Plan Goes to Creditors for Voting
The bankruptcy judge said at a hearing yesterday that she will approve the disclosure statement for Neff Corp. and allow creditors to vote on the reorganization plan negotiated before the Chapter 11 filing in May.
In the process, the judge turned aside objections from unsecured creditors. The judge is still to decide if she will allow the creditors’ committee to investigate the leveraged buyout in 2007.
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. For Bloomberg coverage of yesterday’s hearing, click here.
Wayzata Investment Partners LLC and Apollo Capital Management together have more than 67 percent of the first-lien debt. The plan is financed in part by a fully backstopped $119 million equity rights offering. To determine if there is a better offer for the financing, there will be an auction on Aug. 5. Bids are due initially July 26.
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).
National Envelope Has $134.5 Million Contract with Gores
National Envelope Corp., the largest closely held envelope manufacturing company in the U.S., negotiated with eight potential buyers and ended up signing a contract providing for a sale of the business for $134.5 million to Gores Group LLC.
NEC will ask the bankruptcy court to approve auction and sale procedures testing whether there is an offer to beat Gores. If the bankruptcy judge goes along, other bids would be due Aug. 16, followed by an auction on Aug. 20 and an Aug. 23 hearing for approval of the sale.
If Gores is outbid, it would receive a breakup fee of $2.65 million and up to $2 million in expense reimbursement, if the judge agrees. NEC wants the bankruptcy judge to hold a hearing not later than July 22 to approve sale procedures.
In addition to the purchase price, Gores will pay the cost of curing defaults in contracts and will assume accrued liabilities to workers and on employee benefit programs.
Cenveo Corp., which calls itself a “major player in the envelope business,” previously filed papers in bankruptcy court saying it had been “systematically excluded” from the sale process.
NEC filed under Chapter 11 on June 10 along with a loan agreement where the agent, General Electric Capital Corp., required 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).
Spheris Says Unsecured Creditors May See 23 Percent
Spheris Inc., a transcriber of medical dictation for doctors and hospitals, fine-tuned the disclosure statement in advance of today’s hearing for approval of the description of the liquidating Chapter 11 plan.
Spheris filled in blanks in the prior version of the disclosure statement which now says that unsecured creditors and holders of senior subordinated notes can expect a recovery of almost 23 percent. Should Spheris fail in its effort at eliminating a $21.3 million disputed claim asserted by MedQuist Inc., the return to creditors will be lower, according to the disclosure statement.
Now formally named SP Wind Down Inc., Spheris sold the business for $98.83 million cash and a note that it sold for $13.77 million. At Jan. 31, secured lenders were owed $75.6 million. Unsecured claims consist largely of $125 million owing on subordinated notes.
Franklin, Tennessee-based Spheris listed assets of $61 million against debt totaling $225 million, including $75.6 million on a senior secured credit and $125 million on subordinated notes. For nine months ended in September, revenue was $120 million.
The case is In re SP Wind Down Inc., 10-10352, U.S. Bankruptcy Court, District of Delaware (Wilmington).
U.S. Concrete Releases Too Broad, U.S. Trustee Says
U.S. Concrete Inc., one of the 10 largest producers of ready-mixed concrete in the U.S., would improperly prevent creditors from suing third-parties, the U.S. Trustee said in papers filed on July 9 in objection to approval of the Chapter 11 plan at the confirmation hearing to begin July 23.
The U.S. Trustee believes that bankruptcy law doesn’t compel a creditor to give a release to someone not in bankruptcy unless the creditor affirmatively consents to the release.
The confirmation hearing on the prepackaged reorganization plan will continue on July 28 and 29 if necessary. The plan reduces debt by $285 million through conversion of 8.325 percent subordinated notes into the new equity. Shareholders are opposed. They believe 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).
Crucible Reduces NYSDEC Claim by 94%, to $1.2 Million
Crucible Materials Corp., a steelmaker for the auto and aerospace industries, reached a settlement that will reduce the claims of the New York State Department of Environmental Conservation by some 94 percent.
The New York environmental regulators filed claims for $21 million. Crucible negotiated a settlement where the state will have approved unsecured claims for $1.18 million. The settlement will come to bankruptcy court for approval on July 26.
The confirmation hearing for approval of the Chapter 11 plan is currently scheduled for Aug. 9. The disclosure statement explaining 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.
While the disclosure statement doesn’t say how much unsecured creditors might recover, it reveals that unsecured claims against Crucible Materials could be as much as $400 million while unsecured claims against 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. Affiliate Crucible Development’s schedules showed assets at $17 million against debt totaling $70 million. Syracuse, New York-based Crucible is owned by its 1,000 employees. Crucible 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).
Barzel Still Doesn’t Know Whether Chapter 11 Plan Is Feasible
Barzel Industries Inc., a steel processor and manufacturer, for a third time is seeking an expansion of the exclusive right to propose a Chapter 11 plan.
If granted by the bankruptcy court at an Aug. 20 hearing, the new deadline for filing a plan would be Oct. 11.
As it did in the prior motion for longer exclusivity, the company again said it’s evaluating whether “a liquidating plan is feasible.”
Barzel sold most of the assets in November to Norwood, Massachusetts-based Chriscott USA Inc. for $75 million. The company later settled with secured lenders who received a release of claims in return for giving up $800,000 from sale proceeds.
Barzel had 15 facilities. Its petition listed assets of $366 million against debt totaling $385 million, including $315 million on senior secured notes. There was another $18.4 million owing on an asset-backed loan with a first lien on accounts receivable.
The case is In Barzel Industries Inc., 09-13204, U.S. Bankruptcy Court, District of Delaware (Wilmington).
American Safety Razor 2nd Lien May See 10%, S&P Says
American Safety Razor Co., the leading maker of private- label wet-shaving blades, will generate a recovery on the $175 million second-lien term loan of not more than 30 percent following payment default, Standard & Poor’s said in a report yesterday.
S&P said first-lien debt holders should see 90 percent to 100 percent.
S&P said ASR is “likely” to have a so-called distressed exchange. S&P lowered the corporate, first-lien, and revolving credit ratings to CC. The second-lien debt is now C, the lowest aside from D for default.
ASR issued a statement at the end of June saying it had a financing proposal from a major financial institution and holders of second-lien debt. The terms weren’t disclosed. 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.
N.Y. Racing Association May Need 2nd Reorg, DiNapoli Says
New York Racing Association Inc. may need a second trip through Chapter 11, if New York Controller Thomas DiNapoli is correct when he said the operator of the three thoroughbred racetracks in New York State will become insolvent next year absent revenue from slot machines.
To read Bloomberg coverage, click here.
NYRA confirmed a Chapter 11 plan in April 2008 and emerged from reorganization later in the year following the negotiation and drafting of a definitive settlement with the state.
The settlement allowed the Association to continue operating the racetracks another 25 years in return for admitting that the state is the owner of the tracks. The plan was designed to pay all creditors in full with $105 million coming from the state under the settlement.
NYRA’s Chapter 11 petition in November 2006 listed assets of $153 million and debt totaling $310 million.
The case was In re The New York Racing Association Inc., No. 06-12618, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Gems TV Authorized to Sell Non-Inventory Assets
Gems TV (USA) Ltd., a television retailer of gemstone jewelry products, was authorized yesterday to sell most of the assets other than inventory for $2.96 million to Zalemark Holding Co. The assets excluded inventory and the Gems TV trademark. Other trademarks and customer lists were among the assets sold.
Reno, Nevada-based Gems TV shut down the business before filing under Chapter 11 on April 5. The petition said assets are less than $50 million while debt is expected to exceed $100 million.
The case is In re Gems TV (USA) Ltd., 10-11158, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Leslie-Circor, Chemtura, Oriental, IStar: Audio
The prepackaged asbestos filing by Leslie Controls Inc., a subsidiary of Circor International Inc.; a $7 million substantial contribution payment by Chemtura Corp.; and the financial difficulties of Oriental Trading Co. and IStar Financial Inc. are topics discussed in the latest bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.