Texas Rangers, Visteon, Centaur Creditors, Arrow Air, Axia: Bankruptcy
The Texas Rangers professional baseball club will hold an auction on Aug. 4 with an opening bid from the group that agreed to buy the team just before the filing for bankruptcy reorganization in May.
Other bids are due initially on Aug. 3. The auction will be held in the courtroom.
The first bid will come from a group led by current team President Nolan Ryan and sports lawyer Chuck Greenberg. They signed a contract to purchase the club for about $304 million cash prior to the Chapter 11 filing on May 24.
The team filed a new motion yesterday for approval of auction procedures after the Ryan-Greenberg group agreed to modify the original contract by raising the price to $306.7 million. In addition, they sweetened the offer by lowering an escrow holdback from $30 million to $10 million and by not forcing other purchasers to take over the lease for the team airplane.
The chief restructuring officer for the partnerships that own the team told the judge at yesterday’s quickly convened hearing that an auction on Aug. 4 wouldn’t give other bidders enough time. The team wanted the auction July 22.
The judge at first took sides with the team on having an auction in July and then came down with the Aug. 4 date to compromise the positions by the team and the restructuring officer.
If the Ryan-Greenberg group is outbid, they would receive a $15 million breakup fee. In return for the fee, the so-called stalking-horse agreed to waive exclusivity provisions in the May contract.
Before the auction, other bidders must be approved by Major League Baseball. Although the leaders of the two competing groups have approval, the members of their groups don’t as yet.
The first competing bid at auction must be $15 million higher than the Ryan-Greenberg offer to cover the breakup fee. For Bloomberg coverage on yesterday’s hearing, click here.
Secured lenders owed $525 million have security interests in the partnerships that own the team. The lenders opposed the contract with the Ryan-Greenberg group and believed there would be a higher offer at auction. Under the May contract, the lenders would recover $256 million, according to the team’s disclosure statement.
William K. Snyder was appointed as restructuring officer for the two partnerships that own the team. His appointment came after some of the lenders filed an involuntary bankruptcy petition against the partnerships. His responsibilities include deciding whether the partnership would vote for or against the team’s Chapter 11 reorganization plan. He was opposed to the team’s reorganization plan if the original contract weren’t modified and an auction weren’t held.
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).
Updates
Visteon’s End of Retiree Benefit Overturned on Appeal
Workers won a victory yesterday when the U.S. Court of Appeals in Philadelphia ruled that auto parts maker Visteon Corp. didn’t have the unilateral right to terminate health and life insurance benefits for retirees absent compliance with procedures specified in bankruptcy law.
Soon after filing for bankruptcy reorganization in May 2009, Visteon filed a motion in bankruptcy court claiming it had the ability to terminate because the pre-bankruptcy programs reserved the company’s right to end retire health and insurance benefits at any time.
The bankruptcy court agreed, and the district court affirmed on the first appeal. The Communications Workers of America appealed again and won in a 95-page opinion handed down yesterday by the 3rd Circuit Court of Appeals in Philadelphia.
The circuit court said its ruling was commanded by the plain language of Section 1114(e) of the Bankruptcy Code which says that a company “shall timely pay and shall not modify any retiree benefits” without following the procedures laid out in the section.
The ruling means that Visteon must reinstate retiree benefits that ended in May. The appellate court gave Visteon an escape hatch when it said that Visteon could end retiree benefits on emerging from bankruptcy reorganization, assuming it hadn’t bargained away termination rights during bankruptcy. The ruling affects 8,000 retirees, the opinion says.
The lower courts are divided on the issue. Three bankruptcy courts, including the judge in the reorganization of Delphi Corp., ruled that a company could end retiree benefits unilaterally if there were no contract or promise requiring continuation. Two courts, including one in New York, came down on the same side as the 3rd Circuit.
The three judges on the Philadelphia appellate panel criticized courts for mistakenly relying “on their own view about sensible policy, rather than on the congressional policy choice reflected in the unambiguous language of the statute.” The unanimous 3rd Circuit said the statute “could hardly be clearer.”
Visteon is approaching a contested confirmation hearing for approval of the reorganization plan. The bankruptcy judge set aside 10 days, beginning Sept. 28, to air out objections to the plan. Shareholders and some creditors are in opposition. 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).
Lehman Examiner Discharged, May Still Give Assistance
Anton R. Valukas, the examiner who wrote a 2,209-page report about the downfall of Lehman Brothers Holdings Inc., was officially discharged yesterday, although the bankruptcy judge created a process where he can continue assisting parties in the case on request.
Valukas can provide assistance to Lehman, the creditors’ committee, government agencies and the U.S. Trustee, with his fees paid by Lehman. The order signed by the bankruptcy judge yesterday erected procedures where third parties also can request Valukas’s assistance.
In the case of third-party requests, there must be notice and an opportunity for other parties to object. If there isn’t resolution, the bankruptcy court can resolve the dispute. The examiner’s fees must paid by third-parties who need his help.
The bankruptcy judge also told Valukas to turn over his electronic archive of evidence to a “neutral vendor.” The order yesterday established procedures where creditors in the Lehman case and third parties can serve subpoenas to obtain documents from the electronic data base.
In his February report, Valukas concluded there were what he called colorable claims against senior executives, auditor Ernst & Young LLP and some banks. All of the report was unsealed in March. To read Bloomberg coverage, click here.
Lehman has a Chapter 11 plan and explanatory disclosure statement on file. For details on both, click here and here for the April 15 and 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, while 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).
Nortel Files Plan, Without Disclosure, On Last Day
Nortel Networks Inc., North America’s largest communications equipment provider at one time, filed a liquidating Chapter 11 plan yesterday without a disclosure statement telling creditors how much they stand to receive and why.
The plan was filed on the last day of the companies’ exclusive right to propose a liquidation scheme. Having now been in Chapter 11 for 18 months, bankruptcy law doesn’t allow further expansion of so-called exclusivity. With the filing of the plan, Nortel retains the exclusive right to solicit acceptances of a plan until Sept. 13.
The plan says that secured creditors will be paid in full and won’t be entitled to vote. The plan provides for distribution of remaining asset-sale proceeds to unsecured creditors after creditors with higher priorities are paid in full.
The plan says there will be no distributions to creditors with subordinated claims. Likewise, shareholders and claimants in securities fraud suits aren’t to receive anything. Interest won’t be paid on claims and creditors’ can’t collect more than 100 percent, including distributions from the companion bankruptcy case in Canada.
The plan is in substance 16 plans for Nortel and affiliates. There is no substantive consolidation where the various corporations would be disregarded, with all assets and all claims thrown into one pot. Thus, the recovery will vary depending on the company against which a claim is held.
Nortel raised $2.6 billion from the sale of some businesses. Patents and patent applications are yet to be sold.
Ericsson AB, the world’s largest producer of wireless networks, acquired the primary wireless carrier business for $1.13 billion. It was also part of a group that made the $103 million high bid for Nortel’s so-called GSM business. Ericsson offered to pay $242 million cash for Nortel’s half interest in a South Korean joint venture named LG-Nortel Co.
Other sales include the optical networking and carrier Ethernet networks business bought by Ciena Corp. in December for $769 million. Nortel also sold the Internet telephony business for $182 million after adjustments.
The Toronto-based Nortel companies filed for bankruptcy reorganization in January 2009 in the U.S., Canada and London. The Nortel companies reported $11.6 billion in consolidated assets against debt totaling $11.8 billion as of Sept. 30. Revenue was $9.7 billion in 2007. For the first nine months of 2008, sales were $6.8 billion.
The Chapter 11 case is In re Nortel Networks Inc., 09- 10138, and the parent’s Chapter 15 case is In re Nortel Networks Corp., 09-10164, both in U.S. Bankruptcy Court, District of Delaware (Wilmington).
Centaur Committee Finds Defects in Lender Collateral
The creditors’ committee for casino and racetrack operator Centaur LLC. believes there are defects in the security interests on $192 million in collateral claimed by the first-and second-lien lenders.
The committee arranged a hearing in U.S. Bankruptcy Court in Delaware for July 21 where it will ask the judge for permission to sue the secured creditors and negotiate settlements.
The committee also believes that guarantees of secured debt given by subsidiaries are fraudulent transfers that may be voided in bankruptcy.
At a hearing on July 28 Centaur will be seeking court approval for auction and sales procedures pertaining to the Fortune Valley Hotel & Casino 40 miles west of Denver. The initial bid will come from Luna Gaming Central City LLC.
The price is $7.5 million cash plus a $2.5 million note, less adjustments.
Centaur wants other bids five days before an auction on Aug. 23.
Subsidiaries Centaur PA Land LP and Valley View Downs LP filed for bankruptcy reorganization in October to keep alive a project to develop a racetrack in Pennsylvania. Centaur LLC and 12 affiliates filed Chapter 11 petitions in March. All the companies are subsidiaries of closely owned Centaur Inc., which is not itself in bankruptcy.
The March filings listed assets of $584 million and debt of $681 million. The March filings resulted from the failure to make payments due in October on a $382.5 million first-lien debt and a $192 million second-lien credit.
The companies have horse racing and gambling facilities in five markets in Indiana and Colorado. They are developing a property in Pennsylvania, 55 miles from Pittsburg to be called Valley View Downs and Casino.
Delays in opening the new track together with the $250 million licensing fee paid in Pennsylvania left the companies with insufficient cash flow to service debt, a court filing said.
The companies own Hoosier Park, a casino and horse racetrack, in Anderson, Indiana, along with three offtrack betting parlors in Indiana. They also own Fortune Valley Hotel & Casino in Central City, Colorado, which has a 118-room hotel to complement the casino. The companies generated revenue of $277.5 million in 2009.
The newer case is Centaur LLC, 10-10799, and the first case was In re Centaur PA Land LP, 09-13760, U.S. Bankruptcy Court, District of Delaware (Wilmington).
St. Vincent House Staff Opposes Payments to Others
St. Vincent Catholic Medical Centers, a shuttered 727-bed acute-care hospital in Manhattan’s Greenwich Village, shouldn’t be permitted by the bankruptcy judge to pay pre-bankruptcy salaries owing to independent contractors when interns and residents haven’t received vacation pay and travel reimbursement, the union for the so-called house staff said in a July 12 court filing.
Although the interns and resident have been paid wages owing before bankruptcy, they contend vacation pay is an expense that bankruptcy law requires being paid in full. They worry that St. Vincent will end up with insufficient cash to pay priority claims such as those for accrued vacation time.
The house staff doesn’t want bankruptcy priorities turned upside down by paying pre-bankruptcy wages for independent contractors when the interns and residents haven’t received vacation pay. The bankruptcy judge will sort out the issues at a hearing tomorrow.
Independent contractors are individuals who worked in the hospital although they weren’t regular employees.
St. Vincent is in Chapter 11 a second time. The new petition in April listed assets of $348 million against debt totaling $1.09 billion. The hospital concluded the 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 facility has 941,000 square feet in 10 buildings. The not-for-profit hospital is sponsored by the Catholic Diocese of Brooklyn and the Sisters of Charity. It was founded in the mid-19th century.
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.
Cargo Carrier Arrow Air Has Cash Use for Liquidation
Arrow Air Inc., at one time the largest cargo airline in Miami, won interim approval on July 12 to use cash representing collateral for secured lenders’ claims. Cash may only be used in accordance with an approved budget.
Arrow filed again under Chapter 11 on June 30. The final hearing on financing is set for July 22.
The so-called cash collateral order allows the official creditors’ committee to spend $50,000 investigating whether the lenders’ liens are valid. Otherwise, the committee can’t spend any of the lenders’ cash collateral to sue secured creditors.
The new Chapter 11 case is Arrow’s third. This time, it’s a liquidation. It halted operations the day before the Chapter 11 filing. Also known as Arrow Cargo, it operated 60 flights a week with four leased DC-10-30 and three leased B757-200 aircraft.
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 case is In re Arrow Air Inc., 10-28831, U.S. Bankruptcy Court, Southern District Florida (Miami).
Daily Podcast
Texas Rangers, General Growth, Riviera Casino: Audio
The newest developments in the sale of the Texas Rangers baseball club, the public offering to accompany the reorganization of General Growth Properties Inc., and the prepackaged filing by Las Vegas casino owner Riviera Holdings Corp. are discussed in the latest bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.
Statistics
Claim Trading Activity Declines in June
As major Chapter 11 filings have fallen this year, so too have the number of claim trades reported to the country’s bankruptcy courts.
In June $2.146 billion in claim trades were reported, the second fewest this year, according to a report yesterday from SecondMarket Inc. In amount, traded claims in June were one- third fewer than May.
Lehman Brothers Holdings Inc., with $1.9123 billion in face amount of traded claims, was responsible for the bulk of activity. Flying J Inc. came in second place with $84.8 million in traded claims. Flying J, a vertically integrated oil producer, refiner, and marketer, had its Chapter 11 plan confirmed July 9.
In number of trades, Lehman as usual led the pack with 224 trades. Smurfit-Stone Container Corp., with 114 trades, came in second, after implementing its Chapter 11 plan in June.
In June claims were traded in 64 separate bankruptcy cases, compared with 47 cases in May, SecondMarket said in its report.
Downgrades
CKE and InVentive Downgraded on Acquisitions
CKE Restaurants Inc. and InVentiv Health Inc. were both downgraded yesterday by Standard & Poor’s as a result of being acquired.
CKE, the operator of nearly 3,150 restaurants, was acquired on July 12 by an affiliate of Apollo Management LP for $12.55 a share. The corporate rating for the Carpinteria, California- based company slid by two notches to B.
InVentive, a sales and marketing service provider for the life sciences industry, is to be acquired later this year by an affiliate of Thomas H. Lee Partners LP. The corporate grade for the Somerset, New Jersey-based company went down one click to B+.
CKE’s franchises or owns stores operating under names including Carl’s Jr. and Hardee’s.
Briefly Noted
Axia Sold Asset, Sets Conversion to Chapter 7 Aug. 1
Axia Inc., formerly a manufacturer of automatic taping and drywall finishing tools, completed the sale of the business in March to a group including existing lenders and shareholders and has an appointment in bankruptcy court tomorrow on a motion for conversion of the case to Chapter 7 effective Aug. 1. Axis, now formally named ATT011 Inc., doesn’t have enough cash to pay creditors whose claims must be paid in full in a Chapter 11 plan.
The purchasers paid for the business with a $9 million note payable to the senior term loan lenders and 21.5 percent of the equity earmarked for the subordinated secured term loan. Axia filed under Chapter 11 in December. The Duluth, Georgia-based company sold its products through 72 stores and 130 franchisees. Assets on Oct. 30 were $178 million. Liabilities included $69.2 million on a senior secured term loan and a $91.8 million subordinated secured term loan.
The case is In re Ames Holding Corp., 09-14406, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net.
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