Compania Mexicana de Aviacion, Mexico’s biggest airline by passengers, filed for protection from creditors in Mexico and the U.S. after its executives said they had failed to reach cost-saving agreements with labor unions.
The U.S. filing also cited a rise in jet fuel prices, a 2009 flu epidemic that hurt Mexican tourism and a worldwide recession. The Chapter 15 petition in New York lists more than $500 million in assets and $1 billion in debt, and seeks protection in the U.S. as the 87-year-old company reorganizes in Mexico.
“The company needs to restructure its costs,” said Luis Tellez, president of Bolsa Mexicana de Valores SAB, the Mexican stock exchange operator, and Mexico’s former transportation minister. “Its labor costs are substantially higher than not only low-cost companies, but airlines in the United States, like United, American, etc., that have gone through this, too,” Tellez said in an interview at Bloomberg’s Mexico City office.
The push to cut workers’ pay comes as low-cost competitors Volaris and Interjet eat into Mexicana’s passenger traffic. Mexicana’s share of fliers, excluding its low-cost sister airlines, fell to 22 percent last year from 32 percent in 2005, according to government data. Volaris and Interjet, closely held carriers that started operations in the past five years, gained a combined 21 percent of the market in that period.
The U.S. case is Compania Mexicana De Aviacion SA de CV, 10-14182; U.S. Bankruptcy Court, Southern District of New York (Manhattan).
FGIC Files Prepackaged Chapter 11 Bankruptcy in New York
FGIC Corp., an affiliate of Financial Guaranty Insurance Co., sought bankruptcy protection from creditors after experiencing losses from securities backed by the U.S. housing market.
The company, which insures bonds and loans, listed $11.5 million in assets and $391.5 million in debt in Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Manhattan.
The bankruptcy was related to “exposure to collateralized debt obligations of asset-backed securities and residential mortgage-backed securities,” Chief Executive Officer John S. Dubel said in court papers.
Among FGIC’s largest unsecured creditors listed in court papers were Wilmington Trust FSB, trustee for $345.5 million in bond debt; and JPMorgan Chase Bank, owed $46 million in bank debt.
The case is In re FGIC Corp., 10-14215, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Oaktree Said to Drop Almatis Bid After Debt Plan Fails
Oaktree Capital Management LLC, the largest senior lender to Dubai International Capital LLC’s Almatis, will drop efforts to take over the German alumina-products maker after failing to win support for a debt restructuring plan, a person familiar with the matter said.
A competing proposal by owner Dubai International was due to be approved by a U.S. bankruptcy court yesterday, said the person, who declined to be identified because the information is private. The decision caps a year-long battle between Los Angeles-based Oaktree and Dubai International, the investment fund owned by Dubai’s ruler. A London-based spokeswoman for Oaktree declined to comment.
Oaktree Capital Management LLC, a first-lien lender whose purchase offer was spurned by Almatis BV, was expected to appear in bankruptcy court yesterday, arguing that the producer of specialty alumina products will be saddled with too much debt if a revised reorganization plan goes through.
Oaktree’s bid fell by the wayside when Almatis’ owner, Dubai International Capital LLC, produced a substitute plan giving more to second-lien lenders. Oaktree filed an objection to Dubai’s plan on July 29.
Almatis entered Chapter 11 in late April.
The case is In re Almatis BV, 10-12308, U.S. Bankruptcy Court, Southern District New York (Manhattan).
For details of the new plan, click here.
Cerberus’s LNR Property Accused of Defrauding Retirees
LNR Property Corp., the real estate finance company co- owned by Cerberus Capital Management LP, was accused in a lawsuit brought in bankruptcy court of defrauding creditors including retired California public employees of $700 million.
Creditors of a defunct California land company sued LNR in U.S. Bankruptcy Court in Wilmington, Delaware, claiming LNR and homebuilder Lennar Corp. drained $1.4 billion out of a joint venture that left their partners with nothing. Those partners, including the California Public Employees’ Retirement System, lost their $970 million investment, according to the suit.
LNR and Lennar knew that the company they controlled, LandSource Communities Development LLC, was insolvent when lenders represented by Barclays Capital Plc loaned it as much as $1.55 billion in February 2007, creditors claimed in the lawsuit. Instead of using the money to recapitalize LandSource, the company paid a special distribution of $1.4 billion to LNR and Lennar, creditors claimed.
LandSource filed for bankruptcy in June 2008. Under the company’s plan of reorganization approved last year, creditors set up a litigation trust that filed the lawsuit against LNR. Lennar wasn’t named in the complaint, filed on June 8. The Sacramento Bee first reported the lawsuit yesterday.
LNR spokeswoman Jen Brown declined to comment. A spokesman for Lennar didn’t immediately return a message.
The case is Landsource Creditor Litigation Liquidating Trust v. LNR NWHL Holdings, Inc. 10-51219, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Gems TV (USA) Asks For Extension on Bankruptcy Exit Plan
Gems TV (USA) Ltd., the bankrupt television retailer, has asked the U.S. Bankruptcy Court in Wilmington, Delaware for permission to extend the period during which it would be the only party allowed to file a plan for exiting from its Chapter 11 bankruptcy and seek support for it, according to court files.
It is the debtor’s first request for an extension, the company said in court files.
Gems TV has asked the court to extend the period for filing the plan to Nov. 1 and the period for seeking support for the plan to Jan. 3, 2011, in order to give it more time to file and gain approval of a disclosure statement, which is currently due Aug. 31, court files showed.
Gems TV has expended “substantial time and effort” to liquidating remaining inventory, selling “certain non-inventory assets,” and negotiating the terms of a Chapter 11 exit plan “with several key parties,” and handling administrative matters, and therefore should be given the additional time it requests, the debtor said in a court filing.
A hearing is scheduled for Aug. 31 at 2 p.m. at the U.S. Bankruptcy Court in Wilmington.
The case is In re GemsTV (USA) Ltd., 10-11158, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Rangers Bidder Can’t Take Field Without Baseball’s Blessing
Winning the Texas Rangers at auction will require a high bid, approval from owners of at least 23 of the 30 Major League Baseball teams and Commissioner Bud Selig’s blessing.
Those hurdles set the Rangers sale apart from the typical bankruptcy auction, where the highest offer wins.
Bids are to be announced today in U.S. Bankruptcy Court in Fort Worth, Texas.
The team filed for bankruptcy May 24 and proposed, with the commissioner’s approval, to sell the club to Nolan Ryan, the team’s president, and his partner, attorney Chuck Greenberg, for $575 million. A group of hedge funds that own the team’s debt, including Monarch Alternative Capital, objected.
William Snyder, appointed by the court as chief restructuring officer to evaluate the proposed sale, has pushed for an auction, and the Rangers agreed to take offers from buyers acceptable to Major League Baseball. The winner will also need the approval of 75 percent of baseball’s owners. The Rangers have defended the Greenberg-Ryan deal.
Patrick Courtney, a spokesman for Major League Baseball, Kevin Sullivan, a spokesman for Greenberg and Ryan’s company, and Mark Semer, a Rangers spokesman, all declined to comment.
Last night, Mark Cuban, owner of the National Basketball Association’s Dallas Mavericks, and Houston businessman Jim Crane submitted a joint bid to compete against the Greenberg- Ryan deal, according to two people familiar with the matter. The judge ordered the auction to move forward.
The case is In re Texas Rangers Baseball Partners, 10- 43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
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Texaco Bankruptcy Can Be Reopened to Halt Lawsuit
Texaco Inc., the oil company bought by Chevron Corp. in 2001, can reopen its 1987 bankruptcy to stop a lawsuit by Louisiana property owners seeking damages for alleged toxic waste contamination, a judge said.
All such claims against Texaco and its successors were discharged in accordance with the court order approving its Chapter 11 plan, U.S. Bankruptcy Judge Robert Drain in White Plains, New York, ruled yesterday. He granted Texaco’s request to reopen the bankruptcy case to enforce that order.
Kling Realty Co. and Walet Planting Co. sued Texaco and Chevron USA Inc. in 2006, seeking damages for the alleged contamination.
Mickey Driver, a spokesman for San Ramon, California-based Chevron, didn’t immediately return a call for comment.
The bankruptcy case is In Re Texaco Inc., 87-20142; U.S. Bankruptcy Court, Southern District of New York (White Plains).
Tribune Bankruptcy Delayed as Fraud Claims Studied
Tribune Co. creditors won more time to review evidence behind claims the publisher’s 2007 buyout was a fraudulent transfer after the company agreed to delay its effort to exit bankruptcy.
U.S. Bankruptcy Judge Kevin J. Carey in Wilmington, Delaware, ordered the evidence behind a court-appointed examiner’s report on the buyout to be publicly released. That includes interview transcripts, e-mails and other documents.
To give creditors time to study the evidence, Carey said he would delay a hearing on the company’s reorganization plan by more than a month to Oct. 4. Creditors also got more time to decide how to vote on the company’s reorganization plan.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).
MGM Resorts’ Loss Widens After CityCenter Writedown
MGM Resorts International, the biggest casino operator on the Las Vegas Strip, reported a wider second-quarter loss after a writedown of its CityCenter joint venture, and the new resort posted an operating loss. The news comes as Las Vegas continues struggling to recover from a record two-year slump.
The company’s net loss was $883.5 million, or $2 a share, compared with $212.6 million, or 60 cents, a year earlier, the Las Vegas-based company said yesterday in a statement. MGM booked a $1.12 billion reduction in its CityCenter valuation. Excluding some items, the loss was 35 cents, wider than analysts’ projection of a loss of 24 cents, the average of 20 estimates compiled by Bloomberg.
CityCenter, the $8.5 billion hotels and casino project with Dubai World that MGM opened in Las Vegas in December, will be profitable in the second half of this year as conventions help lift occupancy, the company forecast in May. CityCenter yesterday reported an operating loss of $128 million for the quarter, including a condominium writedown. MGM’s sales rose 2.9 percent to $1.54 billion.
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U.S. July Consumer Bankruptcy Filings Rose: Chart
Consumer bankruptcy filings rose in July, according to American Bankruptcy Institute and the National Bankruptcy Research Center. There was a year-over-year increase of 8.9 percent in bankruptcy filings for the month of July. The total number of consumer filings in July was 137,698
For the chart, click here.
Apollo Investment Corporation, owner of real estate investment trust Innkeepers USA Trust, filed a response to a motion made by Midland Loan Services, Inc., the special servicer for the fixed rate trustee, asking for modification of certain discovery deadlines and establishing a schedule for depositions.
Innkeepers is “working with Midland to facilitate discovery” and has provided “extensive” information and documents, including financial and “property-level information,” the debtor said in court papers.
While Innkeepers proposes a process for completing discovery before a Sept. 10 hearing, Midland’s discovery requests are “overly broad,” the debtor said in a court filing. The discovery relates to whether there is sufficient cash collateral to protect creditors and whether the proposed Plan Support Agreement with Lehman Brothers is an exercise of the debtor’s “reasonable business judgment.” Innkeepers filed for protection under Chapter 11 of the Bankruptcy Code July 19.
The case is In re Innkeepers USA Trust, 10-13800, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Bankrupt New York art dealer Lawrence Salander was sentenced to six to 18 years in prison for grand larceny and fraud, almost three years after he and his Upper East Side gallery declared bankruptcy. Salander, 61, was arrested in March 2009 and pleaded guilty earlier this year to stealing $120 million from clients and investors including tennis player John McEnroe and actor Robert De Niro.
The former owner of the Salander-O’Reilly Galleries has paid no restitution, his defense attorney and prosecutors said.
The art dealer said at his plea hearing that he defrauded consignors of art to his gallery, as well as businesses and investors in art. The gallery went into Chapter 11 in November 2007 after being sued for alleged improper dealings with artworks. The liquidating gallery is being run by an independent chief restructuring officer.
Lawrence Salander and his wife filed under Chapter 11 in November 2007. Their cases were converted to liquidation in Chapter 7 in May 2008. An auction conducted by Christie’s International of artworks belonging to bankrupt Salander- O’Reilly Galleries LLC brought in $2.1 million, below the pre- sale low estimate of $2.3 million. One-third of the lots didn’t sell at all.
The criminal case is People v. Salander, 09-03581, New York State Supreme Court, New York County (Manhattan).
The individual bankruptcy case is In re Lawrence Salander, 07-36735, U.S. District Court, Southern District of New York (Poughkeepsie). The gallery’s case is In re Salander-O’Reilly Galleries LLC, No. 07-30005, both in the U.S. Bankruptcy Court, Southern District of New York (Poughkeepsie).
Lafarge Placed Under Review by Moody’s, Possible Downgrade
Lafarge SA, the building materials supplier, saw its senior unsecured regular bond and debenture rating of Baa3 placed on review yesterday for possible downgrade by Moody’s Investors Service, the ratings company said in a statement.
The action arose from Moody’s “expectation that Lafarge will find it challenging to achieve leverage ratios in the next few quarters” to keep it “in line with triggers” set by Moody’s for the company to keep an investment grade rating, Moody’s said in the statement. While Moody’s anticipates a “pickup” in the company’s business in the second half of 2010, the ratings company is concerned that Lafarge’s “overall capital structure may not improve as quickly as expected,” it said in the statement.
The review will focus on credit metrics and the possible development of Lafarge’s building materials market.