Tronox Inc.’s dispute with Anadarko Petroleum Corp. and its Kerr-McGee Corp. unit over environmental liabilities will go to trial in December 2011, after the U.S. agreed to meet a Nov. 1 deadline to produce documents for its claims of more than $5 billion.
Tronox, a bankrupt chemical maker, is scheduled for a Sept. 16 hearing to seek approval of a Chapter 11 plan to reorganize. Separately, Tronox’s official committee of equity holders has made a proposal to rival the company’s own reorganization plan, which has equity financing in place, lawyer David Crichlow told U.S. Bankruptcy Judge Allan Gropper in Manhattan yesterday.
Crichlow said equity holders are still seeking a consensual resolution, but will ask him to terminate Tronox’s control of its bankruptcy if equity holders don’t get a “fair” distribution under Tronox’s plan.
Tronox has also made progress toward a deal to settle its environmental liabilities, Jonathan Henes, a lawyer for Tronox, told Gropper. He declined to give further details, citing concerns of market-moving information.
The Chapter 11 petition by Tronox in January 2009 listed assets of $1.56 billion and debt of $1.22 billion. Debt includes $213 million on a secured term loan and revolving credit, $350 million in 9.5 percent senior notes, and a $40.7 million accounts receivable securitization facility.
The bankruptcy case is Tronox Inc., 09-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
For more about Anadarko, see Debt Investing section, below.
Sea Island Files for Bankruptcy With Prepackaged Deal
Sea Island Co., a closely held resort and real estate development company, filed for Chapter 11 court protection yesterday in Savannah, Georgia, in a so-called prepackaged bankruptcy.
The company would be liquidated under an Aug. 4 sale agreement, according to a reorganization plan filed with the petition. Sea Island Acquisition LP, the so-called stalking- horse bidder, agreed to pay $197.5 million, Sea Island said in the disclosure statement explaining the plan.
About $170 million would be distributed to secured lenders under the plan. Sea Island Acquisition is a partnership formed by investment funds managed by Oaktree Capital Management LP and Avenue Capital Group, Sea Island said in a statement today.
Sea Island’s units also filed for bankruptcy. The St. Simons, Georgia-based company has assets and debt of as much as $1 billion each and as many as 5,000 creditors, according to a court filing. Synovus Bank, Bank of America Corp. and Bank of Scotland are the secured lenders.
Secured lenders will provide $5 million in revolving credit. The resorts will “continue operating as usual,” Sea Island said today.
The case is In re Sea Island Company, 10-21034, U.S. Bankruptcy Court, Southern District of Georgia (Savannah).
Mexicana Pilots, Investors Discuss Plan for Bankrupt Carrier
The pilots union for Compania Mexicana de Aviacion, Mexico’s largest airline by passengers, said it has spoken with as many as three possible investors as it tries to form a group to rescue the carrier from bankruptcy.
Compania Mexicana filed for protection in both Mexico and the U.S.
The union is interested in buying a stake in the airline and is willing to modify its collective bargaining agreement to secure a deal, its head, Fernando Perfecto, said in an interview in Mexico City on Aug. 9. He declined to name the potential investors or say what concessions the union might make.
Mexicana, which filed for bankruptcy last week, has said it wants to pare pilots’ and flight attendants’ pay to compete with low-cost carriers such as Volaris and Interjet, which have grabbed 21 percent of the market in less than five years. The Grupo Mexicana de Aviacion SA unit has cut flights and suspended ticket sales because its finances have “deteriorated.”
Perfecto said the airline has failed to capture market share and should consider a strategic alliance with the country’s No. 2 carrier, Grupo Aeromexico SA.
Mexicana flies to more than 65 national and international destinations, including in the U.S., Canada, Europe and Latin America.
The U.S. case is Compania Mexicana De Aviacion SA de CV, 10-14182, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Trump Entertainment May Seek Hotel Partner to Upgrade Plaza
One option is a joint venture, in which the company “would probably donate the real estate,” Chief Executive Officer Mark Juliano said in an interview. The partner would contribute capital into the property for renovation, he said.
Upgrading Trump Plaza to 1,500 rooms from 940 would help Trump Entertainment win more convention business, as Atlantic City seeks to replace gamblers who are going to new casinos in neighboring states, according to Juliano.
Trump Entertainment emerged from bankruptcy July 16 under the control of former bondholders led by Marc Lasry’s Avenue Capital Group, which now owns 22 percent. Company founder Donald J. Trump got 5 percent of the equity and warrants to buy another 5 percent for continued use of his name. A bankruptcy judge ruled in April that the bondholders’ bid was better for creditors than a competing offer by investor Carl Icahn, who acquired the company’s bank loan.
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Zell Can’t Be Made to Pay for Tribune Pension Losses
Sam Zell can’t be made to pay for Tribune Co. retirement fund losses, a judge ruled, rebuffing workers who claim the billionaire caused the company’s employee stock ownership plan to lose value.
The workers sued Zell and his closely held company, EGI-TRB LLC, in 2008 after he took the Chicago-based newspaper publisher private in an $8.3 billion transaction. They alleged Zell used their plan to buy back shares, burdening it with unsustainable debt. The workers say Zell is a fiduciary for the plan.
While the workers sought disgorgement of payments made to Zell and EGI-TRB by Tribune in the acquisition, U.S. District Judge Rebecca Pallmeyer in Chicago ruled yesterday that they can’t because Tribune isn’t directly involved in the lawsuit.
The publisher filed for bankruptcy court protection in Wilmington, Delaware, less than one year after going private. Some creditors have alleged the buyout was a fraudulent transfer because it added more than $8 billion in debt to the company while benefiting only Zell and his investors.
The case is Neil v. Zell, 08cv6833, U.S. District Court, Northern District of Illinois (Chicago).
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NEC Holdings Corp. (National Envelope), the largest closely held envelope maker in the U.S., has asked the U.S. Bankruptcy Court in Wilmington, Delaware to approve an agreement with Getzler Henrich & Associates LLC., a management consulting firm.
Under the agreement, Getzler Henrich would provide William H. Henrich and Mark Samson to serve as co-chief restructuring officers and temporary staff for the debtor and its affiliates. Getzler Henrich has experience in providing “restructuring services,” the debtor said in court papers. A hearing is scheduled on the request for Aug. 23. Objections must be filed no later than Aug. 16.
NEC, based in Uniondale, New York, filed for bankruptcy protection on June 10, listing assets and debt of as much as $500 million each, according to court documents. The company operated its business as a debtor-in-possession since the filing the petition. NEC said the recession and increased use of e-mail has eroded sales, leading to more than three years of losses.
The lead case among the debtor and its affiliates is In re NEC Holdings Corp., 10-11890, U.S. Bankruptcy Court, District of Delaware (Wilmington).
An equity holder of bankrupt paper mill company AbitibiBowater Inc. has asked the U.S. Bankruptcy Court in Wilmington, Delaware, to reconsider a request made July 16 that was denied by the court, for the appointment of an equity security holders committee, according to court papers. The new request was made Aug. 6 by Peter I. Shah. In the July motion, a group of equity holders argued they need a committee to protect their interests because under the proposed plan of reorganization, the interests of equity holders “will be wiped out,” according to court files. The group disputed the debtor’s claim that it is “hopelessly insolvent.” AbitibiBowater was formed in October 2007 through a merger of Montreal-based Abitibi-Consolidated Inc. and Greenville, South Carolina-based Bowater Inc.
The case is AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Anadarko Debtors Forgiving Spill in Bond Issues
Companies are taking advantage of borrowing costs near the lowest in six years to issue $51 billion of debt this month, the fastest start to an August on record, according to data compiled by Bloomberg. Anadarko Petroleum Corp., Ally Financial Inc. and Rite Aid Corp. led 12 companies selling $11.7 billion of debt yesterday.
Anadarko sold $2 billion of notes that lack creditor protections against claims stemming from the worst oil spill in U.S. history, underscoring how corporations are gaining the upper hand over debt investors.
Buyers of Anadarko’s seven-year notes will rank lower than winners of damages in lawsuits or settlements arising from the accident and holders of debt backed by the company’s divisions, said Adam Cohen, founder of Covenant Review LLC, a research firm that analyzes corporate bonds’ investor safeguards. Anadarko, based in The Woodlands, Texas, owns a 25 percent stake in the Gulf of Mexico well that BP Plc sealed last week.
John Christiansen, an Anadarko spokesman, declined to comment.
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New Jersey’s Xanadu Mall Taken From Colony by Lenders
Meadowlands Xanadu, the unfinished $2 billion New Jersey shopping mall designed with an indoor ski slope and a Ferris wheel, was taken over by lenders from a group led by Colony Capital LLC after construction stalled.
The creditors, including Credit Suisse Group AG, Capmark Financial Group Inc. and an affiliate of Fortress Investment Group LLC, had given the Colony-led group until yesterday to raise additional equity, four people with knowledge with the matter said last week.
Caroline Luz, a spokeswoman for Santa Monica, California- based Colony, declined to comment on the handover.
The lenders are in talks with new developers to finish the project, the group said in a statement yesterday. Their plans include a rebranding, refinishing the exterior and a completion before the 2014 Super Bowl at the stadium next to the site. Xanadu lenders are seeking to revive a project that has been plagued by delays since construction began five years ago.
Downgrades/Other Ratings Actions
Nabors Ratings Reviewed by Moody’s for Possible Downgrade
Nabors Industries Inc.’s ratings are under review by Moody’s Investors Service, according to a statement yesterday by the ratings company. Approximately $2.4 billion of rated debt may be affected, Moody’s said in the statement.
The action is in response to an announcement by Nabors, a land drilling company, that it has entered into an agreement to acquire Superior Well Services, Inc., an oilfield services company, for approximately $900 million.
Moody’s is “concerned” that the acquisition of a new service line for the company “will increase its already elevated leverage metrics,” said Moody’s vice president Pete Speer. The ratings company also sees “diminishing prospects for substantial debt reduction in 2011.”
The ratings review will focus on management’s specific plans for funding the acquisition, and whether exchangeable notes will be retired or refinanced to maintain liquidity, Moody’s said in the statement.
Tops Holding Put on Review for Possible Downgrade by Moody’s
Tops Holding Corp. and its units have been placed on ratings review by Moody’s Investors Service, according to a statement yesterday by the ratings company. The review includes the corporate family rating of B3, its probability of default rating of B3, and “other long term debt ratings.”
The review stems from Tops’ news “that it has made a return of capital to its shareholders,” Moody’s said in the statement. Moody’s had earlier noted that “continued demonstration of an aggressive financial policy could result in a downgrade,” according to the statement.
The review will focus on the company’s financial policy and objectives, and “revision of expected credit metrics,” Moody’s said.