Lehman Brothers Holdings Inc. paid its lawyers and managers $44.5 million last month, bringing the investment bank’s total adviser fees to $917.6 million after 22 1/2 months in bankruptcy, a regulatory filing shows.
Restructuring firm Alvarez & Marsal LLC, which provided Lehman with its current chief executive officer, Bryan Marsal, led recipients with $326 million in fees for “interim management,” according to an Aug. 13 filing with the U.S. Securities and Exchange Commission.
Weil Gotshal & Manges LLP of New York has collected $212.3 million for acting as the investment bank’s lead bankruptcy law firm. Milbank Tweed Hadley & McCloy LLP got $61.1 million for advising Lehman’s creditors’ committee.
Kimberly Macleod, a Lehman spokeswoman, had no immediate comment. Bryan Marsal has said he expects to recover many times more money for creditors than the amount paid in fees.
By July 31, Lehman and its affiliates had cash and investments of $19.3 billion to liquidate and pay creditors, up from $18.9 billion at the start of the month, according to the filing. Lehman, once the world’s fourth-biggest investment bank, has said it may spend five more years selling assets to pay unsecured creditors as little as 14.7 cents on the dollar. Lehman has said creditors’ allowable claims may total $260 billion, compared with the $1 trillion originally filed.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
New Filings
Hawks Prairie Investments Filed Chapter 11 in Washington State
Hawks Prairie Investments LLC filed for protection under Chapter 11 of the U.S. Bankruptcy Code yesterday in Washington state. The Olympia, Washington-based company didn’t state a reason for the filing. The ownership of the debtor is held by Pacific Investment Group LLC and GBS II Investment LLC, each having a 50 percent interest. The three companies are managed by Tri M. Vo, according to court papers.
The debtor declared assets between $50 million to $100 million and debts in the range of $10 million to $50 million. Among the largest unsecured creditors was law firm Schwabe Williamson & Wyatt PC, which has a claim of $291,569 for professional services.
The case is In re Hawks Prairie Investments LLC, 10-46635, U.S. Bankruptcy Court, Western District of Washington (Seattle).
Ute Mesa Lot 1 Files Chapter 11, Says Western Bank is Claimant
Ute Mesa Lot 1 LLC filed yesterday for protection under Chapter 11 of the U.S. Bankruptcy Code in Colorado, according to court files.
The Aspen, Colorado-based company declared assets and liabilities each in the range of $10 million to $50 million, court papers showed. Ute Mesa Lot 1 and affiliate Ute Mesa Ltd. were sued in a state court action in Colorado brought by United Western Bank. The bank sued over a “loan default” and sought the appointment of a receiver, according information provided by the debtor with its bankruptcy petition. The bank is the company’s largest creditor in the bankruptcy case, holding a claim of $5.6 million, which the debtor disputes, according to a court filing.
In the state court lawsuit, the court appointed a receiver June 24 for the property called Lot 1 and two related properties, having a value of $10 million, the debtor said in the filing.
Ute Mesa Lot 1 was also sued by two building industry companies seeking to foreclose on mechanic’s liens. The suits, now consolidated, are pending, court files showed. Leathem Stearn of Aspen is listed as the holder of 100 percent of the debtor company’s equity, the debtor said in court papers.
The case is In re Ute Mesa Lot 1 LLC, 10-bk-30620, U.S. Bankruptcy Court, District of Colorado (Denver).
Updates
Mexicana to Return Three Aircraft to Wells Fargo
Compania Mexicana de Aviacion, Mexico’s biggest airline by passengers, reached agreements with leasing companies and will return three of five aircraft leased from Wells Fargo & Co., lawyers said.
One of the three planes was returned in July, Arthur Rosenberg, a lawyer for Wells Fargo Bank Northwest NA, said yesterday in an interview. William Heuer, a Mexicana lawyer, declined to comment on court papers showing that the airline has other agreements with leasing companies.
U.S. Bankruptcy Judge Martin Glenn in Manhattan is hearing Mexicana’s request for a so-called preliminary injunction that bars legal actions by creditors under Chapter 15 of the U.S. Bankruptcy Code. He has yet to rule after Mexicana’s service providers said the company hasn’t proven it will be able to meet payments for services.
Objections to the injunction by Wells Fargo and International Lease Finance Corp. were resolved, according to an agenda for the hearing. GE Capital Aviation Services’ objections also were settled, Heuer said in court. A hearing on the dispute with CIT Leasing Corp. was adjourned for a week.
The U.S. case is Compania Mexicana de Aviacion SA de CV, 10-14182, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
LyondellBasell Profit Surges as U.S. Plastics Margins Widen
LyondellBasell Industries NV, the chemical maker that emerged from bankruptcy in April, said profit excluding some items more than doubled as lower raw-material costs widened margins in U.S. plastics.
Earnings before interest, taxes, restructuring costs, inventory revaluation and other items surged to $1.4 billion from $571 million a year earlier, Rotterdam-based LyondellBasell said yesterday in a statement. Net income advanced to $8.84 billion compared with a $353 million loss in the year-earlier period. Sales jumped 40 percent to $10.5 billion.
LyondellBasell exited bankruptcy during the quarter with 70 percent less debt and a dozen fewer production sites. Operating profit quadrupled to $324 million in the unit that makes olefins, polyethylene and polypropylene resins in the Americas, because of lower raw-material costs and higher product prices.
The company was created by Access Industries Holdings LLC’s $5.7 billion purchase of Basell BV in 2005 and its $12.2 billion purchase of Lyondell Chemical Co. in 2007. The chemical maker sought bankruptcy protection in January 2009 when it ran short of cash as plastics demand plummeted during the global recession.
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Pilgrim’s May Absorb JBS USA in Reverse Merger, Batista Says
JBS SA, the world’s biggest beef producer, may turn its $7.1 billion Pilgrim’s Pride unit into the parent of U.S. operations in a so-called reverse merger after postponing an initial public offering of JBS USA, Chief Executive Officer Joesley Batista said.
JBS is weighing the transaction to prevent Brazil from taking greater control of the company after the BNDES state development bank bought $2 billion of convertible bonds, a person familiar with the situation said in an interview last month. The bonds are convertible into JBS stock if the Sao Paulo-based company fails to hold an IPO of JBS USA by 2011.
JBS controls more than 10 percent of global beef processing after about 30 acquisitions in the past 15 years, including the takeover of bankrupt Pilgrim’s Pride in September 2009.
Pilgrim’s Pride had sales of $7.1 billion in the year through September 2009. The operator of chicken processing plants and prepared-food facilities in 12 U.S. states filed for Chapter 11 protection on Dec. 1, 2008, because of “liquidity challenges.” The company emerged from bankruptcy in December. Under the Chapter 11 plan paying creditors in full, Brazil’s JBS SA acquired 64 percent of the stock for $800 million. Existing owners retained 34 percent of the equity.
Debt Activity
Fortress Takeover of AIG Lender Costs Bondholders $792 Million
American General Finance Inc. debt has lost at least $792 million since Fortress Investment Group LLC agreed to buy the lender last week, punishing bondholders from Loomis Sayles & Co. to Pacific Investment Management Co.
Fortress’s purchase is sparking concern that the buyout and hedge-fund firm will seek to swap or repurchase bonds at discounted prices to trim $17 billion of American General’s debt, according to analysts and investors. That’s reversing a June rally fueled by expectations that parent American International Group Inc. would sell the unit to a bank with top credit ratings.
American General’s bonds declined last week by the most since September 2008, when the U.S. government rescued AIG amid mounting losses on securities linked to subprime-mortgage debt. While the New York-based insurer is reducing lending to borrowers with the lowest credit scores, Fortress Chief Executive Officer Daniel Mudd, the former head of Fannie Mae, is seeking to gain from a potential rebound in consumer lending.
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Advance Sheets
8th Circuit Affirms That Rents Are Administrative Expense
The 8th U.S. Circuit Court of Appeals in St. Louis ruled that the Bankruptcy Appellate Panel for the 8th Circuit was wrong when it found that the entire rent due post-petition and pre-rejection wasn’t an administrative expense within the meaning of Section 365(d)(3) of the U.S. Bankruptcy Code. In the July 23 decision, Circuit Judge William Duane Benton, writing for the three-judge panel, said the meaning of Section 365(d)(3) is unambiguous and requires full payment of post-petition, pre- rejection rent obligations on unexpired leases of nonresidential property.
Brothers sharing the family name of Burvial entered into a three-year lease for uncropped land in March 2007. Two days before the second lease payment was due Dec. 1, 2007, the brothers filed a voluntary petition under Chapter 11. The brothers rejected the lease during the bankruptcy case in March 2008 and the landowner filed an administrative expense claim under Section 365(d)(3) for the rent and attorneys fees. The debtor brothers objected. The bankruptcy court agreed with a minority of courts that have held that the section is “ambiguous,” and held that a prorated amount of rent was due.
Both sides appealed to the bankruptcy appellate panel, which reversed the bankruptcy court, allowing part of the rent as recoverable. The debtors appealed to the 8th Circuit, arguing that the Dec. 1, 2007, rental payment was a pre-petition expense because the land had only been used during the 2007 farm season, so the land “added little value to the estate” after the filing. The 8th Circuit held that the language of Section 365(d)(3) isn’t ambiguous and rents must be paid when due after the petition date until the lease is either assumed or rejected, irrespective of whether the rental property adds value to the estate.
The decision is Burvial v. Roehrich (In re Burvial), 09- 2483, (8th U.S. Circuit Court of Appeals (St. Louis).
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9th Circuit Affirms Dismissal Accounts Receivable Claims
The 9th U.S. Circuit Court of Appeals in San Francisco affirmed a decision of the district court dismissing a claim based on an interest in an account receivable. Ta Chong Bank Ltd. entered into factoring agreements with Cyberhome Entertainment Inc., under which the bank agreed to purchase accounts receivable, including a $1.2 million account Cyberhome had with Hitachi High Technologies America, stemming from a transaction between the two companies. Cyberhome assigned its rights to collect the money to Ta Chong Bank. Though the bank notified Hitachi to make payments directly to it, Hitachi paid the $1.2 million to Cyberhome without the bank’s knowledge or consent, the decision said.
Several months after receiving the payment, Cyberhome filed for Chapter 7 protection and the trustee successfully sued Cyberhome to obtain an order stating that Cyberhome hadn’t perfected its lien on the $1.2 million prior to filing for bankruptcy. The trustee then brought an adversary proceeding against the Hitachi, claiming the accounts receivable payment belonged to the bankruptcy estate.
The action was removed to federal court, where the district court dismissed the case. On appeal, Judge Richard Mills, writing for the 9th Circuit, ruled for the trustee. He reasoned that the suit was “an improper appeal” of a bankruptcy court’s order, because in the earlier trustee suit, the bankruptcy court had found that the accounts receivable payment was part of the estate.
The decision is Ta Chong Bank Ltd. v. Hitachi High Technologies America, 08-17007 9th U.S. Circuit Court of Appeals (San Francisco).
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To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.
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