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General Growth, American Mortgage, HSBC-Madoff, PFF Bancorp: Bankruptcy
General Growth Properties Inc., the second-largest mall owner in the U.S., won court approval to move forward with its plan to exit bankruptcy as creditors protest the proposal.
U.S. Bankruptcy Judge Allan Gropper in New York yesterday approved a summary of the plan, known as a disclosure statement. Under the plan, General Growth would pay creditors in full and provide a recovery to shareholders, which is unusual in a bankruptcy case.
General Growth resolved most objections to the disclosure statement before yesterday’s hearing. Unsecured creditors still have “significant” problems with the plan, said Michael Stamer, an attorney for the group. Investors including Fairholme Funds Inc. will be able to receive cash for General Growth bonds to offset their investments, an option not available to other bondholders.
Heirs of Howard Hughes also have objected, saying they won’t get the same recovery as creditors or shareholders. Creditors can raise their objections when General Growth asks Gropper to confirm the plan at an Oct. 21 hearing, he said.
General Growth, based in Chicago, filed for bankruptcy last year after failing to refinance its debt load. The company plans to emerge from bankruptcy this year with $8.4 billion in financing.
The case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Updates
American Mortgage Bankruptcy Plan Terms Win Approval
American Mortgage Acceptance Co., a real estate trust formed in 1991, won approval of the terms of its plan to reorganize by giving creditors stock in a new company.
U.S. Bankruptcy Judge Martin Glenn in New York yesterday approved a revised disclosure statement, or description of the plan to exit bankruptcy. The new disclosure statement limits the scope of third-party transfers, Glenn said. He had raised the issue at an earlier hearing.
The company will transfer some assets to Taberna Preferred Funding I Ltd. to satisfy its claims. New common stock will be issued to C3 Initial Assets LLC. Other unsecured claims will be paid in full. Equity holders will get nothing.
In June, the judge refused to approve an earlier draft of the statement, which gave a blanket release to directors and officers, prohibiting suits by shareholders and creditors.
As soon as the company’s exit from bankruptcy becomes effective, it will issue new preferred shares to fund operations, according to court documents. It will maintain its status as a real estate investment trust.
Creditors have until Sept. 23 to vote on the plan.
American Mortgage Acceptance filed for bankruptcy in April. The company, which invests in mortgage loans and other debt secured by property, had assets of $666.4 million as of Dec.31, 2007, according to court documents. The company’s holdings lost value after the collapse of the market for mortgage-backed securities, according to court papers.
The case is In re American Mortgage Acceptance Co., 10- 12196, U.S. Bankruptcy Court, Southern District of New York.
HSBC Should Reveal Reports on Madoff Risk, Judge Says
HSBC Holdings Plc, Europe’s biggest bank, should turn over internal reviews of potential fraud and other operational risks at Bernard Madoff’s business from 2006 and 2008, a New York judge ruled.
U.S. Bankruptcy Judge Burton Lifland, in an Aug. 17 ruling, agreed to ask the High Court in London to order HSBC to hand over reports, contracts, audio recordings and documents related to examinations conducted by an affiliate of KPMG International. HSBC acted as custodian bank for several funds that invested with the con man.
The last review was commissioned by HSBC in September 2008, about three months before Madoff’s arrest, according to the ruling. London-based HSBC and trustee Irving Picard in New York reached an agreement on which documents should be turned over if the order is issued, Manhattan court filings show.
Picard is suing hedge funds and other parties that profited from the $65 billion fraud to repay victims. Madoff, 72, pleaded guilty last year and is serving a 150-year sentence.
HSBC spokesman Adrian Russell said the company can’t comment on ongoing litigation.
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Goldman Mortgage Denied Protective Order in RQB Bankruptcy
In the Chapter 11 case of RQB Resort LP and RQB Development LP, U.S. Bankruptcy Judge Paul M. Glenn yesterday denied a renewed motion made by Goldman Sachs Mortgage Co., a unit of Goldman Sachs Group Inc., seeking a protective order, according to court files. He did not provide a reason in the order.
Glenn denied the request, writing that the denial was “without prejudice to privileges and confidentiality of Goldman Sachs Mortgage, which should be preserved and may be claimed.”
The term “without prejudice” means the party is not barred from asserting rights or claims in the future.
Goldman Sachs Mortgage asked the court to issue an order prohibiting the debtors from continuing the deposition of Goldman Sachs Mortgage witnesses beyond the areas of inquiry described in the debtors’ notice of deposition.
Goldman Sachs Mortgage said the topic described in the notice of deposition related to the company’s valuation of property underlying a $193 million loan. Goldman Sachs Mortgage argued that discovery beyond valuation that probed loan analysis methods should be recognized for its “irrelevance and highly proprietary nature,” and therefore prohibited, it said in court papers.
The case is RQB Resort, 10-01596, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
N.Y. State’s DiNapoli Reserves Right to Sue Lehman Executives
New York State Comptroller Thomas DiNapoli, who urged the appointment of Lehman Brothers Holdings Inc. examiner Anton Valukas, said the $132.5 billion state retirement fund reserved its “potential right to undertake appropriate actions to recover the losses it sustained from its investments” in the bankrupt investment bank.
The New York State Common Retirement Fund lost $216.3 million over three years after it sold Lehman shares, which traded as high as $82 each in 2007, at 14 cents to 30 cents a share after the September 2008 bankruptcy, according to a court filing yesterday.
DiNapoli made the filing to object to Lehman’s disallowal of the fund’s claim.
The bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Briefly Noted
PFF Bancorp Inc., the holding company for PFF Bank & Trust, yesterday filed with the U.S. Bankruptcy Court in Wilmington, a monthly operating report for the month of July, 2010 and the period to date ending July 31. The report showed cumulative cash in the amount of $6.637 million during the period, and no cash receipts for the month, according to the report. Cumulative total receipts came to $1.389 million. Total disbursements, including net payroll, administrative costs, and professional fees and other expenses were $255,560 for the month of July. Cumulative disbursements to date were $3.272 million. Net cash flow in July showed a loss of $255,560, and cumulative net cash flow showed a loss of $1.883 million.
The case is In re PFF Bancorp Inc., 08-13127, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Fiddler’s Creek LLC, a developer of luxury residential communities, yesterday filed a financial report for the period July 1 to July 31, and cumulative figures for the period ending July 31, the filing showed. Funds at the beginning of July totaled $459,919 and fell to $129,092, according to the report. Cash sales, accounts receivable and other receipts totaled $1.835 million for the month and cumulatively came to $7.119 for the period. Total receipts for the month were $2.454 million and $11.487 million for the period. Total funds for the month and periods were, respectively, $2.914 million and $11.487 million. Total disbursements, including payroll, insurance, repairs, maintenance, and professional fees came to $2.332 million for the month and $10.905 million for the period, according to the filed report. The ending balances both for the month and cumulative period were $581,827.
The case is In re Fiddler’s Creek LLC, 10-3846, U.S. Bankruptcy Court, Middle District of Florida (Fort Myers).
Neff’s Creditors Ask to File Papers Under Seal
Neff Corp.’s committee of unsecured creditors asked U.S. Bankruptcy Judge Shelley C. Chapman on Aug. 18 to let it file under seal an “unredacted” version of a motion asking for permission to prosecute lender claims.
The final order on debtor-in-possession, or DIP, financing in the bankruptcy case would release Neff from obligations to certain lien holders and bar claims or challenges against the company. Aug. 18 was the deadline for challenging the order, according to court papers.
Previously, the committee filed a redacted version of the motion for permission to bring claims challenging the DIP order. The committee now seeks to file the motion under seal with confidential information revealed.
Responses to the motion must be filed by Sept. 3 and a hearing on the request is set for Sept. 9.
The case is In re Neff Corp., 10-12610, U.S. Bankruptcy Court, Southern District of New York Manhattan).
Foreclosure
Ackman Group’s Stuyvesant Town Foreclosure Postponed
A New York judge halted a foreclosure auction planned for next week on Stuyvesant Town-Peter Cooper Village, Manhattan’s biggest apartment complex, as creditors wrangle for control of the property.
A hearing will take place Sept. 2 on how to proceed, according to a statement yesterday from CWCapital Asset Management LLC, the special servicer for the senior mortgage on the property. Bill Ackman’s Pershing Square Capital Management LP and Winthrop Realty Trust had scheduled an Aug. 25 foreclosure auction after buying $300 million in defaulted mezzanine debt.
Senior lenders, who had been given permission to foreclose in June, also agreed not to initiate an auction before the hearing, according to an e-mailed statement from Pershing and Winthrop. The two companies want to take control of the complex under a plan that senior mortgage holders claim will put the 80- acre property in bankruptcy.
Bank of America Corp. and U.S. Bancorp, trustees for holders of the $3 billion senior mortgage, sued to stop the venture’s foreclosure yesterday. The complaint, filed in the New York state Supreme Court in Manhattan, claims the Pershing and Winthrop plan violates terms of an existing agreement among creditors. New York State Supreme Court Justice Richard Lowe is overseeing the case.
As junior creditors, Pershing and Winthrop must pay senior lenders $3.66 billion, which covers the first mortgage plus interest and penalties, before they do anything that might put them in control of the property, according to the lawsuit.
The Pershing and Winthrop venture agreed to a “short adjournment” of the auction until legal objections raised by the senior lenders, represented by CWCapital, are resolved in court, the companies said in the statement.
Tishman Speyer Properties LP and BlackRock Inc. bought Stuyvesant Town-Peter Cooper Village for $5.4 billion in 2006, a record New York commercial real estate deal at the time. They stopped payments on the $3 billion senior mortgage in January after the development’s value sank and the owners failed to raise rents as fast as anticipated.
The case is Bank of America Corp. v. PSW NYC LLC, 10- 651293, New York State Supreme Court in Manhattan (New York County).
Statistics
Municipal Bond Ratings Cuts Outnumber Upgrades, Fitch Reports
Ratings cuts on U.S. state and municipal bonds outnumbered increases for the sixth consecutive quarter amid lingering budget pressures, the longest streak since at least 2002, Fitch Ratings said.
Fifty-seven public-finance issues representing $71.2 billion were downgraded and 36 valued at $28 billion were upgraded in the three months ended June 30, Fitch said yesterday in a report. The ratio of ratings cuts to increases was 1.6-to- 1. That’s down from the first quarter, when it was almost 2-to- 1. Fitch assigned negative outlooks to 246 credits in the second quarter, down from 305 in the previous three-month period, according to the report. That’s the first decrease in the number of negative outlooks since the fourth quarter of 2007. More than 90 percent of ratings had a stable outlook on June 30, the report said.
In the tax-supported bond sector, downgrades outnumbered upgrades by 44 to 18, Fitch said.
Downgrades/Other Ratings Actions
Transocean’s Senior Unsecured, Short-Term Ratings Downgraded
Transocean Inc.’s senior unsecured and short-term ratings were downgraded by Moody’s Investors Service, the ratings company said in a statement.
The senior unsecured rating was downgraded Aug. 18 to Baa3 from Baa2. The downgrade was made with a “negative outlook,” Moody’s said in the statement. The short-term rating was downgraded to Prime-3 from Prime-2, Moody’s said.
In addition, Moody’s also downgraded ratings for debt at unit Transocean Worldwide Inc., which was formerly known as Global Santa Fe, and at unit Global Marine Inc., to Baa3 from Baa2. The ratings company left those two ratings under review for further downgrade, it said in the statement.
The downgrade to Baa3 is a result of Moody’s view that Transocean “potentially faces significant liability exposure due to its involvement in the blowout and subsequent oil spill from the Macondo well and a concern as to whether it will be fully protected under its indemnification from BP,” said Ken Austin, Moody’s Vice President.
DigitalGlobe’s Liquidity Rating Downgraded by Moody’s
DigitalGlobe Inc.’s speculative grade liquidity rating has been downgraded to SGL-3 from SGL-1 by Moody’s Investors Service, the rating company said in a statement.
The action reflects Moody’s “concern that the accelerated timeline of constructing the next generation imaging satellite, WorldView-3, will weaken the company’s liquidity over the next 12 to 18 months,” according to the statement.
Moody’s affirmed all of the company’s other ratings, including the Ba3 corporate family rating, the Ba3 probability of default rating, and the Ba3 rating on the senior secured notes, the ratings company said in the statement.
The outlook “remains stable,” Moody’s said.
Radio One on Review for Possible Downgrade by Moody’s
Radio One Inc.’s ratings were placed on review for possible downgrade by Moody’s Investors Service, according to a statement released by the ratings company.
Approximately $650 million of rated debt is affected, Moody’s said in the statement. The ratings placed on review include Radio One’s Caa1 corporate family rating, and its Caa2 probability of default rating.
The review stemmed from the company’s announcement that Radio One’s bank group “blocked its August 15 interest payment on the 6.375% senior subordinated notes due 2013,” Moody’s said in the statement. The bank group “has the ability to block the interest payment as Radio One has been in violation of the total leverage covenant under its credit agreement as announced in July,” Moody’s said in the statement.
To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.
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