Related News:
Movie Gallery, BankUnited, Lehman, Fleetwood, Hawaii Biotech: Bankruptcy
Almatis BV, a producer of specialty alumina products, scheduled what should be an uncontested approval of a revised reorganization plan at a Sept. 20 hearing after the bankruptcy court in New York approved the explanatory disclosure statement yesterday, the company said in a statement.
The judge also approved a settlement with Oaktree Capital Management LLC, a first-lien lender which had intended to take over ownership of Almatis despite opposition from lower ranking creditors.
Instead of assuming ownership, the settlement gives full payment and interest at the default rate to Oaktree and other holders of first-lien debt owed $676 million. In addition, Almatis will pay $5.25 million in reimbursement of the senior lenders’ expenses. Finally, the senior lenders receive releases of claims that could be brought by Almatis and junior lenders, to the extent bankruptcy law permits.
In return, Oaktree agreed to support the revised plan and accept payment of the claim in the currency in which the debt was originally sold. Oaktree said it holds 46 percent of the first-lien debt.
The original plan sponsored by Oaktree fell by the wayside when Almatis owner Dubai International Capital LLC produced a substitute plan giving more to subordinate lenders. In addition to Oaktree, the new plan is supported by more than two-thirds of the second-lien, mezzanine and junior mezzanine debt.
The revised plan will allow Dubai International to retain indirect ownership of 60 percent of Almatis in return for a new $100 million investment. The second-lien lenders are to have a new note for 52.1 million euros ($65.74 million) that pays interest in additional notes.
Mezzanine and junior mezzanine lenders are to end up having indirect ownership of 40 percent of reorganized Almatis.
Based on the junior lenders’ predicted fair market value for Almatis of $858 million, the new plan represents as much as a 90 percent recovery for the second-lien lenders. For the mezzanine and junior mezzanine lenders, the recoveries are 26 percent and 9 percent, respectively.
Almatis filed under Chapter 11 in April with a plan where the first-lien lenders would take ownership in exchange for debt, almost wiping out second-lien lenders in the process. The original plan would have given the junior lenders warrants for 3 percent of the equity value above an equity value of $325 million.
For details on the revised plan, click here for the July 26 Bloomberg bankruptcy report.
Second-lien lenders include affiliates of Babson Capital Management LLC, Alcentra Group Ltd., and Permira Advisers LLP.
Dubai International bought the Almatis business in 2007 for $1.2 billion. For details on the original plan, click here for the April 30 Bloomberg bankruptcy report.
Almatis revenue in 2009 was $400 million. For 2010, projected revenue is $534 million. Almatis began defaulting on senior debt in June 2009.
Rotterdam-based Almatis listed total debt of $1.3 billion, including $681 million on first-lien obligations, $77.7 million on second-lien debt, and $200.6 million on mezzanine debt. There is junior mezzanine debt of $80.6 million, plus trade debt of $20 million. Assets were listed for $1.53 billion.
The case is In re Almatis BV, 10-12308, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Updates
Lenders Hope to Stop Bashas’ Plan Implementation
Secured lenders to Bashas’ Inc. are appealing approval of the supermarket operator’s reorganization plan that the bankruptcy judge crammed down on the lenders in an Aug. 13 confirmation order. After a five-day hearing that began in July, U.S. Bankruptcy Judge James M. Marlar in Phoenix wrote a 75-page opinion this month explaining why it was proper to approve the plan over the lenders’ “no” vote.
The lenders filed papers asking Marlar to hold a hearing by tomorrow on their request to hold up implementation of the plan pending appeal. If Marlar allows the plan to go ahead, the lenders say they will ask a U.S. district judge for a stay pending appeal. The lenders, owed some $217 million, include Prudential Life Insurance Co. of America, Wells Fargo Bank NA, Bank of America NA and Compass Bank.
The lenders contend that Bashas’ will be unable to pay them in full over time as the plan provides. They also say the plan gives them interest at rates lower than outside lenders were willing to provide.
Although the lenders voted against the plan, the plan received affirmative votes from trade suppliers owed $30 million and other unsecured creditors owed $18 million.
Bashas’ had been unable to arrange outside financing for a prior version of the plan which it modified in June so the reorganization could go ahead without third-party financing.
The revised plan, like the former, promises to pay all creditors in full, so existing shareholders could retain their equity. Newark, New Jersey-based Prudential predicted that the company will fail a second time three years from now when $150 million in debt comes due under the revised plan.
For details on the revised plan, click here for the June 21 Bloomberg bankruptcy report.
The secured debt is comprised of some $120 million owing to bank lenders and $97 million owing to Prudential on secured notes. The banks and noteholders share the same collateral.
With 158 grocery stores in Arizona when the reorganization began, Chandler, Arizona-based Bashas’ has 134 locations. It filed under Chapter 11 in July 2009 in Phoenix, before the deadline ran out for filing preference suits against the lenders who received liens within 90 days of bankruptcy.
The case is In re Bashas’ Inc., 09-16050, U.S. Bankruptcy Court, District of Arizona (Phoenix).
Creditors File Opposition to Innkeepers Financing
Some secured lenders and preferred shareholders filed papers yesterday opposing bankruptcy court approval of a so- called plan support agreement committing a subsidiary of Lehman Brothers Holdings Inc. to stand behind a Chapter 11 reorganization of Innkeepers USA Trust, a estate investment trust owned by Apollo Investment Corp.
Worked out before Innkeepers filed under Chapter 11 on July 19, the so-called plan support agreement calls for Lehman subsidiary Lehman ALI Inc. to exchange its $238 million in mortgage debt for all the new Innkeepers equity. The Lehman subsidiary has floating-rate mortgages on 20 of Innkeepers’ 72 extended-stay and limited-service properties.
The lenders and other parties also filed papers regarding the motion by preferred shareholders for the appointment of an examiner and for approval of financing to allow improvements on the Innkeepers’ properties. The objections will be aired at a Sept. 1 hearing.
Some of the creditors’ papers were filed under seal, including those by secured creditors owed $825 million secured by 45 properties.
Preferred shareholders, including an affiliate of Appaloosa Management, argue that they shouldn’t be wiped out because Innkeepers isn’t liable for the mortgage debt. To the extent that any of the 72 properties has value above the mortgage, the excess would redound to the benefit of preferred shareholders.
The preferred shareholders contend that proposed financing would allow Lehman to foreclose if the contemplated plan isn’t eventually approved in a confirmation order.
Mezzanine lenders, owed $117 million, are similarly opposed to the Lehman financing and the plan support agreement. The contemplated plan would wipe out the mezzanine debt without any distribution. The official unsecured creditors’ committee is likewise opposed to aspects of the financing.
The creditors’ committee is against the idea of having an examiner. The committee says that creditors are conducting investigations of their own. The U.S. Trustee and the committee both say it’s not clear that Innkeepers has more than $5 million in unsecured debt. If the statutory threshold for unsecured debt isn’t met, there shouldn’t be an examiner, they say.
For other Bloomberg coverage of the filings, click here.
The Innkeepers plan contemplates that Lehman will sell half the new stock it receives to Apollo for not less than $107.5 million.
Innkeepers’ plan would have secured creditors, owed $825 million, receiving $550 million in fixed-rate mortgages on the 45 properties that are their collateral. There are another $206 million in mortgages on seven properties that would be reduced by the plan to $150 million. Innkeepers’ general unsecured creditors would receive $500,000 cash under the plan.
In total, Palm Beach, Florida-based Innkeepers has 72 hotels with 10,000 rooms in 20 states. Apollo acquired the company in July 2007 in a $1.35 billion transaction. The Innkeepers petition listed assets of $1.5 billion against debt totaling $1.52 billion.
Midland Loan Services Inc. is the servicer for the $825 million in mortgage debt.
The case is In re Innkeepers USA Trust, 10-13800, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Insiders Won’t Complete Brown Publishing Purchase
Brown Publishing Co., the publisher of the largest- circulation local newspaper on eastern Long Island, evidently won’t be sold after all to insiders.
A group including Roy Brown, the president and chief executive officer, was the high bidder authorized by the bankruptcy judge on Aug. 11 to purchase most of the assets for $22.41 million plus $900,000 in assumption or waiver of debt. According to a court filing, the Brown group said it can’t complete the deal because “its lender has withdrawn.”
If the Brown group failed to close, the bankruptcy judge authorized selling the assets to the second-place bidder, PNC Bank NA as agent for secured lenders. The court filing says the bank expects to complete the purchase by Sept. 3.
The Delphos Herald Inc. won the auction for three publications in Ohio by offering $3.59 million cash. The sale to Delphos has been completed.
Pending the sale to the bank, Brown Publishing is asking the bankruptcy court for an extension of the right to use cash.
Brown’s publications include Dan’s Papers, the weekly newspaper with the largest circulation on eastern Long Island, New York. It also publishes the Montauk Pioneer.
Based in Cincinnati, closely owned Brown listed assets of $94 million against debt totaling $104.6 million. First-lien lenders are owed $70.2 million on a revolving credit and term loan. Second-lien lenders are owed $24.3 million.
Brown has 15 daily, 32 weekly, 11 business and 41 free publications. There are also 51 websites. Seventy-eight of the publications are in Ohio. The business publications are in seven states.
The case is In re Brown Publishing Co., 10-73295, U.S. Bankruptcy Court, Eastern District New York (Central Islip).
Movie Gallery Disclosure Hearing Set for Sept. 8
Movie Gallery Inc., the former movie-rental chain, filed a liquidating Chapter 11 plan in July and will have a hearing on Sept. 8 for approval of the explanatory disclosure statement.
The disclosure statement has a blank where unsecured creditors eventually will be told the percentage they stand to recover from the plan. Secured lenders are giving up $5 million cash to fund a trust for the benefit of unsecured creditors.
The disclosure statement also has a blank were secured term loan lenders will be told their expected recovery.
To prevent anyone from rocking the boat before the plan comes to bankruptcy court for approval at a confirmation hearing, the bankruptcy judge last week extended Movie Gallery’s exclusive right to propose a plan until Oct. 31.
The plan creates two trusts, one for secured creditors and the other for unsecured creditors. The lenders will be paid cash on confirmation of the plan derived from the liquidation of their collateral. Other collateral converted to cash later will go into the lenders’ trust. The term loan lenders won’t assert deficiency claims against the trust for unsecured creditors.
The plan provides for substantive consolidation where all assets from the five Movie Gallery companies are combined and all liabilities go into one pot, without regard for the particular company that owed the debt.
Movie Gallery liquidated the last 1,028 movie-rental stores. It had some 2,600 stores in operation on filing under Chapter 11 again in February. The new filing was less than two years after a previous bankruptcy reorganization. Debt when the new case began included $100 million on a secured revolving credit, $394 million on a first-lien facility, and $146 million in claims held by second-lien creditors.
Movie Gallery operated under the names Movie Gallery, Hollywood Video and Game Crazy. It had 3,490 stores before the first bankruptcy. The prior Chapter 11 case concluded with a confirmed Chapter 11 plan in May 2007. For details on the second filing, click here.
The new case is In re Movie Gallery Inc., 10-30696, U.S. Bankruptcy Court, Eastern District Virginia (Richmond). The prior case is In re Movie Gallery Inc., 07-33849, in the same court.
American Mortgage Acceptance Sets Limits on Third Party Releases
American Mortgage Acceptance Co. has a confirmation hearing set for Sept. 30 in which U.S. Bankruptcy Judge Martin Glenn will consider the Chapter 11 plan and possibly provide an insight into the breadth of so-called third-party releases in reorganizations in the bankruptcy courts in New York.
U.S. Trustees, and creditors at times, have objected to releases in Chapter 11 plans in which creditors and shareholders may be barred from suing officers, directors and other creditors.
At a hearing in June, Glenn refused to approve American Mortgage’s disclosure statement because the plan would have given blanket releases to officers and directors, in the process prohibiting suits by shareholders and creditors.
American Mortgage submitted a revised plan this month. This time, Glenn approved the explanatory disclosure statement.
Under the current version of the plan, creditors and shareholders won’t be precluded from suing American Mortgage’s officers, directors, employees and advisers for violations of state or federal securities laws. Creditors will be barred from filing other types of lawsuits.
If the plan is confirmed, American Mortgage won’t be able to sue the officers, directors, employees and advisers. Shareholders wouldn’t be able to file so-called derivative suits in which they sue on behalf of the company.
The new plan reduces the extent of American Mortgage’s indemnification of its directors and officers. After the plan is confirmed, the directors and officers will be indemnified only to the extent that there was a pre-bankruptcy law or agreement that called for indemnification. The surviving indemnification obligations will represent unsecured claims against American Mortgage that won’t be wiped out by the plan.
The plan does give protection from claims to those who participate in the plan negotiation and confirmation process, as long as there was no gross negligence or willful misconduct.
American Mortgage was a real estate investment trust that had assets of $666 million in 2007. It now has two creditors. To read about the original version of the plan, click here for the May 14 Bloomberg bankruptcy report.
The case is In re American Mortgage Acceptance Co., 10- 12196, U.S. Bankruptcy Court, Southern District New York (Manhattan).
BankUnited Financial Gets Last Extension of Plan Exclusivity
BankUnited Financial Corp., the holding company whose bank was taken over and sold by regulators in May 2009, received a fourth and last extension of the exclusive right to propose a reorganization plan. Its exclusivity expires Nov. 22, under an order signed last week by a U.S. Bankruptcy Court judge in Miami.
Although BankUnited listed only $21 million in assets, its largest asset may be a $3.6 billion net operating loss carryforward. The Internal Revenue Service hasn’t said whether it will adjust the so-called NOL.
BankUnited says that the ability to offset future earnings against the NOL will be built into a “structured transaction” underpinning a Chapter 11 plan.
In addition to figuring out how to utilize the NOL, several lawsuits remain to be resolved. In one, BankUnited is objecting to the $4.9 billion claim filed in the Chapter 11 case by the Federal Deposit Insurance Corp., as receiver for the failed bank subsidiary. The creditors’ committee also is suing the FDIC to determine who owns claims against former officers and directors. The committee was authorized by the bankruptcy judge to investigate and bring lawsuits against company insiders.
BankUnited has a lawsuit pending to decide whether it or the FDIC owns the NOLs. BankUnited also has an unresolved $414 million claim in the bank’s receivership.
BankUnited’s formal lists of creditors show claims of $557 million owed to unsecured creditors. There are no secured claims.
The bank’s failure cost the FDIC $4.9 billion. It had deposits of $8.6 billion and $12.8 billion in assets. Debt of the Coral Gables, Florida-based holding company includes $120 million in convertible senior notes, $12.5 million of junior subordinated debentures, $184 million in mandatorily convertible senior notes known as HiMeds, and $237 million in trust preferred securities.
The case is In re BankUnited Financial Corp., 09-19940, U.S. Bankruptcy Court, Southern District Florida (Miami).
National Envelope Wins Approval for Sale to Gores Affiliates
National Envelope Corp. was authorized by a bankruptcy judge yesterday to sell the business to affiliates of Gores Group LLC under a contract valued at $208 million, including cash of $149.9 million.
Originally, Gores was under contract for $134.5 million. The price rose at auction last week. Part of the remainder of the price is $37.7 million in second-lien debt going to lenders on Term Loan B. Gores guarantees the debt.
For Bloomberg coverage of the sale-approval hearing, click here.
National Envelope called itself the largest closely held envelope manufacturing company in the U.S. It filed under Chapter 11 on June 10. The loan agreement with General Electric Capital Corp., the lenders’ agent, required a quick sale.
Based in Uniondale, New York, National Envelope has 14 manufacturing plants in 11 states, plus three warehouses. Net sales in 2009 were $676 million, with a $44.2 million net loss. The company said in its petition that its assets and debt were both less than $500 million. It said its liabilities include $74.3 million on a secured term loan, $70.6 million on a secured revolving credit and $89 million owed on unsecured debt to trade suppliers.
The case is In re NEC Holdings Corp., 10-11890, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Briefly Noted
Lehman Trial Against Barclays Over Brokerage Deal Resumes
Lehman Brothers Holdings Inc. finished submitting evidence in June at a trial in which it is attempting to prove that Barclays Plc took $11 billion more than it was entitled to receive when it bought Lehman’s brokerage business. The trial resumed yesterday, with Barclays beginning to present its witnesses. To read Bloomberg coverage of yesterday’s trial, click here. The trial began in May.
The Lehman holding company and its non-brokerage subsidiaries filed a revised Chapter 11 plan and disclosure statement in April. For details, click here and here for the April 15 and April 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).
Fleetwood Enterprises Wins Confirmation of Liquidating Plan
Fleetwood Enterprises Inc., once a producer of manufactured housing and recreational vehicles, sold most of its assets and won approval of a liquidating Chapter 11 plan from a bankruptcy judge in California on Aug. 6. As a result of negotiations, almost all objections to the plan were resolved, allowing all voting classes to favor confirmation.
Secured claims will be paid in full under the plan. Holders of the $84.3 million in 14 percent notes are expected to have a 21 percent recovery from receiving a portion of net proceeds from the liquidation after claims with higher priorities are paid.
General unsecured creditors, with $115 million to $195 million in claims, will recover from 10.3 percent to 17.4 percent from sharing part of net liquidation proceeds.
Holders of the $162 million in 6 percent notes would see 1.2 percent from the $2 million cash. Holders of the $1.1 million in 5 percent notes will get a recovery of 6.8 percent in dividing $75,000, according to the plan.
Fleetwood sold the recreational vehicle business for $53 million to private-equity investor American Industrial Partners. The manufactured housing operations were sold for $26.6 million cash to Cavco Industries Inc.
Based in Riverside, California, Fleetwood filed under Chapter 11 in March 2009, listing assets of $560 million and debt of $624 million. It had 19 manufacturing facilities in 11 states. In 2007, it was the second-largest manufactured housing maker in the U.S. and largest manufacturer of recreational vehicles exceeding 30 feet in length.
The case is In re Fleetwood Enterprises Inc., 09-14254, U.S. Bankruptcy Court, Central District California (Riverside).
Hawaii Biotech Assets Sold to Merck Unit for $3.1 Million
Hawaii Biotech Inc., a developer of vaccines for the West Nile and Dengue viruses, was authorized on Aug. 5 to sell its assets for $3.1 million to a Merck & Co. Inc. unit. Before an auction in July, the company planned on selling the business for $1.44 million to be paid by a credit against pre-bankruptcy secured debt.
Hawaii Biotech filed under Chapter 11 in December, needing to sell the assets quickly so there would be no interruption in clinical trials. The assets were intellectual property and proprietary information. The petition says assets and debt were both less than $10 million.
The case is In re Hawaii Biotech Inc., 09-02908, U.S. Bankruptcy Court, District of Hawaii (Honolulu).
Involuntary Filing
Boca Raton Bridge Hotel Hit with Involuntary Petition
Ten creditors owed $69,400 in total filed an involuntary Chapter 11 petition last week in West Palm Beach, Florida, against the owner of the Boca Raton Bridge Hotel.
The case is In re Boca Bridge LLC, 10-34538, U.S. Bankruptcy Court, Southern District Florida (West Palm Beach).
Advance Sheets
Two-Year Limit Means Two-Year Anniversary, Appeals Court Says
The U.S. Court of Appeals in St. Louis clarified when a fraudulent transfer suit must be brought to avoid dismissal for being untimely.
A husband filed under Chapter 11 on Sept. 13, 2004. On Sept. 13, 2006, the bankruptcy trustee sued the wife. The husband appealed a ruling that the suit was filed in time.
The appeals court found no ambiguity in the governing statute, Section 546(a) of the Bankruptcy Code, which in substance says that the suit couldn’t be commenced “after ... two years after” the filing of the Chapter 11 petition.
The appeals court rejected the husband’s argument that the two-year period ended on Sept. 12, 2006. The appeals court said a suit of the type may be filed on the “two-year anniversary.”
The case is Myers v. Raynor (In re Raynor), 09-2464, 8th U.S. Circuit Court of Appeals (St. Louis).
To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net.
Rate These Stories
Rate this Page