Philadelphia Inquirer, MCP, Longyear, Blockbuster, Tronox: Bankruptcy

Philadelphia Inquirer lenders won a bankruptcy court auction for the newspaper and its sister publication with a high bid of $105 million, outbidding Raymond Perelman, father of billionaire Ronald Perelman.

Perelman, 93, declined to raise his $85 million offer, which included $10 million from the Philadelphia Carpenters Union pension fund, he said in an interview after the auction. The Philadelphia-area resident said he decided to bid for the paper for the second time this year to make sure it survives the bankruptcy of parent company Philadelphia Newspapers LLC.

The auction began nine days after the newspapers’ main lenders backed out of a contract to buy them in a deal valued at about $139 million. The lenders, including hedge fund operator Angelo Gordon & Co. and a unit of Credit Suisse Group AG, returned with an offer similar to the earlier one.

Fred Hodara, an attorney for the lenders, said the group would have to complete the sale this time, even if it runs into the same problem with the Teamsters union that scuttled the last deal. The judge engineered a process designed to guarantee the sale will close, including requiring the lenders to post a non- refundable deposit of more than $15 million, Hodara said in an interview.

The lenders refused to complete the previous deal after Teamsters members rejected changes to their pension plan.

The lenders and 14 of the 15 unions at the newspapers have agreed to new employment contracts, Hodara said. The only holdout is the Teamsters, which has rejected a proposal to convert its pension to a 401(k) retirement plan, he said.

John P. Laigaie, head of Teamsters Local 628, didn’t immediately return a call seeking comment.

Under the current offer, the lenders will pay $105 million in cash for the newspapers. U.S. Bankruptcy Judge Stephen Raslavich in Philadelphia said in court he will approve the auction results after minor wording changes are made to the sale contract.

Philadelphia Newspapers filed for bankruptcy in February 2009, blaming the recession and a drop in advertising.

The case is In re Philadelphia Newspapers LLC, 09-11204, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).

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New Filings

MCP Ontario Festival Files for Bankruptcy in California

MCP Ontario Festival LLC, a real estate company, filed for bankruptcy protection in Santa Ana, California.

The Newport Beach, California-based company declared assets of as much as $10 million and liabilities of as much as $50 million in its Chapter 11 petition.

MCP Ontario described real property assets valued at $8.1 million, secured claims of $25.4 million, and unsecured nonpriority claims of $5.6 million, court papers showed. The properties are in Ontario and Yucaipa, California, according to court files.

First Regional Bank has $8.9 million in claims, with $8 million secured.

The case is In re MCP Ontario Festival LLC, 10-23351, U.S. Bankruptcy Court, Central District of California (Santa Ana).

Longyear Properties Files Chapter 11 in Boston

Longyear Properties LLC filed for Chapter 11 bankruptcy protection in Boston.

The Norwood, Massachusetts-based company estimated assets and liabilities in the range of $10 million to $50 million each. Longyear has fewer than 100 creditors, court files show.

The 20 largest unsecured creditors included trade debt owed to Columbia Construction Co. of $535,076, Robinson & Cole LLP of $129,715 and WB Cameron of $88,583. The remaining creditors are owed less than $60,000 apiece, according to court papers.

The case is In re Longyear Properties LLC, 10- 20326, U.S. Bankruptcy Court, District of Massachusetts (Boston)

Blockbuster

Blockbuster Wins Interim Loan Approval, Other First Day Relief

Blockbuster Inc., the movie-rental company that filed for bankruptcy yesterday, won court permission to draw $20 million of a $125 million loan that will let it operate while it reorganizes to emphasize online rentals.

U.S. Bankruptcy Judge Burton Lifland approved the loan yesterday at a hearing in Manhattan. Dallas-based Blockbuster said it will only spend $10 million before Sept. 27. The company said in its Chapter 11 petition that it agreed with a group of bondholders on a plan of reorganization and secured the loan to finance operations in the meantime.

In view of the bondholder support, the company expects to be able to restructure and “ensure its long-term viability,” Stephen Karotkin, a lawyer for Blockbuster, said.

The company sought bankruptcy protection after failing to adapt its storefront model to Web technology pioneered by rivals such as Netflix Inc. Sales at Blockbuster, with about 3,000 stores in the U.S., shrank 20 percent last year while Netflix grew and Coinstar Inc. put Redbox DVD vending machines in supermarkets and drugstores.

Blockbuster hasn’t made any decisions about store closings, which will be “a consideration” during the bankruptcy case, Chief Executive Officer James Keyes said in an interview after yesterday’s hearing.

The judge approved only a portion of the loan to give creditors time to review terms. Blockbuster initially sought approval to borrow $45 million of the bankruptcy loan. It will return to court Sept. 27 for permission to draw another $25 million before seeking approval of the entire loan.

Under the proposed reorganization plan, there will be no recovery by the holders of the company’s outstanding subordinated debt, preferred stock or common stock, Blockbuster said in a statement. Senior bondholders will swap their debt for equity in the reorganized company.

Billionaire Carl Icahn’s Icahn Capital LP, a senior creditor, would have the authority to choose two directors outright and would need agreement from Monarch Alternative Capital LP and other noteholders to pick a third, according to a term sheet for the loan.

The company listed assets of $1.02 billion against debt of $1.46 billion in its Chapter 11 petition.

Lifland yesterday also gave the company permission to continue paying employees, honoring customer reward programs and maintaining its cash-management system.

The case is In re Blockbuster, 10-14997, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Updates

Tronox Wins Approval of Bankruptcy Plan Description

Tronox Inc., a bankrupt chemical maker, won court approval of its disclosure statement explaining the terms of its plan to exit bankruptcy protection.

U.S. Bankruptcy Judge Allan Gropper in New York approved the statement yesterday at a hearing. The approval of the disclosure statement is an important step toward Tronox getting approval of its reorganization plan.

The judge on Sept. 17 approved Tronox’s agreement to pay bondholders to back an offer of new stock in a reorganized company, after an adviser to the company said delays might jeopardize Tronox’s environmental settlements.

Under the agreement, Tronox would pay bondholders an 8 percent fee to back a $185 million rights offering of common stock in the new company.

The bankruptcy case is Tronox Inc., 09-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Abuse Victim Lawyers Object to Delaware Diocese Plan

Lawyers for people allegedly sexually abused by priests in the Catholic Diocese of Wilmington, Delaware, rejected an offer that would pay victims as much as $75,000 each as part of a plan to end the local church’s bankruptcy.

Under the proposal filed yesterday in U.S. Bankruptcy Court in Wilmington, sex-abuse victims who sued the diocese in state court in Delaware would have their cases closed and moved either to federal court or put before a special mediator named by the diocese.

Should the mediator find the claim is legitimate, the victim would be allowed to collect as much as $75,000 from a trust fund the diocese proposed to set up. The diocese didn’t say how much money it would put into the trust or whether the fund would have enough money in it to cover all claims.

Attorney Thomas Neuberger, who represents 98 of the 151 sex-abuse victims with claims against the diocese in bankruptcy court, described the plan as “a mean-spirited, vindictive, hypocritical act.”

The diocese filed bankruptcy last year with plans to settle lawsuits by current and former parishioners who say they were sexually molested by priests. Since then, lawyers for the diocese and those for more than 140 abuse victims have fought in court over everything from the cash pool to which sex-abuse lawsuits should be allowed to go to trial.

Bishop W. Francis Malooly said in a statement yesterday that the plan, while not supported by all creditors, came after months of negotiations with the official creditor committees and “other constituencies.”

The case is In re Catholic Diocese of Wilmington Inc., 09- 13560, U.S. Bankruptcy Court, District of Delaware, (Wilmington).

Hawaiian Telcom Says Regulator Approves Reorganization Plan

Hawaiian Telcom Communications Inc. won approval of its reorganization plan from the Hawaii Public Utilities Commission, allowing the company to exit bankruptcy.

Hawaiian Telcom plans to leave Chapter 11 protection within 30 days, according to a statement. The company, with 1,400 workers, filed for bankruptcy on Dec. 1, listing assets of $1.35 billion. It blamed the filing partly on transition difficulties after Carlyle Group, a Washington-based private-equity firm, bought the company from Verizon Communications Inc. in 2005 for $1.6 billion.

The case is Hawaiian Telcom Communications Inc., 08-02005, U.S. Bankruptcy Court, District of Hawaii (Honolulu).

Briefly Noted

Majestic Star’s Unsecured Creditors Ask to End Exclusivity

Majestic Star Casino LLC’s unsecured creditors’ committee asked the U.S. Bankruptcy Court in Wilmington, Delaware, to end the company’s exclusive right to file a reorganization plan. The committee objected to Majestic’s fourth request for an exclusivity extension in court papers filed Sept. 21, saying the company’s decision to propose a plan “is in bad faith” and involves three settlements that dispose of “valuable assets.” The committee asked the court for permission to solicit support for its own reorganization plan. A hearing is scheduled for Sept. 28.

The case is In re Majestic Star Casino LLC, 09-14136, U.S. Bankruptcy Court, District of Delaware (Wilmington).

GSC Group Wins Bankruptcy Court Permission to Auction Assets

GSC Group Inc., an investment firm founded by a former Goldman Sachs Group Inc. partner, won bankruptcy court approval for an auction of its assets. Judge Arthur Gonzalez in Manhattan approved the auction and bidding rules yesterday at a hearing. Bids are due Oct. 22, and the auction is scheduled for Oct. 26 and 27. Gonzalez’s ruling came amid accusations by GSC creditors and others that Black Diamond Capital Management LLC, GSC’s biggest lender, is exerting too much control over the company and its sale, which Black Diamond denied. Black Diamond said it’s interested in bidding for the assets. GSC, founded by former Goldman partner Alfred Eckert III, filed for bankruptcy on Aug. 31.

The case is In re GSC Group Inc., 10-14653, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

Lehman Wins Approval of $887 Million Aurora Bank Deal

Lehman Brothers Holdings Inc., the bankrupt investment bank, won court approval of a settlement agreement to transfer $887 million in cash and assets to its Delaware-based Aurora Bank FSB, according to court documents. U.S. Bankruptcy Judge James Peck in New York approved the agreement, which also calls for Lehman to ensure that Aurora maintains certain capital levels and to buy all the bank’s non-cash assets in certain circumstances after an 18-month period, according to the filing yesterday. Lehman said in a September filing that agreements with Aurora Bank and Woodlands Commercial Bank in Salk Lake City were crucial to preserving the value of its ownership stakes in the banks, which Lehman has agreed to sell or close.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Ratings Actions

Aquilex Holdings Ratings on Negative Credit Watch, S&P Says,

Aquilex Holdings LLC’s corporate credit rating of B was placed on credit watch with negative implications, along with the company’s other ratings, Standard & Poor’s said in a statement.

S&P cited Aquilex’s “weaker-than-expected operating performance and resulting erosion of financial covenant headroom during the first half of 2010.” The Atlanta-based provider of welding, repair and industrial-cleaning services had total debt of $399 million on June 30, according to S&P.

To contact the reporter on this story: Carla Main in New Jersey at Cmain2@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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