A&P, Lehman, Vitro, Blockbuster, Centaur: Bankruptcy
Great Atlantic & Pacific Tea Co. filed for Chapter 11 reorganization on Dec. 12 and by yesterday afternoon had approval from the bankruptcy judge in White Plains, New York, to borrow $550 million from a promised $800 million secured loan to finance the reorganization. JPMorgan Chase Bank NA is agent for the lenders.
The interim loan will be used to pay off $336.2 million in pre-bankruptcy secured liabilities.
The debts being repaid include $97.5 million outstanding on a term loan, $42.5 million on a revolving credit, and $196.2 million in letters of credit.
The hearing for final approval of the loan was set for Jan. 10.
Montvale, New Jersey-based A&P is reorganizing with 395 supermarkets, mostly in New York, New Jersey and Pennsylvania. It listed assets of $2.531 billion against debt totaling $3.211 billion. Along with A&P, store brands include Pathmark, Food Emporium and Waldbaum’s.
In addition to the pre-bankruptcy secured debt being paid off, liabilities include $260 million on 11.375 percent second- lien notes and $632.8 million on four issues of unsecured notes. A&P has $175 million in convertible preferred stock.
A&P had an $876 million net loss and an $802 million loss from continuing operations for the fiscal year ended in February on sales of $8.81 billion.
The loss from operations in the year was $600.6 million. For 28 weeks ended Sept. 11, the operating loss was $161.4 million on sales of $4.483 billion.
The net loss in the period was $276.3 million. Comparable store sales declined 6.6 percent in the September quarter. The quarter had a $45 million loss before interest, taxes, depreciation, and amortization.
The case is In re Great Atlantic & Pacific Tea Co. Inc., 10-24549, U.S. Bankruptcy Court, Southern District of New York (White Plains).
Statistics
Public Company Filings Lagging Far Behind 2009
Only 99 public companies have filed for bankruptcy this year, with assets totaling about $93 billion, according to statistics compiled by bankruptcydata.com, a service of New Generation Research Inc.
With about two weeks left in the year, public-company filings may end up totaling less than half the 210 begun in 2009.
In terms of assets, filings in 2010 lag far behind 2009. So far this year, the assets in public-company filings total $93 billion, or 84 percent less than the $593 billion in 2009.
The record was in 2008 when assets of public companies in bankruptcy totaled $1.16 trillion in 138 filings.
Updates
Paulson May File Competing Lehman Plan This Week
Paulson & Co. Inc. may file a competing reorganization plan for Lehman Brothers Holdings Inc. as early as this week, according to a person familiar with the matter.
Lehman’s exclusive right to file a plan ended after 18 months in Chapter 11. Lehman has been in bankruptcy since September 2008.
Hedge fund Paulson was part of a group saying in June that so-called substantive consolidation of 23 Lehman affiliates would increase recoveries for holding company creditors “by billions.” Other members of the group included California Public Employees’ Retirement System, Canyon Capital Advisors LLC, Fortress Credit Opportunities Advisors LLC, and Owl Creek Asset Management LP.
Lehman’s revised Chapter 11 plan, filed in April, doesn’t include substantive consolidation. Rather, the plan treats creditors of each of the Lehman companies according to the claims against the particular affiliate and the assets of the entity in question. The plan would enable creditors to enforce guarantees where one Lehman company, typically the holding company, guaranteed debt owing by a subsidiary. A creditor with a guarantee therefore could collect twice on a debt, although not more than the amount owed.
Instead, the ad hoc group advocates substantive consolidation, where guarantee claims aren’t recognized. In substantive consolidation, all assets of all companies would be in one pot, with unsecured creditors of all companies treated the same.
In June, the ad hoc group said that the “purported settlement” in Lehman’s plan regarding some guarantee claims was “illusory.” The settlement includes a cap of $21.2 billion on what the creditor group called “previously undisclosed board resolutions and intercompany agreements” giving rise to guarantees by one Lehman company in favor of creditors of others.
The group argued that the settlement was of little value because affected claims wouldn’t greatly exceed the cap. To read Bloomberg coverage, click here.
The Lehman holding company and its non-brokerage subsidiaries filed their revised Chapter 11 plan and disclosure statement in April. For details, click here and here for the April 15 and 16 Bloomberg bankruptcy reports. Lehman has been saying that it intends on amending the plan this year and having it approved in a confirmation order by March.
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 of New York (Manhattan).
Vitro Says Attachments Stop Distributions on Tender
Vitro SAB, Mexico’s largest glassmaker, continues the litigation tit-for-tat with holders of some of the $1.2 billion on bonds in default for about two years.
Funds affiliated with Elliott International LP and Aurelius Capital Management LP obtained attachment orders from a state court in New York last week, Vitro said in a statement yesterday. For the time being, Vitro decided not to distribute cash to holders of $44 million in bonds who tendered their notes in an exchange offer prior to the first deadline on Dec. 7.
Vitro said the state-court attachment order shouldn’t prohibit the distribution to tendering bondholders. Vitro said it scheduled a hearing in state court on Dec. 16 so the judge can rule whether paying tendering bondholders is prohibited.
Vitro referred to Elliott and Aurelius as “opportunistic vulture funds.”
Vitro again said it would file for reorganization in Mexico not later than Dec. 16. Vitro quoted its Mexican lawyer Fernando del Castillo as saying that the company’s reorganization plan “meets all the requirements to be approved and become binding on all unsecured creditors.”
Where bondholders have opposed the reorganization because they say Vitro created $1.9 billion of intercompany debt to vote in favor of the reorganization, del Castillo said, “intercompany claims held by affiliates of the debtor are allowed to participate and vote.”
Vitro is opposing an involuntary Chapter 11 petition filed in November against U.S. subsidiaries. The attachments in state court arose from complaints where bondholders are suing to recover principal and interest on the notes.
Vitro has said that proceedings in Mexico will be accompanied by a Chapter 15 filing in the U.S.
Noteholders who filed the involuntary petitions are part of a larger group claiming to hold almost $700 million of $1.2 billion of bonds in default since the company first missed interest payments on the notes in February 2009.
The U.S. Vitro companies said in a bankruptcy court filing that third-party debt of the parent is $1.96 billion, with $1.2 billion owing on the unsecured bonds. The parent is proposing a court restructuring in Mexico designed to deal with about $1.5 billion in debt, a bankruptcy court filing said.
Vitro previously said noteholders would recover as much as 73 percent by exchanging existing debt for cash, new debt or convertible bonds.
Vitro is based in Monterrey, Mexico.
The bondholders who filed the involuntary petitions are Lord Abbett Bond Debenture Fund, Davidson Kempner Distressed Opportunities Fund LP, Brookville Horizons Fund LP, and Knighthead Master Fund LP.
The first-filed involuntary case is In re Vitro Asset Corp., 10-47470, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
Blockbuster Committee Opposes Complete Document Dump
The creditors’ committee of Blockbuster Inc. has been asked by a creditor to turn over all communications between the committee and the movie-rental chain. The committee opposes the request made by creditor Lyme Regis Partners LLC. The bankruptcy judge will rule on the dispute at a Dec. 16 hearing.
The controversy relates to a perplexingly vague amendment that Congress made to bankruptcy law in 2005. Section 1102(b)(3) of the Bankruptcy Code provides that an official committee must provide an individual creditor with “access to information.”
Given that the statute contains no detail on what is and what’s isn’t required to be supplied, all significant Chapter 11 cases will have an agreement approved by the bankruptcy judge providing contours to what a committee must turn over to an individual creditor. In the Blockbuster case, the arrangement will be up for approval on Dec. 16.
The Blockbuster committee takes the position that the need to provide information must be “balanced in light of the fiduciary duty of the committee to general unsecured creditors and the attendant need to preserve confidential and proprietary information of a distressed company.”
The proposed Blockbuster arrangement would relieve the committee of the need to give a creditor confidential or non- public information. The committee could also decline a request when a response would be “unduly burdensome and/or unlikely to serve the best interest of the debtors’ estates.”
Lyme Regis has a motion of its own on the Dec. 16 calendar. At the hearing, the creditor wants the judge to give it permission to use subpoenas and conduct its own investigation about Carl Icahn and his dealings with the company.
The committee is performing an investigation of its own. The deadline for objecting to the validity of secured claims is being extended to Feb. 1, the committee said in a court filing.
Before the Chapter 11 filing in September, Blockbuster negotiated a plan with holders of 80 percent of the $630 million in 11.75 percent senior-secured notes. The plan would give them the new stock. General unsecured creditors would have warrants for 3 percent of the stock. Holders of the $300 million in 9 percent subordinated notes would receive nothing. After two extensions, the deadline for filing the plan is now Jan. 14.
Dallas-based Blockbuster has 5,600 stores, including 3,300 in the U.S., with the remainder abroad. Among the U.S. stores, 3,000 are owned and while the rest are franchised.
The petition listed assets of $1.017 billion against debt of $1.465 billion. Blockbuster estimated it owes $57 million in accounts payable in addition to the secured and subordinated notes.
The case is In re Blockbuster Inc., 10-14997, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Broadstripe Settles with Lenders, Unsecured Creditors
Broadstripe LLC announced a settlement last week of disputes that were preventing the St. Louis-based broadband cable operator from moving ahead with the reorganization plan negotiated with first- and second-lien lenders before the Chapter 11 filing in January 2009.
Broadstripe couldn’t push the plan through because of a lawsuit where the official creditors’ committee contended that secured lenders’ claims should be subordinated or recharacterized as equity. In addition, there were two claims by rival cable operators totaling almost $160 million based on Broadstripe’s alleged failures to complete asset purchase agreements.
The settlement with the creditors’ committee will allow the secured lenders to bid their claims rather than cash at a sale of the business. In return, the lenders will create a fund with $3.3 million toward payment of claims of unsecured creditors. Secured lenders won’t take any part of the fund because of their deficiency claims.
Lawyers for the creditors’ committee, who hadn’t been paid for their work on the lawsuit, agreed to accept $500,000 in satisfaction of their fees.
The rival cable operators will have approved unsecured claims for $20 million each. They are James Cable LLC and WaveDivision Holdings LLC.
Funds affiliated with Highland Capital Management LP hold at least a majority of the secured debt, court papers say.
As negotiated at the outset of the reorganization, the holders of first-lien debt, for their $181 million in claims, were to receive $85 million in new first-lien notes and $85 million in notes convertible into 90 percent of the stock. Holders of the $102 million in second-lien claims were in line for 95 percent of the new stock, reserving 5 percent of the new equity for unsecured creditors.
At the outset of Chapter 11, Broadstripe had 93,000 customers in Maryland, Michigan, Washington and Oregon. It was created through four acquisitions in 1998 and 1999 and filed for Chapter 11 reorganization in January 2009.
The case is In re Broadstripe LLC, 09-10006, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Point Blank Replaces Loan Requiring Quick Sale
The two official committees in the reorganization of Point Blank Solutions Inc., a manufacturer of soft body armor for the military and law enforcement, won the first round in their effort to stop a sale and allow them to push through a Chapter 11 plan of their own.
The bankruptcy court on Dec. 10 gave interim approval for $25 million in new financing to replace an existing loan that required selling the business this year. There will be another hearing on Dec. 28 for final approval of the new financing provided by Lonestar Partners LP, Privet Fund Management LLC, and Prescott Group Capital Management.
The main event takes place at a hearing tomorrow where the official committees representing shareholders and creditors will argue for being allowed to propose a plan of their own. The plan would be supported by financing supplied by the three investors who would backstop a $15 million to $25 million equity offering under a Chapter 11 plan. The offering would be open to unsecured creditors and stockholders.
The plan would create a litigation trust with initial funding of $1 million. At first, net recoveries would be shared so unsecured creditors receive 80 percent, with the remainder going to the company. Once unsecured creditors recover 100 percent plus interest at 8 percent, the company would have 70 percent of the trust’s recoveries, with the remainder for existing shareholders.
The agreement on financing requires filing the plan by Jan. 10, obtaining approval of a disclosure statement by Feb. 18, and confirming the plan by March 31.
Based in Pompano Beach, Florida, Point Blank has two plants. Revenue in 2009 exceeded $153 million. The former chief executive and chief operating officer of Point Blank were convicted in September of orchestrating a $185 million fraud.
The Chapter 11 petition in April listed assets of $64 million against debt totaling $68.5 million. Debt included a $10.5 million secured loan paid off by financing for the Chapter 11 case. Point Blank said it also owes $28.2 million to trade suppliers.
The case is In re Point Blank Solutions Inc., 10-11255, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Compromise Sets Centaur for Jan. 21 Confirmation
The creditors’ committee for casino and racetrack operator Centaur LLC reached a settlement with secured lenders allowing the bankruptcy court to schedule what may be an uncontested confirmation hearing on Jan. 21 for approval of a revised Chapter 11 plan.
The committee sued in November to resolve disputes over how much collateral secures the claims of the first- and second-lien lenders. The committee argued that the lenders didn’t have a security interest in collateral securing a $50 million letter of credit accompanying an application for a gaming license. The committee also said that the lenders couldn’t claim security interests in gaming licenses.
The settlement improves the treatment of three classes of unsecured creditors. The secured creditors will realize less than one-half of 1 percent less as a result of what they gave up, a court filing says.
As a result of the settlement, second-lien lenders are to split $3.4 million in notes that pay in kind. Unsecured creditors of Valley View Downs now will receive the lesser of 50 percent paid in cash or a share of $1.5 million cash. Other general unsecured creditors also will have the lesser of half payment or sharing $650,000 in cash.
Yesterday, the bankruptcy judge approved the sale of the new equity to American Harness Tracks LLC. The acquisition takes effect when the plan is implemented.
Centaur LLC and 12 affiliates filed Chapter 11 petitions in March. Affiliates Centaur PA Land LP and Valley View Downs LP filed for bankruptcy reorganization in October 2009 to keep a project alive in Pennsylvania. All the companies are subsidiaries of closely owned Centaur Inc., which isn’t in bankruptcy.
The March filings listed assets of $584 million and debt of $681 million. The newer cases resulted from the failure to make payments due in October 2009 on a $382.5 million first-lien debt and a $192 million second-lien credit. The companies have horse racing and gambling facilities in five markets in Indiana and Colorado.
The companies own Hoosier Park, a casino and horse racetrack, in Anderson, Indiana, along with three offtrack betting parlors in Indiana. Fortune Valley Hotel & Casino in Central City, Colorado, was sold. The companies generated revenue of $277.5 million in 2009.
Credit Suisse AG, Cayman Islands Branch, is agent for the first-lien lenders while Wells Fargo Bank NA is agent on the second lien.
The newer case is Centaur LLC, 10-10799, and the first case was In re Centaur PA Land LP, 09-13760, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Claim Jumper Wants Another 90 Days for Plan Filing
Claim Jumper Restaurants LLC, having sold the chain of 45 western-themed restaurants, says it needs another 90 days to craft a consensual Chapter 11 plan.
At a Dec. 28 hearing, Claim Jumper will ask the judge to extend the exclusive right to propose a plan until April 11.
Early in the case when financing was approved, secured lenders carved out $400,000 for unsecured creditors. Claim Jumper said more time is required to work out details.
A sale of the business was completed last week. The buyer, Landry’s Restaurants Inc., took the business in a transaction valued at $76.6 million after an auction where the opening cash bid of $27 million was made by a company formed by Black Canyon Capital LLC and Bruckmann Rosser Sherrill & Co. Black Canyon holds mezzanine debt that’s subordinated to secured bank debt.
Landry’s winning bid included $48.3 million cash, the assumption of $23.3 million in debt, and $5 million cash to collateralize existing letters of credit.
In addition to $69.5 million in secured debt, Claim Jumper owes $112 million on subordinated notes. The petition says assets are worth more than $50 million while debt exceeds $100 million.
The case is In re Claim Jumper Restaurants LLC, 10-12819, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Banning Lewis Reorganization to Remain in Delaware
The reorganization of Banning Lewis Ranch will remain in Delaware, at least for now.
At a hearing last week, the bankruptcy judge in Wilmington denied a motion by the city of Colorado Springs which wanted the case transferred to Denver, close to where the Banning Lewis development is located.
The judge gave city the right to renew the motion if circumstances change, court papers show.
Banning Lewis is a master-planned community in Colorado, 20 minutes northeast of Colorado Springs. There is $65.5 million owing on a secured loan where KeyBank NA serves as agent. Other debt includes a $105 million mezzanine loan and a separate $23.5 million loan for which KeyBank also is agent.
The Banning Lewis project is 21,000 acres of undeveloped land. The petition said the assets are worth more than $50 million while debt exceeds $100 million.
Greenfield BLR Partners LP and Farallon BLR Investor LLC hold $141 million in debt. Together, they also have 85 percent of the stock and support having the case in Delaware.
KeyBank NA is owed another $65 million on a bank loan, court papers say.
The case is In re Banning Lewis Ranch Co. LLC, 10-13445, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Honolulu Symphony Reorganization Converted to Liquidation
The reorganization of the Honolulu Symphony orchestra was converted to a liquidation in Chapter 7 by the bankruptcy judge yesterday.
The judge in Honolulu made the conversion effective immediately. The symphony didn’t want it effective until Dec. 31.
The symphony filed for Chapter 11 reorganization a year ago this month. The symphony hasn’t performed since bankruptcy.
The symphony previously said that the Chapter 11 filing resulted from a decline in donations.
The case is In re Honolulu Symphony Society, 09-02978, U.S. Bankruptcy Court, District of Hawaii (Honolulu).
To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
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