PetroMena ASA put three subsidiaries into Chapter 11 yesterday in New York to prevent the loss of what the company described as three uncompleted “ultra-deepwater semi-submersible harsh environment drilling rigs.”
The rigs are being constructed by Jurong Shipyard Pte Ltd. in Singapore at a total cost of almost $1.5 billion. Almost $750 million remains unpaid on the construction contracts. Norway-based PetroMena had the units file in Chapter 11 when Jurong was scheduled to foreclose one of the rigs on May 20.
A court paper says that the PetroMena subsidiaries were unable to arrange financing to pay the final installments on the construction contracts.
Debt includes $307 million in 9.75 percent bonds, $245 million in floating-rate notes, and $264 million in 10.85 percent bonds. The loans have a variety of collateral packages to secure repayment. Court papers say the three subsidiaries have assets totaling more than $900 million and debt in an equal amount.
PetroMena is basing the subsidiaries’ bankruptcy in the U.S. on $20 million of equipment in storage in Texas and unused retainers being held by its attorneys in New York.
One of the subsidiaries filed a lawsuit in bankruptcy court against Jurong, contending that the first rig wasn’t ready for delivery, demanding payment of the last purchase-price installment was improper, and selling the vessel at foreclosure isn’t appropriate under the circumstances.
Jurong is a subsidiary of Singapore-based SembCorp Industries Ltd.
The case is PetroRig I Pte Ltd., 09-13083, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Other New Filing
ICO Global Subsidiary Files Prepacked Chapter 11 in New York
DBSD North America Inc., a subsidiary of ICO Global Communications Holdings Ltd., filed a Chapter 11 petition on May 15 in New York along with eight affiliates and an agreement on a plan to swap 95 percent of the stock for $740 million in second-lien notes.
DBSD is a development-stage company that was started to provide wireless communications by satellite to mass-market customers anywhere in North America, including areas where traditional mobile-phone service isn’t available. It owns a geosynchronous satellite placed in orbit in April 2008.
The petition listed assets of $630 million and debt totaling $813 million as of March 31. In addition to the notes, debt includes $46 million in first-lien bank debt. The bank debt matured May 1. The notes were to mature Aug. 15.
DBSD, based in Reston, Virginia, filed for reorganization when a second round of forbearance agreements was expiring with the lenders.
The Chapter 11 filing was caused in part by the illiquidity of $98 million in auction-rate securities purchased in 2008. The securities today have a face value of $74.4 million and a market value of $59.8 million, according to a court filing. The company was unable to secure lenders’ approval to pledge the securities for a loan.
The bankruptcy filing also was precipitated by the contraction in the credit markets, making refinancing not feasible.
The parent ICO is to retain 5 percent of the stock in the reorganized company. ICO also will have warrants for as much as another 10 percent of the stock that can be exercised if the company’s value reaches specified levels.
Affiliates of Highland Capital Management LP and Harbinger Capital Partners together own more than $200 million of the senior notes. The agreement with noteholders requires filing a reorganization plan and explanatory disclosure statement within 15 days. The plan must be approved in a confirmation order within three months.
The unsecured creditor with the largest claim, at $5.2 million, is an affiliate of Loral Space & Communications Inc. In second place is an affiliate of Hughes Communications Inc., owed $1.8 million, according to a court filing.
The parent ICO reported a $46 million net loss for the first quarter. The parent has $643 million in assets and $879 million in liabilities on the March 31 balance sheet. ICO didn’t file for bankruptcy.
The predecessor to ICO filed under Chapter 11 in August 1999 in Delaware and confirmed a reorganization plan in May 2000 in which Craig McCaw and Subhash Chandra together bought the company for $1.2 billion and split the stock 46-28-26 among McCaw, Chandra and ICO’s creditors and shareholders. McCaw is ICO’s chairman.
The case is In re DBSD North America Inc., 09-13061, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
First-Lien Lenders Opposes Foamex Sale to MatlinPatterson
Foam-products maker Foamex LP will face opposition from first-lien lenders at the May 21 hearing for approval of the sale of the business.
The lenders, owed $325 million, contend that the proposed sale would divert $5 million of the proceeds to pay professional fees. Coupled with paying off secured financing for the reorganization, the lenders say they could be left with as little as $25 million, representing an 8 percent recovery on the first-lien lenders’ claim.
At an auction tomorrow, an affiliate of MatlinPatterson Global Advisers LLC, the provider of secured financing for the reorganization, will make the first bid with an offer having a face value of $105 million. It includes the assumption of $26.6 million in liabilities, with most of the remainder representing financing for the reorganization. The agent for the so-called DIP lenders says the debt currently is $54.9 million.
The first-lien lenders say Foamex may not have enough cash and assets after the sale to pay expenses incurred during the Chapter 11 process, a situation known as administrative insolvency. The lenders also say they may have a higher recovery if they liquidate their collateral.
The U.S. Trustee also objected to the sale, saying it’s improper to carve out money to pay professionals when other expenses of the Chapter 11 case go unpaid. The Justice Department’s watchdog over bankruptcy told the bankruptcy judge there’s no basis for selling the stock of non-bankrupt affiliates while precluding creditors of the affiliates from collecting their claims against companies not in bankruptcy.
Foamex filed under Chapter 11 again in February after emerging two years earlier from bankruptcy reorganization. The new petition listed assets of $364 million against debt totaling $380 million. Debt includes $39 million on a revolving credit, $325 million on a first-lien term loan and $47 million on a second-lien term loan. In addition, there is $41 million owed to trade suppliers.
The controlling shareholder, D.E. Shaw & Co., owns 72 percent of the stock. Media, Pennsylvania-based Foamex has 31 plants in the U.S. and abroad. Revenue was $980 million for the fiscal year ended in September.
The case is In re Foamex International Inc., 09-10560, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Lehman Setting Up Procedures to Dispose of Assets
Lehman Brothers Holdings Inc. is looking for bankruptcy court authorization to clarify or simplify procedures for terminating, modifying or selling its portfolio of about $50 billion in commercial loans.
When the bankruptcy began in September, Lehman had $46.7 billion in committed loans outstanding, consisting of $16 billion in loans that were funded plus $30.5 billion in unfunded commitments. It also had $4.3 billion in loans where participations had been sold to others.
Without filing a full-blown motion in bankruptcy court every time, Lehman wants permission to dispose of loan positions by terminating unfunded commitments, transferring or selling commitments to other lenders and restructuring outstanding loans where borrowers need the terms modified.
Lehman’s request for approval of the procedures will be the subject of a June 3 hearing in bankruptcy court.
Separately, Lehman is asking for court permission to accept settlements on several loans made for two real estate projects in Manhattan, at 5 E. 44th St. and 127 Seventh Ave. If approved, Lehman will accept about $17.8 million for loans with a face value of $39 million.
The loan settlements are also scheduled for hearing in court on June 3.
A third matter at the June 3 hearing concerns a procedure for simplifying the sale of assets being sold for $2 million or less.
If the judge goes along, Lehman could sell property for $500,000 or less without court approval and without notifying anyone.
For property where the sale price is between $500,000 and $2 million, Lehman may complete the transaction so long as notice is given to interested parties, the creditors’ committee and the U.S. Trustee and no one objects.
A fourth matter at the June 3 hearing will be what amounts to a workout of a $522 million loan Lehman made to finance a 580-unit condominium in Miami called Canyon Ranch Living Miami Beach Condominiums.
So far, only 209 units have been sold. Buyers who signed contracts for 193 units have been unable to secure financing.
Lehman decided that indirectly offering mortgages to the purchasers was a better alternative than foreclosing the remaining units. If the bankruptcy judge goes along with the idea, Lehman would spend up to $200 million to finance purchases by the remaining buyers.
The Lehman holding company entered Chapter 11 in New York on Sept. 15. The brokerage business went into liquidation on Sept. 19 in the same court under the Securities Investor Protection Act. The brokerage is under the supervision of a trustee selected by the Securities Investor Protection Corp.
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 operations is Securities Investors Protection Corp. v. Lehman Brothers Inc., 08-01420, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Grupo Mexico Files Asarco Plan It Says Is Superior
Grupo Mexico SAB, the parent of Arizona copper producer Asarco LLC, met a May 15 deadline by filing a competing plan to reorganize Asarco. Grupo Mexico, promising to pay 75 percent cash to bondholders and unsecured creditors, says its plan is superior to Asarco’s plan, which is based on a sale to Sterlite Industries (India) Ltd. for $1.1 billion cash and a non-interest-bearing nine-year note for $600 million.
Grupo Mexico said in a statement that its plan is supported by asbestos personal-injury claimants, while the Sterlite-backed plan is conditioned on asbestos claimant’s support.
To retain ownership of Asarco, Grupo Mexico would contribute $1.3 billion cash and a note for $250 million.
Unsecured creditors with up to $382 million in claims and bondholders owed $440 million would receive 75 percent cash from the Grupo Mexico plan. Environmental claims not to exceed $1.36 billion also are slated for 75 percent cash.
Asbestos personal-injury creditors owed around $1 billion are to split up $500 million cash and a note for $250 million. Grupo Mexico will contribute $27.5 million to administer the asbestos claims.
Last week, the bankruptcy judge in Corpus Christi, Texas, approved a disclosure statement explaining Asarco’s plan. The judge said he would consider having one disclosure statement to explain both.
To finance the Asarco plan, the bankruptcy judge in April authorized signing a new contract with Sterlite. The Asarco plan calls for holding an auction to learn if anyone is willing to pay more than Sterlite.
Asarco previously had a plan based on a sale to Sterlite for $2.6 billion. Plan confirmation scheduled for November was called off when Sterlite refused to complete the acquisition. Sterlite is a subsidiary of India’s Vedanta Resources Plc.
Where unsecured creditors and bondholders under Asarco’s prior plan were to have full payment on their claims that might have totaled nearly $1 billion, all unsecured creditors with claims possibly reaching $2.4 billion are slated to receive between 60 percent and 75 percent under Asarco’s modified plan. Unsecured creditors are to receive a combination of cash and collections from lawsuits prosecuted by a litigation trust.
Under Asarco’s revised plan, asbestos personal-injury claimants, with claims totaling between $1.3 billion and $2.1 billion, are likewise to receive between 60 percent and 75 percent.
Other bidders may aim to buy Asarco. Glencore Ltd. said it made a proposal in April about being a plan sponsor. Harbinger Capital Partners Master Fund I Ltd. and Citigroup Global Markets Inc., who say they own two-thirds of Asarco’s bonds and debentures, said they too had a discussion with the creditors’ committee about sponsoring a plan.
Grupo Mexico, which acquired Asarco for $1.2 billion in stock in 1999, lost control in December 2005 when the bankruptcy judge set up a board of three, giving Grupo Mexico only one seat. Phoenix-based Asarco filed under Chapter 11 in August 2005 to deal with asbestos claims.
The Chapter 11 case is In re Asarco LLC, 05-21207, U.S. Bankruptcy Court, Southern District of Texas (Corpus Christi).
Aloha Name May Not Go Mesa through Yucaipa, Judge Rules
The bankruptcy trustee for Aloha Airlines Inc. may not sell the defunct carrier’s name to company owner and second-lien creditor Yucaipa Cos. because the trademark would in turn be sold to Mesa Air Group Inc., the regional airline whose Go! airline allegedly used confidential information and predatory tactics to drive Aloha and Hawaiian Airlines into bankruptcy.
In a 22-page decision handed down last week, U.S. Bankruptcy Judge Lloyd King in Honolulu concluded that Mesa should be considered a co-purchaser of the Aloha name along with Yucaipa. King said that Mesa inflicted “great harm” on Aloha and its thousands of employees and he couldn’t allow Mesa “to perfect its wrongdoing by becoming Aloha.”
Yucaipa wouldn’t have paid for the name with cash. Instead, it would have used some of the $85 million to $90 million in secured debt it’s owed. In passing the Aloha name along, Mesa would have paid Yucaipa $6 million over 10 years. The Aloha trustee would have received 5 percent under previous agreements.
Aloha filed for Chapter 11 reorganization in March 2008, shut down passenger operations 10 days later, and converted the Chapter 11 case to a liquidation in Chapter 7 in April 2008, resulting in the appointment of the Chapter 7 trustee. The Chapter 11 filing was Aloha’s second, occurring 25 months after emerging from a previous bankruptcy reorganization.
The new Aloha Chapter 11 case is In re Aloha Airlines Inc., 08-00337, U.S. Bankruptcy Court, District of Hawaii (Honolulu).
Young Still Lacks Initial Bidder for June 19 Auction
Young Broadcasting Inc., the owner of 10 television stations in 10 markets, still hasn’t selected a lead bidder to submit the offer at the auction for the business June 19, according to a court filing by the company last week.
Young also said it hasn’t yet “finalized” the terms of a Chapter 11 plan. The company nevertheless wants the exclusive right to propose a plan extended until Sept. 14.
The broadcaster points out that time was spent in the initial months of the case marketing the assets and arranging for the auction. Young also fought off an appeal from the order approving the hiring of its bankruptcy lawyers and defeated objections to the retention of financial advisers.
Bids are due June 17 in advance of the auction two days later. The hearing for approval of the sale is to be held June 25. Young is looking for bids from investors intending to own the company or from going-concern buyers.
Young filed under Chapter 11 in February.
Court papers said the company’s $21.4 million in cash would be sufficient to support operations without need for outside financing.
The petition listed assets of $576 million and debt of $980 million. Debt includes $337 million on secured term loans and $484 million on subordinated notes.
The case is In re Young Broadcasting Inc., 09-10645, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Investment Adviser Wants $88 Million from AbitibiBowater
AbitibiBowater Inc., the largest newsprint maker in North America, should be forced to continue a lawsuit it began before it entered bankruptcy to determine whether an investment adviser is entitled to an $88 million fee from the 2007 merger of Abitibi-Consolidated Inc. and Bowater Inc.
Levin Group LP recited in its May 14 bankruptcy court filing how it had an arrangement with Abitibi calling for it to receive a 2 percent fee on any transaction where it provided advisory services.
New York-based Levin says it started a lawsuit in August 2007 in New York that eventually ended up in a state court in South Carolina with Abitibi as the plaintiff. Levin wants the bankruptcy judge to modify the so-called automatic stay so the state court judge can settle the issue of whether Abitibi is liable and for how much.
The motion to modify the stay is scheduled for hearing on June 4 in the U.S. Bankruptcy Court in Delaware.
The Chapter 11 petition filed in April by the combined companies listed assets of $9.9 billion and debt totaling $8.8 billion on Sept. 30. The Montreal-based company has 23 pulp and paper mills plus 30 wood-product plants.
A $347 million secured loan matured on March 31, while a $144 million obligation matures in mid-2009.
AbitibiBowater was formed in October 2007 through a merger between Montreal-based Abitibi-Consolidated Inc. and Greenville, South Carolina-based Bowater Inc.
Abitibi is a producer of newsprint, uncoated mechanical paper and lumber. Bowater also makes newsprint along with papers, bleached kraft pulp and lumber.
The case is AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Quebecor World Plan Going to Creditors for Vote
Quebecor World (USA) Inc. overcame final objections at a May 15 hearing and won approval from the bankruptcy judge for the disclosure statement explaining the Chapter 11 plan.
The approval means creditors may begin voting on the plan, which calls for giving unsecured creditors notes for 50 percent of their claims so long as claims in the class don’t exceed $150 million in total. The revolving-credit lenders, owed $735 million, and equipment-financing lenders, owed $184 million, are to receive a combination of cash, common stock and preferred stock, for a recovery estimated to be worth between 85 percent and 88 percent. The revolving credit includes $135.6 million that’s a secured claim.
New common stock and warrants would go to the holders of $1.45 billion in unsecured notes to produce a dividend estimated to be worth 10 percent to 15 percent. The plan was negotiated with the creditors’ committee.
The disclosure statement is being revised to include a discussion of the unsolicited offer made last week by R.R. Donnelley & Sons Co.
Donnelley said it was prepared either to buy the business or be the sponsor of a plan. Donnelley believes its offer of $1.35 billion in cash and stock is superior to the Chapter 11 plan filed in April by Quebecor, the second-largest commercial printer in the U.S.
Donnelley’s offer includes $700 million cash plus 15 percent of Donnelley’s stock worth $394 million at the May 11 closing price. Donnelley would also pay for the $257 million in cash Quebecor is expected to have on hand when a plan confirms.
Quebecor’s lawyers said in court on May 15 that the Donnelley proposal was being given consideration. To read Bloomberg coverage click here.
The Quebecor parent is being reorganized in Canada alongside the U.S. subsidiaries’ Chapter 11 reorganizations in the U.S. In addition, the parent filed a Chapter 15 petition at the end of September in the U.S. to gain assistance from the U.S. court for its Canadian reorganization.
The bankruptcy reorganizations began in January 2008.
The Chapter 11 case in New York is In re Quebecor World (USA) Inc., 08-10152, U.S. Bankruptcy Court, Southern District New York (Manhattan). The Chapter 15 case is In re Quebecor World Inc., 08-13814, in the same court.
ArcelorMittal Lead Bidder for European Noble International
Noble International Ltd., an auto-parts maker that filed under Chapter 11 on April 15, will hold an auction on May 28 to learn whether anyone will make a better offer for the European business than ArcelorMittal SA, the prior owner.
Steelmaker ArcelorMittal agreed to pay $2.1 million cash and take the business subject to all debt, including a $108 million bank loan.
In unsuccessfully opposing approval of sale procedures, the creditors’ committee pointed out that Luxembourg-based ArcelorMittal is an insider and the former owner of the European business it sold to Noble for $300 million in 2007.
The hearing for approval of the sale will take May 29. ArcelorMittal is requiring a quick sale.
Noble has a separate agreement to sell U.S. assets for $11 million to private-equity investor Patriarch Partners LLC, unless a higher offer turns up at auction. The secured lender General Electric Capital Corp. is objecting to the sale, saying the $12.5 million it’s owed is more than the sale price.
The hearing regarding the Patriarch sale was to have been held last week. The hearing instead will be held today.
Noble filed its formal lists of assets and liabilities showing debt totaling $110.7 million, including $10.9 million in secured claims.
Noble originally listed assets of $190.8 million and debt of $38.7 million. It has 23 plants in 12 countries, including eight in the U.S.
The case is In re Noble International Ltd., 09-51720, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
Tronox Proposes Severance and Bonus Programs
Tronox Inc., the world’s third-largest producer of a white pigment called titanium dioxide, is proposing an incentive bonus program for top officers and a separate severance package for 323 salaried, non-officer workers.
Required by its lenders to sign a buyer to a contract before May 31, Tronox is worried about being able to retain critical workers. Executives covered by the incentive program, which includes the top four officers, are to receive bonuses if the company’s earnings meet targets or projected sales prices are realized.
The court papers don’t disclose how much the officers stand to earn either collectively or individually. The motion does say that the targets were raised after consultation with the official creditors’ committee.
The severance program for the salaried workers would cost up to $1.4 million if Tronox is acquired by an investor. If the buyer is from the industry, the cost is projected to reach $3.9 million.
Motions for approval of the two programs are on the bankruptcy court calendar for June 9.
Making good a threat made on filing under Chapter 11 in January, Tronox this month sued Kerr-McGee Corp. to recover environmental remediation costs it was given when spun off in March 2006. It also sued Anadarko Petroleum Corp., which acquired Kerr-McGee for $18.4 billion in August 2006.
The Chapter 11 petition listed assets of $1.56 billion against debt totaling $1.22 billion. Debt includes $213 million on a secured term loan and revolving credit, $350 million in 9.5 percent senior notes, and a $40.7 million accounts receivable securitization facility.
Tronox’s products are used in paints, coatings, plastics, paper and consumer products. The operations outside of the U.S. didn’t file.
The case is In re Tronox Inc., 09-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Lyondell Chemical to Renew Workers’ Compensation Policy
Lyondell Chemical Co. intends to renew its workers’ compensation and automobile insurance policies with Ace American Insurance Co. that expire June 1.
The new program will cost almost $840,000 in annual premiums, the company said in a May 14 court filing. In addition, Lyondell will post letters of credit or deposits totaling almost $5 million, an increase of $1.85 million from the security Ace was holding when the Chapter 11 case began.
The policy has a $1 million deductible per claim.
Lyondell wants the judge to approve the program unless someone objects by May 19.
Lyondell and affiliates constitute the third-largest independent producer of chemicals. Lyondell, together with affiliate Equistar Chemicals LP, filed under Chapter 11 in January, listing assets of $33.8 billion and debt totaling $30.3 billion. Parent LyondellBasell Industries AF SCA entered Chapter 11 on April 24.
Including the parent and European subsidiaries, the company’s assets were $40 billion on Sept. 30. Total revenue in 2007 was $44 billion. The Lyondell petition says its assets are $27.1 billion against debt of $19.3 billion, while Equistar’s listed assets and debt each total $9 billion.
The case is Lyondell Chemical Co., 09-10023, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Strauss Discount Auto Officers Are Denied Severance Program
Bonus and severance programs are usually, although not always, approved by bankruptcy judges. An example of a case where the plan didn’t fly is Strauss Discount Auto, an 86-store auto-parts retailer formally named Autobacs Strauss Inc.
Although the company and the creditors’ committee negotiated a settlement, the bankruptcy judge in Delaware on May 15 refused to approve severance payments.
U.S. Bankruptcy Judge Christopher S. Sontchi said the seven covered individuals were officers who are prohibited from receiving severance payments under changes made to bankruptcy law by Congress in 2005.
The Chapter 11 case is Strauss’s third. The preceding reorganization ended with confirmation of a Chapter 11 plan in April 2007. The company was then named R&S Parts & Service Inc. The current owner is Japan’s Autobacs Seven Co.
The stores are in New York, New Jersey and Pennsylvania. The new petition listed assets of $75 million against debt of about $72 million. Debt includes $42.4 million owed to the parent under loan agreements, $9.6 million to suppliers and $12 million to landlords and other unsecured creditors. There was no secured debt before bankruptcy.
The new case is In re Autobacs Strauss Inc., 09-10358, U.S. Bankruptcy Court, District of Delaware (Wilmington). The prior case was In re 1945 Route 23 Associates, 06-17474, U.S. Bankruptcy Court, District of New Jersey (Newark).
R.H. Donnelley Has Forbearance and Four More Defaults
Although yellow-page publisher R.H. Donnelley Corp. obtained a forbearance agreement when the 30-day grace period expired on the $55 million interest payment it didn’t make April 15 on one issue of unsecured notes, the company failed to make another $78 million of interest payments due May 15 on four other note issues.
Standard & Poor’s predicted in February that Donnelley would face “challenges” in refinancing $1.2 billion of debt that matures in 2010.
Moody’s Investors Service also said in February that a “complete debt restructuring represents the best alternative of addressing its currently challenged capital structure.”
R.H. Donnelley, based in Cary, North Carolina, isn’t to be confused with Chicago-based R.R. Donnelley & Sons Co., which this month made an unsolicited offer for Quebecor World Inc., the reorganizing commercial printer.
R.H. Donnelley had revenue of $602 million in the first quarter, throwing off $164 million of operating income and a $401 million net loss. Interest expense in the quarter was $199 million.
Station Casinos Signs Up Second Forbearance Agreement
Casino operator Station Casinos Inc., which began missing interest payments earlier this year, signed a second forbearance agreement with lenders. To read Bloomberg coverage, click here.
The Las Vegas-based company previously said it expected to file in Chapter 11 by April 15.
Station has 13 properties in Las Vegas, plus five joint ventures. It also operates casinos for American Indian tribes.
Station’s debt was the result of a leveraged buyout in November 2007 by Feritta Colony Partners LLC.
A group of dealers called the Chrysler National Dealers Council filed papers in bankruptcy court opposing the motion by Chrysler LLC to terminate 789 dealerships. The group contends eliminating 24 percent of Chrysler’s dealers won’t increase the automaker’s profitability. They also want the bankruptcy court to allow them to raise any objections they’d have under state law to the termination of their franchises. To read Bloomberg coverage, click here. Objections are due tomorrow in advance of the May 27 hearing where the Chrysler will ask for authority to spin off the core of the business into a new company where Italy’s Fiat SpA will be a 20 percent owner. Chrysler, the smallest U.S. automaker, filed under Chapter 11 on April 30, listing assets for $39.3 billion and debt totaling $55.2 billion. Revenue in 2008 was $48.5 billion. The case is In re Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Although the reorganization of shopping-mall owner General Growth Properties Inc. is the largest real-estate bankruptcy in U.S. history, the company doesn’t need two large law firms, the U.S. Trustee said in an objection last week to the retention of Weil Gotshal & Manges LLP and Kirkland & Ellis LLP. Either firm by itself is capable of representing General Growth and having both will result in inevitable duplication of effort, the Justice Department’s bankruptcy watchdog said. To read Bloomberg coverage, click here. General Growth filed under Chapter 11 in April. The balance sheet of Chicago-based General Growth had assets of $29.6 billion and total liabilities of $27.3 billion as of Dec. 31. It owns about 200 shopping-mall properties. The case is In re General Growth Properties Inc., 09-11977, Bankruptcy Court, U.S. District Court, Southern District of New York (Manhattan).
The U.S. District Judge in Dallas overseeing the receivership resulting from the alleged $8 billion fraud by R. Allen Stanford modified his prior rulings and is allowing the Antiguan receivers for Stanford International Bank Ltd. to file a Chapter 15 petition in his court in Dallas. Once the petition is filed, the judge will decide if it’s proper to recognize the bankruptcy proceeding in Antigua as a “foreign main proceeding.” To read other Bloomberg coverage, click here.
The creditors’ committee of petroleum product transporter and marketer SemGroup LP renewed its motion for authorization to investigate PricewaterhouseCoopers LLP, Barclays Bank PLC, Ritchie Capital Management LLC and Goldman Sachs Group Inc. To avoid duplication, the committee decided earlier not to request document production on its own in view of arrangements where it would receive documents from the examiner that he obtained from parties in the investigation. As it turns out, the committee said, a plethora of confidentiality agreements precluded the committee from receiving documents obtained by the examiner. The committee thus renewed its request to compel production of documents. SemGroup filed under Chapter 11 in July, listing assets of $3.6 billion against debt totaling $4.7 billion. It has two official committees in addition to an examiner. For affiliate SemCrude LP, the listed assets were $1.6 billion while debt was $4.5 billion. SemGroup Energy Partners LP, the publicly traded affiliate, isn’t in bankruptcy. The case is In re SemCrude LP, 08-11525, U.S. Bankruptcy Court, District of Delaware (Wilmington).
The trustee for Bernard L. Madoff Investment Securities Inc. is terminating benefit plans for the firm’s workers. To read Bloomberg coverage, click here. Bernard Madoff, the firm’s founder pleaded guilty in March to defrauding investors of as much as $65 billion. He faces a prison term of as long as 150 years. The firm’s liquidation in U.S. Bankruptcy Court started in December with the appointment of the trustee under the Securities Investor Protection Act. Madoff went into an involuntary Chapter 7 liquidation in April. The trustee for the firm is now seeking to consolidate Madoff’s individual Chapter 7 bankruptcy into the SIPA liquidation of the broker. The SIPA case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities Inc., 08-01789, U.S. Bankruptcy Court, Southern District New York (Manhattan). Madoff’s individual Chapter 7 bankruptcy is In re Bernard Madoff, 09-11893, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
The hearing begins tomorrow in U.S. Bankruptcy Court in Phoenix where the National Hockey League will make its first attempt at stopping the Phoenix Coyotes from being sold to Jim Balsillie and moved to southern Ontario. To read Bloomberg coverage, click here. Balsillie is a founder of BlackBerry inventor Research in Motion Ltd. The team filed under Chapter 11 on May 5. It moved to Phoenix in 1995 and had a new arena built in 2003. The case is In re Dewey Ranch Hockey LLC, 09-09488, U.S. Bankruptcy Court, District of Arizona (Phoenix).
Beverage & More Downgraded to Caa2 on Deficit Cash Flow
Beverages & More Inc., the operator of 97 alcoholic beverage superstores in the western U.S., received a one-notch downgrade on May 15 from Moody’s Investors Service that lowered the corporate and senior-secured note ratings to Caa2.
Moody’s noted a “sharp deterioration in comparable store sales” and a “large free cash flow deficit in fiscal 2008.”
The Concord, California-based company has annual revenue of around $550 million, Moody’s said.
Sealy Downgraded on Refinancing Announcement
Mattress maker Sealy Corp. is refinancing an existing term loan and revolving credit by issuing $350 million in senior secured notes due 2016 and $177 million in third-lien convertible pay-in-kind notes due 2016.
Standard & Poor’s reacted to the refinancing by lowering the corporate credit a notch to B and thus matching the existing rating from Moody’s Investors Service.
S&P demoted the existing subordinated notes by three clicks to a CCC+ rating, accompanied by a prediction that the holders wouldn’t recover more than 10 percent if there were a default.
The new senior secured notes received a BB- rating from S&P while the new convertible notes are rated B.
Sealy is feeing the effects of lower discretionary consumer spending.
S&P projects Sealy will have $867 million debt after the refinancing. The revolving credit for the Trinity, North Carolina-based company was to mature in January.
KKR & Co. owns 51 percent of the stock as the result of an April 2004 acquisition. Sealy closed May 15 at $3.13, down 65 cents in New York Stock Exchange composite trading. The two-year closing high was $17.05 on June 4, 2007.
Block Communications Lowered on Advertising Weakness
Block Communications Inc., a diversified media company, was lowered by one step to a B+ corporate rating on May 15 by Standard & Poor’s as a consequence of the “continued deterioration of both Block’s newspaper business and, to some degree, its TV broadcasting operations.”
The television business saw revenue drop 15 percent in the first quarter from a year earlier, S&P said.
Block, based in Toledo, Ohio, operates cable systems in Ohio, has newspapers in Pittsburgh and Toldeo, and runs four television stations.
Masco Downgraded Again by Moody’s on Lower Construction
Masco Corp., a manufacturer of faucets, cabinets, and paints, had a negative operating margin in most of its business segments in the first quarter, Moody’s Investors Service said May 15 while lowering the corporate rating another peg to Ba2.
Masco lost investment-grade status in December, when Moody’s lowered the senior unsecured rating by one click to Ba1, the top junk grade.
Sales and margins are lower as a result of the contraction in homebuilding.
Standard & Poor’s also downgraded in December, though the S&P rating remained investment grade at BBB, two spaces above junk.
Revenue for a year ended in March was $8.9 billion, compared with revenue of $11 billion for a year ended in September.
Products made by the Taylor, Michigan-based company include Delta faucets and Behr paints.