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Gems TV, NYC OTB, Orleans Homebuilders: Bankruptcy

Gems TV (USA) Ltd., the television retailer of gemstone jewelry products, yesterday sought Chapter 11 protection from creditors, citing as much as $500 million in debt. The television retailer of gemstone jewelry products, sought bankruptcy protection to sell its assets, after shutting down operations last month.

In papers filed in U.S. Bankruptcy Court in Wilmington, Delaware, the Reno, Nevada-based company listed less than $50 million in assets and said DirecTV was one of its largest unsecured creditors, owed $2.67 million.

DirecTV, based in El Segundo, California, the largest U.S. satellite-TV provider, asked a federal court last month to partially freeze Gems TV assets, the retailer said in a statement.

The company is seeking “an orderly liquidation of its assets,” Gems TV President Diane Schneiderjohn said in bankruptcy papers filed yesterday.

Schneiderjohn said the company’s “troubles were exacerbated this past year as nationwide economic conditions resulted in decreased discretionary spending.”

The case is In re Gems TV (USA) Ltd., 10-11158, U.S. Bankruptcy Court, District of Delaware (Wilmington).

For more, click here.

New Filings

New Mexico Developer Westland Devco Files Bankruptcy

Westland Devco LP, a New Mexico real estate developer, sought bankruptcy court protection after its lenders sued to foreclose on its assets.

The company, based in Albuquerque, New Mexico, listed assets of $361 million and debt of $198 million as of Dec. 31, in Chapter 11 documents filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.

Westland owns 55,000 acres of real estate in Albuquerque, which it planned to develop into residential lots, according to court documents. The company hoped to subdivide about 19,000 acres of that land into 40,000 parcels to sell to homebuilders over the next 20 years.

Barclays Capital Real Estate Inc., a unit of London-based Barclays Plc, sued Westland in December, seeking to foreclose on the project.

The case is In re Westland Devco LP, 10-11166, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Other Updates

New York Racing Appeal from Order Allowing OTB to File Chapter 9

The New York Racing Association has filed a notice of appeal from a March 22 order by U.S. Bankruptcy Judge Martin Glenn in Manhattan that granted the New York City Off-Track Betting Corp., or NYC OTB, permission to file for relief under Chapter 9 of the U.S. Bankruptcy Code, according to court files.

The Racing Association had objected to the request for Chapter 9 protection, saying in court papers that NYC OTB could not meet the requirements for a Chapter 9 filing.

Chapter 9 allows a municipality to file for protection and reorganization of its assets. Unlike Chapter 11, it doesn’t provide for the liquidation of the debtor’s assets for distribution to creditors. The OTB has been in a “downward spiral” for “the last 10 years,” Glenn wrote in the March 22 order and opinion, in which he said the NYC OTB is eligible to reorganize under Chapter 9. There is almost no secured debt in the case.

The NYC OTB, which filed for Chapter 9 protection in December, has said it will halt operations on April 11 unless the state Legislature acts.

The case is In re New York City Off-Track Betting Corp., 09-17121, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Orleans Homebuilder Objects to Homeowner’s Request for Trustee

Orleans Homebuilders Inc., the bankrupt builder of homes and condominiums in seven states, has objected to a request by a creditor for the appointment of a Chapter 11 trustee or examiner to oversee its affairs, according to court papers filed in the U.S. Bankruptcy Court in Delaware. A hearing on the request for a trustee appointment was scheduled for today.

Last month, a motion was made by homeowner Mona F. Mustafa to appoint a trustee for Orleans. The company should be taken over by a Chapter 11 trustee or have an examiner appointed, Mustafa said in court papers.

Mustafa’s request is “procedurally and substantively infirm and replete with misrepresentations,” Orleans said in court papers in opposition to Mustafa’s motion. Mustafa has been “in a protracted legal battle” in Illinois in which the homeowner has alleged “inflated” damages, Orleans said in court papers. Her claims in support of the request for a trustee are based on “conclusory and largely irrelevant factual assertions,” the debtor said in a filing.

Bankruptcy law requires a bankruptcy judge to appoint an examiner whenever one is sought in a Chapter 11 case with more than $5 million in unsecured debt for borrowed money. The bankruptcy judge nonetheless retains the ability to control the scope of the examination and cap the examiner’s fees.

The case is In re Orleans Homebuilders Inc., 10-10684, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Barclays Says Lehman Contract Entitles It to Disputed Assets

Barclays Plc, fighting a lawsuit seeking the return of an alleged “secret” $11 billion profit on the purchase of Lehman Brothers Holdings Inc.’s brokerage, said it wants to be paid money it was promised.

Britain’s second-largest bank said in a court filing late yesterday it was entitled to funds including $769 million in securities held in Lehman’s customer reserve account and asked for an order for it to be given all undelivered assets. The bank said it “would not have agreed” to a purchase with the conditions the bankruptcy trustee is now seeking, it said in the filing in U.S. Bankruptcy Court in New York.

The British bank said it faced exposure for losses of more than $1.1 billion on proprietary options it took over, rejecting claims by the trustee that they were “a market opportunity.”

Separately, Goldman Sachs Group Inc., Morgan Stanley, Credit Suisse Group AG and other banks objected to Lehman’s plan to build its real estate unit into an asset-management business.

The business would be “a reorganization plan for debtors’ employees and management separate, apart and ahead of the reorganization plan for creditors,” the banks said yesterday in a court filing.

A unit called Lamco, staffed by current employees and managers, would run the defunct investment bank’s real estate and private-equity assets, also taking on business from outside, Lehman said in March.

Lehman filed the largest bankruptcy in U.S. history, listing $639 billion in assets.

The bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, and the Barclays case is James W. Giddens v. Barclays Capital Inc., 09-01732, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

For more about the Barclay’s suit, click here.

For more about the reorganization plan and objections to it, click here.

Dekabank Deutsche Asks Court to Dismiss Hotels Union Square Case

Dekabank Deutsche Girozentrale asked the U.S. Bankruptcy Court in Delaware to dismiss the Chapter 11 filing of Hotels Union Square Mezz 1 LLC and bar it from filing again for six months because the filing was made “in bad faith,” according to statements made by the bank in court papers.

The bankruptcy petition was filed the afternoon before Dekabank was scheduled to hold a Uniform Commercial Code foreclosure sale and auction of its interests in the debtor, the bank said in an April 2 court filing.

The W Hotel Union Square LLC is owned by Hotels Union Square LCC and is encumbered by a mortgage of about $115 million, according to the bank’s filing. Equity in the project entity “is pledged to Dekabank” under a security and pledge agreement entered into in December, 2006, securing a loan of $64.4 million, including accrued interests and costs, according to court files. Dekabank said in court papers that it hasn’t been paid on its mezzanine loan since September 2009.

Whether Hotels Union Square Mezz 1 LLC, one of three mezzanine lenders to the W Hotel, had the right to file a Chapter 11 petition on March 23 was thrown into doubt March 31 in a lawsuit filed in bankruptcy court by Union Square Real Holding Corp., the new owner of a mezzanine loan on the hotel.

A date for a hearing on a motion to dismiss hasn’t been set.

The case is In re Hotels Union Square Mezz 1 LLC, 10-10971, U.S. Bankruptcy Court, District of Delaware (Wilmington).

For more about the bankruptcy, click here and scroll down to Hotels Union Square story.

Briefly Noted

KLCG Property Files Monthly Operating Report for February

KLCG Property LLC and Gurnee Property LLC, the bankrupt owners of the KeyLime Cove indoor water park in Gurnee, Illinois, filed a monthly operating for the period beginning Feb. 1 and ending Feb. 28, according to court files.

Total actual receipts for the reporting period were $5.3 million and the projected cash receipts were $2.5 million, according to a schedule attached to the filing. Total actual disbursements for the reporting period were $5.1 million while projected disbursements were $2.5 million, according to the filing.

The case is In re KLCG Property Inc., 09-14418, U.S. Bankruptcy Court, District of Delaware (Wilmington).

HSH Delaware GP Files Monthly Operating Report; Shows Cash

HSH Delaware GP LLC filed a monthly operating report, as debtor-in-possession, for the period ending Jan. 22 through Feb. 28. The debtor, as of Feb. 28, had total cash receipts of $2.8 million for its HSH Lux SARL unit, and $1.36 million for its HSH Convest Lux unit. Cash receipts for other units were less than $500,000, according to court papers. The HSH (Alberta) LLP unit has a portfolio of fixed income assets with a current value at month end of $198 million, according to a statement issued by JPMorgan that was filed with the court.

Icahn Now Owns Whole Mortgage on Trump Casinos, AP Says

Carl Icahn has bought the remaining half of the $500 million mortgage on the three Trump Entertainment Resorts casinos he’s trying to buy out of bankruptcy, according to the Associated Press.

Icahn also won a $10 million interest payment in the Transaction, AP said.

Court documents show the billionaire investor, who previously owned 51 percent of the mortgage issued by Dallas-based Beal Bank, agreed last week to buy the remaining 49 percent at a 7.5 percent discount. Icahn wants to convert the mortgage into ownership of the casinos. A bankruptcy judge is expected to pick a winner by April 15, according to AP


U.S. Apartment Rents Decline as Vacancies at Record, Reis Says

U.S. apartment rents dropped in the first quarter and the vacancy rate remained at a record as unemployment near a 26-year high limited tenant demand. Rent rates rose less than half a percent from the previous quarter, the first sequential growth since the three-month period when Lehman Brothers Holdings Inc. filed for bankruptcy. Actual rents paid by tenants, known as effective rents, declined 1.5 percent from a year earlier, Reis Inc. said in a report today.

For more about the U.S. rental market, click here.

Debt Workouts/Lawsuits

Annie Leibovitz Sued for Failure to Pay Fees in Finance Deal

Photographer Annie Leibovitz was sued by Brunswick Capital Partners LP, a Manhattan-based investment firm, for failing to pay at least $315,000 in fees it claims are due as part of her financing deal with private-equity firm Colony Capital LLC.

Brunswick entered into an agreement with them in February 2009 to seek “strategic financing” for her, according to the allegations of the lawsuit filed April 2 in New York State Supreme Court in Manhattan. In exchange for a $50,000 initial retainer fee and, additionally, weekly $10,000 retainer payments, Brunswick obtained a list of lenders for Leibovitz, Brunswick claims in the complaint. Brunswick also alleges it’s entitled to a 2 percent “success fee” stemming from Leibovitz’s deal with Colony Capital.

A spokesman for Leibovitz wasn’t immediately available for comment.

Credit Markets

Bond Buyers Demand Record Downgrade Protection: Credit Markets

Bonds with built-in protection against rating cuts are making up a record share of debt issues as investors hedge against a slowdown in the economic recovery.

Anheuser-Busch InBev NV, the brewer of Budweiser and Stella Artois, is among companies issuing so-called step-up bonds, whose interest increases if a borrower is downgraded. Sales surged to $37.3 billion in March, or 12.4 percent of all debt issued, according to data compiled by Bloomberg. Most of the notes are sold in the U.S., where almost half of bonds rated as so-called junk or on the cusp of non-investment grade include the protection.

For more about step-up bonds, click here.

Commercial Debt Activity

Western Express Plans Debt as Liquidity Grows: New Issue Alert

Western Express Inc., a Tennessee trucking company that started in 1991, is marketing notes as record issuance of high- yield, high-risk debt as growing profits help provide companies with money to meet their obligations.

Western Express, based in Nashville, plans to sell $275 million of eight-year securities to repay debt and for general corporate purposes, according to a person familiar with the offering who declined to be identified because terms aren’t set.

Issuers that are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s sold $70 billion of debt in the first quarter, the most to begin a year since at least 1999, according to data compiled by Bloomberg.

For description of companies with pending sales dollar- denominated bonds in the U.S., click here.


General Maritime Downgraded by S&P for Possible Covenant Breach

General Maritime Corp., the New York-based tanker company, saw its long-term corporate credit rating downgraded to B+ from BB-, and the rating was placed on CreditWatch with negative implications, according to a statement issued yesterday by Standard & Poor’s Ratings Services.

The company’s senior unsecured notes were downgraded to B-from B and that rating was also placed on CreditWatch with negative implications. The recovery rating remains at 6, according to the statement.

The ratings action was taken because of a “weakened financial profile with a potential financial covenant breach,” S&P said in the statement. In addition, the company “is experiencing liquidity constraints and continuing pressures on earnings and cash flow from reduced tanker rates,” compounded by “the expiration of a significant number of fixed-rate, time-charter agreements,” the ratings company said in the statement.

Electrical Components Sees Ratings Downgrade, Moody’s Says

Electrical Components International Inc. had its corporate family rating downgraded to Ca from Caa3 by Moody’s Investors Service Inc. on April 2, according to a statement issued by the ratings company. Approximately $321 million of rated debt is affected, the report said.

The rating changed occurred as a result of Electrical Component’s filing for bankruptcy protection under Chapter 11 on March 30. Moody’s “will withdraw all of the ratings because of the bankruptcy,” it said in a statement.

Moody’s also lowered the company’s probability of default rating of D from Caa3, lowered the $261 million senior secured bank credit facility to Ca from Caa2, and downgraded the $60 million second lien term loan due 2014 downgraded to C LGD5, from Ca, the ratings company said in the statement.

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