June 15 (Bloomberg) -- Auto-parts maker Visteon Corp. filed a revised Chapter 11 plan, hoping to mollify existing shareholders by offering them 1.94 percent of the stock if they vote in favor of the reorganization. The new plan came in just before the hearing that began yesterday morning for approval of a disclosure statement explaining the plan.
The disclosure statement likewise was revised to reflect the new plan. In return for a “yes” vote, existing shareholders also would receive warrants to buy more stock for $51.59 a share.
The structure of the revised plan is much the same as before. The centerpiece is a proposal where bondholders would control the reorganized company by providing $1.25 billion cash.
Holders of two-thirds of the senior notes signed an agreement to support the new plan. If they are unable to supply the cash, Visteon will proceed with a plan similar to March 15 version where term loan lenders owed $1.63 billion will receive approximately 85 percent of the stock, with noteholders splitting the remaining approximately 15 percent.
The new cash is to come from a $950 million rights offering which some of the noteholders are to backstop and from a $300 million direct purchase of new stock.
If shareholders accept the newly revised plan, bondholders emerge with 90.2 percent of the new stock. Previously, they were to have 95 percent of the stock in return for the cash, with the other 5 percent being distributed to bondholders. If shareholders reject the plan, bondholders can purchase 95 percent of the stock, as before.
If the equity holders are on board with the plan, the new version calls for bondholders to receive 4.8 percent of the new stock. Bondholders receive 5 percent of the stock if existing shareholders are opposed to the plan.
Workers’ pensions plans will be retained, thus obviating a large unsecured claim for pension-plan termination.
Term loan lenders are to be paid in full with cash on hand and new cash from noteholders. The plan was revised to provide that if the lenders vote against the plan, their debt may be reinstated, allowing Visteon to reduce the amount of exit financing.
Assuming debt isn’t reinstated, reorganized Visteon would have a $300 million undrawn working capital loan when the plan is confirmed.
Only bondholders who are so-called accredited investors may participate in the rights offering. Those who aren’t receive cash for a projected recovery of approximately 48 percent for holders of the 7 percent and 8.25 percent senior notes. Non-accredited holders of the 12.25 percent senior notes should see an approximately 70 percent recovery.
From the distribution of new stock, the projected recovery by accredited investors in the 7 percent and 8.25 percent senior notes is approximately 8 percent. For the accredited holders of the 12.25 percent senior notes, the projected recovery is about 27 to 30 percent.
The revised disclosure statement says that the recovery by stockholders is worth more than $27 million, at the so-called plan value of $27.69 a share. The warrants are estimated to have a value of $7.2 million.
Except for Visteon International Holdings Inc., general unsecured creditors owed as much as $167 million will recover 50 percent.
To read about the positions being taken by various parties before yesterday’s hearing, click here for the May 25 Bloomberg bankruptcy report.
Visteon filed for reorganization in May 2009, listing assets of $4.6 billion against debt totaling $5.3 billion. Sales in 2008 were $9.5 billion, including $3.1 billion to Ford Motor Co. Visteon was spun off from Ford in 2000. Van Buren Township, Michigan-based Visteon at the outset owed $2.7 billion for borrowed money, including $1.5 billion on a secured term loan, $862 million on unsecured bonds, and $214 million on other debt obligations.
The case is In re Visteon Corp., 09-11786, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Rangers Lenders Testing Sale Process in Court Today
The Texas Rangers of professional baseball have a hearing in bankruptcy court today to decide whether the case will end July 9 with an approved sale or convert into a reorganization where there’s an auction for the assets and a disclosure statement is sent to creditors who vote on a Chapter 11 plan.
The team began the reorganization on May 24 with a plan it says pays everyone in full and is eligible for approval at a confirmation hearing without permitting any creditors to vote. The plan would implement a sale of the team to a group including current President Nolan Ryan in a transaction the Rangers value at $575 million. The team itself would only pay $75 million to lenders owed $525 million, leaving the lenders attempting to collect from team affiliates.
The official creditors’ committee told the bankruptcy judge in a June 11 court filing that the a few changes to the plan would permit confirmation without allowing creditors to vote. Otherwise, the committee says that unsecured creditors are adversely affected and are entitled to vote.
The committee says the plan must be changed to give unsecured creditors interest on their claims plus the right to sue in any court if they are shortchanged.
The main event at today’s hearing is a clash between the lenders on one side and the club and Major League Baseball on the other. At today’s hearing, the parties were told by U.S. Bankruptcy Judge Michael Lynn to hash out several issues, including whether creditors are entitled to vote, whether the disclosure statement is adequate, and who stands in the shoes of the team’s owner.
The lenders and the league disagree over who controls the team’s destiny. Since the loan was in default for a year before bankruptcy, the lenders believe they assumed the powers of the team’s limited and general partners and have the right to approve or block the plan.
The league answers by pointing to provisions in the loan documents where the lenders agreed that there could be no change in control of the club absent permission from the league after a vote of every team.
The lenders also disagree with the notion that the Nolan Ryan group is making the best offer. They contend a Houston businessman named Jim Crane had a higher bid until the league took over the sale process and compelled a sale to the Ryan group.
The lenders hope to present evidence that the team on the eve of bankruptcy transferred assets into the team where the lenders’ lien is limited to $75 million. They also say liabilities were transferred to the team, with the result that a sale to any other buyer would be “extraordinarily costly.”
The lenders point to correspondence where the league tells the lenders they must consent to a sale if the baseball commissioner decides it’s in the “best interest of baseball.”
The league takes the position that the auction for the team ended on Dec. 15 when the Ryan group was selected as having the highest bid. The lenders point to correspondence they say shows that Crane was offering more. The amount of Crane’s offer wasn’t disclosed in the court filings.
The league said in its June 11 court filing that an agreement under which the league gave financial support required picking the buyer by Dec. 15.
If the Rangers surmount all opposition at today’s hearing, Lynn previously scheduled a July 9 confirmation hearing for approval of the Chapter 11 plan. For details on the proposed plan and sale, click here for the May 26 Bloomberg bankruptcy report.
The case is In re Texas Rangers Baseball Partners, 10-43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
Starwood Still Fighting for Control of Extended Stay
Although Starwood Capital Group LLC lost the auction, it hasn’t given up the fight to take over Extended Stay Inc., the operator of more than 680 long-term lodging properties in 44 states. This time around, Starwood has support from the Extend Stay creditors’ committee.
Centerbridge Partners LP, Paulson & Co. and Blackstone Group LP won the auction with a $3.93 billion all-cash offer that would give them all of the equity. The committee says that Greenwich, Connecticut-based Starwood has a proposal worth hundreds of millions more that will allow a “meaningful distribution” to unsecured creditors and holders of $3.3 billion in mezzanine loans. If Extended Stay is sold to the Centerbridge group, the price is less than the $4.1 billion in mortgage loans, meaning that mezzanine lenders and unsecured creditors would receive nothing aside from an interest in a litigation trust.
In papers filed yesterday in bankruptcy court, Starwood said it’s prepared to file a plan where the existing mortgages would stay in place and be paid according to their terms. Starwood would invest “substantial new cash” while unsecured creditors and mezzanine lenders would receive warrants, an interest in a litigation trust, and the right to subscribe to new stock on the same terms as Starwood.
Starwood said it will soon file a motion to end Extended Stay’s exclusive right to propose a Chapter 11 plan. Starwood wants the bankruptcy court to postpone the June 17 hearing for approval of the disclosure statement until the exclusivity motion is decided.
The committee likewise doesn’t want the disclosure statement approved on June 17. The panel notes that the company consumed two weeks after the auction revising the plan and disclosure statement and wants the disclosure statement approved nine days after the revised papers were filed. The committee says the judge should follow the applicable bankruptcy rule and allow 28 days before the hearing, so the disclosure statement shouldn’t be approved until July 6 at the earliest.
The committee and Starwood argue that Extended Stay departed from the auction rules mandated by the court. As they see the facts, representatives of the mortgage lenders required all-cash bids while not permitting structured proposals.
Extended Stay and the committee also disagree about the disposition of documents collected by the examiner during his investigation.
The examiner himself suggested three alternatives. The bankruptcy judge is scheduled to decide the dispute at a June 17 hearing in the course of discharging the examiner.
The creditors’ committee supports the idea of turning documents over to the committee in view of the panel’s pending motion to investigate and bring lawsuits on behalf of the company. Extended Stay is opposed to allowing suits by the committee when the pending reorganization plan will create a litigation trust funded with $5 million to bring any lawsuits the examiner found to have sufficient merit.
Extended Stay advocates destroying records collected by the examiner. The company says it provided internal documents to the examiner under a confidentiality agreement where privileges were specifically preserved. Extended Stay contends that giving documents to the committee would violate the confidentiality agreement.
For details of the sale and the plan, click here to read the June 10 Bloomberg bankruptcy report. Before the auction, Extended Stay was seeking a confirmation hearing for approval of the plan on July 20.
Extended Stay’s Chapter 11 petition in June 2009 listed assets of $7.1 billion against debt totaling $7.6 billion, including $4.1 billion in mortgage loans and $3.3 billion in 10 different mezzanine loans.
Based in Spartanburg, South Carolina, Extended Stay says it’s the largest operator of mid-priced extended stay hotels in the U.S. The properties are almost all managed by HVM LLC, an affiliate that didn’t file in Chapter 11.
The case is In re Extended Stay Inc., 09-13764, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Mediation May Break Logjam on Circuit City Plan
Although Circuit City Stores Inc. and the official creditors’ committee jointly filed a liquidating plan in August for the 721-store electronics retailer, the two sides never came to agreement on who would control the liquidating trust to be created under the plan.
The committee filed its own version of the plan and liquidating trust documents early this month. Circuit City responded by filing a motion asking the judge to force both sides into mediation over the plan and liquidating trust. The motion for mediation is scheduled for hearing tomorrow in bankruptcy court in Richmond, Virginia.
The committee says it has no objection to mediation. The panel contends the company is unjustified in wanting to control the liquidating trust when the creditors’ representative should be in charge.
The disclosure statement for the joint plan was approved in September. The plan couldn’t be confirmed in view of outstanding Canadian tax claims and disagreement over control of the liquidating trust. No confirmation hearing for either plan is currently on the court schedule.
All but some $5 million to $20 million in secured claims already were paid in full. Unsecured creditors with claims ranging from $1.8 billion to $2 billion were estimated to have a recovery ranging between nothing and 13.5 percent, according to the explanatory disclosure statement for the joint plan.
Circuit City filed under Chapter 11 in November 2008 in its Richmond, Virginia, hometown, listing assets of $3.4 billion and debt totaling $2.3 billion as of Aug. 31, 2008. Papers originally listed $898 million owing to the secured revolving credit lenders. Unsecured trade suppliers were owed another $650 million at the outset, the company said in a court filing.
The case is In re Circuit City Stores Inc., 08-35653, U.S. Bankruptcy Court, Eastern District Virginia (Richmond).
Majestic Star Promises to File Plan by August 20
Casino operator Majestic Star Casino LLC was forced to revise the business plan when quick access by customers from Chicago to the Indiana properties was cut off because a bridge closed for structural repairs. The company is promising to file a reorganization plan by Aug. 20 and wants the bankruptcy judge in Delaware to extend the exclusive right for proposing a reorganization until then.
The hearing on Majestic Star’s so-called exclusivity motion is set for June 29. It’s the second request for more time to file a plan. The company says that the creditors’ committee and secured lenders don’t object to longer exclusivity.
Majestic Star has four casinos, plus hotels with 806 rooms serving the two riverboat casinos in Gary, Indiana. The other casinos are in Tunica, Mississippi, and Black Hawk, Colorado.
Debt includes $79.3 million owing on the senior secured credit facility, with Wells Fargo Capital Finance Inc. as agent. Senior secured noteholders with a second lien are owed $300 million. Majestic Star owes $200 million on unsecured senior notes and $63.5 million on discount notes. Assets were $406 million and debt was $750 million in the quarterly report for the period ended June 30.
The case is In re Majestic Star Casino LLC, 09-14136, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Spheris Files Plan, Recovery Not Yet Specified
Spheris Inc., a transcriber of medical dictation for doctors and hospitals, filed a liquidating Chapter 11 plan last week that proposes to pay creditors in the priorities outlined in bankruptcy law. The disclosure statement currently has blanks where unsecured creditors and holders of subordinated notes eventually will be told the percentage recovery to expect.
Spheris, now formally named SP Wind Down Inc., sold the business for $98.83 million cash and a note that it sold for $13.77 million. On Jan. 31, secured lenders were owed $75.6 million.
Unsecured claims consist largely of $125 million owing on subordinated notes.
The hearing for approval of the disclosure statement explaining the plan is scheduled for July 13.
Spheris’s assets were purchased by subsidiaries of CBaySystems Holdings Ltd., a competing medical transcription services provider.
Franklin, Tennessee-based Spheris listed assets of $61 million against debt totaling $225 million, including $75.6 million on a senior secured credit and $125 million on subordinated notes. For nine months ended in September, revenue was $120 million.
The case is In re SP Wind Down Inc., 10-10352, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Taylor Bean Has $5 Million in D&O Insurance Coverage
Taylor Bean & Whitaker Mortgage Corp., once the largest independent mortgage originator in the U.S., lodged claims against the insurance company that provided $5 million in directors’ and officers’ liability coverage. The insurer, National Union Fire Insurance Co. of Pittsburgh, Pa., is asking the bankruptcy judge to modify the so-called automatic stay so it can pay defense costs.
National Union, a subsidiary of American International Group Inc., says it hasn’t yet decided whether to cover all claims. The U.S. Department of Housing and Urban Development brought departmental proceedings against former officers to bar them from contracting with the federal government. Freddie Mac took action to prevent them from doing business with the agency. The former officers also asked for coverage under the policy.
Taylor Bean itself received subpoenas from the Securities and Exchange Commission and a federal grand jury in Georgia.
After filing under Chapter 11 last August, Taylor Bean sold 1,046 parcels of repossessed real estate for $81.2 million to Selene Residential Mortgage Opportunity Fund LP. The bankruptcy occurred three weeks after federal investigators searched the offices of the Ocala, Florida-based company. The day following the search, the Federal Housing Administration, Ginnie Mae and Freddie Mac prohibited the company from issuing new mortgages and terminated servicing rights. Taylor Bean managed an $80 billion mortgage servicing portfolio. The petition said assets and debt both exceed $1 billion.
The case is Taylor Bean & Whitaker Mortgage Corp., 09-07047, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
Medical Staffing to Be Sold to Lenders in Chapter 11
Medical Staffing Network Holdings Inc., a provider of temporary nursing services, said today that it will begin a prepackaged Chapter 11 reorganization by June 28 where the first-lien lenders owed $95.1 million will buy the business in exchange for debt.
Second-lien lenders owed $25.2 million won’t object to the sale, the company said in a regulatory filing. The agreement on the reorganization was reached with General Electric Capital Corp., agent for the first-lien lenders, and with holders of 95 percent of the second-lien debt.
The sale will be conducted through a typical bankruptcy auction with the first bid to come from the senior lenders. They also will provide $15 million in financing for the Chapter 11 case.
Medical Staffing, based in Boca Raton, Florida, violated loan covenants in December. Access to the revolving credit had been shut off.
Medical Staffing reported a $6.7 million net loss for the first quarter of 2010 on revenue of $72 million. The balance sheet was upside down with assets of $87.7 million and total liabilities of $140.9 million. The operating loss in the first quarter was $1.3 million.
For 2009, Medical Staffing had an operating loss of $34.3 million and a net loss of $51.2 million. Revenue for the year was $340.9 million.
Fairfield Sentry, Madoff Feeder Fund, Files in New York
Fairfield Sentry Ltd., which says it and affiliates were the largest feeder funds for Bernard L. Madoff Investment Securities Inc., filed Chapter 15 petitions yesterday to enlist help from the bankruptcy judge in New York to collect assets for the funds’ liquidations in the High Court of Justice in the British Virgin Islands.
The funds’ former investment manager was Fairfield Greenwich Group. The funds severed their relationship with the manager, court papers say. The funds were created so non-U.S. citizens and certain tax exempt entities could invest with Madoff.
Chapter 15 isn’t a full-blown reorganization like Chapter 11 or a liquidation like Chapter 7. Instead, Chapter 15 allows the judge in the U.S. to assist a bankruptcy principally pending elsewhere. If the Chapter 15 petition is granted, all manner of creditor actions in the U.S. will be halted, and the U.S. judge can lend a hand in collecting assets in the U.S.
The liquidators for the Fairfield funds say the trustee for the Madoff firm has no objection to the Chapter 15 petition.
The liquidators say the funds invested more than $7 billion in the Madoff firm. The Madoff trustee has objected to allowance of the firms’ claims in the U.S. liquidation. The liquidators in their U.S. court filing say they are engaged with the Madoff trustee in “good faith, bilateral discussions toward a consensual resolution.”
If the Chapter 15 petitions are granted, the liquidators say they will use the U.S. court to help collect assets in the U.S.
In May 2009, the Madoff trustee sued Fairfield Greenwich for $3.54 billion, aiming to take back $3.2 billion withdrawn within six years and $1.2 billion taken out in 90 days before bankruptcy.
Bernard Madoff is serving a 150-year prison sentence following a guilty plea. The Madoff firm began liquidating in December 2008 with the appointment of a trustee under the Securities Investor Protection Act. Bernard Madoff himself went into an involuntary Chapter 7 liquidation in April 2009. His bankruptcy case was consolidated with the firm’s liquidation.
The Fairfield case is In re Fairfield Sentry Ltd., 10-13164, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
The Madoff liquidation case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities Inc., 08-01789, U.S. Bankruptcy Court, Southern District New York (Manhattan). The criminal case is U.S. v. Madoff, 09-cr-00213, U.S. District Court for the Southern District of New York (Manhattan).
Trico Marine, Old Time Pottery, Zayat Stables: Audio
Trico Marine Services Inc., Old Time Pottery Inc. and Zayat Stables LLC are topics covered in the new bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.
BP’s Bankruptcy Alternatives Surveyed, Analyzed
BP Plc may find that a Chapter 11 filing doesn’t provide protection from claims resulting from the Gulf of Mexico oil spill. Click here to read a Bloomberg survey of experts discussing the advantages and shortcoming of a bankruptcy filing.
An alternative for BP, where the U.S. court would play a less prominent role, involves a filing for administration in the U.K., accompanied by a Chapter 15 petition in the U.S. For a discussion of the Chapter 15 possibilities, click here and listen to Bloomberg Surveillance with Ken Prewitt and Tom Keene.
Fremont Implements Plan Sponsored by Signature Group
Fremont General Corp. implemented the Chapter 11 plan on June 11 that the bankruptcy judge formally approved in a June 9 confirmation order. Creditors initially had the ability to select among five competing reorganization plans. Signature Group Holdings Inc. ended up with the plan the judge approved. Signature’s plan pays all creditors in full and allows existing shareholders to retain their stock, although diluted by new shares issued under the plan. For details on the Signature plan, click here for the May 13 Bloomberg bankruptcy report. For read other Bloomberg coverage, click here.
Brea, California-based Fremont filed under Chapter 11 in June 2008, just after regulatory approvals were given for the sale of the bank subsidiary Fremont Investment & Loan to CapitalSource Inc. The bank itself never was in bankruptcy. Each of the plans reflected a proposal for how best to take advantage of the company’s tax losses. Fremont filed lists saying assets were $362 million and debt totaled $327 million.
The case is In re Fremont General Corp., 08-13421, U.S. Bankruptcy Court, Central District California (Santa Ana).
Bear Island Creditors Still Investigate Secured Loans
The creditor’s committee for Bear Island Paper Co. LLC, a U.S. subsidiary of Canada’s White Birch Paper Co., needs another 25 days to complete an investigation of the validity of pre-bankruptcy secured claims. If granted by the bankruptcy judge at a June 22 hearing, the new deadline would be July 9. The loan for the Chapter 11 case has a deadline that requires signing up a so-called plan-support agreement by today. Absent a plan, the financing requires selling the business. Bear Island reported there are several prospective buyers.
Nova Scotia-based White Birch is the second-largest newsprint maker in North America. Together with U.S. subsidiaries, it filed for reorganization simultaneously in the U.S. and Canada in February. Secured liabilities include $438 million on a first-lien term loan, $104 million on a second-lien term loan, $50 million on an asset-backed revolving credit, and $51.5 million on swap agreements. Trade suppliers are owed $9.5 million. The companies had $667 million in sales during 2009, with $125 million generated by Bear Island. White Birch has three pulp and paper mills in the province of Quebec. The Bear Island plant is in Ashland, Virginia. White Birch is controlled by Brant-Allen Industries, according to Bloomberg Data.
The case is In re Bear Island Paper Co. LLC, 10-31202, U.S. Bankruptcy Court, Eastern District Virginia (Richmond).
Joint Bank Debt Not Wiped Out in Wife’s Bankruptcy
A former wife who filed bankruptcy remained liable to her former husband to pay her share of a $44,800 home-equity credit, the 10th U.S. Circuit Bankruptcy Appellate Panel ruled in March.
The debt to the bank was incurred jointly by the couple while they were married. The separation agreement provided the former wife would pay $500 a month although she didn’t agree to indemnify the former husband.
After the wife filed bankruptcy, the former husband sued for a declaration that the wife’s share of the bank debt wasn’t discharged. The husband won, and the wife appealed, unsuccessfully.
The appellate panel said it didn’t matter that the wife hadn’t agreed to indemnify the husband or hold him harmless from the bank debt. The panel also said it didn’t matter that the bankruptcy filing prevented the bank from suing the wife. She remained liable to the husband.
The debt wasn’t discharged in bankruptcy as a result of 2005 changes in Section 523(a)(15) of the Bankruptcy Code that prevent eradication of debts to a former spouse.
The case is Woodark v. Woodark (In re Woodark), 09-049, Bankruptcy Appellate Panel for the U.S. 10th Circuit.
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