July 26 (Bloomberg) -- Almatis BV, a producer of specialty alumina products, filed an agreement on July 23 underpinning a revised reorganization plan that will allow the Chapter 11 case to end consensually and avoid a protracted battle between senior and junior secured creditors.
The new plan is supported by holders of more than two-thirds of the second-lien debt. They include affiliates of Babson Capital Management LLC, Alcentra Group Ltd. and Permira Advisers LLP. There will be a hearing on Aug. 3 in U.S. Bankruptcy Court in New York where Almatis hopes the judge will approve the plan-support agreement.
The new plan will pay first-lien creditors in cash, in full with interest, on $676 million they are owed. Second-lien lenders, who previously were to receive almost nothing, now are in line to take home 52 million euros ($67.1 million) in new senior unsecured notes, plus warrants if the notes aren’t fully paid in five years. The notes will be issued by the holding company that will directly own the operating companies.
The original plan called for senior secured creditors led by an affiliate of Oaktree Capital Management LLC to take ownership in exchange for debt, leaving second-lien creditors with warrants for 3 percent of the equity value above $325 million. The disclosure statement for the original plan projected that junior lenders would recover 2.2 percent. The senior lenders were projected to have a 78 percent to 87 percent recovery under the first plan.
Junior lenders opposed the original plan, contending the reorganized company would be worth more than the $540 million the company was claiming at the time.
The new plan is to be financed in part with a $100 million investment from the owner, Dubai International Capital LLC. In addition, there will be a $50 million revolving credit, $400 million in senior secured notes and 110 million euros in senior secured notes.
Mezzanine lenders, owed $199 million, are now to receive 35 percent of the common stock in the holding company that will be ultimate owner of the operating company, plus $14.6 million in junior preferred stock of the top-tier holding company. Junior mezzanine lenders, owed $88.1 million, are to have 4.9 percent of the common stock and $2.1 million in junior preferred stock in the ultimate holding company.
If the new notes for the second-lien lenders haven’t been repaid in five years, they will start receiving warrants each year until they have warrants for 12.5 percent of the stock of the top-level holding company.
For its $100 million investment, Dubai International will have 60 percent of the common stock and $50 million in pay-in-kind preferred stock in the top-level holding company.
Almatis reported a $1.5 million net loss in June on revenue of $17.8 million. Professional fees in the month were $931,000. The company filed under Chapter 11 on April 30 with the original plan already negotiated with holders of first-lien debt. Dubai International bought the Almatis business in 2007 for $1.2 billion. For details on the original plan, click here for the April 30 Bloomberg bankruptcy report.
Almatis’ revenue in 2009 was $400 million. For 2010, projected revenue is $534 million. Almatis began defaulting on senior debt in June 2009.
Rotterdam-based Almatis listed total debt of $1.3 billion, including $681 million on first-lien obligations, $77.7 million on second-lien debt, and $200.6 million on mezzanine debt. There is junior mezzanine debt of $80.6 million, plus trade debt of $20 million. Assets were listed for $1.53 billion.
The case is In re Almatis BV, 10-12308, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Parts of Tribune Examiner’s Report Will Be Secret
Although the examiner for newspaper publisher Tribune Co. will file his report today on the $13.8 billion leveraged buyout in 2007 by Sam Zell, parts of the report won’t be made public initially.
Kenneth N. Klee, the examiner, filed papers on July 23 in bankruptcy court explaining how some of the information and documents he obtained were received under confidentiality agreements not allowing the documents or parts of his report to be made public. Consequently, the entire unredacted report will only be given at first to the judge and immediate parties in the case.
The examiner scheduled an Aug. 9 hearing where he will ask the judge to make public disclosure of his report, except parts the judge believes are entitled to remain secret.
Klee said the entire report should be made public “as expeditiously as possible.” To compose his report, Klee said he received 4.3 million pages of documents that were contained on 150 compact discs, without an index.
Klee’s motion also asks the judge to discharge him and prevent third parties from giving him subpoenas to produce documents. Klee proposes that the documents he examined be given to a third party electronic depository where the information could be subject to subpoena under rules the bankruptcy judge would establish.
The Chapter 11 plan proposes to resolve the fraudulent transfer claims through a settlement opposed by some creditors. The judge said the underlying merits of the claims must be addressed at the confirmation hearing for approval of the plan. The confirmation hearing is currently scheduled to begin on Aug. 30.
The plan, filed in April, is opposed by holders of $3.6 billion in pre-bankruptcy debt who announced their opposition even before the settlement was formally disclosed. For details of the plan, the proposed settlement, and the parties’ arguments, click here for the April 13 Bloomberg bankruptcy report.
Tribune is the second-largest newspaper publisher in the U.S. It listed $13 billion in debt for borrowed money and assets of $7.6 billion in the Chapter 11 reorganization begun in December 2008. It owns the Chicago Tribune, Los Angeles Times, six other newspapers and 23 television stations.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District Delaware (Wilmington).
EnviroSolutions Confirmed with Cramdown on Unsecured Creditors
EnviroSolutions Holdings Inc., a trash hauler and owner of three landfills, has an approved reorganization plan given a confirmation order signed by the bankruptcy judge on July 22. The judge imposed a so-called cramdown on general unsecured creditors with $9.6 million in claims who voted against the plan.
First-lien creditors are receiving almost all of the new stock plus an $85 million secured term loan in return for a $198 million term loan. The disclosure statement explaining the plan projected a 77.8 percent recovery on the existing term loan.
Second-lien lenders, owed $23.3 million, are receiving $1.4 million cash. Some of them objected to the plan.
The unsecured creditors’ committee believed the company is worth more than the first-lien debt. The class voted against the plan. The judge confirmed the plan over their objection and “no” vote because he found that the reorganization gives them more than they would receive through liquidation. The procedure is known as cramdown.
The plan gives unsecured creditors about 10 percent in cash.
Although the second-lien creditors might have received nothing because the company was not worth enough to cover the first-lien debt, U.S. Bankruptcy Judge Stuart M. Bernstein concluded that the plan didn’t discriminate against general unsecured creditors. Bernstein determined that the recovery on the second lien was “gift” from the first-lien creditors.
Northwestern Mutual Life Insurance Co., the holder of $41.7 million in subordinated notes, received warrants for 5 percent of the stock.
The plan was negotiated with holders of 74.8 percent of the first-lien debt.
Based in Manassas, Virginia, EnviroSolutions had a $29.3 million net loss in 2009 on revenue of $134 million. It operates in the mid-Atlantic states and the Northeast.
The case is In re EnviroSolutions of New York LLC, 10-11236, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Centaur Files New Plan With Most Value to First Lien
Casino and racetrack operator Centaur LLC filed a revised reorganization plan last week where holders of $405 million in first-lien debt are slated to recover about 83 percent from a combination of mostly new stock and debt. Holders of $207 million in second-lien debt are in line for a 1.4 percent recovery, according to the disclosure statement filed along with the plan.
Centaur 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 to keep alive a project to develop a racetrack in Pennsylvania. All the companies are subsidiaries of closely held Centaur Inc., which isn’t in bankruptcy.
The plan would distribute $115 million in new first-lien debt to the existing senior secured creditors. The new debt would be decreased by debt issued to finance the company after bankruptcy. Those creditors also would receive almost all of $155 million in new pay-in-kind notes, plus penny warrants for most of the new stock. In addition, proceeds from the sales of the Pennsylvania and Colorado properties would go the first-lien debt holders.
If the class votes in favor of the plan, the holders of second-lien debt would receive a share of $3 million in pay-in-kind notes and recoveries from a litigation trust.
If they vote for the plan, unsecured creditors of Valley View Downs with $61.2 million in claims are to have a 0.7 percent recovery from receiving a share of $400,000 in new pay-in-kind notes and some recoveries by the litigation trust. Other general unsecured creditors, for their $17.2 million in claims, are to have a share of the litigation trust.
The disclosure statement says that the equity of the reorganized company will have a value between $30 million and $90 million.
Centaur has a July 28 hearing for approval of auction and sale procedures for the Fortune Valley Hotel & Casino 40 miles west of Denver. The initial bid will come from Luna Gaming Central City LLC. The price is $7.5 million cash plus a $2.5 million note, less adjustments.
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 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. They were developing a property in Pennsylvania to be called Valley View Downs & Casino, 55 miles from Pittsburgh.
The companies own Hoosier Park, a casino and horse racetrack, in Anderson, Indiana, along with three offtrack betting parlors in Indiana. In addition, they own Fortune Valley Hotel & Casino in Central City, Colorado, which has a 118-room hotel to complement the casino. The companies generated revenue of $277.5 million in 2009.
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).
Abitibi Expanding Eligible Buyers in Rights Offering
AbitibiBowater Inc., the largest newsprint maker in North America, is amending the commitment agreement for the $500 million rights offering to permit creditors of a Bowater financing subsidiary to buy stock if their claims are eventually approved. The hearing to approve the amendment is scheduled for July 30.
The company’s proposed reorganization plan is financed in part by an offering to sell $500 million in convertible notes. There is a backstop agreement where some creditors agreed to buy the notes if eligible creditors don’t. The backstop commitment was approved in June.
In addition to allowing creditors of the Bowater subsidiary to purchase in the offering, the terms will be changed to create so-called oversubscriptions rights were securities not purchase could be bought by creditors other than the backstop parties.
The amendment will also extend the deadline for approval of the disclosure statement until Aug. 6. A hearing is now set for July 30 where Abitibi hopes the bankruptcy judge will approve the disclosure statement explaining the plan. Creditors can’t vote until the disclosure statement is approved.
The disclosure statement tells creditors of each of the more than 30 affiliated companies how much they could recover. For details about the plan, click here for the May 25 Bloomberg bankruptcy report.
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 Montreal-based company began reorganizing with 24 pulp and paper mills plus 30 wood-product plants. Revenue in 2008 was $6.8 billion. In Chapter 11 petitions filed in April 2009, the combined AbitibiBowater companies listed assets of $9.9 billion and debt totaling $8.8 billion as of Sept. 2008.
The case is AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Pacifica Studios Aims to Stop Foreclosure of Owners
Pacifica Mesa Studios LLC, the owner of a movie studio in Albuquerque, New Mexico, sought Chapter 11 protection on July 20 and the next day filed papers in bankruptcy court to block the second-lien lender from foreclosing the ownership interest held by Dana Arnold and Hal Katersky.
The studio, known as Albuquerque Studios or ABQ Studios, has an $84 million first mortgage owing to Longview Ultra I. The second mortgage, for $23 million, is held by Workers Realty Trust II LP.
Pacifica contends that a subordination agreement between the two lenders prevents Workers from taking any action to collect on the second-mortgage so long as the first mortgage is in default. Pacifica wants the bankruptcy judge to rule that the subordination agreement precludes Workers from foreclosing the ownership interest held by Arnold and Katersky.
Pacifica believes that the property is worth $54 million and that Workers therefore is “out of the money.”
The case is In re Pacifica Mesa Studios LLC, 10-18827, U.S. Bankruptcy Court, Central District California (Woodland Hills).
Dreier Trustees Make Settlement for Lawsuit Proceeds
The bankruptcy trustees for convicted lawyer Marc Dreier and the firm he founded, Dreier LLP, both claim ownership of claims and lawsuits against third parties. The bankruptcy court approved an agreement last week where the Chapter 11 trustee for the firm will pay $200,000 in installments to Dreier’s individual Chapter 7 trustee.
In return, the Chapter 11 trustee for the firm will receive all proceeds from lawsuits against third parties based on fraudulent transfers and preferences before bankruptcy.
The first recovery to be covered by the settlement between the trustees involves Vertition Fund Management which agreed to pay $9 million to the firm’s Chapter 11 trustee.
Vertition, which settled before being sued, received a $13.5 million payment one month before the fraud surfaced. The payment was on account of fraudulent notes that Vertition had purchased. Although Vertition was owed money on account of the notes that turned out to be fraudulent, bankruptcy law says that a payment must be returned if it was made with money that was stolen from someone else.
Vertition also agreed not to receive a distribution on a claim unless another holder of a fraudulent note settles before suit is filed and is given an approved claim.
The terms of the settlement also provide that no creditors can sue Vertition based on dealings with Dreier and his firm.
The trustees’ claims against third parties arise from the scheme where investors thought they were buying notes issued by the Dreier firm’s clients. It turned out that the notes were fraudulent.
Dreier pleaded guilty in May 2009 to charges of money laundering, conspiracy, securities fraud and wire fraud in a scheme that cost victims $400 million, prosecutors alleged. He was also ordered to make $387 million in restitution.
The firm he founded once had 250 lawyers. It is being liquidated in a Chapter 11 case begun in December 2008. Dreier himself is now in a Chapter 7 liquidation.
The Chapter 11 case for the firm is In re Dreier LLP, 08-15051, U.S. Bankruptcy Court, Southern District New York (Manhattan). The criminal case is U.S. v. Dreier, 08-mag-2676, U.S. District Court, Southern District of New York (Manhattan). The civil case is SEC v. Dreier, 08-cv-10617, U.S. District Court, Southern District of New York (Manhattan). Dreier’s individual Chapter 7 case is 09-10371, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Fight Scheduled Over Selling InterContinental Chicago Hotel
River Road Hotel Partners LLC, the owner of the InterContinental Chicago O’Hare hotel near Chicago’s largest airport, is scheduled for an Aug. 23 hearing on a motion for approval of bidding procedures related to a sale opposed by the secured lender.
Before a deadline in June, River Road filed a motion to set up auction procedures where the first bid of $42 million would come from an affiliate of Och-Ziff Real Estate Acquisitions LP. The sale would be part of a Chapter 11 plan where more than $2 million of cash on hand would be used to pay expenses of the Chapter 11 case.
Longview Ultra Construction Loan Investment Fund, the secured construction lender owed $161 million, is opposing the sale process and believes the plan can’t be confirmed.
Longview filed a motion last week asking the bankruptcy judge to allow it to file a competing plan. The motion is also on the calendar for Aug. 23.
River Road filed under Chapter 11 in August 2009 in Chicago along with affiliate RadLAX Gateway Hotel LLC, the owner of the Radisson hotel at Los Angeles International Airport. Both are ultimately controlled by Harp Group. The O’Hare property, opened in September, listed $155 million in debt. The Radisson property listed debt of $120 million.
The case is In re River Road Hotel Partners LLC, 09-30029, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).
Global Capacity Files in Delaware for Debt Conversion
Capital Growth Systems Inc., known as Global Capacity, filed a Chapter 11 petition on July 23 in Delaware to convert debt into equity.
The Chicago-based provider of systems to integrate networks had revenue of $64.4 million in 2009, resulting in a $52.8 million net loss including $12.5 million in charges for impairment of goodwill. The first quarter of 2010 resulted in a $2 million loss on revenue of $14.7 million. Revenue in the quarter declined 10 percent from the same period in 2009.
Debt includes $5.2 million on a senior secured loan owing to Pivotal Global Capacity LLC. There is another $38 million on several issues of secured subordinated convertible debt, $4 million in unsecured notes, and $15 million owing to utilities.
The company said in a court filing that there is an agreement on a reorganization plan with Downtown Capital and some debenture holders who also will supply financing for the Chapter 11 case.
The company said it filed in Chapter 11 when out-of-court negotiations over 14 months were “unsuccessful.”
The case is In re Global Capacity Holdco LLC, 10-12302, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Reno’s Siena Hotel & Casino Files in Oakland, Calif.
Wild Game Ng LLC, the operator of the Italian-themed Siena Hotel Spa and Casino in Reno, Nevada, filed a bare-bones Chapter 11 petition on July 21 in Oakland, California.
The petition says debt exceeds $50 million. A court filing lists Barney NG as the unsecured creditor with the largest claim, $36.5 million. The filing says the debt is for “rent payments.”
The hotel has 185 rooms and 29 suites, according to the website. The casino covers 23,000 square feet.
By the day after filing, there were no papers on file in bankruptcy court aside from the printed-form petition, a list of creditors, and other form documents.
The case is In re Wild Game Ng LLC, 10-48272, U.S. Bankruptcy Court, Northern District California (Oakland).
Holiday Isle Condo on Dauphine Island Files in Mobile, Alabama
Holiday Isle LLC, the developer of a seven-story beachfront condominium on Dauphin Island, Alabama, filed a Chapter 11 petition on July 23 in Mobile, Alabama.
The filing was a so-called bare-bones petition with little filed in court initially aside from the printed form petition and a list of creditors. The attorney received a retainer of $70,000.
The project has 144 units, according to the Web site.
The petition says assets and debt both exceed $50 million.
The case is In re Holiday Isle LLC, 10-03365, U.S. Bankruptcy Court, Southern District Alabama (Mobile).
Bankruptcy Releases, General Growth, Rangers: Audio
Why releases for third parties are popular in bankruptcy; the bankruptcy judge lets go of a significant dispute regarding General Growth Properties Inc.; whether the judge will cajole the Texas Rangers baseball team to settling with lenders, and being in Chapter 11 without being bankrupt are examined in the new bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.
GSI Group Consummates Plan, Exits Chapter 11 Reorganization
GSI Group Inc., a provider of laser-based systems to aid manufacturing, exited Chapter 11 by implementing the reorganization plan last week that the bankruptcy court approved in a May 27 confirmation order. Existing shareholders kept 86 percent of the stock. For details of the plan, click here for the July 15 Bloomberg bankruptcy report.
The original version of the plan and explanatory disclosure statement were filed with the Chapter 11 petition in November. The original plan was rejected by holders of 80 percent of the stock. The petition in November listed assets of $555 million and debt totaling $370 million. Bedford, Massachusetts-based GSI had no substantial secured debt.
The case is In re MES International Inc., 09-14109, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Seven Takeovers Bring Year’s Bank Failures to 103
Seven banks in seven states were taken over by regulators on July 23, bringing total U.S. bank failures for the year to 103.
The failures will cost the Federal Deposit Insurance Corp. an estimated $431 million.
To read Bloomberg coverage, click here.
There were 140 bank failures in 2009, five times more than 2008. The failures in 2009 were the most since 1992, when 179 institutions were taken over by regulators.
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