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Blockbuster, Bear Island, Thompson, CBGB: Bankruptcy

Blockbuster Inc., the movie rental chain, received interim approval from a bankruptcy judge yesterday for $45 million in financing from a promised loan that will grow to $125 million at the final hearing on Oct. 19.

The judge also granted interim authority to pay $28 million toward the pre-bankruptcy claims of Twentieth Century Fox Home Entertainment, Warner Home Video Inc. and Sony Pictures Home Entertainment, which are owed $68.5 million secured by assets of the Canadian subsidiary. The judge also gave interim approval to paying another $12.4 million to movie suppliers whose support is deemed critical.

The financing requires approval of a disclosure statement explaining the Chapter 11 plan by Jan. 15 and approval of the reorganization plan itself by March 15. The plan would give all the new stock to holders of the $630 million in 11.75 percent senior-secured notes. Holders of the $300 million in 9 percent subordinated notes are to be given nothing.

The so-called plan-support agreement, negotiated with holders of 80 percent of the senior notes, calls for offering warrants for 3 percent of the stock to general unsecured creditors. The three-year warrants would be based on an equity value of $630 million.

The new stock is to be listed on the New York Stock Exchange or the Nasdaq Stock Market.

The $125 million credit for the reorganization is to be converted to exit financing on confirmation of the plan. The exit loan will bear interest at 8.5 percentage points more than the London interbank borrowed rate. Libor can’t be lower than 2 percent. In addition, there can be a $50 million revolving credit on emergence from Chapter 11.

Dallas-based Blockbuster has 5,600 stores, including 3,300 in the U.S. and the remainder abroad. In the U.S., almost 3,000 of the stores are owned while the rest are franchised.

The Chapter 11 financing requires converting $250 million of existing secured debt into a new loan with a lien ahead of existing debt.

The petition listed assets of $1.017 billion against debt of $1.465 billion. Blockbuster estimated it owes $57 million in accounts payable in addition to the secured and subordinated notes.

The Dallas-based company had a $134.1 million net loss for six months ended July 4 on revenue of $1.728 billion.

The case is In re Blockbuster Inc., 10-14997, U.S. Bankruptcy Court, Southern District New York (Manhattan).


Bear Island-White Birch Auction Winner to Be Decided by Judge

The bankruptcy judge must decide at a Sept. 30 hearing who made the best offer to buy Bear Island Paper Co. LLC and its Canadian parent, White Birch Paper Co.

Two groups of first-lien lenders participated in the auction last week. The company decided that the best bid came from the original bidders, a group comprised of Black Diamond Capital Management LLC, Credit Suisse Group AG, and Caspian Capital Advisors LLC. They hold 65 percent of the $438 million in first-lien debt.

A group holding 22 percent of the first-lien debt contend in a court filing that their offer was the best. The minority group includes funds managed by BlueMountain Capital Management, Lombard General Insurance Co. of Canada, Macquarie Americas Corp., and Wexford Capital LP.

Arguing its offer is the best, the minority group points out that the collateral for the first-lien lenders doesn’t include current assets. The minority group, which calls itself Sixth Ave. Investment Co. LLC, offered $175 million. The group says its offer allocates $173.4 million to the current assets by means of $136.7 million cash and $36.7 million in assumed liabilities. First-lien lenders would receive $35 million cash.

As a result, the Sixth Ave. group says its offer would produce almost $140 million cash to pay administrative costs with $44 million available for unsecured creditors.

As explained by the Sixth Ave. group, the Black Diamond bid includes $90 million allocated to the current assets that have a going-concern value of $173.4 million. The Black Diamond offer would provide $4.5 million for fixed assets and a $78 million credit bid for the Canadian fixed assets.

The Sixth Ave. group contends that the Black Diamond offer, if approved by the court, would give general unsecured creditors less than one-half of one percent.

Dune Capital LP and another investor in the second-lien debt want the judge to approve the Sixth Ave. bid. They say they hold 61.5 percent of the $100 million in second-lien debt.

Bear Island’s exclusive right to propose a Chapter 11 plan was extended to Jan. 3.

Based in Nova Scotia, White Birch and U.S. subsidiaries filed for reorganization simultaneously in the U.S. and Canada in February. White Birch is the second largest newsprint maker in North America.

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 attributable to 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).

Thompson Publishing Wins Approval for $750,000 Interim Loan

Thompson Publishing Holding Co., a publisher of newsletters and loose-leaf services on regulatory issues, filed under Chapter 11 on Sept. 21 and three days later secured interim approval for $750,000 in financing. At an Oct. 12 hearing, Thompson will be asking the bankruptcy judge in Delaware to give final approval for a $3 million credit.

The Oct. 12 hearing will also see Thompson asking for approval of auction and sale procedures where the business would be sold to first-lien lenders in exchange for secured debt. The loan agreement requires having approval of the auction process within 20 days of the Chapter 11 filing. The auction itself must take place within 45 days of the bankruptcy filing.

At auction, the first bid will come from the first-lien lenders under contract to buy the business in exchange for $42 million in secured debt. The buyer will assume liabilities on subscriptions and obligations to employees.

Based in Washington, D.C., Thompson has 300 products and 70,000 subscribers. The company expects revenue will decline this year to $49 million. Debt includes $122.6 million owing on first-lien debt with PNC Bank NA serving as agent. Second-lien creditors, owed $43.5 million, have Ableco Finance LLC as agent.

Controlled by Avista Capital Partners LP, Thompson generated 74 percent of income from subscription. The company also arranges conferences and employee training events.

The case is In re Thompson Publishing Holding Co., 10-13070, U.S. Bankruptcy Court, District of Delaware (Wilmington).

PharMerica Aims to buy Chem Rx for $70.6 Million

Chem Rx Corp., the third-largest provider of institutional pharmacy services in the U.S., has a contract to sell the assets after more than four months in Chapter 11.

Over the weekend, PharMerica Corp. signed a definitive agreement to buy the business for $70.6 million plus the assumption of specified liabilities.

The bankruptcy judge scheduled a hearing for Oct. 4 to rule on proposed auction and sale procedures. If adopted by the judge, competing bids would be due initially by Oct. 25, followed by an auction on Oct. 27. A hearing to approve the sale would take place around Oct. 28.

Chem RX said it signed 65 prospective buyers to confidentiality agreements. The last round of bidding had eight potential buyers. PharMerica, the so-called stalking horse, operates 90 institutional pharmacies in 41 states.

Chem Rx filed under Chapter 11 on May 11 after first-lien lenders owed $103 million were seizing the Long Beach, New York-based company’s income. The first-lien debt had been in default since early 2009. Other liabilities include $37 million owing on a second lien and $8.3 million in subordinated debt held by affiliates of insiders. CIBC World Markets Corp. is agent for the lenders on the first- and second-lien loans. The petition listed assets of $170 million against debt totaling $178 million.

The case is In re Chem Rx Corp., 10-11567, U.S. Bankruptcy Court, District of Delaware (Wilmington).

CBGB Trademark to be Used in Guitar Hero 6 Game

CBGB Holdings LLC, the owner of trademarks associated with what was a music club at Bowery and Bleecker Streets in Manhattan, has approval to grant a non-exclusive license for use of the trademarks in the sixth iteration of the video game Guitar Hero. The game is developed by Activision Blizzard Inc.

Although the license will bring in only $30,000, CBGB explained how using the trademark appearing in the new version of the game will give “vital” exposure to the “12-25 demographic.”

The club was opened in 1973 by Hillel Kristal, known as Hilly. The name is an acronym for Country, Blue Grass, and Blues. It closed in October 2006, less than a year before Kristal’s death.

Kristal’s estate sold the CBGB trademarks and other intellectual property to the company that filed under Chapter 11 in New York in June. The buyer paid $3.5 million, with $1.11 million in cash and the remainder covered by a secured note with a lien on the assets.

Kristal’s estate claims the debt is now $2.58 million. Ownership of the assets is being contested between Kristal’s heirs and his former wife.

CBGB’s bankruptcy schedules listed assets of $133,500 against debt totaling $3.59 million.

The case is In re CBGB Holdings LLC, 10-13130, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Surefil, Shampoo Maker, Sold for $4.5 Million

Surefil LLC, a contract manufacturer of shampoos, conditioners and mouthwash, completed the sale of the assets last week to a company led by Bill Currie, the chairman of Universal Forest Products Inc., the company said in a statement. The sale for $4.5 million was approved this month by the bankruptcy court.

Surefil’s formal lists of assets and debt showed property with a value of $5.1 million against liabilities totaling $19.3 million. The secured lender Huntington National Bank was owed $11.6 million.

The Grand Rapids, Michigan-based company filed under Chapter 11 in June 2009 in its hometown.

The case is In re Surefil LLC, 09-06914, U.S. Bankruptcy Court, Western District Michigan (Grand Rapids).

Meruelo Maddux Told by Judge to Withdraw Inaccurate Statement

Meruelo Maddux Properties Inc. was officially instructed by the bankruptcy judge last week to withdraw a Sept. 9 press release. After holding hearings, the judge concluded that the release contained “substantial inaccuracies” and was an “improper plan solicitation in violation” of the Bankruptcy Code.

Shortly after the release was issued, the official creditors’ committee accused the Los Angeles-based developer and manager of commercial and multifamily residential property of making “inaccurate and materially” false statements. The company already withdrew the release at the behest of the judge.

The judge is in the process of approving disclosure statements explaining three competing reorganization plans. The first, for the plan proposed by lenders Legendary Investors Group No. 1 LLC and East West Bank, was approved by the judge last week.

The company itself has a plan, as do shareholders Charlestown Capital Advisors LLC and Hartland Asset Management Corp. The committee previously recommended that creditors turn down the company plan. The creditors’ committee previously said that the shareholders’ plan would give the reorganized company more liquidity from a $30 million cash infusion at confirmation.

The deadline for voting and the date for a confirmation hearing haven’t yet been set, a court filing says.

The bankruptcy court in Woodland Hills, California, began allowing other plans in May. The Chapter 11 petition filed in March 2009 listed assets of $682 million against debt totaling $342 million.

The case is In re Meruelo Maddux Properties Inc., 09-13356, U.S. Bankruptcy Court, Central District California (Woodland Hills).

Old GM Gets Voting Exclusivity Extension Until March 29

Old General Motors Corp., now formally named Motors Liquidation Co., sought and received an extension until March 29 of the exclusive right to solicit votes on a Chapter 11 plan.

The bankruptcy judge also authorized old GM to vote in favor of an amendment to new GM’s corporate charter designed to preserve $42 billion of net operating losses that went to new GM when it bought old GM’s business.

If the charter amendment weren’t to occur until after an initial public offering, old GM said that the prohibitions on accumulating additional stock would be more restrictive.

Old GM filed a liquidating Chapter 11 plan in August. The hearing for approval of the explanatory disclosure statement is scheduled for Oct. 21. The company previously said it hopes the confirmation hearing for approval of the plan will occur two months later. A trust for unsecured creditors would distribute stock and warrants in new GM that resulted from the sale of the core business last year. To read about the plan, click here for the Sept. 1 Bloomberg bankruptcy report.

The sale of the core business brought in 10 percent of the stock of the new GM plus warrants for 15 percent. The warrants will have value if the new company is profitable enough to raise the company’s value to specified levels. New GM, formally named General Motors Co., is 60.8 percent owned by the U.S. government.

Old GM began the largest manufacturing reorganization in history by filing under Chapter 11 on June 1, 2009. The sale was completed on July 10, 2009. GM listed assets of $82.3 billion against debt totaling $172.8 billion.

The case is In re Motors Liquidation Co., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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