Las Vegas Monorail Co. said there are discussions with first-tier bondholders on what it hopes will be a consensual reorganization plan.
The Monorail, which winds its way behind casinos on the eastern side of the Las Vegas Strip, filed a proposed Chapter 11 plan in August. The senior bondholders, owed $451 million, didn’t like the plan to give them notes totaling $18.5 million for their secured and deficiency claims.
Absent settlement, Monorail and bondholders have several court dates during the next month. On Oct. 12, Monorail will argue a motion for an extension of the exclusive right to propose a plan until Oct. 18.
On Nov. 9, the bondholders will ask the bankruptcy judge in Las Vegas to end Monorail’s exclusive plan proposal rights. A hearing for approval of Monorail’s disclosure statement is on the calendar for Nov. 17.
Under Monorail’s plan, unsecured creditors, with claims totaling as much as $175,000, would be in a separate class and share $175,000 cash. The bondholders believe that putting general creditors into a separate class is so-called gerrymandering to insure that at least one class will vote in favor of the plan. Without one class voting “yes,” bankruptcy law prohibits cramming down on the first-tier debt.
Holders of $159 million in second-tier bonds and $48.5 million in third-tier bonds would receive nothing from the Monorail’s plan.
U.S. Bankruptcy Judge Bruce A. Markell ruled in April that Monorail isn’t a municipality and therefore can reorganize in Chapter 11. For a discussion of Markell’s ruling, click here for the April 27 Bloomberg bankruptcy report.
Monorail, a nonprofit corporation, began operation in 2004. It built a 3.9-mile driverless transportation system running behind the Las Vegas Strip to the convention center. Revenue was never enough to service debt.
Making seven stops, the monorail takes 15 minutes for the entire trip. It winds behind hotels and casinos on the east side of the Strip. There were plans for extending the monorail to the airport.
The case is In re Las Vegas Monorail Co., 10-10464, U.S. Bankruptcy Court, District of Nevada (Las Vegas).
Business Filings Down, Individuals’ Up in September
Commercial and Chapter 11 bankruptcy filings declined again in September compared with the year before. Conversely, total bankruptcies, comprising mostly individual filings, are on pace to top 2009 by more than 10 percent.
Through September, there were almost 1.2 million total bankruptcies, according to data compiled from court records by Automated Access to Court Electronic Records. If the trend continues, 2010 will see about 1.6 million bankruptcies, up from 1.45 million in 2009. Last year’s bankruptcies represented a 32 percent increase from 2008.
In contrast with the increase in individual filings, bankruptcies by businesses continue to trail 2009, according to AACER, a service of Oklahoma City-based Jupiter ESources LLC. There were about 7,000 commercial filings in September, 4.3 percent less than the same month in 2009. The approximately 65,400 business filings so far this year are on course to trail the almost 90,000 in 2009 by 2.8 percent.
Chapter 11 filings also have fallen from last year. With some 1,200 new Chapter 11 cases in September, the year is headed toward an 8 percent decline from the approximately 15,200 business reorganizations in 2009. In total, September had almost 134,000 bankruptcy filings by individuals and businesses.
Bankruptcy filings remain behind the record 2.1 million in 2005, when 630,000 Americans sought protection from creditors in the two weeks before revisions to federal bankruptcy laws became effective in October of that year. The changes made it more difficult for individuals to erase debt.
Truvo, Junior Noteholders Settle on Plan Confirmation
Truvo Luxemburg Sarl, a Belgium-based international publisher of directories, settled with the creditors’ committee and holders of high-yield notes to head off opposition to approval of the reorganization plan at a confirmation hearing that would have been held today.
Instead, today’s hearing will authorize Truvo to send supplemental disclosure materials to senior secured creditors who are entitled to vote again. Approval of the revised plan appears all but assured because holders of more than two-thirds of the senior debt agreed to support the settlement. Holders of 56 percent of the high-yield notes are also in agreement, the company said in a statement.
Truvo wants the confirmation hearing for approval of the revised plan to take place on Oct. 26, so that the plan can be implemented in November.
Under the prior version of the plan, holders of the 778 million euros ($1.08 billion) of first-priority senior debt were to have a recovery of 67.2 percent to 87.5 percent. Taking into account the give-up to the second-lien debt under the settlement, the recovery will decline by 0.6 percent to 1.7 percent.
Under the original plan, the junior noteholders, owed 595 million euros, were to have 15 million euros in cash, plus warrants for 14 percent of the equity. The settlement increases the cash by 5 million euros and the warrants to 20 percent. The recovery for junior creditors is estimated to increase by 1 percent to 2.4 percent, for a recovery between 3.8 percent and 7.8 percent.
For a summary of the prior version of the plan and the arguments on both sides, click here for the Aug. 30 Bloomberg bankruptcy report.
The revised plan will reduce Truvo’s debt from 1.4 billion euros to 475 million euros, the company said in a statement.
Truvo’s petition listed assets for 1.04 billion euros against liabilities totaling 1.67 billion euros. It is the leading directory publisher in Belgium, Ireland and Romania. Through a joint venture, Truvo is the leading directory publisher in Portugal.
The case is In re Truvo USA LLC, 10-13513, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Abitibi Has $3.2 Million August Net; Hearing on Plan Tomorrow
AbitibiBowater Inc., the largest newsprint maker in North America, reported $3.18 million of net income in August on sales of $396.3 million. The gross profit and operating income in the month were $19.8 million and $5 million, respectively.
Abitibi was authorized this week by the bankruptcy judge to sell 16 acres and a former paper-coating plant in Covington, Tennessee, to True Partners Financial Services LLC for $4.6 million.
Abitibi returns to bankruptcy court tomorrow for another effort to persuade the judge to approve the reorganization plan by signing a confirmation order. For details on Abitibi’s plan and disclosure statement, click here to read the July 29 Bloomberg bankruptcy report.
The company was formed in October 2007 by 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 September 2008.
The case is AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Black Crow Sues for Subordination of Debt to GECC
Black Crow Media Group LLC, a closely held owner of 22 radio stations, launched a new attack in its ongoing battles with General Electric Capital Corp., the secured lender owed $38.9 million at the outset of the reorganization in January.
Relying on what it called “misconduct” by GECC before and during the Chapter 11 case, Black Crow filed a lawsuit this week asking the bankruptcy judge in Jacksonville, Florida, to subordinate the lenders’ claim and prevent GECC from voting on a reorganization plan. Black Crow also wants damages for abuse of legal processes by Stamford, Connecticut-based GECC.
The suit by Black Crow comes after a complaint GECC filed in late August asking the bankruptcy judge to declare that substantive consolidation of all the companies is improper. According to GECC, Black Crow wants creditors to have claims against one pot of assets rather than against the individual companies obligated on the debts.
The bankruptcy judge said in July that Black Crow’s exclusive right to propose a plan wouldn’t be extended beyond Nov. 8 “unless truly extraordinary circumstances occur which could not have been reasonably anticipated.” In March, Black Crow defeated a motion by GECC to dismiss the case or allow foreclosure.
Black Crow filed for Chapter 11 protection in January, two days before a hearing in U.S. district court where GECC was seeking appointment of a receiver following default on term loans and a revolving credit.
Black Crow’s stations are in five markets in Florida, Alabama, Georgia and Tennessee. In addition to the GECC debt, another $6 million is owing to unsecured creditors. Daytona Beach, Florida-based Black Crow had $12.9 million of revenue in 2009, a 23 percent decline from 2008.
The case is In re Black Crow Media Group LLC, 10-00172, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
Broadstripe Posts August Net Loss of $3 Million
Broadstripe LLC, a St. Louis-based broadband cable operator, reported a $3.02 million net loss in August on revenue of $7.63 million. For the month, depreciation and amortization was $2.29 million. Interest expense was $1.84 million. The balance sheet had $4.45 million in cash at the end of August, compared with $5.02 million at the end of July.
Any creditor is at liberty to file a reorganization plan because Broadstripe has been in Chapter 11 more than 18 months. Broadstripe is caught in the middle of a dispute between secured creditors and the unsecured creditors’ committee.
The creditors’ committee says secured lenders’ claims should be subordinated or recharacterized as equity. Also inhibiting confirmation of a plan are two claims by rival cable operators totaling almost $160 million. The competitors base their claims on Broadstripe’s alleged failures to complete asset purchase agreements.
Broadstripe filed a reorganization plan in January 2009 based on an agreement from before the Chapter 11 filing with holders of the first- and second-lien debt. When the reorganization began, Broadstripe had 93,000 customers in Maryland, Michigan, Washington State and Oregon. It was created through four acquisitions in 1998 and 1999 and filed for Chapter 11 reorganization in January 2009.
The case is In re Broadstripe LLC, 09-10006, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Lehman-Barclays Suit, Tousa Fraud, Third-Party Releases: Audio
Tough choices facing the bankruptcy judge in the lawsuit by Lehman Brothers Holdings Inc. against Barclays Plc, a possible fraudulent transfer judgment against directors of homebuilder Tousa Inc., and a template for permissible third-party releases in New York-based reorganizations are covered in the new bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.
Savannah Festival Outlet Center Files in Hometown
The owner of the Savannah Festival Outlet Center filed for Chapter 11 protection on Oct. 4 in its hometown of Savannah, Georgia.
The center owes $10.1 million on the first mortgage and $600,000 on a second-lien debt. The center, with more than 20 stores, is located on Gateway Boulevard, just off exit 94 on Interstate 95.
Tenants include Carter’s, General Nutrition Center, Van Heusen, Reebok, Dress Barn and OshKosh B’gosh, according to the web site.
The petition said assets and debt both exceed $10 million.
The case is In re Savannah Outlet Shoppes LLC, 10-42135, U.S. Bankruptcy Court, Southern District of Georgia (Savannah).
Alabama County Commission Head Now Open to Bankruptcy
The president of the Jefferson County Commission changed her stance and now says she will not rule out a municipal Chapter 9 bankruptcy for the Alabama county.
She also said that the appointment of receiver for the water system will slow negotiations while lenders wait to see how much the receiver will raise rates.
To read Bloomberg coverage, click here.
Dreier Alimony Dispute Remains in Bankruptcy Court
A bankruptcy court can interpret an agreement from a matrimonial case with the same facility as the divorce court, U.S. Bankruptcy Judge Stuart M. Bernstein ruled on Oct. 4 in the bankruptcy of Marc Dreier, the lawyer who turned the firm that bore his name into a $400 million Ponzi scheme.
Dreier and his wife separated in 2003, making a settlement at the time calling for the payment of alimony. The former wife served a notice of default in December 2008, contending $7.1 million in alimony was accelerated. The notice came before an involuntary petition was filed against Dreier in January 2009.
The former wife contends that the entire $7.1 million is a first priority debt in her former husband’s bankruptcy. If she’s correct, her alimony claim would come ahead of unsecured creditors. Dreier’s trustee objected.
The former wife filed papers asking Bernstein to rule that the state matrimonial court was the proper forum to decide whether the debt was accelerated. Bernstein disagreed and denied the wife’s motion.
Bernstein said that the wife is free to enforce her alimony claim in state court from property that isn’t part of the bankrupt estate. With Dreier in prison for 20 years and not earning income, the former wife said the bankruptcy court is the only source of recovery. Because the former wife wanted to collect alimony from the bankrupt estate, Bernstein said the so-called automatic stay applies and precludes her from taking action in state court.
Bernstein said he was “equally well-suited to interpret” the settlement agreement and decide if the debt was accelerated. He also ruled it was proper for the dispute to be decided in bankruptcy court on account of the “significant impact” it would have on the bankruptcy case.
To read Bernstein’s opinion, click here.
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 in a Chapter 7 liquidation where a trustee was appointed automatically.
Dreier’s individual Chapter 7 case is 09-10371, and the Chapter 11 case for the firm is In re Dreier LLP, 08-15051, both U.S. Bankruptcy Court, Southern District of 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.