GM, EarthRenew, Cello Energy, Lehman: Bankruptcy

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General Motors Corp.’s bankruptcy estate seeks approval of a settlement that would set aside $773 million of U.S. money to resolve environmental claims by the federal government and 14 states.

A mixture of cash and assets, put into trusts, would clean up and administer 89 properties, 59 of which are known to be contaminated, Gary Grindler, acting deputy attorney general, said in a statement. A 30-day period to gather public comment will precede a request for bankruptcy court approval.

More than half the money would go for sites in New York and Michigan, Grindler said.

The St. Regis Mohawk Tribe, the U.S. Environmental Protection Agency and the states are part of the settlement. The tribe has yet to accept the proposal. A public hearing was set to take place last night.

The accord paves the way for the carmakers’ unwanted business to wind down in bankruptcy on the eve of a hearing scheduled for today at which the Old GM estate will seek court approval of terms of its liquidation.

When GM filed for bankruptcy in June 2009, it sold attractive assets to a newly formed company and left the 89 properties in the settlement being considered yesterday under bankruptcy protection.

The U.S. Treasury and Canada’s export credit agency had lent the bankrupt estate $1.175 billion to wind down the bankrupt properties. The EPA later filed claims in the case for environmental cleanup costs, as did the states.

Money for the settlement will come from past government loans to the automaker, said Tim Yost, a spokesman for the estate.

U.S. Bankruptcy Judge Robert Gerber in New York in May gave the company a four-month extension of time in Chapter 11 to resolve environmental and asbestos liabilities.

Two units of the carmaker formed to hold environmental liabilities owed about $1.2 billion in cleanup costs, according to court papers. The amount set aside by Old GM is the largest of recent environmental settlements.

Chrysler Corp. and Lyondell Chemical Co. resolved billions in environmental claims, according to court papers.

Old GM’s settlement includes $641 million in cash and non-cash assets worth $120 million. It has paid $11.5 million to clean properties during its bankruptcy.

The so-called Massena site in Saint Lawrence County will receive $120.8 million. The U.S. alleged that GM’s aluminum die-casting plant, operating there from 1959 to 2009, polluted the property with polychlorinated biphenyls, or PCBs.

The St. Regis Mohawk Tribe has lands affected by contamination from the Massena property.

The settlement doesn’t affect U.S. claims against Old GM for past costs related to natural-resources damages at the properties being placed in the trust, according to Grindler’s statement.

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

New Filings

EarthRenew Corp. Files for Protection From U.S. Creditors

EarthRenew Management General Partner Ltd., the Canadian company providing corporate finance services to rural based businesses, filed for protection from U.S. creditors under Chapter 15 of the U.S. Bankruptcy Code yesterday in Wilmington, Delaware, according to court files.

The debtor listed assets of less than $50,000 and liabilities of $1 million to $10 million, according to the bankruptcy petition.

Affiliates of Calgary, Alberta-based EarthRenew also filed and the companies have requested joint administration of the cases, court papers revealed. A court filing showed that the bankrupt affiliates include EarthRenew IP Holdings LLC, EarthRenew Corp., EarthRenew Inc., EarthRenew Management LP, EarthRenew Operational Employee LP, and EarthRenew Strathmore General Partner Ltd.

The case is In re EarthRenew Corp., 10-br-13366, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Cello Energy Files For Bankruptcy Following Civil Judgment

Cello Energy LLC has filed for protection under Chapter 11 of the U.S. Bankruptcy Code, according to court papers.

Bay Minette, Alabama-based Cello Energy filed its petition in the U.S. Bankruptcy Court in Mobile, declaring less than $50,000 in assets and liabilities of $10 million to $50 million, according to court papers. The largest of the unsecured creditors is Parsons & Whittemore Enterprises Corp., which has a claim of $10.4 million, court files.

Other unsecured debts include $640,000 owed to the Internal Revenue Service and $1 million owed to Biofuels Operating Co., according to court papers.

Rye, New York-based Parsons & Whittemore Enterprises obtained a certificate of judgment Sept. 29 in the U.S. District Court in Mobile for $10.4 million against Cello Energy in a lawsuit it brought against the energy company in 2007, according to court papers in that case. Parsons & Whitmore Enterprises sued Cello Energy over an investment it made “for the exclusive right to participate” with Cello Energy “in the commercial development of technology that allows the production of synthetic fuels from cellulosic and polymer-based material,” according to the complaint.

A meeting of creditors in the bankruptcy case is scheduled for Nov. 23 at the bankruptcy courthouse in Mobile.

The bankruptcy case is In re Cello Energy LLC, 10-04877, U.S. Bankruptcy Court, Southern District of Alabama (Mobile).

The civil case is Parsons & Whittemore Enterprises Corp. v. Cello Energy LLC, 07-00743, U.S. District Court, Southern District of Alabama (Mobile).

Petra Offshore Fund, REIT Unit File for Bankruptcy in New York

Petra Offshore Fund LP, along with its Petra Fund REIT unit, filed for Chapter 11 bankruptcy court protection in New York.

Petra Fund REIT, an investor in commercial real estate- backed loans, and the parent company listed assets of $1 million to $10 million and liabilities of $100 million to $500 million in filings yesterday in U.S. Bankruptcy Court in Manhattan.

The Chapter 11 filing follows a judgment one of the fund’s creditors, KBS Preferred Holding I LLC, won against Petra to collect on its debt, according to an affidavit filed with the bankruptcy petition.

Petra said it has a restructuring agreement with a secured creditor that requires it to file for bankruptcy.

The case is In re Petra Fund REIT Corp., 10-15500, U.S. Bankruptcy Court, Southern District of New York (Manhattan.)

Antietam, Affiliate of SageCrest, Seeks Bankruptcy

Antietam Funding LLC, a Connecticut-based holder of life insurance assets, sought bankruptcy protection yesterday, listing as much as $500 million in debt.

Antietam, a subsidiary of hedge fund SageCrest II LLC that filed for bankruptcy in 2008, seeks to have its Chapter 11 jointly administered with that of SageCrest. It listed as much as $100 million in assets in its filing in Bridgeport, Connecticut.

Antietam’s primary asset is a portfolio of life insurance investments, according to court documents.

“Their sole business is to lend monies to finance payments of insurance premiums and, in the event the borrowers fail to repay the loans, to foreclose on and own the underlying policies,” lawyers for Antietam wrote.

SageCrest Finance LLC, SageCrest Holdings Ltd. and SageCrest Dixon Inc. are also jointly administered with the bankruptcy of SageCrest II. The fund, managed by Windmill Management LLC, filed for bankruptcy Aug. 17, 2008.

SageCrest and its affiliates provided secured loans to small and midsized business, specializing in life-insurance products, real estate finance and auto finance.

The bankruptcy case is Antietam Funding LLC, 10-52523, U.S. Bankruptcy Court, District of Connecticut (Bridgeport). The consolidated case for SageCrest is 08-50754, U.S. Bankruptcy Court, District of Connecticut (Bridgeport).


Ambac to Withdraw $6 Billion in Claims Against Lehman

Ambac Financial Group Inc. will withdraw more than $6 billion in claims against bankrupt Lehman Brothers Holdings Inc. over derivatives transactions.

The agreement was approved yesterday in U.S. Bankruptcy Court in Manhattan.

The claims, filed in September 2009, were based on Lehman’s “purported breach of obligations” related to residential mortgage-backed securities deals with Ambac, Lehman said in an Oct. 5 filing. Under terms of the settlement, Lehman will release the insurer from demands for unspecified payments and from liabilities under derivatives transactions insured by Ambac, New York-based Lehman said.

Ambac, the second-largest bond insurer before the onset of the credit crisis, started “rehabilitation proceedings” in March in a Wisconsin court that bar Lehman from suing the company over the claims or insured derivatives deals, according to the filing.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Lehman Can Halt Lawsuits Filed to Recover Payments

Lehman Brothers Holdings Inc., the investment bank in bankruptcy, can halt dozens of lawsuits it filed against banks and investors to recover payments as part of its effort to recover money for creditors.

Judge James Peck of the U.S. Bankruptcy Court in Manhattan approved Lehman’s request to stay the lawsuits while it negotiates with defendants, a group that includes Bank of America Corp. and Deutsche Bank AG as trustees for investors.

Lehman filed about 50 lawsuits, known as avoidance actions, to meet a statute of limitations for bringing the complaints and preserve its claims, according to court papers. It has agreements that could lead to lawsuits against additional defendants. More than 1,000 parties are potentially involved, Harvey Miller, Lehman’s bankruptcy attorney told Peck at yesterday’s hearing.

Lehman won approval to halt the lawsuits so it can avoid the costs of litigation. The stay applies to cases that have been filed and future cases, according to court papers. Several of the defendants named in the lawsuits filed objections, and Peck imposed a nine-month period for the stay.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Tronox Wins Court Approval of $425 Million Exit Loan

Tronox Inc., the bankrupt chemical maker, won court approval of a $425 million loan to replace a prior loan for the same amount, funding its exit from bankruptcy.

U.S. Bankruptcy Judge Allan Gropper approved the loan agreement yesterday on an interim basis at a hearing in New York. The new loan, syndicated by Goldman Sachs Lending Partners LLC, will save Tronox about $1.45 million a month in interest expense, the company said in court documents.

The loan replaces a $425 million loan approved in December 2009, which funded operations in bankruptcy. The need for more funding “prompted Tronox to refinance both tranches of the Existing Facility (to allow the entire $425 million facility to roll into exit financing) in addition to pursuing a revolving credit facility,” lawyers for the company wrote.

The loan will default if a final order approving it isn’t entered by Nov. 17, the date on which Tronox plans to seek final court approval of its Chapter 11 plan, according to court papers.

Tronox will also seek court approval of a $125 million revolving credit facility and has an agreement with Goldman Sachs Lending Partners on an inter-creditor agreement that governs the loan, according to court documents.

Oklahoma City-based Tronox filed an outline of a reorganization plan on Sept. 1 that set aside $320 million to cover what it estimates are $1.4 billion to $5 billion in environmental claims.

The bankruptcy case is Tronox Inc., 09-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

TerreStar Wins Interim Approval for EchoStar Loan

TerreStar Networks Inc., a satellite mobile-communications company, won court approval to begin borrowing from EchoStar Corp., the telecommunications company financing TerreStar’s bankruptcy restructuring.

U.S. Bankruptcy Judge Sean Lane in Manhattan yesterday approved an order allowing TerreStar, a unit of TerreStar Corp., to borrow as much as $18 million of a $75 million loan from EchoStar. TerreStar will return to court in November for permission to borrow the remainder.

TerreStar, based in Reston, Virginia, was in court after filing for bankruptcy Oct. 19 to reduce its $1.6 billion debt. The company provides mobile satellite coverage throughout the U.S. and Canada in areas where traditional mobile networks are unavailable, according to court papers.

EchoStar, a television equipment and satellite services company, and New York hedge fund Harbinger Capital Partners are TerreStar Corp.’s largest shareholders, according to Bloomberg data.

EchoStar, based in Englewood, Colorado, has agreed to support a restructuring plan in which it and other secured noteholders would swap their debt for equity, according to court papers. EchoStar would also backstop $100 million of a $125 million rights offering under the plan.

The case is In re TerreStar Networks Inc., 10-15446, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Briefly Noted

NYC OTB to Remain Open Under Debt-Forgiveness Plan

New York City Off-Track Betting Corp., the bankrupt operator of 68 wagering locations across the city, will remain open after reaching a debt-forgiveness agreement with unsecured creditors. About $95 million owed by OTB, which in March was ruled eligible for Chapter 9 reorganization, will be resolved, according to a statement yesterday by New York Governor David Paterson. The agreement is the “cornerstone” of OTB’s plan to emerge from bankruptcy that will be filed with the court, according to the release. Creditors including Yonkers Racing Corp. and New York Racing Association will forgive about $65 million in exchange for some of OTB’s wagering operations and changes to state racing laws to help video-lottery terminal operators generate revenue.

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

Tribune Board May Have Shelved Decision on Michaels, WSJ Says

Tribune Co.’s board of directors may have shelved a decision on the future of Chief Executive Officer Randy Michaels, the Wall Street Journal reported, citing people familiar with the situation. While the board was to have discussed his position Oct. 19, an unidentified spokesman said the directors were concentrating on the company’s reorganization plan, to be filed on Oct. 22. Michaels told local reporters in Chicago he was still working, the newspaper said.

Separately, Tribune Co. unsecured investors are to ask a judge to rule whether they have the right to sue real estate billionaire Sam Zell, who led a buyout of the company a year before it filed for bankruptcy in December 2008, the New York Post reported, without saying where it obtained the information.

Tribune filed for bankruptcy in December 2008, a year after a buyout led by real estate billionaire Sam Zell.

For more Bloomberg reporting about Tribune Co., click here and click here.

Quote of the Day

“To some degree, banks have been flying blind in terms of pricing this type of loan exposure,” Andrew Davison, senior vice- president for project finance at Moody’s Investors Service said yesterday, commenting on project finance loans.

Davison is the author of a report published this week on the use of debt to finance infrastructure development.

For more on loan pricing and risk of default, click here.

Downgrades/Other Ratings Actions

H&R Block Placed on Credit Watch; Affiliate Downgraded

H&R Block Inc.’s ratings, including its BBB/A-2 counterparty ratings, were placed on credit watch “with negative implications” yesterday by Standard & Poor’s Ratings Services, according to a statement by the ratings company.

The rating action also applies to the counterparty credit ratings of H&R Block Inc.’s unit Block Financial LLC, S&P said in the statement.

The negative CreditWatch reflects the “heightened risk” that H&R Block Inc. may not be able to offer refund anticipation loans, or RALs, during its fiscal 2011 tax season.

Separately, H&R Financial LLC’s long-term rating was downgraded to Baa2 from Baa1 and the senior unsecured notes to Baa2 from Baa1, by Moody’s Investors Service, according to a statement yesterday by the ratings company.

The “rating outlook is negative,” Moody’s said in the statement.

The downgrade “reflects declining tax return volumes over the last two years, the risk of further market share losses in the bricks and mortar segment to digital products over the medium term,” as well as and regulatory and business risks, Moody’s said in the statement.

For more about Moody’s ratings action, click here.

Eli Lilly’s A1 rating Placed on Review by Moody’s

Eli Lilly’s A1 long-term rating was placed on review for possible downgrade by Moody’s Investors Service, according to a statement by the ratings company yesterday, adding that the “outlook is negative.”

“Approximately $6.7 billion of rated debt” is affected, according to the statement.

Moody’s affirmed Eli Lilly’s prime-1 short-term rating, reflecting its strong liquidity profile, Moody’s said in the statement.

The rating actions follow the recent Federal Drug Administration request for a new clinical trial for diabetes drug Bydureon, according to the statement. The “earliest date of U.S. approval now appears to be mid-2012,” according to Moody’s statement. The “Bydureon delay follows several other setbacks” for Eli Lilly related to “pipeline progress and patent challenges,” stated Michael Levesque, Moody’s Senior Vice President.

For more, click here.

American National Insurance and Units Downgraded by S&P

American National Insurance Co. yesterday saw its counterparty credit and financial strength ratings and those of certain operating units downgraded by Standard & Poor’s Ratings Services to A+ from AA-, according to a statement by S&P.

The units affected by the ratings action are American National Insurance Co. of Texas, American National Property & Casualty Co., and American National General Insurance, according to the statement.

“The downgrade primarily reflects the operating performance” of American National Insurance Co. group’s property and casualty business, “which has been volatile and has weakened as a result of sustained operating losses over the past few years, mainly because of significant catastrophe losses,” Standard & Poor’s credit analyst David Zuber said in the statement.

For more, click here.

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