Publisher Tribune Co. filed a modified Chapter 11 plan on Oct. 23 incorporating a revised settlement announced this month. In addition to Tribune, proponents of the revised plan include the official creditors’ committee, senior lenders Oaktree Capital Management LP and Angelo Gordon & Co., and JPMorgan Chase Bank NA, as agent for the senior lenders.
The accompanying disclosure statement says that senior lenders, owed $8.6 billion, will recover about 71 percent through receiving cash plus all of the new stock. Holders of $1.28 billion in senior notes would receive $420 million in cash for an initial recovery of about 32.7 percent.
Other unsecured creditors of the parent Tribune would receive 35.2 percent cash or an initial 32.7 percent plus the ability to participate in litigation recoveries. General unsecured creditors of operating subsidiaries are to get 100 percent payment, without interest, up to a total of $150 million.
Holders of the $1.6 billion bridge loan won’t receive any distribution unless they succeed in fending off a lawsuit set to proceed after Tribune emerges from bankruptcy.
The settlement and the new plan are based on a settlement with senior lenders of claims that the leveraged buyout in 2007 resulted in fraudulent transfers. Distributions under the plan exceed what the examiner said would be probable recoveries through litigation, according to the disclosure statement.
After bankruptcy, a trust established for creditors can pursue lawsuits to void the bridge loan while seeking recoveries against selling shareholders. In addition, the trust can sue directors, officers and company advisers. The first $90 million recovered by the trust will go to unsecured creditors, including bondholders.
At a hearing on Oct. 22, the bankruptcy judge said he would sign an order allowing creditors to file lawsuits based on the 2007 buyout. For Bloomberg coverage of the hearing, click here.
Any competing plans and their disclosure statements are to be filed by Oct. 29. The company’s disclosure statement was more than 140 pages, not including exhibits.
The arrangers for the bridge loan and the debt issued in the second part of the leveraged buyout are providing a backstop to insure that sufficient cash will be available for payment to senor noteholders.
The disclosure statement says that Tribune had $1.8 billion cash at Sept. 26, an increase of $300 million since December. Net income for nine months this year was $121 million on $2.33 billion revenue. Operating cash flow for the period was $422 million.
The disclosure statement says that the mid-point enterprise value for the reorganized company is $3.2 billion. Including cash and other assets, the mid-point distributable value is $6.75 billion. The equity value of the reorganized company is pegged at $4.3 billion, according to the disclosure statement.
Tribune said on Oct. 22 that Randy Michaels resigned as chief executive officer, effectively immediately. Tribune said that a four-member executive council will take over Michaels’s duties until a replacement is selected. The executive council includes the chief restructuring officer, the chief investment officer, and the publishers of the Chicago Tribune and the Los Angeles Times.
Tribune withdrew a reorganization plan in August after the examiner issued a report saying there was some likelihood that the second phase of the leveraged buyout in December 2007 could be attacked successfully as a constructively fraudulent transfer. The examiner found less likelihood that the first phase of the transaction in June 2007 could be attacked successfully.
The second part of the buyout entailed the issuance of $2.1 billion on the senior credit and the $1.6 billion bridge loan. For a summary of some of the examiner’s conclusions, click here for the July 27 Bloomberg bankruptcy report. Tribune’s abandoned plan would have forced through a settlement some creditors opposed.
For details on the withdrawn plan, click here for the April 13 Bloomberg bankruptcy report.
The $13.7 billion leveraged buyout in 2007 was led by Sam Zell.
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).
Cuban, Crane Have Opposition to Expense Reimbursement
Mark Cuban and James Crane, who bid unsuccessfully at auction for the Texas Rangers baseball club, aren’t entitled to reimbursement of $2.65 million they spent on attorneys, although they pushed the price $100 million higher, according to an Oct. 21 bankruptcy court filing by the agent for second-lien lenders owed $130 million.
The agent says that neither Cuban nor Crane is a creditor and that the Bankruptcy Code only permits recovery by creditors who make a substantial contribution in a bankruptcy case. The lenders’ agent also cited prior court decisions saying that unsuccessful bidders don’t qualify for substantial contribution claims.
The motion by Cuban and Crane originally was to be argued today in U.S. Bankruptcy Court in Fort Worth, Texas. The hearing today instead will be a status conference. The U.S. Trustee, according to a court filing, will make a motion for summary judgment that will be on the Nov. 17 calendar. Assuming Cuban and Crane survive the summary judgment motion, their request for reimbursement will return to bankruptcy court on Dec. 6.
Crane is a Houston businessman, and Cuban owns the National Basketball Association’s Dallas Mavericks.
Soon after the auction, the Rangers emerged from reorganization in August with a confirmed Chapter 11 plan where the club was purchased by a group including team President Nolan Ryan and sports lawyer Chuck Greenberg. The team is playing in the Baseball World Series, which begins this week.
The Rangers filed under Chapter 11 in May with a sale contract and a plan that claimed to be paying all creditors in full. The original contract with the Ryan-Greenberg group had a cash price of $304 million. Michael “Buzz” Rochelle, brother of Bloomberg reporter Bill Rochelle, is a lawyer for an agent for the lenders.
The case is In re Texas Rangers Baseball Partners, 10-43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
Arrowgrass Says Trico Made 2009 Fraudulent Transfer
Trico Marine Services Inc., a provider of support vessels for the offshore oil and gas industry, will have opposition at today’s hearing for final approval of $35 million of secured credit supplied by Tennenbaum Capital Partners LLC. Opposition comes from two funds affiliated with Arrowgrass Capital Partners.
In papers filed Oct. 19, Arrowgrass alleges that Trico committed fraudulent transfers in a two-step transaction between May and October 2009 involving 8.125 percent second-lien debentures that were issued in the first stage. The new debentures paid off the then-outstanding 6.5 percent debentures.
Arrowgrass, which says it owns 3 percent senior convertible debentures, contends that the transactions were made with actual intent to hinder, delay or defraud creditors. Arrowgrass also says that Trico should have known it was insolvent by the first quarter of 2009.
Opposition by Arrowgrass to the financing in part is pointed at provisions providing $25 million in pre-bankruptcy debt owing to Tennenbaum will be converted into a post-bankruptcy obligation with a larger collateral package. Arrowgrass contends that Tennenbaum is embarked on a strategy to “take over non-debtor subsidiaries comprising the Trico Supply Group.”
Filing for reorganization in August, Woodlands, Texas-based Trico is in Chapter 11 a second time. It completed a so-called prepackaged reorganization in early 2005 by exchanging $250 million in debt for equity. Shareholders were given warrants.
Apart from a Cayman Islands holding company, none of the foreign subsidiaries are in bankruptcy this time. The consolidated balance sheet for June listed assets of $904 million against liabilities totaling $1.027 billion. The bankruptcy petition listed liabilities of $354 million for Trico Marine.
Liabilities include $202.8 million on secured convertible debentures and $150 million owing on unsecured convertible debentures. Non-bankrupt Trico Shipping owes $400 million on the 11.875 percent senior secured notes.
The case is In re Trico Marine Services Inc., 10-12653, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Sea Island Lenders Settle, Creditors’ Recovery Doubled
Sea Island Co., a resort and real-estate development company, is set for approval of the liquidating Chapter 11 plan at a Nov. 4 confirmation hearing as the result of a settlement between unsecured creditors and secured lenders.
The lenders are increasing the fund for unsecured creditors to $6.33 million from $3 million. The lenders are also making $217,000 available to finance a liquidating trust.
Directors and officers won’t receive releases, although plaintiffs in lawsuits may only recover from directors’ and officers’ liability insurance policies.
The settlement ended disputes over which assets are covered by the secured lenders’ liens and which aren’t.
The settlement will come to bankruptcy court for approval at the Nov. 4 confirmation hearing. The hearing is also to approve the $212.4 million sale of the assets to a group including Oaktree Capital Management LP, Avenue Capital Group, Starwood Capital Group Global LP and Anschutz Corp. The opening bid at auction had been $197.5 million.
Sea Island’s properties are on or near St. Simons Island and Sea Island, Georgia.
Before the price rose at auction, Sea Island projected having $180 million remaining after paying priority claims. If unsecured creditors vote for the plan, they are eligible to split up $6.33 million, for a recovery of around 6 percent on their $100 million in claims.
The remaining $177 million under the pre-auction price would go to secured lenders with $566 million in claims. Their recovery originally was estimated to be 31 percent. Unsecured creditors are expected to receive nothing if they vote against the plan and don’t give releases.
The Chapter 11 plan and the original sale were negotiated before the bankruptcy petition was filed on Aug. 10.
Synovus Bank, Bank of America Corp. and Bank of Scotland are lenders.
The case is In re Sea Island Company, 10-21034, U.S. Bankruptcy Court, Southern District of Georgia (Savannah).
Sex.com Domain Name Being Sold for $13 Million
The Internet domain name “sex.com” and two associated trademark registrations are on track to be sold for $13 million cash at a hearing Oct. 27 in U.S. Bankruptcy Court in Woodland Hills, California.
The owner of the domain name, Escom LLC, previously received permission from the judge to sell the assets in a private sale. After marketing, Clover Holdings Ltd. made the best bid. The bankruptcy judge scheduled the Oct. 27 hearing to consider approval of the sale.
Three creditors filed an involuntary Chapter 7 petition in March against Calabasas, California-based Escom. The petition halted foreclosure by secured creditor DOM Partners LLC, owed $4.5 million.
With a motion pending for the appointment of a Chapter 11 trustee, the company and creditors agreed on a settlement that resulted in the approved sale and marketing procedures.
Escom acquired the domain name in January 2006, according to a company statement.
The case is In re Escom LLC, 10-13001, U.S. Bankruptcy Court, Central District California (Woodland Hills).
Banks Have Plan Competing to Reorganize Fulton Homes
Bank lenders for homebuilder Fulton Homes Corp. have a competing reorganization plan scheduled for approval at a Dec. 28 confirmation hearing. For their plan to prevail, the banks must first stop Fulton from confirming the company’s Chapter 11 plan at a confirmation hearing currently set for Nov. 8.
To block the company’s plan, the banks filed papers last week saying the company’s reorganization doesn’t comply with law and can’t be confirmed. They also claim the bankruptcy court has denied them due process by affording too little time to take discovery and prepare for trial on the company’s plan.
The lending group includes Bank of America NA, JPMorgan Chase Bank NA, and Wells Fargo Bank NA.
Fulton’s plan offers the banks a “substantial cash payment” on confirmation and senior liens to secure their remaining debt. The new plan only gives secured suppliers 60 percent payment on confirmation in return for their $1.2 million in claims, with the remainder secured by a lien subordinate to the banks. The suppliers also must agree to provide “normal trade terms.”
The plan presumes that Fulton is solvent. As a result, the plan offers interest on unsecured claims. The company’s valuation expert says the going-concern value is between $200 million and $210 million.
Charlotte, North Carolina-based Bank of America NA is agent for unsecured lenders owed about $164 million. Fulton has no substantial secured debt. In addition to the suppliers, general unsecured claims amount to $1.2 million.
Fulton previously said it accumulated $65 million cash during the Chapter 11 case that began in January 2009. The company says it generated a cumulative profit of $8.5 million while in reorganization.
The case is In re Fulton Home Corp., 09-01298, U.S. Bankruptcy Court, District of Arizona (Phoenix).
Arrow Air Plan Based on MatlinPatterson Settlement
Arrow Air Inc., once the largest cargo airline in Miami, has a hearing scheduled on Nov. 10 for approval of a disclosure statement explaining the Chapter 11 plan.
The plan is the product of a settlement between unsecured creditors and affiliates of MatlinPatterson Global Advisors which are both secured lenders and controlling shareholders.
MatlinPatterson is giving up $1.6 million of its cash collateral to fund the plan. As lender, it won’t receive any distribution on the $34.7 million deficiency claim.
Unsecured creditors, with claims estimated to total between $30 million and $41 million, are expected to recover 7.6 percent on the low side to 21.9 percent tops.
The plan contemplates selling the shell of the corporation along with the operating certificate for $800,000 cash. The operating certificates would allow the buyer to conduct business as an airline.
A trust for creditors will bring preference lawsuits based on $48.6 million in payments made in the 90 days before bankruptcy. The suits are expected to net between $1.6 million and $6.2 million. The trust won’t sue for less than $15,000 on the theory that the expenses of suit will exceed expected recoveries.
Also known as Arrow Cargo, the company at one time operated 60 flights a week with four leased DC-10-30 and three leased B757-200 aircraft.
Arrow was acquired in June 2008 by a fund affiliated with MatlinPatterson. At bankruptcy, the funds were owed $72 million on secured and unsecured term loans.
The case is In re Arrow Air Inc., 10-28831, U.S. Bankruptcy Court, Southern District of Florida (Miami).
FairPoint Amends Loan Terms to Enable Confirmation
FairPoint Communications Inc., a local exchange carrier with 1.7 million access lines, may soon be able to have the judge put his name on a confirmation order approving the Chapter 11 plan, according to an Oct. 21 motion for a 101-day extension of the exclusive right to propose a reorganization.
The bankruptcy judge couldn’t confirm the Chapter 11 plan in May for lack of regulatory approval from Vermont, New Hampshire and Maine. He overruled other objections to confirmation.
Although New Hampshire and Maine later settled, Vermont regulators refused to go along out of concern the company couldn’t comply with its loan agreements.
The hearing on the exclusivity motion will take place Nov. 18.
FairPoint re-examined its financial condition and said in the exclusivity motion that it “believes it now has financial forecasts that are both reasonable and achievable.” The company renegotiated the exit financing agreement with a steering committee of lenders. The result was a revised loan designed for confirmation of the plan and approval from Vermont regulators.
Although the plan will be amended, FairPoint doesn’t believe creditors will be required to vote again because the distribution formula won’t change.
For details on the plan, click here for the March 12 Bloomberg bankruptcy report.
Lenders are to own FairPoint when it emerges from Chapter 11.
FairPoint’s Chapter 11 petition listed assets of $3.236 billion against debt totaling $3.234 billion. Funded debt, aggregating $2.7 billion, included $2 billion under a secured credit facility, $575 million in senior unsecured notes, and $88 million on interest rate swap agreements.
The case is In re FairPoint Communications Inc., 09-16335, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Mesa Air Extends Code-Sharing With US Airways Group
Mesa Air Group Inc. has a non-binding agreement in principle for a 39-month extension of the agreement to fly 39 regional jets under a code-sharing agreement with US Airways Group Inc. A statement says that the extension will reduce the rates paid by US Airways.
Absent extension, the existing agreement would expire in June 2012.
The hearing for approval of the disclosure statement explaining Mesa’s reorganization plan is currently scheduled for Nov. 10. It had been on the Oct. 26 calendar.
The new agreement with US Air is contingent on confirmation of Mesa’s plan and approval by the bankruptcy court. For details on Mesa’s plan and the treatment of creditors of each of the different Mesa companies, click here for the Sept. 21 Bloomberg bankruptcy report.
Mesa filed under Chapter 11 in January with a fleet of 178 aircraft. At the time, 130 were operating to provide 700 daily departures serving 127 cities in 41 states, Canada, and Mexico. After rejecting aircraft leases, Mesa is now operating 76 aircraft making 460 departures a day.
Phoenix-based Mesa listed assets of $976 million against debt totaling $869 million. Liabilities include $393 million on loans secured by 24 owned aircraft, $26 million on three note issues, and $33.6 million secured by 20 other aircraft. In addition, there was $1.62 billion in potential liability on aircraft leases. Mesa operates regional aircraft under code-sharing agreements with US Airways Group Inc. and UAL Corp.’s United Airlines.
The case is In re Mesa Air Group Inc., 10-10018, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Petters Hedge Fund Victims Confirm Liquidating Plan
Palm Beach Finance Partners LP and Palm Beach Finance II LP, two hedge funds forced to liquidate by unknowingly investing in the Ponzi scheme orchestrated by Thomas Petters, confirmed their liquidating Chapter 11 plan last week.
Confirming the plan was made possible by a settlement with Kaufman Rossin & Co., a Florida-based accounting firm that provided accounting services for the funds. The Kaufman firm agreed to pay almost $10 million in settlement of claims by hedge funds. The almost $10 million being paid by the Kaufman firm will be divided under a formula with offshore liquidators of affiliates.
The two funds filed for Chapter 11 protection in November 2009, following public disclosure of the Petters fraud in Sept. 2008. The two funds have some $143 million in claims by limited partner investors and another $790 in claims by unsecured creditors.
Petters was given a 50-year prison sentence.
The hedge funds’ Chapter 11 case is In re Palm Beach Finance Partners LP, 09-36379, U.S. Bankruptcy Court, Southern District Florida (West Palm Beach).
San Antonio Jet-Plane Maker Emivest Files in Delaware
Emivest Aerospace Corp., a manufacturer of a private jet aircraft, filed for Chapter 11 protection on Oct. 20 in Delaware, saying assets and debt are both between $50 million and $100 million.
Previously named Sino Swearingen Aircraft, the company is located at the airport in San Antonio. Emivest’s SJ30 is the “world’s fastest, highest flying and longest range, light business jet,” according to a court filing.
Although there is an order backlog of more than 200 aircraft, Emivest said it could deliver three aircraft in the next two years, if financing is available. The last delivery was in November 2009. Each copy costs $7.2 million.
Debt includes $38.4 million on a secured revolving credit owing to Emivest Aviation (US) LLC, the controlling shareholder. The company owes another $15 million to Taiwan’s Yao-Hwa Glass Co. on a promissory note. There is a $4.2 million arbitration award in favor of Wells Fargo Securities LLC for breach of an agreement to raise capital.
Lenders have agreed to provide $4 million in secured financing, with $1 million to be available on an interim basis. The motion for approval of financing is on the calendar for hearing today.
The company originally was funded by the government of Taiwan. Emivest Aviation acquired a controlling interest in 2008.
The case is In re Emivest Aerospace Corp., 10-13391, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Virginia’s Movie Starz Rental Chain Files Chapter 11
The owner of the 22-store movie rental chain known as Movie Starz Video filed a Chapter 11 petition on Oct. 21 in Roanoke, Virginia. The company is making arrangements to close as few as four stores.
Court papers say a decision may be made to close all stores. The stores are in Virginia and West Virginia. Competition was blamed for the filing.
The company, formally named Adventure Entertainment Inc., said that revenue of $8.9 million in 2008 is estimated to decline this year to $6.8 million. There was a $308,000 net loss in 2009 on sales of $7.6 million.
The petition says debt is less than $10 million.
The case is In re Adventure Entertainment Inc., 10-72517, U.S. Bankruptcy Court, Western District of Virginia (Roanoke).
Contech, Maker of Corrugated Steel and Pipe, May Restructure
Contech Construction Products Inc., a West Chester, Ohio-based manufacturer of corrugated steel and plastic pipe, will “likely” need an amendment or waiver of bank loan covenants, according to an Oct. 22 report by Standard & Poor’s.
S&P also said Contech will “possibly” restructure debt, which includes subordinated notes and notes issued by the holding company. S&P lowered the corporate rating another two clicks to CC.
Financial problems are resulting from what S&P said is “lower than expected housing starts and continued weak commercial construction.”
Koosharem Still Hasn’t Filed 2009 Financial Statements
Koosharem Corp., a staffing services provider also known as SelectRemedy, still hasn’t delivered audited financial statements for 2009. As a result, first-lien lenders suspended the company’s ability to borrow, according to Standard & Poor’s.
Noting that the lenders have the right to accelerate the debt, S&P on Oct. 22 lowered Koosharem’s corporate rating to CCC-, a one-notch demotion.
S&P noted that an offer to convert a $100 million term loan into equity failed in February, the same month that Koosharem was acquired by Atlas Acquisition Holdings Corp.
The Santa Barbara, California-based company is one of the 10 largest temporary-staffing providers in the U.S. Total debt in September was $588 million, S&P said.
Koosharem has about 420 offices in 40 states. About half of its revenue is generated in California, according to S&P.
Tronox Has $12.3 Million Gross Margin in September
Tronox Inc., the world’s third-largest producer of the white pigment titanium dioxide, filed an operating report showing a $19.8 million net loss in September on net sales of $59.9 million. The gross margin was $12.3 million, and reorganization items were $26.6 million.
Creditors are voting on the Chapter 11 plan in anticipation of a Nov. 17 confirmation hearing. The equity committee withdrew what would have been a competing plan. Tronox’s revised plan is financed in part by a $185 million backstopped rights offering. For details on Tronox’s plan, click here for the Sept. 2 Bloomberg bankruptcy report.
The Chapter 11 petition by Tronox in January 2009 listed assets of $1.56 billion against debt totaling $1.22 billion. Debt includes $213 million on a secured term loan and revolving credit, $350 million in 9.5 percent senior notes, and a $40.7 million accounts receivable securitization facility. Tronox’s products are used in paints, coatings, plastics, paper and consumer products. The operations outside of the U.S. did not file.
The case is In re Tronox Inc., 09-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Lehman Settlement for $445 Million With Soc Gen Approved
Lehman Brothers Holdings Inc. received bankruptcy court approval on Oct. 21 for settlement of a complex credit-default swap involving Societe General, New York Branch, designed to generate least $445 million. For details on the settlement, click here for the Sept. 22 Bloomberg bankruptcy report.
The Lehman holding company and its non-brokerage subsidiaries filed a revised Chapter 11 plan and disclosure statement in April. For details, click here and here for the April 15 and 16 Bloomberg bankruptcy reports. Lehman said it intends on amending the plan in the last quarter of the year and have the plan approved in a confirmation order by March.
The Lehman holding company Chapter 11 case is In re Lehman Brothers Holdings Inc., 08-13555, while the liquidation proceeding under the Securities Investor Protection Act for the brokerage operation is Securities Investors Protection Corp. v. Lehman Brothers Inc., 08-01420, both in U.S. Bankruptcy Court, Southern District New York (Manhattan).
Tousa Cash Grows $40.5 Million in Sept. to $514 Million
Liquidating homebuilder Tousa Inc. grew cash by $40.5 million in September thanks mostly to a $42.4 million sale of most of the assets in Arizona, Nevada, and Colorado to RERF Acquisition Co., an affiliate of New York-based hedge fund Paulson & Co. The cash balance at the end of September was $514.06 million.
Oral argument was held last week on the bank lenders’ appeals from a judgment by the bankruptcy judge in October 2009 finding that the bailout and refinancing in mid-2007 of a joint venture in Transeastern Properties Inc. included fraudulent transfers.
Tousa has a hearing on Oct. 27 for approval of a disclosure statement explaining the Chapter 11 plan filed in July. For a summary of the plan, click here for the July 20 Bloomberg bankruptcy report. The plan assumes appellate courts uphold the judgment the creditors’ committee won in October 2009 against the lenders.
Tousa filed for bankruptcy reorganization in January 2008. The Hollywood, Florida-based company listed assets of $2.1 billion against debt totaling $2 billion. At the outset of the reorganization it was 67 percent-owned by Technical Olympic SA.
The case is In re Tousa Inc., 08-10928, U.S. Bankruptcy Court, Southern District of Florida (Fort Lauderdale).
Adelphia Creditors’ Trust Settles With Banks for $175 Million
The trust created for creditors of Adelphia Communications Corp. reached a $175 million settlement with bank lenders being sued for aiding and abetting breaches of fiduciary duty by company officers and directors. The banks include Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co.
Adelphia founder John Rigas and his son Timothy Rigas reported to federal prison in August 2007 to serve their respective 15 years and 20 year sentences for conspiracy, bank fraud and securities fraud.
The settlement headed off a trial to have begun this week. For Bloomberg coverage, click here.
Adelphia’s liquidating Chapter 11 plan was implemented in February 2007 with an initial distribution of $11.2 billion in cash and stock to creditors.
The Chapter 11 case is In re Adelphia Communications Corp., 02-41729, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The lawsuit against the banks is Adelphia Recovery Trust v. Bank of America N.A., 05-cv-9050, U.S. District Court, Southern District of New York (Manhattan).
Sawgrass Marriott Has $2.3 Million September Net Loss
The Sawgrass Marriott Resort in Ponte Vedra Beach, Florida, reported $2.28 million in revenue during September, about $835,000 below budgeted revenue. The operating loss for the month was $148,000, and the loss before interest, taxes, depreciation and amortization was $395,000. The month’s net loss was $2.3 million, according to the operating report filed with the bankruptcy court.
The resort and the secured lender Goldman Sachs Mortgage Co. are in litigation over the value of the property. The lender, owed $193 million, claims it is worth $135.3 million. The owner pegs the value at $90 million.
The resort filed under Chapter 11 on March 1 in Jacksonville, Florida, saying assets and debt both exceed $100 million.
The case is In re RQB Resort LP, 10-01596, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
Thompson Publishing Reports $410,000 September Net Loss
Thompson Publishing Holding Co., a publisher of newsletters and loose-leaf services, reported a $410,000 net loss in September on revenue of $1.4 million. Earnings before interest, taxes, depreciation and amortization were $173,000. The net loss was narrowed by a $221,000 tax benefit.
Secured lenders are aiming to buy the business in exchange for debt at a Nov. 17 auction. Bids are due Nov. 12. The hearing for approval of the sale is set for Nov. 19.
If no one else bids, the first-lien lenders intend to buy Thompson in exchange for $42 million in secured debt. The lenders also will assume liabilities on subscriptions and obligations to employees.
Based in Washington, 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).
Accredited Home Disclosure Slowed, Exclusivity Given
Accredited Home Lenders Holding Co., a former home mortgage originator and securitizer, had been banking on approval of the disclosure statement at an Oct. 20 hearing. Now that the plan-disclosure document won’t be approved before Nov. 2 at the earliest, the bankruptcy court last week extended the exclusive right of the company to solicit acceptances of a plan until Jan. 1.
A settlement where the owner Lone Star Funds would pay $15.6 million cash is a principal feature of the plan. Lone Star is giving up its own claims.
The disclosure statement says that unsecured creditors of the holding company are expected to recover as much as 30 percent on more than $20 million in claims while unsecured creditors of the operating companies, whose claim total $106 million, might see 67 percent to 100 percent.
Accredited sold the mortgage-servicing business after the Chapter 11 filing in May 2009. Most of the mortgage loans were sold later. The Chapter 11 petition for Accredited Home said assets were less than $50 million while debt exceeded $100 million.
The case is In re Accredited Home Lenders Holding Co., 09-11516, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Daufuskie Island Resort Headed for Sale to Lenders
Daufuskie Island Resort & Breathe Spa on Hilton Head Island, South Carolina, attracted no qualified cash bidders at the Oct. 21 auction. In court today, the company will ask the bankruptcy judge to approve the sale of the properties on so-called credit bids, where secured lenders exchange debt for ownership.
The sale was the resort’s second. The owner, Daufuskie Island Properties LLC, was authorized in January to sell the project for $49.5 million to Montauk Resorts LLC. The buyer was unable to complete the acquisition.
The Chapter 11 case was filed in January 2009 in Charleston, South Carolina. A Chapter 11 trustee was appointed later. The petition listed assets of $97.1 million against debt of $88.2 million. Debt includes $71.6 million owing to secured creditors. The real estate was listed as having a value of $87.7 million.
The case is In re Daufuskie Island Properties LLC, 09-00389, U.S. Bankruptcy Court, District of South Carolina (Charleston).
NutraCea Confirms Full-Payment Liquidating Plan
NutraCea, a processor of byproducts from rice milling, won approval of a full-payment liquidating Chapter 11 plan at an Oct. 19 confirmation hearing, court records show. The company sold a non-core facility in Phoenix for $4.5 million and paid off remaining secured debt.
The plan pays unsecured creditors in full with interest. The distribution to unsecured creditors is to be some $6.2 million.
NutraCea filed under Chapter 11 in November, listing assets of $83.7 million and debt totaling $18.9 million. NutraCea developed processes for converting raw rice bran into stabilized rice bran for use in food and feed products.
The case is In re NutraCea, 09-28817, U.S. Bankruptcy Court, District of Arizona (Phoenix).
Schutt Receives Approval for $2 Million Management Bonuses
Schutt Sports Inc., a football-helmet manufacturer, was given authorization from the bankruptcy court on Oct. 21 to adopt a bonus program that could pay company managers as much as $2 million. Schutt was forced into Chapter 11 after being hit with a $29 million patent-infringement judgment in favor of competitor Riddell Inc.
The program would pay a minimum of $842,000 in bonuses, assuming the lowest targets are met. The award could go as high as $2 million.
Based in Litchfield, Illinois, Schutt said in the Chapter 11 petition on Sept. 6 that assets and debt both exceed $50 million.
The case is In re Schutt Sports Inc., 10-12795, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Getty Images Downgraded on $495 Million Dividend
Getty Images Inc., the largest archive of pictures for the media and advertisers, is taking on an additional $480 million in debt to provide part of the cash necessary for a $495 million special dividend to the owners, according to Moody’s Investors Service.
Moody’s lowered the corporate rating by one grade to Ba3 on Oct. 22.
Seattle-based Getty was acquired in July 2008 in a $1.915 billion transaction by private-equity investor Hellman & Friedman LLC.
Seven Bank Failures Bring Year’s to Total to 139
Seven bank failures on Oct. 22 brought the year’s total to 139, one shy of the number of banks taken over by regulators in all of 2009.
Last week’s failing banks had a combined $2.4 billion in assets. The banks were in Kansas, Florida, Georgia, Arizona and Illinois.
To read Bloomberg coverage, click here.
The 140 bank failures in 2009 were five times more than 2008. The failures in 2009 were the most since 1992, when 179 institutions were taken over by regulators.
Bankruptcy Trustees Can’t Sue on Alter Ego Claim
California law doesn’t recognize a so-called alter ego claim allowing a bankruptcy trustee to make a company’s owner individually liable for all of a company’s debt, the U.S. Court of Appeals in San Francisco ruled on Oct. 21.
The 9th Circuit in San Francisco reversed the district court, which had ruled that only a bankruptcy trustee could file suit to pierce the corporate veil when the alleged harm was done to all creditors.
The Court of Appeals reversed because three circuit judges interpret California law as not having an independent alter ego claim.
Law on piercing the corporate veil, sometimes referred to as alter ego, deals with situations where an individual can be liable for a corporation’s debt.
The case is Ahcom Ltd. v. Smedling, 09-16020, U.S. 9th Circuit Court of Appeals (San Francisco).
No Judgment Required to Bar Malicious Injury Debt
The victim of a willful or malicious personal injury isn’t required to have a judgment before the defendant’s Chapter 13 bankruptcy filing for the debt to be excepted from discharge, U.S. District Judge Joel A. Pisano in Newark, New Jersey, ruled on Oct. 20.
The case involved an assault where the defendant pleaded guilty to one count of aggravated assault in the third degree. Before the victim of the assault could obtain judgment in a civil suit, the defendant filed Chapter 13 bankruptcy.
The bankrupt argued that the plain meaning of the word “awarded” in Section 1328(a)(4) of the Bankruptcy Code means that there must have been a judgment before bankruptcy for the debt to be non-dischargeable.
Although he said the courts are split on the question, Pisano agreed with a majority of courts and said that the debt can be barred from discharge even if the judgment is made after bankruptcy.
The case is Lepore v. Kerner, 10-1472, U.S. District Court, District of New Jersey (Newark).