Tribune, Refco, Point Blank, Urban Brands: Bankruptcy

The Tribune Co. examiner’s report ended up costing $12 million when the bankruptcy judge on Oct. 22 approved final compensation for examiner Kenneth N. Klee, his two law firms and his financial advisers.

Klee himself was awarded almost $700,000, while the remainder was split almost evenly among the three professional firms.

Publisher Tribune filed a new Chapter 11 plan on Oct. 23 based on a settlement negotiated among the creditors’ committee, senior lenders Oaktree Capital Management LP and Angelo Gordon & Co. LP, and JPMorgan Chase Bank NA, as agent for senior lenders. For details on the plan and accompanying disclosure statement, click here for the Oct. 25 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).

New Filings

Carefree Senior Living Files for Reorganization in Las Vegas

The owner of 300-unit Carefree Senior Living in Las Vegas filed a Chapter 11 petition on Oct. 22 in the hometown, saying the facility is worth $30 million.

Secured creditor Union Bank is owed $31.5 million, according to a court filing. Total debt is $36.5 million.

The facility is located at 3250 South Town Center on the west side of Las Vegas.

The case is In re Carefree Willows LLC, 10-29932, U.S. Bankruptcy Court, District of Nevada (Las Vegas).

Shopping Center Near Universal Studios Files Chapter 11

International Shoppes LLC, the owner of a shopping center at 5600 International Drive in Orlando, Florida, filed a Chapter 11 petition on Oct. 21 in Orlando, saying the property is worth $4.6 million.

Secured lender Telesis Community Credit Union is owed $11 million.

Court papers indicate that revenue for the shopping center was $1.16 million in 2009, although the amount may be a typographical error.

The shopping center is across Interstate 4 from the Universal Studios theme park in Orlando.

The case is In re International Shoppes LLC, 10-18809, U.S. Bankruptcy Court, Middle District Florida (Orlando).

Moo Town Dairy Files Chapter 11 in Sherman, Texas

Moo Town Dairy LLC and its owner Rene H. Coumans filed Chapter 11 petitions yesterday in Sherman, Texas, owing $8.24 million to Bank of the West, one of the secured lenders.

The dairy farm near Como, Texas, has more than 5,200 head of cattle, including 1,900 milking cows, a court filing says. The decline in raw milk prices in 2009 was blamed in part for the Chapter 11 filing.

An additional $2.78 million in secured debt is owing to Legacy FLCA.

The case is In re Coumans, 10-43677, U.S. Bankruptcy Court, Eastern District Texas (Sherman).

Crestwood Apartments in Indianapolis File Chapter 11

The owner of the 518-unit Crestwood Apartments in Indianapolis filed for Chapter 11 protection on Oct. 22, owing $16.6 million to US Bank NA, the mortgage holder.

The project is 77 percent rented, a court paper says. The monthly rent roll is $204,000.

The owner projects generating cash flow exceeding $5,000 a month from November through January after paying $35,000 a month on the mortgage.

The case is In re MREF III Property LLC, 10-16001, U.S. Bankruptcy Court, Southern District Indiana (Indianapolis).


Ashley Stewart Auction Attracted Four Bidders

Urban Brands Inc., the owner of the Ashley Stewart line of women’s clothing, held an auction yesterday with four bidders. The opening bid, nominally $15 million, came from liquidator BG Merchant Partners LLC, an affiliate of Gordon Brothers Group LLC.

The hearing for approval of the sale will be held tomorrow in U.S. Bankruptcy Court in Delaware.

To read Bloomberg coverage about the other bidders, click here.

Urban Brands sells what it calls clothing for “plus sized urban women.” The Chapter 11 filing Sept. 21 was designed to sell the business. The bankruptcy judge approved auction and sale procedures on Oct. 4. Based in Secaucus, New Jersey, Urban Brands, lost $44.3 million in 2008 and $28.6 million in 2009.

The company has 210 stores in 26 states, including the flagship store on 125th Street in the Harlem neighborhood of Manhattan. Sales declined from $179.6 million to $174.6 million between 2008 and 2009.

Funds affiliated with Trimaran Capital Partners are the largest shareholders, court papers say. Trimaran is owed $81.2 million on senior unsecured notes. The other principal shareholder is UBI Holding Corp. Bank of America NA, a secured lender, is owed $2.3 million.

The petition said assets are less than $50 million while debt exceeds $100 million.

The case is In re Urban Brands Inc., 10-13005, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Point Blank Reports $2.47 Million September Net Loss

Point Blank Solutions Inc., a manufacturer of soft body armor for the military and law enforcement, reported a $2.47 million net loss in September on net sales of $10.01 million. Operating income for the month before non-recurring expenses was $230,000. After non-recurring items, the operating loss was $1.68 million.

Point Blank has a plant and head office in Pompano Beach, Florida, and a second plant in Jacksboro, Tennessee. Revenue in 2009 exceeded $153 million. The petition listed assets of $64 million against debt totaling $68.5 million. Debt included a $10.5 million secured loan paid off by financing for the Chapter 11 case. Point Blank said it also owes $28.2 million to trade suppliers.

The case is In re Point Blank Solutions Inc., 10-11255, U.S. Bankruptcy Court, District of Delaware.

Daily Podcast

Two Major Opinions, Third-Party Releases, Tousa: Audio

Important opinions on the finality of bankruptcy plans and protections for mechanics’ lienholders, special counsel for Innkeepers USA Trust, the Tousa Inc. fraudulent transfer appeal to two district judges, and the limitation on third-party releases in the confirmed Chemtura Corp. Chapter 11 plan are discussed in the new bankruptcy podcast on the Bloomberg terminal and To listen, click here.

Advance Sheets

New York Ruling Upholds Barrier on Professional Suits

Outside lawyers and accountants for a company that commits fraud can’t be sued by a bankruptcy trustee for aiding and abetting the fraud unless they totally abandon the company’s interests, the New York Court of Appeals ruled on Oct. 21 in a case arising from the liquidation of Refco Inc.

The suit was brought by the trustee of the litigation trust created under the Chapter 11 plan confirmed for Refco in December 2006. The U.S. District Court on New York dismissed the suit. The U.S. Circuit Court of Appeals in Manhattan certified questions about governing New York law to the New York Court of Appeals. Although called the Court of Appeals, it is the highest court in the New York state court system.

The New York court ruled that it was proper to dismiss the suit because the complaint was “saturated by allegations that Refco received substantial benefit” from the fraud conducted by the insiders. The suit faulted the professional firms for failing to detect the fraud.

The New York appeals court continued a strict reading of a long-standing defense from common law known as in pari delicto. The doctrine says that a company or its representative, such as a trustee, can’t sue third parties when the company itself was perpetrating fraud. Except in limited circumstances the court described, it doesn’t matter that the fraud was carried out by company officers.

For the in pari delicto defense not to prohibit a trustee from suing, the New York Court of Appeals said that the company officer “must have totally abandoned his principal’s interest and be acting entirely for his own” purposes. The court said that a bankruptcy trustee can succeed only if the “scheme that benefitted the insider operated at the corporation’s expense.”

The New York court declined to follow the highest court in New Jersey which went the other way in a similar case.

In the Refco case, the professionals let off the hook include the law firm Mayer Brown LLP and the accounting firm Grant Thornton LLP. The suit charged the firms and others with breach of fiduciary duty and aiding and abetting the fraud at Refco, with the consequent loss of more than $500 million by Refco customers.

Refco and affiliates filed under Chapter 11 in October 2005, one week after disclosure $430 million was owing by purported customers secretly controlled by the former Chief Executive Officer Phillip R. Bennett, who was given a 16-year prison sentence for his crimes.

The case is Kirschner v. KPMG LLP, 151, Court of Appeals of the State of New York.