LTAP US LLP, a purchaser of life insurance policies in the so-called life settlement market, filed for Chapter 11 protection yesterday in Delaware to protect what it believes is the value of the portfolio above the $222.5 million owing to secured lender Wells Fargo Bank NA, as agent.
LTAP, based in Atlanta, is managed by a company wholly owned by Berlin Atlantic Holding GmbH & Co. It was formed in 2003 and since then bought 410 policies on the lives of 313 individuals. It intended to recover the investment, and earn a profit, by securitizing the portfolio.
LTAP says the portfolio has a value of $311.5 million as of Nov. 30, according to an appraisal by Towers Watson Risk Consulting Inc. Court papers peg the value of all assets at $359 million against liabilities of $231 million, including $7.6 million of unsecured debt.
In the life settlement market, companies like LTAP buy a policy for less than the death benefit from the owner of a policy on an individual’s life. The price is higher than what the policy owner would receive were the policy instead surrendered. After buying the policy, LTAP must continue paying premiums until the insured individual’s death.
The case is In re LTAP US LLP, 10-14125, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Lenders File Sexy Hair Concepts to Complete Sale
Sexy Hair Concepts LLC, a distributor and marketer of hair-care products, filed under Chapter 11 on Dec. 21 in Woodland Hills, California, to complete a sale that proved impossible to close outside bankruptcy court.
Sexy Hair, based in Chatsworth, California, was acquired in April 2008 by a group led by private-equity investor Thoma Bravo LLC. By December 2008, the new owners notified the lenders that loans to finance the acquisition would be in default, according to a court filing. A payment default occurred by June 2009.
Debt includes $62.6 million owing to secured lenders where Bank of Montreal serves as agent. The Northwestern Mutual Life Insurance Co., owed $24 million on a subordinated unsecured note, is an 8.2 percent owner. Chicago-based Thoma Bravo owns 37.4 percent.
Court papers say a buyer has been lined up. The buyer’s lenders wouldn’t finance the purchase through a foreclosure sale, according to court papers. The company’s chief restructuring officer said in a court filing that Northwestern Mutual blocked signing up the sale before bankruptcy even though there would be a later auction and court approval. All the terms of the proposed sale weren’t yet disclosed.
The secured lenders are willing to provide $5 million in secured financing for the Chapter 11 case. Half would be available on an interim basis.
The lenders, exercising their rights as secured creditors with liens on the stock, already installed a new board of directors and a chief restructuring officer, court papers say.
The petition says debt totals $88.7 million.
The case is Ecoly International Inc., 10-25919, U.S. Bankruptcy Court, Central District of California (Woodland Hills).
Reston, Virginia, Buildings File to Stop Foreclosure
The owners of office buildings in Reston, Virginia, filed Chapter 11 petitions on Dec. 15 in Manhattan to head off foreclosure the next day.
The properties, whose ultimate owner is now a fund managed by Garrison Investment Group, owe $107 million on a mortgage where $67.5 million of the debt is now held in a securitization.
A Garrison fund originally was the lender on a $31.5 million mezzanine loan. In November, Garrison foreclosed its lien on the ownership interest in the owner of the buildings. When negotiations on an extension of the $107 million mortgage failed, Garrison put the buildings into Chapter 11.
The mortgage and the mezzanine debt both matured in August, court papers say. SL Green Loan Services LLC is the special servicer for the mortgage, according to a court filing.
Little more than the Chapter 11 petitions and lists of creditors were filed on Dec. 15. Nothing more was filed until Dec. 21 when affidavits were placed on the court record containing basic information about the businesses.
The first-filed case is In re Penzance Parkridge Five LLC, 10-16646, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Paulson Refines Competing Lehman Plan Recoveries
Paulson & Co. Inc. submitted refined disclosure materials yesterday regarding the recoveries creditors would receive under the competing Chapter 11 plan it proposed this month for Lehman Brothers Holdings Inc.
The revised exhibit to Paulson’s disclosure statement shows how senior creditors with claims against the Lehman holding company would recover about 24.5 percent, compared with 17.4 percent under Lehman’s plan. The larger recovery from the holding company results from substantive consolidation where all assets are thrown into one pot and creditors receive a similar distribution regardless of the Lehman company that owed the debt.
Holders of claims against subsidiaries with guarantees by the holding company would recover 25.7 percent under Paulson’s plan. The 1.2 percent more than the recovery on general creditors’ claims is intended to induce creditors with guarantees to accept the plan. Creditors with guarantees would see less under the Paulson plan because it doesn’t enforce guarantees.
Under Lehman’s non-consolidation plan where guarantees are enforced, the same group of creditors would recover more. The classes’ recoveries under Lehman’s plan would range from 100 percent to 33 percent for creditors of six Lehman subsidiaries. Creditors of only one subsidiary would have a larger recovery under the Paulson plan.
Paulson filed the plan along with nine other creditors. Paulson previously said the group holds $12 billion in claims, including $9.4 billion of senior unsecured claims against the Lehman holding company. Members of the group include California Public Employees’ Retirement System and Owl Creek Asset Management LP.
The Lehman holding company and its non-brokerage subsidiaries filed their revised Chapter 11 plan and disclosure statement in April. For details, click here and here for the April 15 and April 16 Bloomberg bankruptcy reports. For a discussion of the Paulson plan and substantive consolidation, click here for the Dec. 16 Bloomberg bankruptcy report.
The Lehman holding company filed under Chapter 11 in New York on Sept. 15, 2008, and sold office buildings and the North American investment banking business to London-based Barclays Plc one week later. The Lehman brokerage operations went into liquidation on Sept. 19, 2008, in the same court. The brokerage is in the control of a trustee appointed under the Securities Investor Protection Act.
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 of New York (Manhattan).
Union Seeks Trustee for NYC Off-Track Betting
The District Council 37 labor union filed a motion yesterday seeking appointment of a trustee to sue racetracks in New York state for receiving fraudulent transfers from Off-Track Betting Corp. in New York City.
If the motion is granted by the bankruptcy judge in New York, NYC OTB would fail in its effort at having the Chapter 9 municipal reorganization dismissed at the same Jan. 19 hearing. NYC OTB halted operations on Dec. 7 and sought dismissal when the state Senate adjourned for the year without adopting legislation required to fund the reorganization plan filed in November.
Chapter 9 law doesn’t allow appointment of a trustee to take over the entire municipality. Rather, Section 926(a) of the U.S. Bankruptcy Code permits appointment of a trustee only to sue for the recovery of preferences and fraudulent transfers. The provision was included in bankruptcy law because political considerations might cause a municipality to forego filing suits.
The union recounts how NYC OTB admitted that payments made over the years to the state’s racetracks were the “principal cause” of bankruptcy. The union says the payments qualify as fraudulent transfers because nothing was received in return and the payments were made while NYC OTB was insolvent.
NYC OTB likely will argue in response that the payments were not fraudulent transfers because they were mandated by state law as a means for subsidizing the racing industry.
The bankruptcy judge ruled in March that NYC OTC was eligible to reorganize in Chapter 9. The petition, filed in December 2009, said assets were less than $50 million while debt exceeded $100 million. Liabilities included $8 million in governmental statutory claims, $43.7 million owing to the racing industry, and $6.3 million in claims held by general unsecured creditors. There is almost no secured debt.
The case is In re New York City Off-Track Betting Corp., 09-17121, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
TerreStar Set for March 4 Confirmation Hearing
TerreStar Networks Inc., a satellite-based mobile phone provider, scheduled a March 4 confirmation hearing for approval of the Chapter 11 plan when the bankruptcy judge in New York approved the explanatory disclosure statement at a hearing yesterday.
Most objections to the disclosure statement were resolved in advance. An objection by Sprint Nextel Corp. wasn’t. Sprint filed a lawsuit on Dec. 17 asking the bankruptcy court to rule that TerreStar can’t grant liens on licenses granted by the Federal Communications Commission nor on proceeds from the licenses.
Overland Park, Kansas-based Sprint argued there isn’t time to resolve the lawsuit before confirmation in March. For Bloomberg coverage of yesterday’s hearing, click here.
The plan would give control to EchoStar Corp., the largest secured creditor. It would swap 97 percent of the stock for the $944 million in 15 percent senior secured pay-in-kind notes. The secured creditors also have the right to purchase 97 percent of the preferred stock in a $125 million rights offering fully backstopped by EchoStar.
Unsecured creditors, including holders of the $179 million in 6.5 percent exchangeable pay-in-kind notes, would share 3 percent of the new stock and the right to purchase 3 percent in the rights offering.
TerreStar, based in Reston, Virginia, provides mobile satellite coverage throughout the U.S. and Canada where traditional mobile networks are unavailable. EchoStar is a television equipment and satellite services company.
EchoStar, based in Englewood, Colorado, and New York hedge fund Harbinger Capital Partners LLC are TerreStar Corp.’s largest shareholders, according to Bloomberg data.
TerreStar listed assets $1.4 billion and debt totaling $1.64 billion. In addition to $944 million in 15 percent senior secured pay-in-kind notes and $179 million in 6.5 percent exchangeable pay-in-kind notes, debt includes $86 million on a purchase money credit agreement. The purchase money debt would remain in place under the TerreStar plan.
The case is In re TerreStar Networks Inc., 10-15446, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Approval Sought for Blockbuster Customers’ Class Claim
Customers who paid late fees want the bankruptcy judge to authorize the filing of a class claim against Blockbuster Inc., the movie-rental chain.
A class-action suit was begun in Illinois state court in 1999 on behalf of customers who either paid late fees or were forced to purchase unreturned merchandise for about 10 years ending in 2004.
The suit was certified as a class action. The state judge later decertified the class. The plaintiffs had a motion for recertification under consideration when Blockbuster filed in Chapter 11.
The plaintiffs want the bankruptcy judge to allow them to file a class claim for at least $2 million. A hearing on the motion is set for Jan. 20.
An ad hoc group of 35 individuals with more than 27.5 million shares of Blockbuster stock filed a motion asking for the ability to conduct discovery. The group believes they can prove the movie rental chain is worth “considerably more” than the $1.2 billion necessary to pay claims in full. The group’s motion is on the bankruptcy court’s calendar for Jan. 20. For Bloomberg coverage, click here.
In advance of the Chapter 11 filing in September, Blockbuster negotiated a reorganization plan with holders of 80 percent of the $630 million in 11.75 percent senior-secured notes. The plan would give them the new stock. General unsecured creditors would have warrants for 3 percent of the stock. Holders of the $300 million in 9 percent subordinated notes would receive nothing. After two extensions, the deadline for filing the plan is now Jan. 14.
Dallas-based Blockbuster began reorganization with 5,600 stores, including 3,300 in the U.S., with the remainder abroad. Among the U.S. stores, 3,000 were owned and while the rest are franchised. Blockbuster said it will have closed about 182 stores from the commencement of the bankruptcy through March 2011. About 200 stores closed before bankruptcy.
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 case is In re Blockbuster Inc., 10-14997, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
California Coastal Sets Jan. 12 Disclosure Hearing
California Coastal Communities Inc., a homebuilder that filed for bankruptcy reorganization in October 2009 with three projects in Southern California, scheduled a Jan. 12 hearing for approval of the disclosure statement filed this week.
The company this week also received interim approval for $5 million of a $15 million loan to support the Chapter 11 process. In addition, the bankruptcy judge in Santa Ana, California, approved a so-called plan support agreement outlining a reorganization structure negotiated with secured lenders.
The lenders are to receive the new stock under the plan. The loan for the Chapter 11 case can remain as a first-lien obligation when the plan is confirmed.
The company previously said that the plan is supported by holders of 81 percent of the revolving credit and 88 percent of the term loan.
The holders of the $81.7 million revolving credit are slated to have their loan continue after bankruptcy, secured by a second lien and maturing in 2016. The treatment is intended to mean payment-in-full on the secured claim, according to the disclosure statement.
In exchange for the $99.8 million term loan, the lenders would receive a new third-lien note for $44 million maturing in 2017 plus all the new stock. The third-lien note would accrue interest at 15 percent. Neither interest nor principal would be paid until the first- and second-liens are fully repaid. The disclosure statement says the recovery on the $99.8 million loan is undecided.
Unsecured creditors would split a fund ranging from $2 million to $3 million. The disclosure statement has a blank where unsecured creditors later will be told the percentage recovery to expect.
California Coastal filed under Chapter 11 in October 2009, listing assets of $291 million against debt totaling $231 million. The Irvine, California-based company listed $81.7 million owing on a revolving credit and $99.8 million on a term loan. Both secured obligations were owed to KeyBank NA.
The company missed a $758,000 payment due KeyBank in September 2009.
The case is In re California Coastal Communities Inc., 09-21712, Bankruptcy Court, Central District of California (Santa Ana).
Former Cynergy Data Confirms Liquidating Chapter 11 Plan
CD Liquidation Co. Plus LLC, the name given to Cynergy Data LLC after it sold the credit-card processing business, has an approved liquidating Chapter 11 plan given the bankruptcy judge’s signature on a Dec. 21 confirmation order.
The plan doesn’t provide anything other than lawsuit recoveries for anyone aside from holders of first-lien debt. The maximum recovery by secured lenders is 5 percent, according to the disclosure statement. The plan is founded on a settlement with secured lenders.
Cynergy sold the business to private-equity investor ComVest Group for $81 million, including $14 million in subordinated debt payable by the purchaser.
Long Island City, New York-based Cynergy processed $10 billion in credit charges annually for 80,000 merchants before the Chapter 11 filing in September 2009. The petition listed assets of $110 million against debt totaling $186 million, including $39.8 million on a first-lien credit and $80.1 million on a junior secured credit. There was also $9 million owing by an affiliate that Cynergy guaranteed.
The case is In re CD Liquidation Co. Plus LLC, 09-13038, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Tamarack to Operate This Season, Lift Stay Undecided
Tamarack Resort LLC, a golf and ski resort in Valley County, Idaho, was given official authority by the judge this week for an agreement where the homeowners’ association will lease and operate the ski resort for the current winter season. The land is leased from the state.
The association pays the state $80,000 to extend the time for assuming the lease until June 2011. The secured lender paid the state almost $300,000 in rent that was due in January 2010 and pays the state another $125,000 for 2011.
The bankruptcy judge held a hearing this month on a motion by the secured lender, Credit Suisse AG, Cayman Islands Branch, to dismiss the case or convert the Chapter 11 reorganization to a liquidation in Chapter 7. Court records say a ruling is “forthcoming.”
The Tamarack case began with an involuntary petition in Chapter 7 which the company opposed. The company lost, was put into a Chapter 7 liquidation, and later converted the case to Chapter 11 even though a Chapter 7 trustee was named in March.
The project’s 27.5 percent owner, VPG Investments Inc., filed for Chapter 11 reorganization in 2008. The petition was dismissed in October 2008. VPG was controlled by Mexican businessman Alfredo Miguel Afif.
The new case is In re Tamarack Resort LLC, 09-03911, U.S. Bankruptcy Court, District of Idaho (Boise). The previous case was In re VPG Investments Inc., 08-00253, U.S. Bankruptcy Court, District of Idaho (Boise).
National Envelope Reports Negotiations on Chapter 11 Plan
National Envelope Corp. sold the business in September and will be in bankruptcy court on Jan. 6 asking for an extension until April 6 of the exclusive right to propose a Chapter 11 plan.
NEC says it drafted a plan and is in negotiations with interested parties.
Affiliates of Gores Group LLC bought the business under a contract valued at $208 million, including cash of $149.85 million. National Envelope called itself the largest closely held envelope manufacturing company in the U.S. on filing under Chapter 11 in June.
Based in Uniondale, New York, National Envelope said assets and debt were both less than $500 million. Liabilities included $74.3 million on a secured term loan, $70.6 million on a secured revolving credit, and $89 million owing on unsecured debts to trade suppliers.
The case is In re NEC Holdings Corp., 10-11890, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Comercial Mexicana Reorganization Plan Enforced in U.S.
Controladora Comercial Mexicana SAB, the third-largest food retailer in Mexico, won an order yesterday from a U.S. bankruptcy judge in New York enforcing the company’s reorganization plan in the U.S. The plan was approved last month by a court in Mexico.
The company filed for Chapter 15 protection in the U.S. in July. Before the proceedings began in Mexico and the U.S., the reorganization had been accepted by 85 percent of creditors, court papers say.
The company operated 231 retail stores and 73 restaurants at the end of 2009. The petition said assets and debt both exceeded $1 billion.
The case is In re Controladora Comercial Mexicana SAB, 10-13750, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Lehman-E&Y Suit, WaMu Delay, Blockbuster: Bankruptcy Audio
The New York Attorney General’s lawsuit charging Ernst & Young LLP with civil accounting fraud regarding Lehman Brothers Holdings Inc., a delay in knowing whether Washington Mutual Inc. will confirm the Chapter 11 plan, more store closings by Blockbuster Inc., and the opportunity to buy the owner of Thomas the Tank Engine are analyzed in the bankruptcy podcast with Bloomberg Law’s Lee Pacchia and Bloomberg News bankruptcy columnist and editor-at-large Bill Rochelle. To listen, click here.
Perkins Family Restaurants May Miss Interest Payments
Perkins & Marie Callender’s Inc., an operator of family restaurants, is at “significant risk” of being unable to pay $19 million in interest due during the first half of 2011, Standard & Poor’s said in a report yesterday.
The 10 percent notes due October 2013 last traded yesterday at 34.125, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
S&P lowered the corporate credit by two notches to CC. S&P said that earnings before interest, taxes, depreciation and amortization declined 13 percent, to $45 million, for a year ended in October.
For 2010 through Oct. 3, the company reported a $38.1 million net loss on total revenue of $378.7 million. The balance sheet is upside down. As of Oct. 3, assets were $290 million while long-term debt alone was $338 million.
The Memphis-based company has 236 owned locations and 319 franchised stores under the names Perkins and Marie Callender’s. Annual sales are almost $600 million.
The company was acquired in 2005 by Castle Harlan Inc. for $245 million cash.