Casino operator Majestic Star Casino LLC sued owner Don H. Barden on New Year’s Eve for violating the so-called automatic stay in bankruptcy cases by terminating the company’s status as a qualified subchapter S corporation.
The Dec. 31 complaint explains how Majestic Star’s non-bankrupt parent, Barden Development Inc., elected tax status as a subchapter S corporation in 2005. Bankrupt subsidiary Majestic Star Casino II Inc. was made a qualified subchapter S corporation.
A subchapter S corporation is treated much like a partnership for tax purposes. The corporation itself doesn’t pay taxes while the owners do. If there are losses, they flow upstream to the owners. In the case of Majestic Star, the company said the losses went to the ultimate owner, Don Barden.
The complaint alleges that Don Barden changed the status of Barden Development to a subchapter C corporation sometime after the Chapter 11 filing, without notifying Majestic Star. Majestic Star said that the change made the company liable for “millions of dollars of tax liabilities in 2010, and millions more going forward.”
Majestic Star wants the bankruptcy judge in Delaware to declare that the change violated the automatic stay because there was no court approval and it interfered with the company’s property. The casino owner also wants the judge to restore subchapter S status while making Don Barden and his company liable for damages “believed to exceed” $2 million.
A call to Don Barden seeking comment on the lawsuit wasn’t returned.
Majestic Star filed a Chapter 11 plan in September and had been scheduled for approval of the disclosure statement in December. The hearing was postponed to a date to be determined. For details of the plan, click here for the Sept. 21 Bloomberg bankruptcy report.
Majestic Star has four casinos, plus hotels with 806 rooms serving the two riverboat casinos in Gary, Indiana. The other casinos are in Tunica, Mississippi, and Black Hawk, Colorado. Majestic Star’s finances suffered when the closing of a bridge for repairs cut off convenient access for Chicago customers to the Indiana properties.
When the Chapter 11 case began, Majestic Star’s debt was listed as including $79.3 million on the senior secured credit facility, with Wells Fargo Capital Finance Inc. as agent. Senior secured noteholders had a second lien for a $300 million debt. Majestic Star owed $200 million on unsecured senior notes and $63.5 million on discount notes. It listed assets of $406 million and debt of $750 million in the quarterly report for the period ended June 30, 2009.
The case is In re Majestic Star Casino LLC, 09-14136, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Milwaukee Archdiocese Files Chapter 11 After Mediation Fails
The Catholic Archdiocese of Milwaukee filed for Chapter 11 protection yesterday in Milwaukee to deal with sexual-abuse claims. The filing became necessary, according to a statement on the website by Archbishop Jerome E. Listecki, after a “failure to reach a mediated resolution with victims/survivors.”
Milwaukee is the eighth diocese to seek bankruptcy protection from sexual-abuse claims.
The balance sheet of the archdiocese lists assets of $98.4 million and total liabilities of $35.3 million. More than $90 million of the assets “do not belong to the archdiocese, are restricted for specific use as designated by donors, or are offset by corresponding liability,” according to the website. The largest amount, $62.6 million, is a “commitment” to a perpetual-care trust for cemeteries.
The diocese in a statement said it “wants to fairly compensate” victims because “priest perpetrators sexually abused minors.” The archdiocese said it has “identified” $4.6 million of assets “that could be applied to a settlement” of pending and future claims.
Liabilities include $4.65 million on a mortgage taken out to fund a settlement in 2006 that cost the archdiocese $8.25 million. There are $1.4 million in accounts payable, according to the website, together with another $1 million owed to abuse victims on mediated settlements.
Sexual-abuse creditors aren’t bound to accept the archdiocese’s conclusion about what property is or isn’t available to pay victims’ claims. In the Chapter 11 case of the Wilmington, Delaware, diocese, the bankruptcy judge rejected the church’s arguments and ruled in June that $75 million of money for parishes and parochial schools, which should have been held in trust, became part of the diocese’s bankrupt estate and had to be shared with sexual-abuse claimants.
The diocese is facing 12 lawsuits involving 17 victims, according to court papers. There are seven more claimants, the filing says. As the result of a Wisconsin state appellate court ruling, there is no insurance coverage for the lawsuits, a court filing says.
The Milwaukee archdiocese says its case is different from most others because each parish is a separate corporation. The parishes didn’t file. Consequently, the diocese says there can’t be any dispute about whether parish property is liable for claims against the diocese.
In addition to Wilmington, the other dioceses that have filed for bankruptcy are Spokane, Washington; Portland, Oregon; Tucson, Arizona; Davenport, Iowa; Fairbanks, Alaska; and San Diego.
The case is In re Archdiocese of Milwaukee, 11-20059, U.S. Bankruptcy Court, Eastern District of Wisconsin (Milwaukee).
Wilmington Dioceses to Increase Payments under Plan
Catholic Diocese of Wilmington Inc. told the bankruptcy judge at a hearing yesterday that it will file an amended Chapter 11 plan next week substantially increasing the payout to victims of sexual abuse.
The average maximum payment will now exceed $349,000, diocese lawyer Anthony Flynn said in an interview yesterday. The original plan was filed in September. The official creditors’ committee and sexual-abuse claimants had objected, contending the plan was inadequate and not confirmable. For Bloomberg coverage of yesterday’s hearing, click here.
The diocese’s Chapter 11 filing in October 2009 automatically stopped 136 abuse suits involving 147 plaintiffs, according to a court filing. The Delaware diocese was the seventh of eight Roman Catholic dioceses to file for Chapter 11 protection to deal with lawsuits for sexual abuse.
The case is In re Catholic Diocese of Wilmington, 09-13560, U.S. Bankruptcy Court, District of Delaware, (Wilmington).
Broadstripe Reports $3.15 Million November Net Loss
Broadstripe LLC, a St. Louis-based broadband cable operator, reported a net loss of $3.15 million in November on revenue of $7.63 million. Operating expenses in the month were $5.45 million.
Other expenses in November included $3.48 million of interest on senior debt and $1.42 million in depreciation and amortization.
Just before the year’s end, Broadstripe received bankruptcy court approval for a settlement with first- and second-lien lenders designed to permit confirmation of the reorganization plan negotiated when the Chapter 11 case began in January 2009. For details of the settlement and what it means for unsecured creditors, click here for the Dec. 30 Bloomberg bankruptcy report.
Funds affiliated with Highland Capital Management LP hold at least a majority of the secured debt, according to court papers. The order approving the settlement allows Highland to bid its secured debt at a sale and would let the firm unwind the settlement if there is a sale or plan confirmation it doesn’t approve.
At the beginning of the reorganization, 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).
Reorganized American Media Has B Corporate Rating
Newly reorganized American Media Inc. was assigned a B corporate rating yesterday by Standard & Poor’s. The publisher of supermarket tabloids Star and National Enquirer has what S&P called an “aggressive” financial profile.
The $385 million in new first-lien notes also have a B rating. The $104.9 million of second-lien notes were given a CCC+ rating.
American Media consummated a prepackaged reorganization plan on Dec. 22 that the bankruptcy judge confirmed on Dec. 20. The company filed a prepackaged Chapter 11 petition on Nov. 17. For details of the plan, click here for the Nov. 18 Bloomberg bankruptcy report.
American Media, based in Boca Raton, Florida, listed assets of $668 million against debt totaling $1.23 billion. Borrowed money was almost $880 million. Liabilities included $491 million on a first-lien obligation, including a $60 million revolving credit and a $431 million term loan. There were $356 million in subordinated notes.
The case is American Media Inc., 10-16140, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Fiddler’s Creek Retains Exclusivity for Filing Plan
Fiddler’s Creek LLC, developer of a master-planned community in Naples, Florida, beat back an effort by the official creditors’ committee and secured lender Colonnade Naples Land LLC to end the exclusive right to propose a reorganization.
The bankruptcy judge signed an order on Jan. 3 denying Colonnade’s motion to terminate exclusivity. Just as exclusivity was ending on Dec. 3, Fiddler’s Creek filed separate plans for itself and its 27 affiliates. The company also filed a disclosure statement explaining the plans.
Before the plans were filed, Colonnade, owed $52.6 million, filed a motion to end exclusivity. Colonnade had called Fiddler’s Creek a “horizontal fractured real estate project.” The lender said there was almost no income while Fiddler’s Creek had consumed $6.5 million in secured financing provided by an affiliate which received a lien prior to existing debt.
For details of the Fiddler’s Creek plan, click here for the Dec. 7 Bloomberg bankruptcy report.
Fiddler’s Creek filed for bankruptcy reorganization in February, saying assets and debt both exceed $100 million. Upon completion, the project is to have 100 communities on almost 4,000 acres.
The case is In re Fiddler’s Creek LLC, 10-03846, U.S. Bankruptcy Court, Middle District of Florida (Fort Myers).
Thompson Publishing Completes Sale of Business to Lenders
Thompson Publishing Holding Co., a newsletter publisher, reported this week that the sale of the business was completed on Dec. 23. Thompson was authorized in November to sell the business to the first-lien lenders in exchange for $42 million in secured debt.
Based in Washington, Thompson had 300 products and 70,000 subscribers, producing an estimated $49 million in revenue in 2010. Debt included $122.6 million owing on first-lien debt with PNC Bank NA as agent. Ableco Finance LLC serves as agent for second-lien creditors owed $43.5 million.
Thompson, which was controlled by Avista Capital Partners LP, also arranged conferences and employee-training events. It generated 74 percent of income from subscription.
The case is In re Thompson Publishing Holding Co., 10-13070, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Lehman, WaMu, GSC, Vitro, Statistics, Sales: Bankruptcy Audio
Bankruptcy statistics for 2010, the Lehman Brothers Holdings Inc. dispute with affiliates of Nomura Holdings Ltd., whether Vitro SAB ends up in New York or Texas, the new confirmation deadline for Washington Mutual Inc., and the opportunity to buy radio stations or waterfront property in Fort Lauderdale, Florida, are among the topics covered 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.
CommScope Downgraded to B+ on Carlyle Acquisition
The pending leveraged buyout of CommScope Inc. will result in a downgrade from Standard & Poor’s lowering the corporate rating for the supplier of communications infrastructure products by one notch to B+.
As part of the acquisition by Carlyle Group announced in October, CommScope will have $2.72 billion in proceeds from the sale of new debt, plus $1.6 billion in existing cash and equity investments from Carlyle. The funds will be used to pay the $3.1 billion purchase price and $1.4 billion in existing debt, according to S&P.
For Bloomberg coverage of the financing for the LBO, click here.
CommScope, based in Hickory, North Carolina, reported net income of $72.7 million for the first nine months of 2010 on sales of $2.38 billion.
Contingent Environmental Cleanup Claims Disallowed
U.S. Bankruptcy Judge Robert E. Gerber in Manhattan took care of unfinished business in the completed reorganization of chemical producer Lyondell Chemical Co. by dismissing environmental contribution claims asserted by other companies which hadn’t yet incurred any remediation costs.
The case turned on Section 502(e)(1)(B) of the U.S. Bankruptcy Code, which disallows a claim for contribution that is contingent at the time of allowance. Although there are no cases on point from the U.S. Court of Appeals in Manhattan, Gerber said he would follow decisions by other bankruptcy judges in New York.
Gerber disallowed claims where the creditors hadn’t yet incurred response costs. Gerber disallowed the contribution claims against Lyondell even though the creditors have claims against them for environmental costs.
Not including governmental claims, 70 companies filed claims against Lyondell for $1.1 billion in past and future environmental cleanup costs. Most of the 70 companies consented to the disallowance of their claims for future costs. Weyerhaeuser Co., Georgia-Pacific LLC and Hamilton Beach Brands Inc. didn’t consent and had their claims for future damages dismissed in Gerber’s 34-page opinion yesterday.
Gerber permitted Weyerhaeuser an $11 million claim for costs already incurred.
Federal and state governments had filed $5.5 billion in claims against Lyondell. They were resolved in a settlement Gerber approved in April. Under the settlement and the reorganization plan, Lyondell transferred specific environmentally impaired properties it owns to a trust, along with cash to perform a cleanup.
All together, the U.S. government and seven states were given $1.18 billion in approved unsecured claims. In addition, Lyondell contributed $108.4 million cash to the trust and paid another $61.6 million to settle other claims. Lyondell consummated the Chapter 11 plan on April 30.
For details of Lyondell’s plan, click here for the April 26 Bloomberg bankruptcy report.
Lyondell and affiliate Equistar Chemicals LP together were the third-largest independent producer of chemicals. They filed under Chapter 11 in January 2009, listing assets of $33.8 billion and debt totaling $30.3 billion. Parent company LyondellBasell Industries AF filed under Chapter 11 in April 2009.
To read Gerber’s opinion, click here.
The Chapter 11 case is Lyondell Chemical Co., 09-10023, U.S. Bankruptcy Court, Southern District of New York (Manhattan).