Jan. 26 (Bloomberg) -- Lehman Brothers Holdings Inc. filed a revised Chapter 11 plan and explanatory disclosure statement before midnight last night. The documents, including charts and exhibits, exceed 450 pages. The new plan is supported by the official creditors’ committee, Lehman said in a statement today.
The new plan revises the distribution formula promulgated with the original plan in March. In substance, it offers a compromise with creditors urging substantive consolidation of all 23 of the Lehman entities in Chapter 11. A rival plan filed by a group including Paulson & Co. would substantively consolidate by throwing all assets and debt into one pot, in the process not recognizing intercompany claims or the validity of claims based on guarantees.
The new plan contains a carrot and stick for holders of claims in Classes 3, 6 and 7 who have senior unsecured claims against the holding company, derivative claims against the holding company, and general unsecured claims against the holding company. If those classes vote against the plan, they won’t receive what the plan calls the Plan Adjustment.
The disclosure statement says that senior unsecured creditors in Class 3 with clams against the holding company should have a 21.4 percent recovery. Under the first plan, the predicted recovery was 17.4 percent. If the class votes against the new plan, their predicted recovery is 17 percent.
Senior intercompany claims against the holding company in Class 4a are in line for 16.6 percent. Intercompany claims against the holding company in Class 8a are to have 15 percent.
Senior third-party guarantee claims against the holding company in Class 5a are estimated to see 12.9 percent.
Holders of derivative claims in Class 6 against the holding company are to receive their pro rata share of cash plus the Plan Adjustment. However, the disclosure statement says there are expected to be no allowed claims in the class.
For Class 7, general unsecured claims against the holding company, the recovery is an estimated 19.8 percent. If the class votes against the plan, the predicted recovery is 15 percent. Under the first plan, it was 14.7 percent.
Holders of subordinated claims against the holding company are to receive nothing. Similarly, holders of securities law claims aren’t to receive anything.
The recovery on derivative claims and unsecured claims against Lehman Commercial Paper Inc. is an estimated 51.9 percent. In the original plan, it was 44.2 percent.
For derivative and general unsecured claims against Lehman Brothers Special Financing, the recovery is 22.3 percent. In the first plan, it was 24.1 percent.
For other Bloomberg coverage on the revised plan, click here. For details on the original plan, click here and here for the April 15 and 16 Bloomberg bankruptcy reports. For a discussion of the Paulson plan and substantive consolidation, click here for the Dec. 16 Bloomberg bankruptcy report.
Lehman said it will file a separate motion to authorize a blanket method for determining the amount of derivative claims, rather than having each claim determined individually.
When Lehman issued a status report earlier this month, it said the new plan would reallocate some recovery from “certain of the subsidiary debtors” to senior and unsecured creditors of the holding company.
The Lehman holding company filed under Chapter 11 in New York on Sept. 15, 2008. The Lehman brokerage operations went into liquidation four days later in the same court.
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 Investor Protection Corp. v. Lehman Brothers Inc., 08-01420, both in U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Summit Business Media Files Prepack in Delaware
Summit Business Media Holding Co., a business-to-business publisher and event organizer, filed a Chapter 11 petition yesterday in Delaware after agreement on a reorganization plan with holders of 83 percent or more of the first- and second-lien debt.
Summit and affiliates publish magazines and websites and produce conferences for the insurance, accounting, financial services, banking and legal industries. They blamed financial problems on the recession and the 33 percent decline in print revenue. The company was formed through seven acquisitions since 2006.
Summit is 85 percent-owned by Wind Point Partners, according to a bankruptcy court filing. Summit says it has $252 million in debt, with $8.2 million owing to unsecured creditors. It doesn’t put a value on the business.
The plan calls for giving a new $110 million first-lien term loan and 89.4 percent of the new stock to holders of the $189 million first-lien debt. Holders of the $55 million in second-lien debt are to receive $1 million cash and 5.6 percent of the new stock. The plan will reduce debt by $140 million, a court filing says.
Unsecured creditor are to divide $100,000 cash.
Summit, based in New York, first violated loan covenants in December 2008 and went through several workouts with lenders. Since inception, it never paid dividends to Wind Point, a court filing says.
The Chapter 11 exercise will be financed with a $5 million loan provided by the existing lenders. The loan will be repaid with a $6 million revolving credit to kick in on implementation of the reorganization plan.
Bank of Montreal is agent for the first-lien lenders, and Ares Capital Corp. is agent for the junior secured lenders.
Several of Summit’s competitors also sought Chapter 11 protection. They include Cygnus Business Media Inc., Questex Media Group Inc. and Penton Media Inc.
The case is In re Summit Business Media Holding Co., 11-10231, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Manhattan’s DeWitt Nursing Home Files for Chapter 11
DeWitt Rehabilitation & Nursing Center Inc., a 499-bed nursing home on East 79th Street in Manhattan, filed for Chapter 11 protection yesterday, saying it owes $38.4 million.
The nursing home said bankruptcy resulted from “the failure to control costs over the last several years.” As a result, DeWitt owes back taxes and is behind on payments to a union benefit fund. The decision by New York state not to increase the reimbursement rate pushed the nursing home over the edge and precipitated the Chapter 11 filing.
Court papers don’t give a value for the assets other than saying there are $10 million in accounts receivable. Secured lenders with liens on all assets are owed $10 million on a term loan. The lenders are Metropolitan National Bank and Israel Discount Bank.
The nursing home is owned by Marilyn Lichtman, who has been the operator since the facility opened in 1967.
The case is In re DeWitt Rehabilitation & Nursing Center Inc., 11-10253, U.S. Bankruptcy Court, Southern District New York (Manhattan).
NYC OTB Chapter 9 Dismissed Despite Union Objection
The Chapter 9 municipal reorganization of Off-Track Betting Corp. in New York City was dismissed yesterday. In the process, U.S. Bankruptcy Judge Martin Glenn denied a motion by a labor union for the appointment of a trustee to file fraudulent transfer suits.
Glenn recited how the ability of NYC OTB to reorganize was dependent upon legislation that failed to pass in the state Senate. As a result, operations halted Dec. 7. NYC OTB has no employees and disbursed all cash except enough necessary to cover outstanding checks, the judge said.
Glenn said that dismissal was appropriate as a result of the court’s and creditors’ limited powers in a Chapter 9 case. The court, for example, can’t tell a Chapter 9 debtor how to spend its money, and creditors can’t file a plan. If the entity in Chapter 9 can’t or won’t reorganize, the court’s recourse is to dismiss, and allow the parties to exercise their rights in state court, Glenn said.
District Council 37, a labor union representing some 1,000 former workers, argued unsuccessfully that NYC OTB was a different sort of municipal debtor where the bankruptcy court has more powers. Glenn rejected the argument, saying he could not “differentiate between political subdivisions, public agencies or instrumentalities of the state.”
The union wanted a trustee appointed to sue racetracks in New York State for receiving fraudulent transfers. Glenn denied the motion for a trustee, saying that the payments the union wanted to attack were made to comply with state law that in substance required NYC OTB to help subsidize the racing industry.
Glenn said that allowing the suits would violate constitutional limitations on the power of a bankruptcy court in Chapter 9. Even if there were success in the suit, Glenn said he lacked power to compel NYC OTB to pay the proceeds to any creditor in particular.
To read Glenn’s opinion, click here.
Chapter 9 law does not allow appointment of a trustee to take over the entire municipality. Instead, Section 926(a) of the Bankruptcy Code permits appointment of a trustee only to sue for the recovery of preferences and fraudulent transfers.
The bankruptcy judge ruled in March 2010 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 New York (Manhattan).
Chicken Producer Townsends to Auction February 15
Townsends Inc., a vertically integrated chicken producer, is aiming to sell the business at auction on Feb. 15. Although there are discussions with several potential buyers, no one as yet is under contract.
There will be a Jan 28 hearing in U.S. Bankruptcy Court in Delaware to set up auction and sale procedures. Townsends wants initial bids on Feb. 14, the day before the auction, with the hearing to approve the sale on Feb. 18.
Financing for the Chapter case is set to expire Feb. 20. The lenders are requiring sale approval before funding terminates.
Townsends filed under Chapter 11 on Dec. 19. Based in Georgetown, Delaware, the family-owned company can produce 700 million pounds of poultry a year and 1.3 million eggs a week. The four production facilities are in Arkansas and North Carolina.
Townsends listed assets of $131 million and liabilities of $127 million. Liabilities include $20.7 million owing to secured lenders on a term loan and $40 million on a revolving credit. Twelve-month revenue was $504 million. Townsends contracts with over 300 growers who operate 1,200 chicken houses.
The case is In re Townsends Inc., 10-14092, U.S. Bankruptcy Court, District of Delaware.
Lenders May or May Not Take O’Hare Hotel Through Plan
Longview Ultra Construction Loan Investment Fund and co-lender U.S. Bank NA filed a Chapter 11 plan where they hope to take ownership of the InterContinental Chicago O’Hare hotel near Chicago’s largest airport. The property is owned by River Road Hotel Partners LLC. The creditors’ plan was made possible when the bankruptcy judge in Chicago terminated River Road’s exclusive right to propose plan in August.
The lenders’ plan could be upset depending on the outcome of an appeal River Road was allowed to take directly to the U.S. Court of Appeals in Chicago.
The plan will give the lenders ownership in exchange for their $138.7 million in debt. The lenders cite an appraisal as valuing the property at $86 million. The lenders will waive their deficiency claims if they take title through the plan.
If a pending state court lawsuit concludes with a ruling that some $9 million in mechanics’ liens are ahead of the lenders’ mortgages, the lenders will pay the claims in full. If the mechanics’ liens are subordinate, the lenders will supply enough cash for a 10 percent recovery.
Other unsecured creditors are to receive about 10 percent through cash also supplied by the lenders.
At a hearing in August where it lost exclusivity, River Road was hoping the judge would approve bidding procedures for a sale of the property the lenders were opposing. Instead, the judge denied the motion for sale procedures and held that the lenders were being improperly denied the right to bid their secured claims rather than cash.
The bankruptcy judge allowed River Road to take a direct appeal to the Court of Appeals, overstepping an intermediate appeal in the U.S. District Court.
The appeal will test whether the Court of Appeals for the 7th Circuit goes along with rulings from sister courts of appeal in Philadelphia and New Orleans which held that lenders can be denied a so-called credit bid so long as they receive the equivalence of the value of their mortgages, which can be less than the face amount of the mortgage.
Had River Road been allowed to conduct an auction, the first bid of $42 million would have come from an affiliate of Och-Ziff Real Estate Acquisitions LP. The sale was to have been part of a Chapter 11 plan.
River Road filed under Chapter 11 in August 2009 in Chicago along with affiliate RadLAX Gateway Hotel LLC, the owner of the Radisson hotel at Los Angeles International Airport. Both are ultimately controlled by Harp Group. The O’Hare property listed $155 million in debt. The Radisson property listed debt of $120 million.
The case is In re River Road Hotel Partners LLC, 09-30029, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).
Vitro Wants Delay in Trial on Texas Involuntaries
Vitro SAB, Mexico’s largest glass maker, filed a motion yesterday asking the bankruptcy judge in Fort Worth, Texas to push back the hearing date for deciding if its U.S. subsidiaries should be in Chapter 11 reorganizations involuntarily.
Holders of some of the $1.2 billion in defaulted bonds filed involuntary petitions against Vitro’s U.S. subsidiaries in November. Vitro is opposing the petitions, saying the subsidiaries don’t qualify for involuntary bankruptcy although they admittedly haven’t made good on guarantees of bonds in default for about two years. The bankruptcy judge had scheduled a Feb. 10 trial on the involuntary petitions.
Vitro said in papers filed yesterday that it can’t complete the production of documents even by Jan. 26, the extended deadline. Vitro wants more time to produce documents requested by noteholders and is asking the court to reschedule the hearing until Feb. 22-23.
Vitro said it identified 56,000 documents responsive to the bondholders’ requests. Among them, more than 60 percent are in Spanish, Vitro said. Vitro needs to review the documents before turning them over to the bondholders.
Vitro is voluntarily dismissing the Chapter 15 case it filed in New York in December in view of the dismissal of its reorganization in a court in Mexico. The Mexican judge ruled that Vitro couldn’t push through a plan based on the vote of intercompany debt when third-party creditors were opposed.
Bondholders also filed involuntary bankruptcy petitions against Vitro in Mexico. In addition, there are lawsuits in New York state court where bondholders attached Vitro assets.
Vitro previously said noteholders would recover as much as 73 percent by exchanging existing debt for cash, new debt and convertible bonds. Bondholders believe Vitro is worth enough to pay them in full. For a summary of Vitro’s dismissed reorganization and the suits between Vitro and the noteholders, click here for the Dec. 15 Bloomberg bankruptcy report.
The first-filed involuntary case is In re Vitro Asset Corp., 10-47470, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth). The Chapter 15 case to be dismissed is In re Vitro SAB, 10-16619, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Orchard Brands Subs File Motion for Exit Loan Approval
Subsidiaries of Orchard Brands Corp. began their prepackaged reorganization on Jan. 19 and on Jan. 24 filed a motion for approval of a commitment from lenders to provide $80 million in financing to underpin an emergence from Chapter 11.
The hearing for approval of the commitment will take place Feb. 11. There will be a separate hearing to approve the loan itself.
The contemplated loan has optional interest rates. One is for 3.5 percentage point above the London interbank borrowed rate, with a Libor floor of 1.5 percent. The lenders are UBS Loan Finance LLC, Wells Fargo Bank NA, and Ally Commercial Finance LLC.
The Orchard Brands companies operate 55 retail stores. The agreement with creditors requires either consummation of a Chapter 11 plan or a sale of the business not later than May 21. In case the plan process falls behind schedule, the company filed a separate motion setting up sale procedures. The hearing on sale procedures will be Feb. 11 also.
The plan is supported by holders of 80 percent of the first-lien debt and all of the second-lien obligations. The plan would give the stock and new debt to the secured creditors. Unsecured creditors other than a selected group of trade suppliers are to receive nothing. For details on the plan, which would reduce debt by $420 million, click here for the Jan. 20 Bloomberg bankruptcy report.
Debt includes $115 million owing to trade suppliers and $725.1 million for borrowed money. Orchard is controlled by private-equity investor Golden Gate Capital Corp. Orchard, a holding company, is not itself in Chapter 11.
Beverly, Massachusetts-based Orchard has 17 brands, including Appleseed’s, Draper’s & Damon’s, Gold Violin, Haband and Norm Thompson. The stores sell clothing, footwear, and household goods. They appeal to shoppers over age 55. Orchard also sells through catalogues and the Internet.
The case is In re Appleseed’s Intermediate Holdings LLC, 11-10160, U.S. Bankruptcy Court, District of Delaware (Wilmington).
SCO Trustee Picks unXis as Buyer for Assets
The Chapter 11 trustee for software developer SCO Group Inc., after several delays, held an auction and selected unXis Inc. as having the best offer to buy the business of selling Unix system software products and services. The sale will be up for approval at a Feb. 16 hearing.
unXis is to pay $600,000 cash and give the trustee warrants for 3 percent of its stock. The warrants will be exercisable after unXis has raised $4 million in equity financings. The exercise price will be price for the stock paid by the investor in the last round of financing that brings the total to $4 million.
In August 2009 the bankruptcy judge called for a Chapter 11 trustee, approximately one month before the U.S. Court of Appeals in Denver ruled in the company’s favor after six years of litigation with Waltham, Massachusetts-based Novell Inc. The case went back to the district court where the judge and jury largely ruled against SCO with regard to rights in certain Unix software incorporated in network systems. The trustee sought permission to hold the auction after SCO’s interest in Unix was clarified.
After filing for bankruptcy protection in September 2007, SCO and an affiliate filed schedules listing combined assets of $14.2 million and debt totaling $5.2 million.
The case is In re SCO Group Inc., 07-11337, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Ambac Assurance’s Rehabilitation Approved in Wisconsin
The rehabilitation of insurance company Ambac Assurance Corp. was approved by a judge in Wisconsin state court who held a five-day trial in November.
Some $50 billion of policies were put into a so-called segregated account where the policy holders will receive 25 percent in cash and the remainder in notes. For Bloomberg coverage, click here.
The insurance subsidiary stopped paying dividends to the parent in 2007 and stopped writing new business entirely in mid-2008. The parent Ambac Financial Group Inc. filed under Chapter 11 in November. The Ambac parent listed assets of $90.7 million and liabilities totaling $1.624 billion, virtually all unsecured. Nearly all the debt is made of up $1.622 billion owing on seven note issues. One issue for $400 million is subordinated.
The case is In re Ambac Financial Group Inc., 10-15973, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Palm Harbor to Sell Georgia Plant for $1.05 Million
Palm Harbor Homes Inc., a maker of factory-built homes, intends on selling a plant it doesn’t need in LaGrange, Georgia for $1.05 million. Having marketed the plant for two years without another buyer, Palm Harbor wants the bankruptcy judge to approve the sale at a Feb. 17 hearing without holding an auction.
In 2008, Palm Harbor had an offer for $1.25 million. According to a court filing, the offer was rejected at the time as insufficient. Since then, the filing admits, the market declined further.
The buyer is VSP Logis Inc. The plant has 221,000 square feet situated on 23.3 acres.
The remainder of the facilities will go up for auction March 1. The opening bid will be an offer from Fleetwood Enterprises Inc., a venture between Cavco Industries Inc. and a fund advised by Third Avenue Management LLC. The hearing for approval of the sale will be held on March 4. Palm Harbor filed under Chapter 11 in late November.
Fleetwood is providing $50 million in secured financing that can be increased to $55 million. For the business, Fleetwood will pay $50 million or the amount outstanding on the financing, whichever is larger, plus $6.5 million attributed to the assumption of liabilities on warranties. The price is subject to possible downward adjustment.
In addition, $3 million cash will be set aside to fund expenses for winding down the bankruptcy.
Fleetwood was purchased out of Chapter 11 in 2010 for $26 million by Cavco, a producer of manufactured homes from Phoenix.
Palm Harbor’s petition said assets are $321 million with debt totaling $280 million. On top of $34 million owing to Textron Financial Corp., there is $53.8 million owing on 3.25 percent convertible senior notes due 2024.
Palm Harbor is based in Dallas.
The case is In re Palm Harbor Homes Inc., 10-13850, U.S. Bankruptcy Court, District of Delaware.
Retired Judge Richard Bohanon Died January 18
Richard L. Bohanon, a bankruptcy judge in Oklahoma City from 1982 until his retirement last year, died on Jan. 18 at age 75.
Bohanon, the son of U.S. District Judge Luther Bohanon, received his undergraduate degree from Dartmouth College and his law degree from University of Oklahoma College of Law, the family said. After law school, he was a clerk for a judge on the U.S. Circuit Court of Appeals in Denver.
Harry & David ‘Likely’ to Default Soon, Moody’s Says
Harry & David Operations Corp., the specialty-food retailer and direct marketer from Medford, Oregon, “will likely default on its debt obligations in the very near-term,” according to Moody’s Investors Service.
In a report yesterday, Moody’s lowered the corporate rating by another notch to Ca.
Moody’s noted that Harry & David owes $7 million in interest on March 1 on unsecured notes and doesn’t have access to the revolving credit. The $58 million in notes mature in March 2012.
The new Moody’s rating is comparable to the CC rating assigned last week by Standard & Poor’s. S&P said the company “will not be able to finance its operations without restructuring its debt obligations and securing new capital.”
The company is controlled by Wasserstein & Co., according to Bloomberg data. Annual revenue is about $420 million, Moody’s said.
Lone Star to Recoup Half of Bi-Lo Plan Investment
Bi-Lo LLC, which emerged from Chapter 11 reorganization in May, is selling $285 million in senior secured notes, partly so Lone Star Funds can recoup about half the investment it made to retain ownership of the supermarket operator, Moody’s Investors Service said yesterday.
Bi-Lo will use proceeds from the new notes to pay off a $195 million term loan that otherwise would mature in 2015.
Moody’s lowered the corporate rating by one notch to B2.
By virtue of a $150 million equity investment, Lone Star retained ownership of Bi-Lo under the Chapter 11 plan confirmed by a bankruptcy court in South Carolina in April. Other financing for the plan came from a new $200 million term loan and a new $150 million working capital loan.
The plan gave term-loan lenders, owed $260 million not including interest, $260 million cash, for a 94.5 percent recovery. Unsecured creditors, with claims of $65 million to $85 million, were to split up $40 million, for an estimated recovery between 43.7 and 57.8 percent.
Bi-Lo, based in Greenville, South Carolina, filed under Chapter 11 in March 2009 with maturity looming on a $260 million term loan. The 207 stores are in South Carolina, North Carolina, Georgia and Tennessee. Annual revenue is $2.6 billion, Moody’s said.
Lone Star Funds bought the business in 2005 from Royal Ahold NV, a Netherlands-based supermarket operator.
The Bi-Lo Chapter 11 case was In re Bi-Lo LLC, 09-02140, U.S. Bankruptcy Court, District of South Carolina (Spartanburg).
Del Monte LBO Raises Debt $2.6 Billion, Lowers Rating
The upcoming leveraged buyout of Del Monte Foods Co. is bringing on a downgrade that will lower the corporate credit by two notches to B+ on the Standard & Poor’s scale.
Del Monte, based in San Francisco, is a producer, distributor and marketer of branded food and pet products. The buyers are KKR & Co., Vestar Capital Partners V LP and Centerview Capital LP.
S&P said the LBO will increase debt by $2.6 billion. The new $1.5 billion in senior unsecured notes will be rated B-. The new $2.5 billion senior secured term loan will have a B+ rating.
Smurfit Buyout, Gulfstream, Charlie Brown’s: Bankruptcy Audio
What the RockTenn Co. acquisition means for “old” creditors of Smurfit-Stone Container Corp., the sale of airline owner Gulfstream International Group Inc. to Chicago-based Victory Park Capital Advisors LLC, the chance to buy some 30 restaurants from the owner of Charlie Brown’s Steakhouse, and three bankruptcy lawyers becoming bankruptcy judges in California are 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.
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