WaMu, Holley, EnPro, Bear Island, Lehman: Bankruptcy
Washington Mutual Inc.’s official shareholders’ committee followed up on a suggestion made by the bankruptcy judge and filed another request for an examiner to investigate the merits of a proposed settlement with the Federal Deposit Insurance Corp. and JPMorgan Chase & Co.
The judge denied the shareholders’ examiner motion the first time around, saying that WaMu and the creditors’ committee already performed an investigation. After WaMu declined to provide the shareholders’ panel with its analysis of the merits of the claims against the FDIC and JPMorgan, the judge said June 3 it was time for another examiner’s motion.
The new motion likely will be on the court’s hearing calendar for June 17, when the judge could approve a disclosure statement explaining WaMu’s Chapter 11 plan to implement the global settlement. The judge declined to approve the disclosure statement at the hearing this month.
The shareholders said in their new motion filed yesterday that WaMu’s investigation was “minimal at best,” and they don’t know whether an examiner’s report will favor the global settlement. The shareholders said they will withdraw their appeal of the prior denial of an examiner if they succeed on the second motion.
WaMu refused to turn over its lawyers’ analysis of the claims, saying the documents are protected by the so-called attorney-client privilege.
Holders of notes issued by the bank subsidiary also oppose the settlement. They have papers on file asking the judge to appoint a trustee in either Chapter 7 or Chapter 11. Their motion is likewise on the calendar for June 17.
To read about the global settlement, click here for the May 24 Bloomberg bankruptcy report. The settlement and plan confirmation would enable WaMu to distribute more than $7 billion to creditors. Click here to read the May 18 Bloomberg bankruptcy report for a summary of WaMu’s plan.
Shareholders and bank bondholders say WaMu and the FDIC are giving up too cheaply and should continue lawsuits with New York-based JPMorgan.
The WaMu holding company filed under Chapter 11 in September 2008, one day after the bank subsidiary was taken over. The bank was the sixth-largest depository and credit-card issuer in the U.S. and the largest bank failure in the country’s history. The holding company filed formal lists of assets and debt showing property with a total value of $4.49 billion against liabilities of $7.83 billion.
The holding company Chapter 11 case is Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
EnPro Has Interim Injunction Against Asbestos Suits
So far, the bankruptcy judge is giving EnPro Industries Inc. what it wants in the Chapter 11 reorganization begun on June 5 by subsidiary Garlock Sealing Technologies LLC.
Without giving asbestos plaintiffs a chance to appear, U.S. Bankruptcy Judge George R. Hodges in Charlotte, North Carolina, signed a temporary injunction on June 7 stopping asbestos lawsuits not only against Garlock and the two affiliates in bankruptcy, but also against EnPro and 65 affiliates not in bankruptcy.
Hodges will hold a June 21 hearing on a preliminary injunction to decide if he should continue the ban on suits against non-bankrupt companies. Suits against the companies in Chapter 11 are automatically stopped by the bankruptcy filing alone.
Hodges yesterday granted interim access to a $10 million loan for the Chapter 11 case being provided by Bank of America NA, the existing secured lender. The final hearing on financing is scheduled for June 30.
Garlock, a Palmyra, New York-based gasket maker, filed in Chapter 11 to deal with the last 100,000 asbestos claims. The company said it intends to pay all creditors in full, including asbestos claimants. There is $194 million of insurance remaining, according to a court filing.
Garlock had sales of $113 million in 2009. The company was spending $100 million a year to settle and defend asbestos claims.
EnPro had assets of $1.33 billion and total liabilities of $923.5 million on the March 31 balance sheet. EnPro’s $99 million in net income included $5.6 million of income from continuing operations for the first quarter. EnPro makes engineered products, including diesel and natural-gas engines, at 44 plants in the U.S., plus operations in 10 other countries.
The case is In re Garlock Sealing Technologies LLC, 10- 31607, U.S. Bankruptcy Court, Western District of North Carolina (Charlotte).
Holley Confirms Second Chapter 11 Plan in Two Years
Holley Performance Products Inc., a supplier of high- performance products for cars, confirmed a Chapter 11 plan for the second time in just over two years.
Holley filed for bankruptcy protection in Delaware in September, 18 months after undergoing a so-called prepackaged reorganization in the same court. The new Chapter 11 plan was approved in a June 7 confirmation order.
The second filing prevented foreclosure on a $20 million first-lien term loan where Regiment Capital Special Situations Fund IV LP was the majority holder. The new plan pays off or rolls over the old loan with a new $17.8 million revolving credit and term loan. There is also a $11.2 million second-lien term loan to finance the reorganized business.
The new plan gives the new stock to holders of secured notes owed $57.6 million. Their recovery is 60.8 percent, according to the disclosure statement. Holders of less than $3.5 million in notes were entitled to receive cash instead, for a projected 45.6 percent dividend.
Unsecured creditors with $11 million in claims receive nothing, just like existing shareholders.
The plan confirmed in March 2008 gave 90 percent of the new stock and $50 million in new second-lien notes to the holders of $145.8 million in 12.5 percent senior secured second-lien notes.
The reorganization in 2008 was a so-called prepack where creditors voted on the plan before the Chapter 11 petition was filed. The second-lien noteholders in the first case were projected to recover 48.5 percent.
Holley, based in Bowling Green, Kentucky, listed assets of $106 million against debt totaling $243 million in the first case. In the second reorganization, debt and assets both exceeded $100 million.
The new case is In re Holley Performance Products Inc., 09- 13333, and the prior case was In re Holley Performance Products Inc., 08-10256, both in U.S. Bankruptcy Court, District of Delaware (Wilmington).
Bear Island Lacks Chapter 11 Plan, Buyer for Business
Bear Island Paper Co., a U.S. unit of Canada’s White Birch Paper Co., hasn’t yet reached an agreement with secured lenders on a Chapter 11 plan, the company said while requesting a first extension of the exclusive right to propose a reorganization.
The loan financing the Chapter 11 case has a deadline that requires signing up a so-called plan-support agreement by June 15. The U.S. plan would proceed in tandem with the reorganizations of sister companies in the Canadian court.
Absent a plan, the financing requires selling the business. Bear Island said it negotiated with several prospective buyers over confidentiality agreements that would permit it to disseminate financial information, though none has been executed.
The hearing on the exclusivity motion is set for June 22.
White Birch, based in Nova Scotia, is North America’s second-largest newsprint maker. It filed for reorganization with U.S. units simultaneously in the U.S. and Canada in February. Secured liabilities include $438 million on a first-lien term loan, $104 million on a second-lien term loan, $50 million on an asset-backed revolving credit and $51.5 million on swap agreements. Trade suppliers are owed $9.5 million.
The companies had sales of $667 million in 2009, with $125 million generated by Bear Island. White Birch has three pulp and paper mills in Quebec province. The Bear Island plant is in Ashland, Virginia. White Birch is controlled by Brant-Allen Industries, according to Bloomberg Data.
The case is In re Bear Island Paper Co., 10-31202, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond).
Barcalounger to Hold Auction for Assets on August 16
Barcalounger Corp., a furniture maker from Martinsville, Virginia, filed under Chapter 11 on May 19 and will hold an auction on Aug. 16 to learn if there’s a better bid for the business than the $1.5 million offered by the current owner, private-equity investor Hancock Park Associates.
If Hancock Park prevails at auction, it will also forgive $32.5 million in debt.
Under auction procedures established this week by the bankruptcy judge in Delaware, other bids are due Aug. 11. The hearing for approval of the sale will take place Aug. 18.
Given opposition from creditors, the sale will take place more than a month later than the company wanted. Originally, Barcalounger sought an initial bidding deadline on July 1 and a July 6 auction.
The company ceased operations before the bankruptcy filing. It owes $1.2 million on two commercial factoring agreements, plus $32.5 million on subordinated debt owing to a fund managed by Los Angeles-based Hancock Park.
The petition says assets are less than $10 million while debt exceeds $10 million.
Hancock Park acquired the business in March 2006 in a $20 million transaction, according to data compiled by Bloomberg.
The case is In re Barcalounger Corp., 10-11637, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Spheris Sells Notes for More than Redemption Price
Spheris Inc., a transcriber of medical dictation for doctors and hospitals, was authorized by the bankruptcy judge to sell a $17.5 million subordinated note for $13.8 million to Black Horse Capital LP.
Originally, Spheris intended to sell the note to Riva Ridge Master Fund Ltd. without holding an auction. When other potential purchasers surfaced, Spheris changed course and decided to hold an auction, even though it wasn’t sanctioned officially by the bankruptcy judge.
At the auction on June 7, Black Horse had the high bid. Riva Ridge objected, saying Spheris was breaching their contract. The bankruptcy judge at yesterday’s hearing awarded Riva Ridge $50,000 for termination of the contract.
Spheris, now formally named SP Wind Down Inc., received the note from purchasers who bought the business in April for $98.8 million. The five-year note starts off paying interest at 8 percent, rising to 12.5 percent. The buyers of the assets have the right to prepay the note within six months for 77.5 percent of the outstanding principal. The price paid by Black Horse exceeds what it would receive if the buyers redeem the note at the first opportunity.
The purchasers of Spheris’ assets were units of CBaySystems Holdings Ltd., a competing medical-transcription services provider.
Spheris, based in Franklin, Tennessee, listed assets of $61 million against debt totaling $225 million. Liabilities included $75.6 million on a senior secured credit and $125 million on subordinated notes. For the nine months ended in September, revenue was $120 million.
The case is In re SP Wind Down Inc., 10-10352, U.S. Bankruptcy Court, District of Delaware (Wilmington).
GECC Appealing Black Crow’s Financing Approval
Black Crow Media Group LLC, a closely held owner of 22 radio stations, still isn’t getting along with General Electric Capital Corp., the secured lender owed $38.9 million.
Black Crow won bankruptcy court approval on May 28 for a $1.5 million loan over the objection of Stamford, Connecticut- based GECC, even though the judge required payment of $1.88 million to GECC for cash collateral on hand.
GECC appealed the order approving the new financing and sought to stay implementation of the loan during the appeal. The bankruptcy judge in Jacksonville, Florida, denied the stay motion yesterday.
GECC argues that the bankruptcy judge improperly made its existing loan subordinate to the lien securing the new $1.5 million loan. GECC claims that Black Crow continued to say that the new loan wouldn’t “prime” the existing loan until papers were submitted to approve the new financing.
Black Crow filed for Chapter 11 protection in January, two days before a hearing in U.S. district court where GECC was seeking appointment of a receiver following default on the term loans and revolving credit.
Black Crow’s stations are in five markets in Florida, Alabama, Georgia and Tennessee. In addition to the GECC debt, another $6 million is owing to unsecured creditors. Daytona Beach, Florida-based Black Crow had revenue of $12.9 million in 2009, a 23 percent drop from 2008.
The case is In re Black Crow Media Group LLC, 10-00172, U.S. Bankruptcy Court, Middle District of Florida (Jacksonville).
Spansion Settles WARN Lawsuit for $8.57 Million
Spansion Technology Inc., a manufacturer of flash-memory semiconductors, won approval for an $8.57 million settlement of a so-called class-action WARN lawsuit filed on behalf of employees who were fired just before the Chapter 11 filing without the 60 days’ notice required in labor law.
The workers collectively will have $6.8 million in approved priority claims that will be paid in full under Spansion’s Chapter 11 plan, which was confirmed and implemented on May 10. The priority portion of the settlement works out to an average of $6,800 for each worker, before deductions for attorneys’ fees and other costs.
The workers will also have $1.76 million in unsecured claims that will pay $2,000 in cash to each worker. Lawyers for class-action plaintiffs received approval for $1.7 million in fees.
Workers have priority claims because they were fired within weeks before bankruptcy, giving rise to claims that must be paid in full under a priority carved out for employees under the Bankruptcy Code.
Spansion’s plan reduced debt to less than $480 million from $1.5 billion. To read about the plan, click here for the Dec. 31 Bloomberg bankruptcy report.
Before filing under Chapter 11 in March 2009, Sunnyvale, California-based Spansion hadn’t reported a profit since being spun off by Advanced Micro Devices Inc. in 2005. It had a $352 million net loss during the first three quarters of 2008 on revenue of $1.8 billion.
The case is Spansion Inc., 09-10690, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Penn Traffic Draws U.S. Trustee Objection to Bonuses
Supermarket operator Penn Traffic Co. is proposing a bonus program that is an incentive plan in name only, according to an objection filed on June 7 by the U.S. Trustee in Delaware.
The plan will cost a maximum of $315,000 to cover 20 executives and other employees, according to the motion scheduled for hearing on June 16.
The U.S. Trustee refers to provisions in bankruptcy law banning retention bonuses for top officers. She says that the Penn Traffic plan has “virtually no incentive criteria.” She says that “retention of the alleged key employees” is the “primary purpose” of the program.
Tops Markets LLC purchased almost all of Penn Traffic’s stores as a going concern by paying $85 million in cash. The sale was structured so that Penn Traffic avoided a $72 million claim for pension-plan termination and a $27 million claim by the principal supplier.
Penn Traffic filed under Chapter 11 in November, intending to sell the assets. The petition listed assets of $150 million against debt totaling $137 million.
Based in Syracuse, New York, Penn Traffic was in Chapter 11 twice before. Debt at the outset of the newest bankruptcy included $63.2 million owing to secured creditors, including $41.8 million to General Electric Capital Corp. on a senior secured facility and $10 million on a supplemental real estate credit with Kimco Capital Corp. serving as agent.
Penn Traffic operated stores in Pennsylvania, upstate New York, Vermont and New Hampshire using the names BiLo, P&C and Quality.
The case is In re Penn Traffic Co., 09-14078, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Advanta Sells Long-Dated ‘Zeros’ for 75% of Accreted Value
Long-dated zero-coupon bonds are worth only a fraction of face value, as shown by a sale Advanta Corp. received approval from the bankruptcy judge to carry out. The judge also extended Advanta’s exclusive right to propose a Chapter 11 plan until Sept. 6.
Advanta was holding $1.49 million in face amount of zero- coupon subordinated bonds issued by the Delaware State Housing Authority. The authority offered to repurchase the bonds for $346,000, representing 75 percent of their $457,000 accreted value. The bankruptcy judge approved the sale on June 4.
The Spring House, Pennsylvania-based bank holding company filed under Chapter 11 in November, saying at the time that it intended to distribute the last $100 million cash in a manner “that benefits stakeholders fairly.” Shareholders shouldn’t expect anything, Advanta said in January.
Advanta’s bank subsidiary ceased issuing new credit cards and stopped allowing new charges on existing cards in May 2009. It was taken over by regulators in March.
The holding company’s petition listed assets of $363 million against debt totaling $331 million on Sept. 30. Debt included $138 million in senior retail investment notes and $89 million in subordinated notes. Debt owing to trade creditors was listed as $5 million.
The case is In re Advanta Corp., 09-13931, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Four Pacific Ethanol Plants Confirm Reorganization Plans
Four ethanol plants owned by Pacific Ethanol Inc. have an approved reorganization plan after the bankruptcy judge signed a confirmation order yesterday.
Before creditors began voting in April, the plan was modified to give Pacific Ethanol, the parent company, an option to buy as much as 25 percent of the reorganized company from the secured lenders for $30 million. Secured lenders are predicted to have a recovery between 17 percent to 37 percent. Unsecured creditors with $1.4 million in claims are to take home 21 percent
The plan converts $293.5 million of secured debt into the new stock and $115 million in new debt obligations. Secured lenders owed $244.5 million under the pre-bankruptcy credit agreement are to receive 73 percent of the equity in a new company being created to own the plants. The pre-bankruptcy lenders also will receive a new $48.8 million term loan.
To induce lenders to provide a $15 million revolving credit and term loan to finance an exit from Chapter 11, the lenders will receive 27 percent ownership of the plants plus a new $18.2 million term loan.
Financing for the reorganization in the amount of $24 million will be repaid from the a new term loan. Pre-bankruptcy debt that was converted to a post-bankruptcy secured loan will be exchanged for a new term loan.
Pacific Ethanol and marketing affiliate Kinergy Marketing LLC aren’t in Chapter 11. The Sacramento, California-based company wasn’t operating three plants when the reorganization began in May. One was returned to service. At full production, annual capacity would be more than 200 million gallons.
At the outset of Chapter 11, debt included $270 million owing to the secured creditors on a term loan, revolving credit, construction financing and other liabilities.
The case is Pacific Ethanol Holding Co. LLC, 09-11713, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Majestic Liquors Files in Fort Worth with 46 Stores
Majestic Liquor Stores Inc., a chain of 46 liquor stores in Texas, filed for Chapter 11 reorganization on June 6 in Fort Worth, where it’s based. Majestic operates under 16 names, including Red Colemans.
Majestic owes $13.4 million to F&M Bank & Trust Co., the secured lender. Revenue for the year ended in September was $151.7 million.
The company blamed financial distress on the recession and the consequent decline in consumer spending. In addition, Lubbock, Texas, expanded the areas where liquor could be sold, leading to the closings of five stores when sales “dramatically decreased,” a court filing says.
The chain had 14 locations in 2004 when it was acquired by John Bratton and Kyle Fair. Majestic also has three wholesale locations. The petition says assets and debt are both less than $50 million.
The case is In re Majestic Liquor Stores Inc., 10-43849, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
PFF Bancorp, FDIC to Put Tax Refunds into Escrow
PFF Bancorp Inc., the holding company for a failed bank, expects to receive a tax refund. The bankruptcy judge approved an agreement where the Federal Deposit Insurance Corp. and PFF will put the refund into a segregated account until there’s a decision about whether the money belongs to the holding company or to the FDIC as receiver for the bank. Court papers don’t describe the size of the tax refunds.
PFF’s bank unit, PFF Bank & Trust, was taken over by regulators in November 2008. The holding company’s bankruptcy began in December 2009. The bank’s deposits were transferred to U.S. Bank NA. The petition listed assets of $7.8 million against debt totaling $131.7 million.
The case is In re PFF Bancorp Inc., 08-13127, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Lehman Seeks to Invest $255 Million to Protect $437 Million
Lehman Brothers Holdings Inc. is asking for court authorization to invest $255 million to protect an existing $437 million investment in the office building at 237 Park Avenue in New York, just north of Grand Central Terminal. A hearing to approve the investment is set for June 16. To read Bloomberg coverage, click here.
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, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Texas Rangers Want to Hire Investment Bank Perella Weinberg
The Texas Rangers of professional baseball applied to the bankruptcy judge for authority to continue employing Perella Weinberg Partners as investment bankers. The firm was working for the team before bankruptcy.
The proposed compensation is $87,500 a month plus a $1.5 million fee on completion of a sale or restructuring. To read Bloomberg coverage, click here.
The bankruptcy judge in Fort Worth, Texas, tentatively scheduled a July 9 confirmation hearing for approval of the Chapter 11 plan, which claims to be paying all claims in full by selling the team to a group led by current President Nolan Ryan. For details on the proposed plan and sale, click here for the May 26 Bloomberg bankruptcy report.
The case is In re Texas Rangers Baseball Partners, 10- 43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
Neenah Gains Longer Exclusivity as Insurance Policy
In the event Neenah Foundry Co. doesn’t nail down approval of the reorganization plan at the scheduled June 23 confirmation hearing, the maker of cast-iron products such as man-hole covers and sewer grates obtained an extension until Oct. 1 of the exclusive right to propose a Chapter 11 plan.
The plan was negotiated with holders of 55 percent of secured notes and all the subordinated notes in advance of the Chapter 11 filing in February. For details of the plan, click here to see April 29 Bloomberg bankruptcy report. Neenah, based in the Wisconsin town of the same name, reported a $150 million net loss for the fiscal year through Sept. 30 on sales of $333 million.
The case is In re Neenah Enterprises Inc., 10-10360, U.S. Bankruptcy Court, District of Delaware (Wilmington).
DBSD Gets Longer Exclusivity After Confirming Plan
DBSD North America Inc., which won approval of the Chapter 11 plan in a November confirmation order, got an extension of the exclusive right to propose a reorganization while waiting for the Federal Communications Commission to authorize the transfer of licenses. The plan can’t be implemented until then. The new deadline is Oct. 7.
DBSD, based in Reston, Virginia, is a development-stage company aiming to provide wireless communications by satellite to customers in North America where traditional cellular service isn’t available. It placed a geosynchronous satellite in orbit in April 2008. In confirming the plan, U.S. Bankruptcy Judge Robert E. Gerber crammed down on two classes of creditors, one the first-lien creditor Dish Network Corp. and the other including unsecured creditor Sprint Nextel Corp. To read about the 67-page opinion and details on the plan, click here to see the Oct. 28 Bloomberg bankruptcy report.
DBSD’s petition listed assets of $630 million and debt totaling $813 million as of March 31, including $51 million in first-lien debt. The Chapter 11 filing was caused in part by the illiquidity of $98 million in auction-rate securities purchased in 2008.
The case is In re DBSD North America Inc., 09-13061, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Blockbuster Noteholders Offer Financing for Chapter 11
Blockbuster Inc. is being offered financing for a reorganization by holders of senior secured notes. They would receive stock in exchange for debt, analysts said. To read Bloomberg coverage, click here.
The movie-rental chain reported a $67.1 million net loss for the quarter ended April 4 on revenue of $939.4 million. For the fiscal year ended Jan. 3, the net loss was $569 million. The company admitted there is substantial doubt about its ability to continue as a going concern.
For the first quarter, the operating loss was $29.4 million. For the fiscal year, the operating loss was $355 million. Revenue last year was $4.06 billion, down from $5.07 billion a year earlier.
The balance sheet is upside down, with assets on the books for $1.32 billion against liabilities totaling $1.69 billion in April.
Blockbuster said in February that it is closing an additional 545 stores this year on top of 347 that shut in 2009. Dallas-based Blockbuster had 5,220 company-owned and 1,300 franchised stores as of Jan. 3.
Ambac Financial Group Warns It May Default on Debt This Year
Ambac Financial Group Inc. said yesterday that a bankruptcy, prepackaged or not, is among its alternatives given that the holding company won’t be receiving dividends from the operating companies that insure bonds. Ambac said it might default on debt payments this year, even before liquidity runs out.
To read Bloomberg coverage, click here.
In March, the Wisconsin insurance regulator created a so- called special account for some of $35 billion in policies issued by the principal operating unit Ambac Assurance Corp. The policies going into the segregated account are for credit default swaps, residential mortgage-backed securities, the Las Vegas Monorail and some student loans. No claims on the policies will be paid until a rehabilitation is worked out in the Wisconsin court.
The Ambac parent, based in New York, said at the time that the regulator’s action cut off the income stream from the unit. As was the case in March, the company still says it has sufficient liquidity until the second quarter of 2011.
Even so, Ambac said in yesterday’s regulatory filing that it may decide not to pay debt service as early as the second quarter of this year.
Offshore Service Providers Downgraded on Moratorium
As a result of the six-month moratorium on new drilling permits in water deeper than 500 feet, Standard & Poor’s took rating actions yesterday against eight companies in the oil and natural-gas industry. Four were downgraded.
When the moratorium is lifted or expires, S&P expects “extensive delays” in issuing permits. S&P also predicts that rigs used in deep water will compete and reduce rates for rigs used in shallower water, where there is no moratorium.
ATP Oil & Gas Corp., an acquirer and developer of oil and gas properties, saw the rating decline two clicks to CCC+.
Hercules Offshore Inc., a provider of offshore-drilling and support services, has a B- rating following the one-grade downgrade.
Helix Energy Solutions Group Inc., a marine contractor and operator of offshore properties, has a B rating today, down one notch.
Hornbeck Offshore Services Inc., a provider of deepwater supply vessels, now sports a B+ rating, down one level.
Bankruptcy No Antidote for Contempt Imprisonment
Filing for bankruptcy won’t release an individual being held in prison for failure to produce documents, U.S. District Judge J. Owen Forrester in Atlanta ruled on June 7.
An individual named Pefanis was sent to jail for civil contempt after failing to produce documents sought by a plaintiff attempting to enforce a judgment. Pefanis filed for Chapter 7 bankruptcy and asked Forrester to release him from prison since enforcement of the judgment was automatically halted by the bankruptcy filing.
Forrester said that civil contempt proceedings aren’t exempted from the automatic stay when imprisonment is intended as an aid in collecting a judgment. On the other hand, Forester doesn’t see the automatic stay as applicable when the jail sentence is “to uphold the dignity of the court.”
Forrester kept the defendant in jail, saying Pefanis blatantly violated court orders requiring the turnover of documents. The judge said being kept in prison at that stage was only to coerce the production of documents and not to collect the judgment.
The case is Forsberg v. Pefanis, 07-03116, U.S. District Court, Northern District Georgia (Atlanta).
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