Almatis, National Envelope, Flying J, FairPoint, Abitibi: Bankruptcy
Leslie Controls Inc., a subsidiary of Circor International Inc., filed a Chapter 11 petition this morning in Delaware to implement a reorganization plan already negotiated with lawyers representing asbestos claimants.
Faced with 1,307 asbestos personal injury claims, Tampa- based Leslie filed a Chapter 11 plan to created a trust for asbestos claimants funded with $74 million cash from Circor plus a $1 million note secured by the stock of Leslie. The trust will also have the right to sue insurance companies.
Creation of the trust through confirmation of the plan is intended to give the parent Circor and the former parent Watts Industries Inc. protection from asbestos claims.
The asbestos claims arise from valves made by Leslie that contained two components with asbestos. Leslie believes it has $48 million in insurance coverage remaining.
Leslie had $35 million revenue in 2009. Circor has a $14.3 million secured claim resulting from advances made to settle asbestos claims. The parent is offering $10 million in secured financing for the Chapter 11 case.
Leslie filed a Chapter 11 plan and explanatory disclosure statement. The petition says assets are less than $50 million while debt exceeds $50 million.
Circor rose 30 cents on July 9 to $26.36 in New York Stock Exchange trading. Leslie’s revenue represents approximately 5 percent of Circor’s consolidated revenue of $643 million. Circor had net income of $5.7 million in the first quarter and $5.8 million net income in 2009.
The case is In re Leslie Controls Inc., 10-12199, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Texas Rangers Auction Expected to Draw Higher Bids
The Texas Rangers professional baseball team may have several bidders at auction where the first offer should be “significantly higher” than the contract signed before bankruptcy with a group including current team President Nolan Ryan, a person familiar with the matter said.
The club filed in Chapter 11 on May 24 saying the Ryan group’s bid was worth $575 million.
The bankruptcy judge is urging the parties to reach agreement on auction rules so he can approve the sale at a July 22 hearing, another person said after the judge met privately in chambers with attorneys for the parties. For Bloomberg coverage, click here.
Last week the Rangers filed a motion to set up auction procedures where the Ryan group would have made the first offer and receive a breakup fee if outbid. The team withdrew the motion late last week after opposition arose from the independent chief restructuring officer for the team’s partnership owners.
Secured lenders owed $525 million opposed the contract with the Ryan group. They believed there was a higher offer. They also argued that some of the value from the sale was being directed to the current owner, Thomas Hicks, rather than to them as creditors of the team and the partnership owners. The Ryan group’s offer would have given the lenders a recovery of $256 million, according to the team’s disclosure statement.
The Rangers moved from Washington to Texas in 1972. The team defaulted on payments owing to the lenders in March 2009. Michael Rochelle, a brother of Bloomberg reporter Bill Rochelle, is a lawyer for an agent for the lenders. The partnership that owns the team is Texas Rangers Baseball Partners.
The case is In re Texas Rangers Baseball Partners, 10- 43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
St. Vincent Selling Long-Term Health-Care Program
St. Vincent Catholic Medical Centers, a shuttered 727-bed acute-care hospital in Manhattan’s Greenwich Village, has a $17.1 million offer from Metropolitan Jewish Health Care Inc. for its long-term health-care program.
A hearing will be held July 22 to settle on auction and sale procedures. If approved by the judge, the auction seeking a higher offers would take place Aug. 11, followed by an Aug. 19 hearing to approve the sale.
The auction and sale procedure will duplicate a separate process testing whether the $15 million offer from North Shore University Hospital is the best bid for St. Vincent’s certified home health-care agency.
St. Vincent filed a second time under Chapter 11 in April. The new petition listed assets of $348 million against debt totaling $1.09 billion. The hospital ended the prior reorganization in July 2007 with a Chapter 11 plan claimed at the time to have a “a realistic chance” of paying all creditors in full. The prior reorganization left the medical center with more than $1 billion in debt. When the first bankruptcy started in July 2005, St. Vincent had seven operating hospitals. Five were sold.
The main hospital has 941,000 square feet in 10 buildings. The not-for-profit hospital is sponsored by the Catholic Diocese of Brooklyn and the Sisters of Charity. It was founded in the mid-19th century.
The new case is In re Saint Vincent Catholic Medical Centers of New York, 10-11963, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The prior case was In re Saint Vincent Catholic Medical Centers of New York, 05-14945, in the same court.
Chemtura Shareholders Oppose Plan-Support Agreement
The official equity committee for specialty chemical maker Chemtura Corp. filed papers on July 9 objecting to a so-called plan-support agreement where the creditors’ committee and an ad hoc group of bondholders bind themselves to support the reorganization plan originally filed in June. The shareholders’ committee finds fault with the agreement on two grounds.
The stockholders contend that the so-called lock-up agreement is barred by bankruptcy law if it’s made during the Chapter 11 case. The equity committee also argues that the agreement has no purpose aside from giving the ad hoc committee a $7 million payment for making a substantial contribution in the case.
The equity holders posit that only the bankruptcy judge has the right to bestow a creditor with a payment for making a substantial contribution. They say the payment can’t be camouflaged as a settlement.
Chemtura announced on July 9 that a Canadian-based subsidiary named Chemtura Canada Co. Cie will be filing a Chapter 11 petition in New York and a companion reorganization in Canada to facilitate emergence from bankruptcy by the entire family of companies.
Chemtura says the new filing shouldn’t slow down the hearing on July 21 for approval of the disclosure statement approving the Chapter 11 plan for the companies already in reorganization. The Canadian subsidiary needs bankruptcy to deal with personal injury claims arising from a chemical called diacetyl. The U.S. companies are already providing for diacetyl claims in their plan.
Chemtura filed a revised Chapter 11 plan on July 9. In addition to providing for the filing by the Canadian subsidiary, it fine tunes the existing plan.
Supported by the creditors’ committee and the ad hoc bondholder group, Chemtura’s plan is intended to pay creditors in full while holding the possibility of preserving some value for existing shareholders. The plan would reduce debt for borrowed money from $1.3 billion to approximately $750 million. For details, click here for the June 18 Bloomberg bankruptcy report.
The Chapter 11 petition in March 2009 by Middlebury, Connecticut-based Chemtura listed assets of $3.06 billion against debt totaling $2.6 billion, including $1.02 billion owing on three issues of notes and debentures. Sales in 2008 of $3.5 billion declined to $2.5 billion in 2009. The subsidiaries outside of the U.S. didn’t file.
The case is Chemtura Corp., 09-11233, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Committee Finds Defects in Bear Island Lenders’ Liens
The creditors’ committee for Bear Island Paper Co. LLC, a U.S. subsidiary of Canada’s White Birch Paper Co., believes it’s found defects in the secured lenders’ collateral.
In papers filed last week, the committee explained why it concluded the lenders don’t have valid security interest in three bank accounts, 22 acres of property and several vehicles.
At an Aug. 12 hearing, the committee will ask the bankruptcy judge to modify the March approval of financing. The committee wants the judge to delete the described properties from the list of the lenders’ collateral. The committee believes that changing the financing order will be cheaper and easier than filing a more typical lawsuit to void parts of the lenders’ liens.
Based in Nova Scotia, White Birch and U.S. subsidiaries filed for reorganization simultaneously in the U.S. and Canada in February. White Birch is the second-largest newsprint maker in North America.
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 $667 million in sales during 2009, with $125 million attributable to Bear Island. White Birch has three pulp and paper mills in Quebec. 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. LLC, 10-31202, U.S. Bankruptcy Court, Eastern District Virginia (Richmond).
Almatis Nearing Plan Revision to Help Junior Lenders
Almatis BV, a producer of specialty alumina products, appears on the brink of dropping a prepackaged reorganization plan now scheduled for approval at a confirmation hearing on July 19.
Under the filed plan, senior secured creditors led by an affiliate of Oaktree Capital Management LLC would take ownership in exchange for debt, leaving second-lien creditors with warrants for three percent of the equity value above $325 million. The disclosure statement projects junior lenders would recover 2.2 percent under the existing plan.
Almatis told the bankruptcy judge in a June 7 letter that it has a refinancing proposal from the owner, Dubai International Capital LLC, which would pay off the first-lien lenders in full and allow a greater recovery for junior lenders.
The existing plan is opposed by second-lien and mezzanine debt holders who would almost be wiped out. They believe Almatis has much greater value than the $540 million originally claimed by the company.
At a conference on July 8, the judge gave Almatis until July 19 to file a revised reorganization plan incorporating the refinancing. Details weren’t disclosed. Almatis says it’s seen “evidence” that Dubai International has financing to implement a revised plan paying off the senior debt.
If there isn’t a new plan, the confirmation hearing on the existing plan will begin Aug. 16. Opposition to the existing plan is being mounted by junior lenders including affiliates of Babson Capital Management LLC, Alcentra Group Ltd. and Permira Advisers LLP.
Almatis filed under Chapter 11 on April 30 with the plan already negotiated with holders of first-lien debt. Dubai International bought the Almatis business in 2007 for $1.2 billion. For details on the existing plan, click here for the April 30 Bloomberg bankruptcy report.
Almatis’ revenue in 2009 was $400 million. For 2010, projected revenue is $534 million. Almatis began defaulting on senior debt in June 2009.
Rotterdam-based Almatis listed total debt of $1.3 billion, including $681 million on first-lien obligations, $77.7 million on second-lien debt, and $200.6 million on mezzanine debt. There is junior mezzanine debt of $80.6 million, plus trade debt of $20 million. Assets were listed for assets $1.53 billion.
The case is In re Almatis BV, 10-12308, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Creditors Oppose National Envelope Financing Approval
The reorganization of National Envelope Corp., the largest closely held envelope manufacturing company in the U.S., will likely be dismissed after the business is sold, leaving nothing for suppliers who are supposed to be paid in full, according to a court filing by Neenah Paper Inc.
Neenah, based in Alpharetta, Georgia, is betting that the business will be sold and the proceeds turned over to secured lenders, leaving nothing for other creditors. Neenah points out that it’s owed almost $850,000 for goods delivered within three weeks of bankruptcy. For shipments so close to filing, suppliers are supposed to be paid in full.
Neenah contends it’s improper when Chapter 11 is used only to benefit the secured lender. Once the lender receives sale proceeds, Neenah predicts the Chapter 11 case will be dismissed, leaving nothing for suppliers.
Neenah is opposing approval of financing for the Chapter 11 exercise. Multi-Plastics Inc., owed almost $300,000 for shipments just before bankruptcy, opposes financing approval for the same reason.
The hearing for financing approval is scheduled for tomorrow. Neenah says there are suppliers with some $20 million in claims entitled to full payment who are at risk of receiving nothing.
NEC filed under Chapter 11 on June 10 along with a loan agreement where the agent, General Electric Capital Corp., required having a sale agreement by July 2 and approval of sale procedures by July 16. The first deadline was missed.
NEC, based in Uniondale, New York, has 14 manufacturing plants in 11 states, plus three warehouses. Net sales in 2009 were $676 million, resulting in a $44.2 million net loss. The petition says assets and debt are both less than $500 million. Liabilities include $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).
Flying J’s Full Payment Chapter 11 Plan Confirmed
The bankruptcy judge signed a confirmation order on July 9 approving the Chapter 11 plan for Flying J Inc., a vertically integrated oil producer, refiner, and marketer. The plan pays all creditors in full.
No creditors or shareholders could vote because the plan either pays them in full or does not adversely affect their rights.
The centerpiece for the plan is the sale of most of the retail business to Knoxville, Tennessee-based Pilot Travel Centers LLC in a $1.17 billion transaction. The price includes $515 million cash plus equity in Pilot.
Previously, the Longhorn pipeline subsidiary was sold for $335 million. The refinery went for $40 million.
Among the classes of creditors paid in full are $189 million in unsecured claims against Flying J, $100 million in unsecured claims against the refinery, and $33 million in unsecured debt of the pipeline. For details on the plan and the underlying financing, click here for the Feb. 12 Bloomberg bankruptcy report.
At the beginning of the Chapter 11 reorganization in December 2008, Flying J had a $53 million revolving credit along with a $395 million secured term loan. Pipeline-owner Longhorn Partners Pipeline LP owed $45 million on a revolving credit and $166 million on a secured note. The companies also owed $90 million on an unsecured revolving credit with Zions Bank.
The case is In re Flying J Inc., 08-13384, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Vermont Regulator Delays FairPoint Plan Confirmation
FairPoint Communications Inc., a local exchange carrier with 1.7 million access lines, was unable to complete the confirmation hearing last week for lack of a settlement agreement with regulators in Vermont. The hearing for approval of the plan was put off to an unspecified date after Vermont comes to terms.
The bankruptcy judge held the first phase of the confirmation hearing in May. He adjourned the hearing until there were agreements with regulators in Vermont, New Hampshire, and Maine. Although there were settlements in New Hampshire and Maine, regulators in Vermont rejected the proposal.
The company is exploring options, spokeswoman Rose Cummings told Bloomberg News. For details on the plan, click here for the March 12 Bloomberg bankruptcy report.
FairPoint’s Chapter 11 petition listed assets of $3.236 billion against debt totaling $3.234 billion. Funded debt, aggregating $2.7 billion, included $2 billion under a secured credit facility, $575 million in senior unsecured notes, and $88 million on interest rate swap agreements.
The case is In re FairPoint Communications Inc., 09-16335, U.S. Bankruptcy Court, Southern District New York (Manhattan).
Abitibi Delays Disclosure Hearing, Selling Plant
AbitibiBowater Inc., the largest newsprint maker in North America, didn’t go ahead with the hearing that was scheduled for July 7 to approve the disclosure statement explaining the Chapter 11 plan. The hearing was adjourned to July 15.
Aurelius Capital Management LP and Contrarian Capital Management LLC contend they have a blocking position preventing approval of the plan because they own notes representing more than one-third of unsecured claims against Bowater. In addition to other objections, the indenture trustee for notes issued by Abitibi similarly believes the disclosure statement shouldn’t be approved until it contains an explanation for how value was allocated between Abitibi and Bowater.
Last week the bankruptcy judge gave approval for the second attempt at selling a shuttered paper mill in Lufkin, Texas. Bids are due by July 28, followed by an Aug. 2 auction and an Aug. 4 hearing for approval of the sale. Although the judge approved a $20.5 million sale in October, the buyer never completed the acquisition, and the contract was terminated. No buyer is under contract in advance of the second sale attempt.
The disclosure statement tells creditors of each of the more than 30 affiliated companies how much they could recover. For details about the plan, click here for the May 25 Bloomberg bankruptcy report.
AbitibiBowater was formed in October 2007 through a merger between Montreal-based Abitibi-Consolidated Inc. and Greenville, South Carolina-based Bowater Inc. Abitibi is a producer of newsprint, uncoated mechanical paper, and lumber. Bowater also makes newsprint along with papers, bleached kraft pulp and lumber. The Montreal-based company began reorganizing with 24 pulp and paper mills plus 30 wood-product plants. Revenue in 2008 was $6.8 billion. In Chapter 11 petitions filed in April 2009, the combined AbitibiBowater companies listed assets of $9.9 billion and debt totaling $8.8 billion as of September 2008.
The case is AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Trucker Titus Transportation Promises Quick Reorganization
Titus Transportation LP, a trucker based in Denton, Texas, filed under Chapter 11 on July 2 and said in a statement last week that the reorganization is designed to “close down a separate brokerage unit.”
Titus said the Chapter 11 case is a “well-planned, quick in-and-out.” By July 9, one week after filing, there was no reorganization plan or disclosure statement on file.
Titus owes $2.6 million to Marquette Transportation Finance Inc., the secured lender said in court papers. The lender says the collateral is worth $3.05 million.
Titus says its trucking business is “financially sound.” The Chapter 11 petitions says assets and debt are both less than $10 million.
The case is In re Titus Transportation LP, 10-42202, U.S. Bankruptcy Court, Eastern District Texas (Sherman).
Lightyear Buying SouthEast Telephone in Ch11 Plan
A hearing for approval of a disclosure statement explaining the plan is scheduled for July 16.
Louisville-based Lightyear will pay $560,000 cash toward the costs of SouthEast’s Chapter 11 case and transfer 200,000 of its shares to SouthEast’s existing equity holders. Lightyear will also assume $3.77 million in secured debt.
On entering Chapter 11, SouthEast had 32,000 customers in 52 rural counties in Kentucky. The petition listed assets of $15.6 million against debt totaling $31.4 million, including a disputed $24.1 million debt owing to BellSouth Telecommunications Inc.
The case is In re SouthEast Telephone Inc., 09-70731, U.S. Bankruptcy Court, Eastern District Kentucky (Pikeville).
Jeweler Esmerian Puts Self and Company in Chapter 11
Ralph Esmerian, who owned liquidated antique jewelry retailer Fred Leighton LLC, decided not to oppose the involuntary bankruptcy petition filed against him and his company R. Esmerian Inc. Rather than have the businesses liquidated in Chapter 7, Esmerian and his company filed papers on July 9 taking advantage of their right under bankruptcy law to have the case begin in Chapter 11 as a reorganization.
Esmerian and his company also filed papers on July 9 asking the bankruptcy judge to appoint an examiner with expanded powers in view of what Esmerian called “accusations of impropriety.” In addition to investigating transfers of property, Esmerian wants the examiner to “oversee financial affairs generally” and be in charge of asset sales. To save money, Esmerian wants one examiner to serve in his Chapter 11 case and in the company’s reorganization.
Individuals or companies sometimes seek an examiner with expanded powers to head off the appointment of a Chapter 11 trustee or conversion of a case to Chapter 7. Esmerian proposes for the examiner to have possession of jewelry and other tangible property.
The creditors who filed the involuntary petition said they were collectively owed $40 million.
Secured lender Merrill Lynch Mortgage Capital Inc. brought on the Fred Leighton Chapter 11 filing in April 2008 by filing suit in state court to hold a foreclosure auction. Ultimately, Fred Leighton was liquidated under a Chapter 11 plan proposed by Merrill. The Leighton plan was confirmed in November 2009.
The cases are In re R. Esmerian Inc. and In re Ralph Esmerian, 10-12719 and 10-12721, both in U.S. Bankruptcy Court, Southern District New York (Manhattan).
Oriental Trading Misses Second-Lien Debt Payment
Oriental Trading Co., a direct marketer of home décor products, toys and novelties, didn’t make the interest payment within the grace period that was due May 31 on second-lien debt, Standard & Poor’s and Moody’s Investors Service Reported on July 9.
The company remains current on first-lien and mezzanine debt, Moody’s said.
S&P said OTC is “currently seeking to reorganize its capital structure.” Moody’s said the capital structure is “unsustainable.”
Moody’s said annual revenue for the Omaha, Nebraska-based company is $485 million.
IStar Needs Distressed Exchange in 2011, Says S&P
Although IStar Financial Inc., a property finance company, has “ample liquidity” this year, Standard & Poor’s believes there is a “likelihood” the real estate investment trust will use a so-called distressed exchange to restructure $3.0 billion of debt in 2011 and $3.5 billion maturing in 2012.
S&P said in its July 9 report there is a “possibility” the exchanges will extend maturities “on some debt.”
IStar had investment grade status from Standard & Poor’s until October 2008. The July 9 action was the third S&P downgrade for the New York-based REIT since then. The new S&P grade is two steps higher that the demotion issued August 2009 by Moody’s Investors Service.
IStar listed assets of $12.36 billion and total liabilities of $10.72 billion on the March 31 balance sheet. Revenue for the first quarter was $173.5 million, producing a $26.18 million net loss, including $89.5 million in provisions for loan losses.
For the year 2009, the net loss was $811.1 million on revenue of $893.3 million. Provisions for loan losses last year were $1.26 billion.
The stock rose 8 cents to $4.31 in New York Stock Exchange trading on July 9. The three-year high was $46.07 on July 9, 2007. The low in the last three years was 76 cents on Feb. 20, 2009.
Congoleum Consummates Chapter 11 Reorganization Plan
Congoleum Corp. implemented the reorganization plan on July 1 that the U.S. District Court approved in a June 7 confirmation order. Consummating the plan ended what was intended to be a quick restructuring begun with the Chapter 11 filing in late 2003. The plan places $100 million into a trust for payment of asbestos claims.
Mercerville, New Jersey-based Congoleum originally intended to complete a reorganization in July 2004 after the so-called prepackaged Chapter 11 filing in December 2003 to deal with asbestos claims. Congoleum’s petition listed assets of $187.1 million against debt totaling $205.9 million. The case was concluded in the district court rather than in bankruptcy court.
The district court case is In re Congoleum Corp., 09-04371, U.S. District Court, District of New Jersey (Newark). The bankruptcy case is In re Congoleum Corp., 03-51524, U.S. Bankruptcy Court, District of New Jersey (Trenton).
Supreme Court, Rangers, Skilled Nursing, WaMu: Audio
This year’s Supreme Court decisions on bankruptcy, the resurgence of the stock price for Skilled Healthcare Group Inc., and the move toward settlement for both the Texas Rangers and bank holding company Washington Mutual Inc. are topics discussed in the latest bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.
Four Takeovers Bring Year’s Bank Failures to 90
After taking a week off for the July 4 holiday, regulators closed four more banks on July 9, bringing the year’s total to 90.
The institutions were in Oklahoma, Maryland and Texas. They had a combined $1.13 billion in assets and will cost the Federal Deposit Insurance Corp. $159.9 million.
To read Bloomberg coverage, click here.
There were 140 bank failures in 2009, five times more than 2008. This year is on pace to have over 20 percent more bank takeovers than 2009. The failures in 2009 were the most since 1992 when 179 institutions were taken over by regulators.