WaMu, Thompson Publishing, Leslie, Point Blank, Louisville: Bankruptcy
Most if not all of the Washington Mutual Inc. examiner’s report should be filed publicly on Nov. 1, as the result of procedures laid down by the bankruptcy judge for resolving confidentiality disputes.
The examiner, Joshua Hochberg, will report on the merits of a settlement among WaMu, the Federal Deposit Insurance Corp. and JPMorgan Chase & Co. The contents of many documents to be covered in the report were obtained under confidentiality agreements that prohibit public disclosure of underlying information.
In an order on Oct. 8, U.S. Bankruptcy Judge Mary F. Walrath created a procedure where objections to public disclosure of documents or their contents are to be worked out between Oct. 25 and Oct. 28. To the extent that disputes aren’t resolved, the examiner’s report will be filed publicly in redacted form on Nov. 1. The entire report will be filed under seal.
WaMu filed a revised plan and disclosure statement last week incorporating a modified settlement with the FDIC and JPMorgan that increases the recovery by holders of senior bonds issued by the failed bank subsidiary Washington Mutual Bank. For a discussion of the changes, click here for the Oct. 7 Bloomberg bankruptcy report. WaMu’s revised plan would distribute more than $7 billion to creditors. To read about the settlement before it was modified, click here for the May 24 Bloomberg bankruptcy report. Click here to read the May 18 Bloomberg bankruptcy report for a summary of WaMu’s plan.
The WaMu holding company filed under Chapter 11 in September 2008, one day after the bank subsidiary was taken over. The bank, which had been the sixth-largest depository and credit-card issuer in the U.S., was 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 In re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
U.S. Trustee and Ableco Object to Thompson Publishing Sale
Thompson Publishing Holding Co., a publisher of newsletters and loose-leaf services on regulatory issues, is facing opposition to procedures for the auction and sale of the business. Objections were filed by the U.S. Trustee and by creditor Ableco Finance LLP.
A hearing to approve sale procedures is set for today.
The U.S. Trustee says that the proposed procedures for the auction give the first-lien lenders control “at every step.” The lenders are also the intended purchasers, unless someone submits a higher bid.
Ableco contends there is no need for an “extremely expedited sale process.” According to Ableco, the company is “not bleeding cash” and the time periods for the auction are “unnecessarily truncated.”
The U.S. Trustee, an arm of the U.S. Justice Department, pointed out how proposed auction rules require Thompson to obtain the consent of the lenders in deciding who is qualified to bid and who made the best bid at auction. In addition, the lenders would have “discretion” to decide whether to permit a sale, the U.S. Trustee claims.
Thompson filed under Chapter 11 on Sept. 21. Unless outbid, the first-lien lenders would buy the company in exchange for $42 million in secured debt. The buyer must also assume liabilities on subscriptions and obligations to employees. The loan agreement requires having approval of the auction process within 20 days of the Chapter 11 filing and an auction within 45 days.
Based in Washington, Thompson has 300 products and 70,000 subscribers. The company expects revenue will decline this year to $49 million. Debt includes $122.6 million owing on first-lien debt with PNC Bank NA serving as agent. Second-lien creditors, owed $43.5 million, have Ableco Finance LLC as agent.
Thompson is controlled by Avista Capital Partners LP. The company generated 74 percent of income from subscription. It also arranges conferences and employee training events.
The case is In re Thompson Publishing Holding Co., 10- 13070, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Cuban and Crane Seek Reimbursement from Texas Rangers
Mark Cuban and James Crane, who bid unsuccessfully at the auction for the Texas Rangers baseball club, filed papers asking the bankruptcy judge for reimbursement of $2.65 million for what they say was their “substantial contribution” to the successful outcome of the case.
As a result of their bids at the auction in August, the price for the team rose almost $100 million, Cuban and Crane said in their papers filed last week in U.S. Bankruptcy Court in Fort Worth, Texas. A hearing on their motion for reimbursement will be held Oct. 25.
Crane, a Houston businessman, and Cuban, owner of the National Basketball Association’s Dallas Mavericks, say their intervention brought a “peaceful resolution of these cases.” The two are asking for reimbursement of attorneys’ fees and other expenses under Section 503 of the U.S. Bankruptcy Code where a creditor can receive payment for making a “substantial contribution in a case.” Crane and Cuban will need to persuade the judge that they fall within the category of creditors entitled to reimbursement.
If allowed by U.S. Bankruptcy Judge Michael Lynn, the recovery for Crane and Cuban would in effect be taken from money that otherwise would go to secured lenders who were owed $525 million.
The team emerged from reorganization in August soon after the auction under a confirmed Chapter 11 plan where the club was purchased by a group including team President Nolan Ryan and sports lawyer Chuck Greenberg.
The Rangers filed under Chapter 11 in May with a sale contract and a plan that claimed to be paying all creditors in full. The original contract with the Ryan-Greenberg group had a cash price of $304 million. Michael “Buzz” Rochelle, brother of Bloomberg reporter Bill Rochelle, is a lawyer for an agent for the lenders.
The case is In re Texas Rangers Baseball Partners, 10- 43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
Sea Island Auctioned for $212.4 Million Yesterday
The auction for Sea Island Co., a resort and real estate development company, ended yesterday with a high bid of $212.4 million, an improvement on the opening bid of $197.5 million from a company affiliated with Oaktree Capital Management LP and Avenue Capital Group.
Near the end of an all-day auction, competing bidders Starwood Capital Group Global LP and Anschutz Corp. joined with Oaktree and Avenue to make the final bid, according to a report in the Atlanta Journal-Constitution. The combination of the bidding groups was approved by secured creditors and the official creditors’ committee, the Atlanta newspaper reported.
The sale is scheduled for approval as part of a Nov. 4 confirmation hearing for approval of the Chapter 11 plan at U.S. bankruptcy court in Savannah, Georgia.
Sea Island’s properties are on or near St. Simons Island and Sea Island, Georgia.
Before the price rose at auction, Sea Island projected having $180 million remaining after paying priority claims. If unsecured creditors vote for the plan, they are eligible to split $3 million, for a projected 3 percent recovery on their $100 million in claims.
The remaining $177 million under the pre-auction price would go to secured lenders with $566 million in claims. Their recovery originally was expected to be 31 percent. Unsecured creditors are projected to receive nothing if they vote against the plan and don’t give releases.
The Chapter 11 plan and the original sale was negotiated before the bankruptcy petition was filed on Aug. 10.
Synovus Bank, Bank of America Corp. and Bank of Scotland are lenders.
The case is In re Sea Island Co., 10-21034, U.S. Bankruptcy Court, Southern District of Georgia (Savannah).
Asbestos Creditors Vote in Favor of Leslie Reorganization Plan
Leslie Controls Inc., a subsidiary of Circor International Inc., has the green light for a confirmation hearing tomorrow now that more than 90 percent of asbestos claimants voted in favor of the prepackaged reorganization plan. The plan was negotiated with lawyers for asbestos claimants in advance of the July 12 Chapter 11 filing.
Tampa, Florida-based Leslie is using Chapter 11 to deal with 1,307 asbestos personal injury claims. The plan will create 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.
The bankruptcy court in Delaware approved the disclosure statement in August that explains the plan, which will give protection from asbestos claims to parent Circor and the former parent Watts Industries Inc.
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.
Circor rose 16 cents yesterday to $34 in New York Stock Exchange composite trading. Leslie’s revenue represents approximately 5 percent of Circor’s consolidated revenue. Circor had a net loss of $5.5 million in the first half of 2010 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).
Holiday Inn in Louisville Files, Mortgage in Default
The owner of the Holiday Inn Hurstbourne in Louisville, Kentucky, filed for Chapter 11 protection on Oct. 8 in Louisville.
The 271-room hotel hasn’t made principal payments of $45,000 a month on the $13.9 million mortgage since October 2009. The mortgage is part of the collateral in a pass-through trust. Wells Fargo NA is trustee for the trust.
The property is currently appraised for $10 million, court papers say. Previously, the assessed value was $14.1 million.
There is about $500,000 in unsecured debt, according to a court filing.
The case is In re RW Louisville Hotel Associates LLC, 10- 35356, U.S. Bankruptcy Court, Western District Kentucky (Louisville).
Lehman Takes in $213 Million in Mediation Settlements
Lehman Brothers Holdings Inc. reported to the bankruptcy judge yesterday that it will collect more than $213 million from 31 derivatives settlements with 37 counterparties. All 17 disputes that went into mediation were settled, the letter to the bankruptcy judge said.
The Lehman holding company and its non-brokerage subsidiaries filed a revised Chapter 11 plan and disclosure statement in April. For details, click here and here for the April 15 and 16 Bloomberg bankruptcy reports. Lehman said this month that intends to amend the plan in the last quarter of the year and have the plan approved in a confirmation order by March.
The Lehman holding company filed under Chapter 11 in New York on Sept. 15, 2008, and sold office buildings and the North American investment banking business to London-based Barclays Plc one week later. The Lehman brokerage operations went into liquidation on Sept. 19, 2008, in the same court. The brokerage is in the control of a trustee appointed under the Securities Investor Protection Act.
The Lehman holding company Chapter 11 case is In re Lehman Brothers Holdings Inc., 08-13555, while the liquidation proceeding under the Securities Investor Protection Act for the brokerage operation is Securities Investors Protection Corp. v. Lehman Brothers Inc., 08-01420, both in U.S. Bankruptcy Court, Southern District New York (Manhattan).
Point Blank Says Buyers Inspecting Financial Docs
Point Blank Solutions Inc., a manufacturer of soft body armor for the military and law enforcement, reported that prospective buyers are examining financial information in a data room. The status report was contained in a motion seeking an expansion until Feb. 9 of the exclusive right to propose a Chapter 11 plan. The hearing on the exclusivity motion is set for Nov. 23.
Point Blank has a plant and head office in Pompano Beach, Florida, and a second plant in Jacksboro, Tennessee. Revenue in 2009 was more than $153 million. The petition listed assets of $64 million against debt totaling $68.5 million. Debt included a $10.5 million secured loan paid off by financing for the Chapter 11 case. Point Blank said it also owes $28.2 million to trade suppliers. The former chief executive and chief operating officer were convicted in September of orchestrating a $185 million fraud.
The case is In re Point Blank Solutions Inc., 10-11255, U.S. Bankruptcy Court, District of Delaware.
Petters Trustee Sues JPMorgan Chase, Ritchie Capital
The trustee for Petters Group Worldwide and Petters Co. is teaching investors that they can be compelled to return payments they received from a Ponzi scheme, even without knowing there was a fraud. The latest defendants to be sued include JPMorgan Chase & Co. and Ritchie Capital Management LLC. For Bloomberg coverage, click here.
The companies’ founder, Thomas Petters, was convicted in December on 20 counts including fraud, conspiracy, and money laundering and given a 50-year prison sentence. After a raid by federal investigators, a receiver was appointed for Petters’ companies. The receiver put them into Chapter 11 in October 2008.
The Chapter 11 cases for the two Petters companies are In re Petters Co. and In re Petters Group Worldwide LLC, 08-45257 and 08-45258, U.S. Bankruptcy Court, District of Minnesota (St. Paul).
Exchange Offer News
Marisco Fund Manager Parent Exchanging $600 Million
Marsico Parent Co. LLC, an affiliate of mutual fund manager Marsico Capital Management, has seen funds under management decline by more than half to $48 billion since the peak in 2007.
Marisco is offering to exchange the $600 million of 10.625 percent senior subordinated notes due January 2016 for an equal amount of senior subordinated notes due 2020. The debt will be issued by a newly created holding company named Marsico Holdings LLC. Interest on the new notes will vary between nothing and 15 percent, depending on cash flow. The holders also will receive 30 percent of the equity of the new holding company.
Managed assets were $106 billion at the time of the debt- financed management buyout in late 2007. Denver-based Marisco specializes in investing in large-capitalization growth stocks, according to Standard & Poor’s.
Courts Have Concurrent Jurisdiction on Stay Suits
The federal courts are split on whether a federal district court has concurrent jurisdiction with the bankruptcy court over a lawsuit claiming the defendant violated the so-called automatic stay in bankruptcy.
In the case before U.S. District Judge Dana Sabraw in San Diego, an individual in Chapter 7 sued the secured bank lender contenting there was fraud when the lender caused the bankrupt to add new collateral before the Chapter 11 case was converted to Chapter 7. The plaintiff also contended the actions violated the automatic stay prohibiting efforts by creditors to recover on pre-bankruptcy debt.
Sabraw cited how the U.S. Court of Appeals in New York ruled in 2001 that a claim for a stay violation may be brought only in the bankruptcy court because the district court only has appellate jurisdiction over stay violations.
The U.S. Court of Appeals in Atlanta came down the other way in 2005, holding that the district court has concurrent jurisdiction with the bankruptcy court.
Sabraw said the issue is undecided in the 9th U.S. Circuit Court of Appeals, which sits San Francisco and makes law covering federal courts in California. Concluding there is concurrent jurisdiction, Sabraw decided to follow the Atlanta court and therefore denied a motion to dismiss the complaint.
The case is Gray v. Preferred Bank, 09-2010, U.S. District Court, Southern District California (San Diego).
Top-Hat Plan Payments Refunded If Company Is Insolvent
If a company terminates and makes a distribution to officers under a so-called top-hat deferred compensation plan, the recipients can be compelled to return the payments if the company was insolvent at the time of the distribution, the 9th U.S. Circuit Court of Appeals in San Francisco said in an unpublished opinion.
A top-hat plan provides deferred compensation to high-level company officers. Although money to fund the payments may be held in a trust, the plans provide that trust funds go to creditors if the company is insolvent.
Before bankruptcy, the company terminated the plan and made distributions from the funds to company officers. The district court dismissed a lawsuit to recover the payment. The 9th Circuit reversed on Oct. 8.
The circuit court said that termination “does not mean that the employer may actually pay the participant if the company is insolvent at the time of payment.”
The circuit court remanded the case to the district court for a determination about whether the company was insolvent at the time of payment.
The case is Pham v. Decker (In re community Lending Inc.), 09-15302, 9th U.S. Circuit Court of Appeals (San Francisco).
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