Thompson, Bear Island, Trico, St. Vincent, Tribune, Daufuskie: Bankruptcy
Secured lenders to Thompson Publishing Holding Co. won’t be able to control the auction for the publisher of newsletters and loose-leaf services, as the result of rulings by U.S. Bankruptcy Judge Peter Walsh at a hearing this week.
The U.S. Trustee objected to proposed auction and sale procedures. According to the bankruptcy arm of the U.S. Justice Department, the lenders could control the auction “at every step.” Walsh agreed with the U.S. trustee, with the result that the lenders are no longer able to control Thompson’s decision about who’s qualified to bid and who made the best offer at auction.
The rulings were important in the Thompson case because the lenders are aiming to buy the business in exchange for debt. The revised auction and sale rules only oblige Thompson to consult with the lenders. Thompson must also consult with the creditors’ committee regarding important decisions in the course of the auction.
Competing bids are due Nov. 12, in advance of the Nov. 17 auction and the Nov. 19 hearing for approval of the sale.
Absent a competing offer at auction, the first-lien lenders intend to buy Thompson in exchange for $42 million in secured debt. The lenders also will assume liabilities on subscriptions and obligations to employees.
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.
Controlled by Avista Capital Partners LP, Thompson generated 74 percent of income from subscription. The company 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).
Black Diamond Capital Wins Approval to Buy Bear Island Paper
Bear Island Paper Co. LLC and its Canadian parent White Birch Paper Co. represented the unusual case in which it wasn’t immediately evident who submitted the highest or best offer at auction. Ambiguity arose because the ultimately prevailing bidder group submitted a credit bid where not all the assets were collateral for the loan.
The two bidding groups filed post-trial briefs last week, and U.S. Bankruptcy Judge Douglas O. Tice read his ruling from the bench yesterday when he concluded that Bear Island was correct in selecting the original bidders as having the best bid. The winning group is comprised of Black Diamond Capital Management LLC, Credit Suisse Group AG and Caspian Capital Advisors LLC.
The winners offered $172.5 million, or $94.5 million in cash and $78 million as a credit against secured debt. The Black Diamond group estimated that their offer would generate $90 million to $94.5 million in cash for assets not representing their collateral. The winners hold 65 percent of the $438 million in first-lien debt.
They were opposed by another group of first-lien lenders that own 22 percent of the senior debt. The losing side included funds managed by BlueMountain Capital Management, Lombard General Insurance Co. of Canada, Macquarie Americas Corp. and Wexford Capital LP.
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).
Judge to Rule if Tamarack May Have $2 Million Loan
Whether Tamarack Resort LLC will be able to survive the winter is in the hands of the bankruptcy judge. The golf and ski resort in Valley County, Idaho, completed a two-day trial yesterday attempting to convince U.S. Bankruptcy Judge Terry L. Myers in Boise, Idaho, that it’s proper to approve $2 million in secured financing.
Myers heard Tamarack explain why the property can’t be winterized without financing. On the other side of the fence, holders of mechanics’ liens argued that there is no protection for their security interests which they contend come ahead of $293 million in existing secured debt.
The financing requires approval of a restructuring officer to take over operations and the sale effort.
The financing would be provided primarily by Candlewood Special Situations Master Fund Ltd. and an affiliate of Credit Suisse AG, Cayman Islands Branch, the existing lender. Court records say that a decision by Myers on financing will be “forthcoming.”
The Tamarack case began with an involuntary petition in Chapter 7 that the company unsuccessfully opposed. The company converted the case to Chapter 11 in April. Tamarack conceded it was not paying debts as they mature.
Myers granted the motion for conversion to Chapter 11 even though the Chapter 7 trustee had been named in March.
The project’s 27.5 percent owner, VPG Investments Inc., filed for Chapter 11 reorganization in 2008. The petition was dismissed in October 2008. VPG was controlled by Mexican businessman Alfredo Miguel Afif.
The new case is In re Tamarack Resort LLC, 09-03911, U.S. Bankruptcy Court, District of Idaho (Boise). The previous case was In re VPG Investments Inc., 08-00253, U.S. Bankruptcy Court, District of Idaho (Boise).
Trico Marine Services Selling Four More Vessels for $76 Million
Vessels Trico Moon and Trico Mystic will go for $13 million each. The Trico Sabre and Trico Star will fetch $25 million each. The Sabre and Star are owned by Trico subsidiaries not in bankruptcy. As a technical matter, Trico is asking the bankruptcy court in Delaware only to approve the Moon and Mystic sales.
The hearing to approve the sales will be held Nov. 4. Trico used a broker to market the vessels.
Trico was authorized in this month to sell the vessels Spirit River and the Truckee River for $8.5 million to NigerDelta Shipping Agency Ltd.
Trico’s Chapter 11 filing in August was the second by the Woodlands, Texas-based company. It completed a so-called prepackaged reorganization in early 2005 by exchanging $250 million in debt for equity. Shareholders were given warrants.
Apart from a Cayman Islands holding company, none of the foreign subsidiaries are in bankruptcy the second time around. The consolidated balance sheet for June listed assets of $904 million and liabilities of $1.027 billion. The bankruptcy petition listed liabilities of $354 million for Trico Marine.
Liabilities include $202.8 million on secured convertible debentures and $150 million owed on unsecured convertible debentures. Non-bankrupt Trico Shipping owes $400 million on the 11.875 percent senior secured notes.
The new reorganization is being financed primarily with a $35 million secured credit facility supplied by Tennenbaum Capital Partners LLC.
The case is In re Trico Marine Services Inc., 10-12653, U.S. Bankruptcy Court, District of Delaware (Wilmington).
St. Vincent Wins Approval to Sell Three Facilities
St. Vincent Catholic Medical Centers, a shuttered 727-bed acute-care hospital in Manhattan’s Greenwich Village, received formal authority this week to sell the inpatient and outpatient behavioral health services operations in Westchester County, New York, to St. Joseph’s Medical Center.
The price is $18 million cash and the assumption of $5 million in debt.
St. Vincent also received approval to sell two nursing homes in Brooklyn, the Holy Family Home and the Bishop Mugavero Center for Geriatric Care. Holy Family went for $17.26 million while Mugavero brought $30.7 million. The Holy Family Home has 200 beds while the Mugavero facility has 288 beds.
St. Vincent’s has now been in Chapter 11 twice. The second time is a liquidation. The new petition in April listed assets of $348 million and debt of $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 facility has 941,000 square feet in 10 buildings. The nonprofit 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 2005 case was In re Saint Vincent Catholic Medical Centers of New York, 05-14945, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Substantial Contribution, Auctions, WaMu, Top-Hat Plans: Audio
Rewards for increasing the bid at auction, lender control of auction procedures, the public filing of the Washington Mutual examiner’s report, and restrictions on distributions of deferred compensation under so-called top-hat plans are discussed in the new bankruptcy podcast on the Bloomberg terminal and Bloomberglaw.com. To listen, click here.
Tribune’s Deadline for Revised Plan Pushed Back to Oct. 22
After Tribune Co. announced another change this week in the settlement underlying a revised reorganization plan, the bankruptcy judge at a hearing yesterday gave the newspaper publisher an extra week to file a revised plan. The new due date is Oct. 22 for Tribune and Oct. 29 for other creditors aiming to file a competing plan. To read Bloomberg coverage, click here.
To read about the latest change in the Tribune settlement and reorganization plan, click here for the Oct. 13 Bloomberg bankruptcy report.
Tribune is the second-largest newspaper publisher in the U.S. It listed $13 billion in debt for borrowed money and assets of $7.6 billion in the Chapter 11 reorganization begun in December 2008. It owns the Chicago Tribune, Los Angeles Times, six other newspapers and 23 television stations.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District Delaware (Wilmington).
Daufuskie Island Resort Set for Oct. 25 Auction
Daufuskie Island Resort & Breathe Spa on Hilton Head Island, South Carolina, is being sold a second time. An auction will be held on Oct. 21 at the Marriott Resort and Spa on Hilton Head. The hearing to approve the sale will occur Oct. 25. The resort’s owner, Daufuskie Island Properties LLC, was authorized in January to sell the project for $49.5 million to Montauk Resorts LLC. The buyer was unable to complete the acquisition.
The Chapter 11 case began in January 2009 in Charleston, South Carolina. A Chapter 11 trustee was appointed later. The petition listed assets of $97.1 million against debt of $88.2 million. Debt includes $71.6 million owing to secured creditors. The real estate was listed as having a value of $87.7 million.
The case is In re Daufuskie Island Properties LLC, 09- 00389, U.S. Bankruptcy Court, District of South Carolina (Charleston).
Movie Gallery Says Former Worker Shopping Information
Movie Gallery Inc., the former movie-rental chain, alleges that a former employee has contacted a potential buyer of its Video Library unit and offered to provide “confidential business information” in exchange for a job.
The former employee, Jason Grosz, “recently resigned,” Movie Gallery said in a court filing last week.
Movie Gallery has demanded that Grosz terminate his actions and is asking the bankruptcy court for authority to use subpoenas as part of an investigation. Movie Gallery is looking for a buyer for the Video Library business.
Movie Gallery’s liquidating Chapter 11 plan is set for approval at an Oct. 28 confirmation hearing. For details on the plan, click here for the Sept. 14 Bloomberg bankruptcy report.
Movie Gallery liquidated the last of its 1,028 remaining movie-rental stores. It had some 2,600 stores in operation when it filed under Chapter 11 in February. The new filing was less than two years after a previous bankruptcy reorganization. Debt when the new case began included $100 million on a secured revolving credit, $394 million on a first-lien facility, and $146 million in claims held by second-lien creditors.
Movie Gallery operated under the names Movie Gallery, Hollywood Video and Game Crazy. It had 3,490 stores before the first bankruptcy. The earlier bankruptcy case concluded with a confirmed Chapter 11 plan in May 2007. For details on the second filing, click here.
The new case is In re Movie Gallery Inc., 10-30696, U.S. Bankruptcy Court, Eastern District Virginia (Richmond). The prior case is In re Movie Gallery Inc., 07-33849, in the same court.
Hollywood Theaters Demoted for Lack of Free Cash Flow
Hollywood Theaters Inc., a subsidiary of Wallace Theater Holdings Inc., lost one notch yesterday on the corporate scale when Moody’s Investors Service lowered the corporate grade to Caa1. The new Moody’s ranking lines up with the action Standard & Poor’s took against the parent Wallace in September.
Moody’s said that Hollywood will need a “significant and unexpected” improvement in performance to avoid a “significant challenge” in refinancing secured bonds that mature in June 2013. Moody’s said that Hollywood hasn’t generated any positive free cash flow since 2008.
Portland, Oregon-based Wallace operates in small and mid- sized markets in 15 states. Hollywood has 49 theaters with 546 screens.
Lennar Lowered to B+ After Distressed Asset Purchases
Homebuilder Lennar Corp. was downgraded one notch yesterday to a B+ corporate grade by Standard & Poor’s. The rating on the $2.4 billion in senior unsecured notes sustained a similar ding to B+
S&P acted after Lennar used unrestricted cash to buy three portfolios of distressed real estate assets.
Lennar’s deliveries of new homes are down 77 percent from 2006, S&P said. Even so, the Miami-based company is “marginally profitable,” S&P said, in view of the generation of $99 million in net income for a year ended Aug. 31.
Junior Lenders May Object to Sale Procedures, New Judge Says
Shelley C. Chapman, the newest bankruptcy judge in New York, issued an important decision dealing with bankruptcy sales. Her new pronouncement involves the Nov. 15 auction for Boston Generating LLC, the owner of five electric generating plants in the Boston area.
First-lien lenders contended that second-lien creditors had no right to object to proposed terms of sale given a subordination agreement between the lenders. Chapman disagreed and held that the junior lenders have standing to object to propose auction and sale procedures.
In her decision from the bench on Oct. 4, Chapman parsed the subordination agreement and concluded it didn’t mean that the junior lenders “promised to be silent.” She also said that second-lien creditors weren’t engaging in “obstructionist behavior.” Rather, she said they are “very close to the money” and were attempting to insure that the company would “discharge their fiduciary duty to get the highest price.”
The judge said the subordination agreement contained no express prohibition against objecting to bidding procedures.
Generally speaking, Chapman said the junior lenders could object to auction rules because the issue before the court did not involve an “exercise of remedies.” Chapman said her ruling on objecting to sale procedures did not mean that the junior lenders necessarily will be able to object at the hearing for approval of the sale. The judge said she could revisit the standing issue at the sale-approval hearing.
Chapman began her ruling from the bench saying that the company couldn’t “abdicate their fiduciary duties to their creditors collectively or individually.” She said a sale- procedures hearing is not the same as foreclosure in state court.
Absent a higher bid at auction, Constellation Energy Group Inc. will buy the facilities for $1.1 billion. Competing bids are initially due Nov. 1. Final bids have a Nov. 13 deadline in advance of the Nov. 15 auction. The hearing for approval of the sale will take place Nov. 17.
The case is In re Boston Generating LLC, 10-14419, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the editor responsible for this story: David E. Rovella at email@example.com.