Interstate Bakeries, Delphi, 5 Filings: Bankruptcy (Update2)
By Bill Rochelle
Jan. 23 (Bloomberg) — The Teamsters union and Ron Burkles
Yucaipa Cos. LLC were among those filing objections to approval
of the disclosure statement proposed by Interstate Bakeries Corp.
to explain the Chapter 11 reorganization plan.
Pointing out in a court filing yesterday that concessions
from the Teamsters are a requirement of the plan, the union says
“negotiations have ended and the parties appear incapable of
reaching agreement.
The union added, “no amount of time will allow the debtors
to cure this deficiency, and the plan is therefore incapable of
confirmation.
Yucaipa and the union said last year they intended to offer
their own reorganization proposal. None was submitted by last
weeks deadline. The union agreed to cooperate with no one other
than Yucaipa in structuring a reorganization.
Yucaipa, also filing an objection to approval of the
disclosure statement, likewise said Interstates plan “depends
entirely on a business plan that requires massive concessions
from the Teamsters. Yucaipa points out how the union “repeatedly
and consistently said it prefers “liquidation to that business
plan.
Also like the union, Yucaipa notes how the disclosure
statement lacks a liquidation analysis and projections for the
companys operations after emerging from reorganization.
When it was the largest wholesale baker in the U.S.,
Interstate filed under Chapter 11 in September 2004. The brand
names include Wonder, Hostess, Merita, Dolly Madison, Drakes,
and Butternut. The company currently has 41 bakeries, 633
distribution centers, and 730 thrift stores.
The case is In re Interstate Bakeries Corp., 04-45814, U.S.
Bankruptcy Court, Western District of Missouri (Kansas City).
Other Updates
Judge to Approve Delphi Plan in Confirmation Order
A bankruptcy judge ruled yesterday he would sign a
confirmation order approving Delphi Corp.s reorganization plan
once changes are made in the executive compensation plan.
All classes of creditors except those from a unit named
Delphi Diesel Systems Corp. voted to accept the plan. Bankruptcy
Judge Robert Drain decided he could use the so-called cramdown
power to approve the plan over the dissenting vote.
Ordinarily, using cramdown requires wiping out stockholders.
Drain said on the third day of the confirmation hearing that the
general rule didnt apply because the parent company was adding
new value to retain ownership of the subsidiary.
To put the plan into effect, Delphi still needs to land $5.8
billion in new secured financing. Delphis lawyer wouldnt
comment on the status of discussions with potential lenders.
Delphi is looking for a $1.6 billion secured revolving credit, a
$3.7 billion first-lien term loan, and an $825 million second-
lien term loan.
Last month Drain approved a revised agreement with a group
led by Appaloosa Management LP providing $2.55 billion in
financing to complement the new secured loans. At the time,
several bondholders opposed, saying the discounts being given to
Appaloosa for buying new preferred stock were too steep.
Delphis plan was advertised as paying unsecured creditors
in full with 77.3 percent of the value coming from distributions
of new common stock valued at $59.61 a share and the other 22.7
percent attributable to creditors ability to buy more stock at a
35.6 percent discount.
Delphis existing stockholders were said in the disclosure
statement to be receiving a package of new securities worth $348
million. The existing stock closed yesterday at 15.5 cents a
share, down 1.5 cents in over-the-counter trading.
Delphi was the worlds largest auto-parts maker when it
filed to reorganize in October 2005 and listed $19.1 billion in
debt in its amended schedules of property and liabilities.
The case is In re Delphi Corp., No. 05-44481, U.S.
Bankruptcy Court, Southern District New York (Manhattan).
Fedders Creditors Want Permission to Sue Lenders and Insiders
The official creditors committee of New Jersey-based air
conditioner manufacturer Fedders Corp., saying it conducted “an
extensive investigation, filed papers asking the bankruptcy
court in Delaware for authority to sue insiders and lenders.
The institutions that could find themselves defending a
lawsuit if the bankruptcy judge gives approval at a Feb. 15
hearing include Goldman Sachs Credit Partners LP, Bank of America
NA, General Electric Capital Corp. and Highland Capital Partners.
The lawsuit would make claims based on “improvident
lending, fraudulent conveyance, equitable subordination, and
waste of corporate assets.
The committee says the lawsuit must be filed by Jan. 31 or
else the lawsuit will be barred under the agreement allowing
Fedders to use incoming cash during the reorganization.
Until the Jan. 17 filing that included a copy of the
proposed complaint, the committee kept the basis for the lawsuit
a secret.
In the Chapter 11 case begun in August, Fedders listed
assets of $194.5 million and debt totaling $407.5 million,
including $67 million in secured debt. Fedders has six plants in
the U.S., plus manufacturing in China, India and the Philippines.
The case is In re Fedders North America Inc., 07-11176, U.S.
Bankruptcy Court, District of Delaware (Wilmington).
Musicland Confirms Liquidating Plan After 14 Months of Trying
Musicland Holding Corp. won the signature of the bankruptcy
judge on a Jan. 18 confirmation order, 14 months after the
liquidating Chapter 11 plan first came to court for approval.
The delay resulted from the inability to assure that all
priority claims could be paid in full. Wachovia Bank NA, as the
agent for the secured banks, had been objecting to the plan,
saying it might eventually have an administrative claim based on
an indemnification agreement arising from secured claims that
were paid in full.
Known for its music stores under the names Sam Goody, Media
Play and Suncoast, Musicland filed the liquidating Chapter 11
plan in September 2006.
The plan pays only a portion of secured trade claims and
provides unsecured creditors with a share of litigation proceeds.
The last settlements were hashed out among the company, the
creditors committee, the secured trade vendors and Wachovia.
In March 2006 the bankruptcy court authorized Musicland to
sell 345 Sam Goody and Suncoast stores for $104 million to Trans
World Entertainment Corp., the owner of the Coconuts, Wherehouse,
Planet Music and F.Y.E. music stores. The acquisition gave Trans
World some 1,100 stores.
Based in Minnetonka, Minnesota, before liquidating,
Musicland filed under Chapter 11 in January 2006, claiming assets
of $371.5 million and listing debt totaling $485.6 million.
The case is In re Musicland Holdings Corp., 06-10064, U.S.
Bankruptcy Court, Southern District New York (Manhattan).
Movie Gallery Signs Creditors to Plan Support Agreement
Movie Gallery Inc., the second-largest in the movie rental
business behind Blockbuster Inc., announced that majorities in
its major creditor groups signed agreements supporting the
reorganization plan filed in December.
The plan calls for carrying out the restructuring that was
agreed upon before Movie Gallerys bankruptcy filing by holders
of majorities of the $325 million in 11 percent senior notes and
the $175 million in second-lien debt.
Plan support agreements were signed by Sopris Capital
Advisors LLC, the holder of more than two-thirds of the
$750 million in first-lien credit, a majority of the second-lien
creditors, and a majority of holders of the senior notes.
The plan would reduce liabilities by $400 million through a
swap of debt for stock.
Movie Gallery said in a statement yesterday it intends for
the bankruptcy court to approve the plan in a confirmation order
early in the second quarter.
Using the names Movie Gallery, Hollywood Video, and Game
Crazy, Dothan, Alabama-based Movie Gallery has 3,640 stores in
all 50 states. The petition listed assets of $892 million against
debt totaling $1.4 billion.
The case is In re Movie Gallery Inc., No. 07-33849, U.S.
Bankruptcy Court, Eastern District Virginia (Richmond).
Salander Galleries to Sell 35,000 Art Book Collection
Salander-OReilly Galleries LLC plans to sell its collection
of 35,000 art books and catalogues acquired for $4 million. To
read Bloomberg coverage, click here.
The Manhattan gallerys landlord has asked the bankruptcy
court for a ruling that the lease was terminated before the
bankruptcy filing. If the landlord is correct, the lease couldnt
be sold to generate cash for creditors claims.
The bankrupt gallery is being investigated by the Manhattan
district attorney and sued for improperly dealing with millions
of dollars in artworks.
Creditors filed an involuntary Chapter 7 petition on Nov. 1
against the gallery. Lawrence Salander, the gallerys proprietor,
and his wife filed under Chapter 11 on Nov. 2. The gallery
switched the case to a Chapter 11 reorganization on Nov. 6.
The individuals case is In re Lawrence B. Salander and
Julie D. Salander, No. 07-36735, and the gallerys case is In re
Salander-OReilly Galleries LLC, No. 07-30005, both in the U.S.
Bankruptcy Court, Southern District of New York (Poughkeepsie).
Ritchie Funds to Borrow $1.8 Million to Pay Coventry
The two funds in Chapter 11 reorganization operated by
Ritchie Capital Management LLC are asking for permission to
increase their secured borrowing by $1.8 million to $4.5 million.
The new loan will be used in part to pay the $1.55 million
owed to Coventry First LLC in settlement of the dispute over who
owned files containing information regarding the more than 1,000
life-insurance policies the funds were authorized to sell last
week. The settlement with Coventry was approved early this month.
An affiliate of Bear Stearns Cos. will pay $56.5 million
cash for a package of policies with face amounts exceeding $400
million while secured creditor ABN Amro Bank NV will purchase
more than $2 billion in face amount of policies in exchange for
$396 million in claims.
The Ritchie funds blamed their financial failure on
Coventry, saying they couldnt complete a securitization and were
eventually forced into bankruptcy after the New York attorney
general charged Coventry in 2006 with engaging in fraudulent
business practices. The funds listed debts of $817 million in the
Chapter 11 cases begun in June.
The case is Ritchie Risk-Linked Strategies Trading (Ireland)
Ltd., 07-11906, U.S. District Court for the Southern District of
New York (Manhattan).
Third Ritchie Fund Fighting Involuntary Petition Next Month
A third hedge fund operated by Ritchie Capital Management
LLC, this one facing an involuntary Chapter 11 petition in
Chicago, has a schedule for hearings on the disputes to decide if
the fund will be declared bankrupt.
The fund, Ritchie Multi-Strategy Global LLC, will bring the
petitioning creditors into bankruptcy court on Feb. 6, where the
judge will be asked to require the creditors to post a $5 million
bond covering the funds expenses and damages if the involuntary
petition is dismissed.
They will return to court on Feb. 26 on the funds motion to
throw out the involuntary petition on whats known as a motion
for summary judgment.
The fund says the petitioning creditors are actually equity
investors who arent creditors eligible to file an involuntary
petition. Ritchie also says the investors arent eligible to be
involuntary petitioners because any claims they hold are
disputed.
The three petitioning creditors include Benchmark Plus
Institutional Partners LLC and an affiliate owed $45.2 million
total. The three petitioners say they invested a combined $46.1
million in the fund that shut down and began liquidating more
than a year ago. A court filing by the petitioners says the fund
invested $600 million in the two other Ritchie funds already
undergoing Chapter 11 liquidation in New York.
The involuntary filing in Chicago is In re Ritchie Multi
Strategy Global LLC, 07-24236, U.S. Bankruptcy Court, Northern
District of Illinois (Chicago).
Rouge Industries Nearing Five Years Working on Liquidating Plan
Rouge Industries Inc., once a steel producer from Dearborn,
Michigan, filed under Chapter 11 in October 2003, sold all its
assets for $285.5 million in January 2004 to OAO Severstal, and
is now asking for another extension of the exclusive right to
file a liquidating plan.
If approved by the bankruptcy court in Delaware at a Feb. 6
hearing, no one else could file a Chapter 11 plan before March
18.
Once the fifth-largest steelmaker in the U.S., the company
said much time has been spent the last year negotiating claims
related the pension plan. Rouge reports to the court how it
reached agreement in July with the Pension Benefit Guaranty Corp.
and only this month worked out the definitive settlement.
Rouge had a letter of intent with Severstal on filing the
bankruptcy petition. Rouge listed assets of $565 million against
debt totaling $465 million. The business was spun off from Ford
Motor Co. in 1989.
The case is In re Rouge Industries Inc., 03-13272, U.S.
Bankruptcy Court, District of Delaware (Wilmington).
Default
Greenhouse Tomato Grower Eurofresh Defaults on Senior Notes
Eurofresh Inc., a producer of tomatoes grown in greenhouses,
didnt make the Jan. 15 interest payment on the 11.5 percent
senior notes of 2013.
Willcox, Arizona-based Eurofresh has a 30-day grace period
before the debt can be declared due and payable.
New Involuntary Filing
Friedmans Facing Another Bankruptcy, This One Involuntary
Friedmans Inc., a recently reorganized jewelry retailer
with 500 stores, may be forced back into bankruptcy court if
three creditors owed $9.1 million succeed with the involuntary
petition they filed yesterday in Delaware.
Friedmans can fight off the petition by proving to the
bankruptcy court its generally paying creditors as debt comes
due.
Addison, Texas-based Friedmans completed a reorganization
in November 2005 by confirming a Chapter 11 plan giving Harbert
Distressed Investment Master Fund Ltd. all the stock in return
for a $25 million cash infusion.
In July 2006, Crescent Jewelers, the largest jewelry
retailer in California, completed its own Chapter 11
reorganization plan under which Friedmans and Harbinger Capital
Partners Master Fund I Ltd. took all the new stock in exchange
for their claims and capital investment. Crescent shared
ownership with Friedmans.
Bradley Stinn, the former chief executive officer of
Friedmans, was indicted in March for conspiracy to commit
securities fraud, wire fraud and mail fraud. Federal prosecutors
in Brooklyn, New York, said Stinn misled investors about
Friedmans ability to collect payments from customers purchasing
jewelry on credit.
To read Bloomberg coverage, click here.
The case is In re Friedmans Inc., 08-10161, U.S. Bankruptcy
Court, District of Delaware (Wilmington).
New Filings
Xyience Submits to Involuntary Petition by Filing in Chapter 11
Xyience Inc., the beverage maker claiming to be the official
drink of the Ultimate Fighting Championship, responded to an
involuntary petition filed early this month by putting itself in
Chapter 11 in Las Vegas, listing debt of $42.3 million and assets
of $5.3 million.
Company President Omer Sattar said in a sworn statement
filed in the bankruptcy court that some creditors threatened
violence unless they were paid.
Xyiences main product Xenergy is a drink the company
describes as “an extreme blend of ingredients developed
especially for periods of increased mental and physical
exertion.
To read Bloomberg coverage, click here.
The case is In re Xyience Inc., 08-10049, U.S. Bankruptcy
Court, District of Nevada (Las Vegas).
Affordable Housing Developer Files in Miami to Reorganize.
Greater Miami Neighborhoods Inc., a developer of affordable
housing for low-income families, filed to reorganize in its Miami
hometown, listing debt of up to $50 million and assets of less
than $10 million.
The not-for-profit agency developed 6,000 units in Florida.
To read Bloomberg coverage, click here.
The case is In re Greater Miami Neighborhoods Inc., 08-
10694, U.S. Bankruptcy Court, Southern District of Florida
(Miami).
Total Vein Files Chapter 11 to Stop Patent Suit
Hoping to stop an impending ruling by a federal district
judge, Total Vein Solutions LLC, a developer of treatments for
varicose veins, filed a Chapter 11 petition in Houston on Jan.
17.
Diomed Holdings Inc. sued Total Vein in 2004 for patent
infringement. The petition listed assets of $1.5 million against
debt of $242,000.
To read Bloomberg coverage, click here.
The case is In re Total Vein Solutions LLC, 08-30203, U.S.
Bankruptcy Court, Southern District of Texas (Houston).
New Canadian Filing
Luggage Retailer Bentley Files for Creditor Protection
Bentley Leathers Inc., a Canadian luggage retailer with 550
stores, filed for protection from creditors, according to a
report in the Toronto Star.
The chain uses names including Bentley, Access and Xcetera.
Briefly Noted
Shareholders whose stock will be wiped out if Calpine Corp.
carries out the reorganization plan the U.S. Bankruptcy Court in
New York approved Dec. 19 asked a federal district judge to hold
up the plan while they appeal. If the plan isnt halted, their
appeal could become moot, a legal term meaning the court couldnt
fashion relief even if the shareholders won the appeal. The
bankruptcy judge on Jan. 15 turned down a request to reconsider
approving the plan. Calpines Chapter 11 filing was the largest
in 2005 measured by assets. Calpines plan pays creditors with
the reorganized companys stock and gives warrants expiring in
August to existing stockholders. To read Bloomberg coverage,
click here. The case is In re Calpine Corp., 05-60200, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).
The U.S. Supreme Court decided yesterday not to allow an
appeal from the decision handed down last March by the 5th U.S.
Circuit Court of Appeals in New Orleans, effectively ending the
lawsuit by investors in Enron Corp. against the remaining
defendants Merrill Lynch %26amp; Co., Credit Suisse Group and Barclays
Plc. The high courts action followed the unanimous ruling last
week by the Justices dismissing a similar suit called Stoneridge
Investment Partners LLC v. Scientific-Atlanta Inc. which the
Enron plaintiffs said raised the same issues about the liability
of third parties for federal securities fraud. To read Bloomberg
coverage, click here. The Enron case in the lower court is Newby
et al. vs. Enron Corp., H-01-3624, U.S. District Court, Southern
District of Texas (Houston). In the Supreme Court it was called
Regents of the University of California v. Merrill Lynch, 06-
1341.
New York Racing Association Inc., the operator of New York
States three thoroughbred racetracks, pushed back the
confirmation hearing for approval of its reorganization plan
until Feb. 7 while the legislature continues negotiating changes
in the settlement reached in September with New York Governor
Eliot Spitzer. The settlement, if approved under the governors
proposal, would give the Association an extension of the license
to operate the tracks and $75 million cash to fund a plan
intended to pay creditors in full. The Association has held the
franchise to operate Aqueduct, Belmont and Saratoga since 1955.
The Chapter 11 petition listed assets of $153 million and debt
totaling $310 million. The case is In re The New York Racing
Association Inc., 06-12618, U.S. Bankruptcy Court, Southern
District New York (Manhattan).
Global Power Equipment Group Inc. completed the Chapter 11
plan the bankruptcy court approved in a confirmation order last
month. The plan carries out an agreement made in August to pay
most creditors in full while allowing existing stockholders to
retain their stock. Creditors of affiliate Deltak LLC split up a
fund of $34 million. The plan is financed by $150 million in new
secured financing and a $71 million rights offering giving
existing stockholders the right to purchase additional stock in
addition to the stock they are to retain under the plan. Tulsa,
Oklahoma-based Global Power, a designer and builder of equipment
for the energy industry, filed under Chapter 11 in September 2006
listing assets of $22.7 million and debt totaling $89.9 million.
The case is In re Global Power Equipment Group Inc., 06-11045,
U.S. Bankruptcy Court, District of Delaware (Wilmington).
James Marquez, a founder of bankrupt Bayou Group LLC, was
sentenced yesterday to 51 months in prison and told to pay $6.2
million in restitution as a result of his guilty plea in December
2006 to conspiracy charges. Bayou was a hedge fund that turned
out to be a Ponzi scheme. The Bayou fraud resulted in two other
guilty pleas, from Samuel Israel III, another founder, and Daniel
Marino, the head of finance. They pleaded guilty in September
2005. To read Bloomberg coverage, click here. The Chapter 11 case
is In re Bayou Group LLC, 06-22306, U.S. Bankruptcy Court,
Southern District New York (White Plains).
To contact the reporter on this story:
Bill Rochelle in New York at
