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WSJ.com: Bankruptcy Beat (72)

Lyondell’s CEO-To-Be Set To Rake In Millions

Posted: June 30th, 2009, 1:38pm PDT

Need some incentive to take the reins of a bankrupt company? Would $32 million do the trick?

It seems to be enough for James L. Gallogly, who is poised to become the new chief executive of Lyondell Chemical Co. The company is seeking permission to hire Gallogly, and, thanks to bankruptcy court rules, had to disclose the details of everything from his undergraduate education at the University of Colorado – go Buffs! – to his compensation.

Of course, we here at Bankruptcy Beat are more interested in the millions he’ll be racking up as CEO than in his student days in Boulder. According to court papers, that $32 million price tag includes a base salary of $1.5 million, a $2.5 million signing bonus to be paid within five days of approval of his employment and a performance-based bonus equal to up to 200% of his base salary. But let’s not forget the $25 million in stock options Gallogly is set to receive upon the company’s emergence from bankruptcy protection. Although, we hear that hasn’t worked out so well for some other executives.

A judge is set to consider approving Lyondell’s employment agreement with Gallogly at a hearing July 21.

Freestyle Music Park Keeps Faith With Jackson Tribute

Posted: June 30th, 2009, 9:09am PDT

Following millions of others who are paying tribute to the late King of Pop, Freestyle Music Park has set up a memorial of its own.

The family-friendly musical theme park hosted a weekend of Michael Jackson tributes, including a memorial wall outside the park’s gates where fans were able to leave notes and write their thoughts, NBC’s affiliate in Myrtle Beach, S.C., reported. Freestyle also let fans leave flowers, candles and Michael Jackson memorabilia at the site.

The park offered other perks over the weekend to persuade patrons to pay tributes, such as $5 admission to anyone wearing a red, zippered jacket, white socks with dress shoes or a single white glove. Donations were accepted for the Make-A-Wish foundation, a charity Jackson has supported.

Freestyle, whose opening was heavily publicized due to its previous incarnation as the troubled Hard Rock Park, has been faced with lower attendance than owners had hoped for. Its former owner, HRP Myrtle Beach Holdings, entered Chapter 11 protection last September after just one season, citing the crashing economy and high gas prices. The case was converted to Chapter 7 in January. In February, the park was sold to FPI MB Entertainment, which reopened it on Memorial Day Weekend.

The Daily Docket: Madoff Victims Influence Sentencing

Posted: June 30th, 2009, 6:45am PDT

U.S. District Judge Denny Chin said victims’ statements and 113 letters filed with the court influenced his decision to give Bernard Madoff 150 years in prison, The Wall Street Journal reports.

On Tuesday, General Motors will ask the New York bankruptcy court to approve a restructuring plan that will allow the auto maker to sell its most valuable assets to a new company controlled by the U.S. and Canadian governments, the United Auto Workers union and its unsecured creditors. Read the Daily Bankruptcy Review story here.

Auto makers and analysts say the troubled auto industry could see a bit of a turnaround when U.S. sales are reported Wednesday, possibly hitting the 10 million mark, WSJ reports.

But according to the Detroit News, Detroit Public Schools is considering bankruptcy as well as laying off 17.7% of its workforce, though it still won’t eliminate the district’s $259.5 million debt.

City officials in Douglas, Ga., have been trying to find a buyer for the Pilgrim’s Pride plant in order to save almost 1,000 jobs and $300,000 in tax revenues, but the chicken processors isn’t eager to sell, according to WSJ.

Nortel Networks Corp. Monday won court approval to put the bulk of its network carrier business on the bankruptcy auction block in July. Read the DBR story here.

AIG Bankruptcy Contemplated in Feds Emails To Davis Polk

Posted: June 29th, 2009, 2:31pm PDT

Emails between Davis Polk & Wardwell LLP bankruptcy attorneys and federal officials became the subject of a Fox Business story that showed the government considered allowing insurance giant American International Group to fall into bankruptcy even after it received more than $100 billion of taxpayer dollars.

The emails obtained by the network showed that U.S. Treasury and Federal Reserve officials corresponded with prominent attorneys Marshall Huebner and Ethan James in January and February to discuss “bankruptcy options” for AIG.

Ultimately, the government pushed aside thoughts of a bankruptcy and in early March came through with a revised bailout strategy which increased the government’s total commitment to AIG to about $180 billion.

Treasury Secretary Timothy Geithner said in testimony to Congress later in March that allowing AIG to collapse could “cause large and unpredictable global losses with systemic consequences – destabilizing already weakened financial markets.”

A Treasury spokesman told Fox Business that the bankruptcy discussions were “a matter of prudent planning,” looking at all scenarios.

The Daily Docket: Madoff Sentencing Today

Posted: June 29th, 2009, 7:25am PDT

The Associated Press reports via BusinessWeek that Bernard Madoff is due in court Monday to hear sentencing for running a massive Ponzi scheme, and both he and victims are expected to speak at the sentencing.

And Madoff’s trustee, Irving Picard, has recovered just a fraction of investors’ losses since 1995, but he still has a lot of ground to cover, according to The Wall Street Journal.

It’s going to be a challenge for GM’s Saturn unit to recover from its slump, though it is set to be sold to a new owner later in the year, WSJ reports.

Chrysler has given the green light to reopen most of its assembly plants Monday, according to the Detroit News.

The Phoenix Coyotes may not know where they’ll be playing next season, but many players think the team won’t be leaving Arizona, Sify reports via the AP.

Hotel chain Extended Stay Inc. is moving to appease lenders, including the Federal Reserve Bank of New York, that have mounted a challenge to the company’s plan to spend their cash during its bankruptcy case. Read the Daily Bankruptcy Review story here.

The government’s plan to let banks get rid of troubled assets, the Public-Private Investment Program (PPIP), is facing troubles and is losing momentum, WSJ reports.

You Get What You Need

Posted: June 26th, 2009, 1:32pm PDT

As Mick Jagger sang, you can’t always get what you want. But sometimes, you do. Just ask the members of Rock Creek Sports Club outside of Washington, D.C. Their grassroots campaign to prevent an unfavorable outcome in the Chapter 11 proceeding of their gym’s parent company not only drew the support of 1,000-plus gym members and Maryland’s attorney general, but may just turn out the way they had hoped.

After the members discovered that the owner of their Silver Spring, Md., health club, AGT Crunch Acquisition, was seeking bankruptcy court approval of a $300,000 deal to close the gym and transfer memberships to a nearby L.A. Fitness, the members launched a letter-writing campaign in protest. Fearing the loss of their club’s “family- and community-oriented atmosphere,” dozens of members filed objections were filed in with the U.S. Bankruptcy Court, including a petition signed by more than 1,000 of the club’s 1,800 members.

The members’ quest, which spawned a Web site, drew the attention of Maryland Attorney General Douglas F. Gansler, who filed a formal objection to the sale on the grounds that that AGT Crunch’s proposal would violate state consumer protection laws by failing to deliver the services that customers paid for. Gansler pointed out that while both facilities have similar exercise equipment, L.A. Fitness isn’t the “haven of peace and community in an otherwise hectic city” that the Rock Creek members claim their gym is. He also cited the “substantially different” environments in which each gym is located - L.A. Fitness is downtown, surrounded by office complexes, while Rock Creek is “worlds away…nestled in a quiet neighborhood.”

Heeding their call is Rock Creek’s founder and current minority owner, Marc Tascher, who is offering $700,000 – more than double L.A. Fitness’ offer – to acquire and continue running the gym at its current location. The deal, which is still subject to the approval of the U.S. Bankruptcy Court in Manhattan at a hearing Monday, earned a “tentative YIPPEE!” from the Committee to Save Rock Creek Sports Club.

Mortal Kombat Caught In Legal Combat

Posted: June 26th, 2009, 9:51am PDT

If Threshold Entertainment Inc. were facing off against Midway Games in a round of Mortal Kombat, there might be some karate chops involved.

Fortunately, the company - which claims to have helped Midway develop movies, TV shows and music based on the violent video game - is taking the legal route to settling a recent dispute over Midway’s looming sale.

Threshold filed a lawsuit against Midway on Wednesday, accusing the video game maker of attempting to sell assets that it doesn’t actually own, namely intellectual property associated with the Mortal Kombat franchise. Threshold insists it holds the rights to some of the licenses, copyrights and trademarks protecting the Mortal Kombat name and the right to develop multimedia content derived from the video game.

“The Mortal Kombat franchise, as it stands today, is far more a creation of Threshold and [Threshold chief executive] Kasanoff than of Midway,” the company said in papers filed with the U.S. Bankruptcy Court in Wilmington, Del.

The Mortal Kombat empire includes fun favorites like “Mortal Kombat: Behind the Dragon,” a made-for-TV-special; “Mortal Kombat: Annihilation,” the soundtrack to a 1997 feature film of the same name; and “Mortal Kombat Conquest,” a live-action TV series. And Threshold insists we have it to thank for these entertainment gems, not Midway.

“Kasanoff and Threshold were responsible for virtually all of the creative input that went into turning the videogame concept into a multimedia enterprise,” Threshold said.

According to the lawsuit, Kasanoff approached Midway in 1993 with “an idea to launch the Mortal Kombat concept in a totally new direction.” Kasanoff proposed transforming the fighting game, which started out as a coin-operated arcade game in 1992 and eventually brought decapitations and beating hearts into the living rooms of teenage boys across the country, into a multi-platform brand. The partnership spawned a host of endeavors that crossed from film to TV to even live theatre. (At Radio City Music Hall, no less. We’re hoping there weren’t any rockettes involved.)

Threshold insists that it was the driving force behind these creative pursuits and that it has the rights to prove it. But Midway is apparently not on the same page, and has opted to place some of the intellectual property that Threshold claims to hold an interest in on the auction block on June 29. Midway has even “suggested at times that it does not fully accept Threshold’s exclusive license,” Threshold said, adding that it believes Midway is searching for other potential producers for a Mortal Kombat sequel.

The Daily Docket: Lear Nears Chapter 11

Posted: June 26th, 2009, 7:24am PDT

Auto-parts supplier Lear Corp. is preparing to file for bankruptcy as soon as next week, according to The Wall Street Journal.

General Motors Corp. is close to announcing a decision to put a new small-car manufacturing plant in Orion Township, Mich., WSJ reports.

The Treasury Department is negotiating with state attorneys general to change terms of GM’s bankruptcy-sale plan that would have wiped out claims from accident victims and auto dealers, according to WSJ.

GM won court approval Thursday to borrow the full amount of a $33 billion loan from the U.S. and Canada while it moves to swiftly wrap up its bankruptcy restructuring. Read the Daily Bankruptcy Review story here.

Some of Delphi Corp.’s bankruptcy lenders preferred to see the auto-parts supplier liquidate rather than pursue a deal that would have given them a controlling stake in the company, Delphi’s chief financial officer said. Here’s the DBR story.

Jefferson County, Ala., is getting closer to bankruptcy, the Associated Press reports, via the Montgomery Advertiser.

The bankruptcy and distressed deal-making has hit $160.6 billion in the first half of 2009, the second-highest total on record, according to Financial Times.

Friends Help Save Edith Wharton Estate

Posted: June 25th, 2009, 1:41pm PDT

Thanks to a little help from its friends, The Mount’s evening café and weekly ghost tours will live on.

Some Enchanted Evenings, Friday Night Fright and other events have been given a second chance to entertain the public at late writer Edith Wharton’s sprawling estate in Lenox, Mass. According to a statement, the Alice M. Kaplan Memorial Reserve has supplied a $750,000 grant to help the home, which boasts 3 acres of “formal gardens” as well as “extensive woodlands,” restructure and avoid bankruptcy. The grant was said to play a key part in aiding the recovery of The Mount, whose debt will be reduced to $4.7 million from $8.4 million.

Lawyers from Shearman & Sterling and Foley Hoag, including bankruptcy lawyer Andrew Schwartz, worked on the restructuring pro bono. Also key to The Mount’s recovery was $1.4 million raised last year by the Save The Mount Campaign (as must have been The Mount’s supplemental blog, an ode to all things Wharton).

Chairman Gordon Travers, who’s previously worked with restructuring firm Alvarez & Marsal, expressed thanks for the emergency funding, adding that the restructuring “represents a remarkable achievement in extraordinarily difficult times” and that “we are grateful to everyone who…recognized the importance of keeping The Mount in the public domain.”

The Mount’s troubles are far from over, however. It still needs to keep raising money to continue operations and to “fund a critical expansion of mission,” Travers said. “The restructuring and fundraising success that we have achieved over the past year will hopefully demonstrate…that The Mount’s leadership provides responsible financial stewardship for this great asset, and is worthy of their confidence.”

The Daily Docket: GM To Close Plant

Posted: June 25th, 2009, 7:08am PDT

General Motors Corp. on Wednesday said it will close its vehicle assembly and metal-stamping plants in Shreveport, La., by 2012, according to The Wall Street Journal.

Meanwhile, the committee representing GM’s unsecured creditors says it’s satisfied that there are no viable alternatives to restructure the ailing auto maker other than the company’s proposed bankruptcy sale, but it’s asking the court to require GM to make some changes to the sale proposal. Read the Daily Bankruptcy Review story here.

Dealers question if GM will actually save money by cutting retail locations, according to Deal Journal.

A judge Wednesday said Lehman Brothers Holdings Inc. can probe whether Barclays Plc earned a “windfall” worth billions of dollars when it bought Lehman’s broker-dealer business in 2008. Read the DBR story here.

Most of the 100 foundations that lost at least 30% of their assets in the Madoff fraud had four or fewer board members, according an analysis by the National Committee for Responsive Philanthropy, the New York Times reports.

Golf Course Left In The Rough

Posted: June 24th, 2009, 12:58pm PDT

The owner of struggling resort Lake Las Vegas, the luxury development built around a man-made lake some 20 miles from Las Vegas Strip, is shuttering another of its money-losing golf courses.

Lake Las Vegas, which has been mired in bankruptcy court for nearly a year, said in a recent court filing it will close Reflection Bay Golf Club and lay off virtually all the club’s employees on June 30. The highly rated course, designed by Jack Nicklaus, will revert to senior lender Carmel Land & Cattle Co., which will hold a foreclosure sale on the property July 9.

The resort’s developer says it’s abandoning Reflection Bay because the golf course is worth “significantly less” than the approximately $29 million it owes to Carmel.

Reflection Bay is actually the second Lake Las Vegas golf course to go under since the development filed for bankruptcy protection. Carmel also took control of The Falls Golf Club, a Tom Weiskopf-designed golf course, earlier in the bankrupt case. A third course, the private SouthShore Golf Club, remains open.

Lake Las Vegas is a planned residential community and resort located in Henderson, Nev., that also boasts two luxury hotels and a 320-acre lake in the desert. The resort filed for bankruptcy in July 2008, blaming its financial woes on a combination of more than $800 million in debt, the housing downturn and lack of cash brought on by the global credit crunch.

More Jewelers File For Bankruptcy

Posted: June 24th, 2009, 10:47am PDT

Hollywood celebrities might soon have fewer options when it comes to picking out new bling.

Three upscale jewelers have sought bankruptcy protection over the past few weeks, following in the footsteps of companies like jeweler-to-the-stars Fred Leighton, which has been entangled in Chapter 11 proceedings for over a year. While the bankruptcy court newcomers – Henry Dunay Designs Inc., Michael Beaudry Inc. and David Webb Inc. – are all relatively small companies, their filings could certainly make some waves in Manhattan and Los Angeles, where the likes of Tom Cruise and Leonardo DiCaprio were said to shop for their high-end merchandise.

Liz Chatelain, president of jewelry industry marketing and research company MVI Marketing Ltd., said that the bankruptcy filings could be testament to a new mentality sweeping through the jewelry industry, which has been fighting an uphill battle against falling consumer spending throughout the economic downturn.

“Some companies, I think, are taking advantage of the excuse to go bankrupt because so many people are doing it anyway,” Chatelain said in an interview Tuesday. “You’ll just sort of blend in with the crowd. It’s not such a stigma as it was some years ago.”

For example, Chatelain said, when a high-end jeweler known as Nova Stylings sought bankruptcy protection in the mid-90s, people in the jewelry industry were shocked. “It was so out of the norm, everyone called the owner, Marty” to ask if he was OK, Chatelain said. “Nowadays, nobody bothers calling.”

Still, Chatelain said, many of the jewelers that are tumbling into bankruptcy protection now were already struggling to make ends meet before the downturn hit. Michael Beaudry for example, had “financial problems for a while,” she said, and had been hoping a foray into the watch business would help shore up its balance sheet. (It didn’t.)

Other jewelers, like Henry Dunay, say their otherwise solid business plans were sidetracked by the sudden drop in consumer spending. Henry Dunay sells much of his merchandise in upscale department stores like Bergdorf Goodman and Neiman Marcus, stores that have taken huge hits as consumers abandon discretionary and luxury items. Dunay told Crain’s New York Business that the economy was to blame for his bankruptcy filing and vowed to reorganize. He says he’s focused on straightening out his debts, introducing a new collection for the fall and moving forward.

The Daily Docket: ‘Staggering’ GM Fees

Posted: June 24th, 2009, 5:43am PDT

The U.S. trustee overseeing General Motors’ bankruptcy thinks fees charged by Evercore Partners and AlixPartners are “staggering” and “excessive,” DealBook reports.

Meanwhile, GM says it will cut 4,000 U.S. white-collar jobs by Oct. 1, according to The Wall Street Journal.

A group of GM bondholders lost their bid for a greater voice in the auto maker’s bankruptcy case Tuesday when a judge refused to appoint a committee to represent them. Read the Daily Bankruptcy Review story here.

Extended Stay Hotels’ bankruptcy filing may trigger $100 million in personal liability for real-estate investor David Lichtenstein, WSJ reports.

Hotel chain Red Roof Inn Inc. defaulted on $367 million face amount of mortgage debt, according to WSJ.

The same day North Carolina media company MIG Inc. filed for bankruptcy protection, it sued its former outside law firm, Paul Weiss Rifkind Wharton & Garrison, for malpractice, the American Lawyer reports, via ABA Journal.

Bankruptcy Is A Family Affair

Posted: June 23rd, 2009, 11:17am PDT

There’s a family feud brewing in Butte, Mont., and we’re not talking about the cheesy game show. This battle is taking place in the bankruptcy court between ex-Yellowstone Club owner Edra Blixseth and her son, Montana developer Matthew R. Crocker. And, like many mothers and sons before them, the feud concerns a car.

But this isn’t just any mother-son fight. The twist is that both Blixseth and Crocker are both seeking the sale of a 2004 Land Rover Range Rover as part of their Chapter 7 bankruptcy liquidations, each claiming the car is their property and therefore may be sold to help pay off his or her debts.

On June 5, Land Rover’s financing unit, Land Rover Capital Group, filed a motion in Crocker’s bankruptcy case asking him to turn over the car, which secured the $8,402.73 Land Rover was owed on the vehicle. According to Land Rover, Crocker defaulted on the contract when he failed to make a monthly payment on the vehicle in September 2008 and has missed every payment due since then.

But according to the independent official in charge of Crocker’s assets, Chapter 7 Trustee Joseph V. Womack, the car should be sold be sold for the benefit of Crocker’s creditors and shouldn’t be turned over to Land Rover. Trouble is, the car isn’t in Crocker’s possession. So Womack turned to Blixseth, arguing that Crocker told him that the car was given to his mother through “an informal, undocumented agreement.” Womack is urging the bankruptcy court to force Blixseth to park the car “at a secure location” and give him the keys so he can reclaim the Range Rover. If Womack is allowed to take back the car, he said he would seek to throw out Land Rover’s claimed security interest in the car as well as any interest that Blixseth claims.

According to Blixseth, Crocker didn’t purchase the car. On Monday, she filed an objection in which she argued that one of the companies under her control was the buyer, meaning that the car belongs to her estate instead of Crocker’s. As such, the car can be sold in order to pay off her debts.

Bankruptcy Judge Ralph B. Kirscher is slated to take the stage – er, bench – to settle the feud at a July 14 hearing.

The Daily Docket: Chrysler Fears Overblown?

Posted: June 23rd, 2009, 5:33am PDT

Moody’s Investors Service says fears that Chrysler’s bankruptcy may set a dangerous precedent for secured lenders are exaggerated, according to DealBook. “Moody’s believes that the case does not herald a new regime for secured creditors, and that whatever precedential value it has is limited to the exceptional circumstances involved in the Chrysler bankruptcy,” the ratings agency said Monday.

Former Chrysler Chief Executive Lee Iacocca says Chrysler and General Motors should pay back their loans from the government as fast as possible, the Associated Press reports, via the Chicago Tribune.

J.D. Power & Associates says the quality of cars manufactured by GM, Chrysler and Ford has increased, the Wall Street Journal reports.

A bankruptcy judge has sided with SemGroup LP’s banks and against oil producers from Texas, Oklahoma and Kansas in a fight over who has a senior claim to payment when the distressed energy company exits from Chapter 11. Read the Daily Bankruptcy Review story here.

Hawaiian Telcom, which is operating under bankruptcy protection, is balking at a buyout offer from Sandwich Isles Communications, according to Pacific Business News.

The Road To Nowhere

Posted: June 22nd, 2009, 2:45pm PDT

It’s hard to move on when memories of your past linger at every turn. Just ask any newly single teenage girl – or Freestyle Music Park, which is stuck on a street named for its ill-fated predecessor.

After months of renaming and rebranding, Freestyle Music Park has found that it just can’t shake its former identity as Hard Rock Park, the failed rock ‘n’ roll themed attraction that entered bankruptcy protection during its first season. A completely clean slate just isn’t in reach, thanks to the park’s location on Hard Rock Parkway.

WMBF News in Myrtle Beach, S.C., reports that park officials are hoping to redub the thoroughfare Fantasy Harbour Boulevard, but they need permission from the local government first. The Horry County Planning Commission approved the change Monday afternoon, but the name change will still take time, leaving park workers and patrons alike with a painful daily reminder of the enterprise’s unsuccessful roots.

“I don’t want to give tourists the wrong impression that if they come to this area they’re going to see something Hard Rock, whether it’s a Hard Rock restaurant, Hard Rock theme park – that’s a chapter or a page in our business life we’d like to turn and move forward,” Habib Sofa, who owns New York Pizzeria, situated near Freesyle Music Park, told WMBF.

Other local business owners, like Bill Smith of Phantom Fireworks, support the name swap because it doesn’t specifically promote one business. Why should Myrtle Beach throw all its eggs in one basket again, naming the street after the theme park, when the former tenant only survived a matter of months? “By having so many different names and so many businesses on one road, I just think it’s wrong to specifically state one business,” Smith.

Despite all the support for the name swap, the road to Fantasy Harbour Boulevard could be a long – and pricey – one. Both the county and the South Carolina Department of Transportation must make the changes, and each replacement sign will cost $135.

Ghosts Of Retailers Past

Posted: June 22nd, 2009, 12:35pm PDT

Two new (old) brands are finding life after liquidation, thanks to recently signed licensing agreements.

Natura World will be producing a line of mattresses emblazoned with the Shaper Image name, and Summit Global Group is set to make an array of digital Polaroid products, according to recent stories in Furniture World and the Boston Herald. The announcements cap a months-long trend of once-dead companies – or at least their names - given new life by firms like Gordon Brothers Brands and Hilco Consumer Capital, which snatch up the intellectual property at bankruptcy auctions.

Gordon Brothers and Hilco acquired Polaroid during a heated battle for the company’s assets back in April that necessitated three auctions and triggered countless objections. Now the official owners of the brand, the pair is embarking on an exclusive five-year licensing deal with Salt Lake City-based Summit Global, which will produce Polaroid digital cameras, video cameras, picture frames and PoGo mobile printers.

The venture is “expected to generate over $1.3 billion in retail sales beginning in 2009,” according to a statement from Gordon Brothers and Hilco. Scott W. Hardy, president of the entity that owns the Polaroid brand, called it “a new era” for the Polaroid name, once synonymous with instant photography.

Gordon Brothers and Hilco also joined forces with Bluestar Alliance to acquire the rights to the Sharper Image brand. The company’s retail outlets were forced to hold going-out-of-business sales after it entered bankruptcy protection, but the Sharper Image name is set to live on, in the form of mattresses and adjustable beds. The products will appear later this year in department stores and specialty outlets as well as through mail orders and online.

Other Sharper Image products may soon start cropping up as well, according to our colleagues at WSJ’s Digits blog. Earlier this year, Sharper Image’s Federico de Bellegarde told Digits to expect to see old Sharper Image favorites and new items alike at stores like Macy’s, Kohl’s and Bed Bath & Beyond.

Gordon Brothers and Hilco also own the rights to names like former Bed Bath & Beyond competitor Linens ‘n Things and home furnishing store Bombay Co.

The Daily Docket: We Shall Overcome

Posted: June 22nd, 2009, 7:14am PDT

Experts say that despite auto makers’ huge financial losses, job cuts and plant closures, this bleak period may turn into profits in a few years, according to the Detroit Free Press.

Many auto makers’ media and analyst events, especially at General Motors Corp. and Chrysler, have been done away with as auto makers are scaling back, The Wall Street Journal reports.

But GM says its new ad budget, between $40 million and $50 million, will be about the same as in the months prior to its bankruptcy filing, according to WSJ.

WSJ reports that Nortel Networks Corp. might get less than $2 billion at an asset sale, far less than the $250 it was once worth.

Tribune Co. is negotiating with the Ricketts family on a Chicago Cubs deal, but it’s also separately discussing a deal with a group led by investor Marc Utay, the Chicago Tribune reports.

After about five months under Chapter 11 protection, Star Tribune Holdings Corp. filed a document Thursday mapping out how the newspaper publisher will restructure its balance sheet and emerge from bankruptcy. Read the DBR story here.

Same Old Song And Dance For Freestyle Music Park

Posted: June 19th, 2009, 1:56pm PDT

A few weeks after the much-publicized opening of Freestyle Music Park, owner FPI MB Entertainment may not yet be seeing the whiter shade of pale.

According to an ABC affiliate in Conway, S.C., attendance at the family-friendly music theme park hasn’t picked up quite the way officials had hoped. The article noted that during a visit to the park earlier this month, “the attraction called Myrtle’s Beach looks pretty sparse and the roller coasters have empty seats.”

The tough economy may factor into Freestyle’s less-than-stellar attendance; rival theme park Six Flags entered bankruptcy protection just last weekend with more than $2 billion in debt. The high-profile bankruptcy of the park’s previous incarnation, Hard Rock Park, may also be hurting attendance; the $400 million rock ‘n’ roll theme park went out of business in one season.

Still, it’s too early to draw conclusions as to whether Freestyle’s attendance rate will become a trend, said John Stine, Freestyle’s marketing director. “We’ve seen a build on attendance and while it’s not maybe as high as we expected, we’re encouraged by the growth,” he said.

And though attendance is disappointing, FPI MB will not be like former owner HRP Myrtle Beach Holdings, Stine said. “The other side of the coin is, we got a park that’s just absolutely spectacular, we got a great destination here and we know…that spells success.”

Happy ‘Make It Seven’ Day!

Posted: June 19th, 2009, 10:27am PDT

BlackBerry mogul Jim Balsillie is encouraging Canadians to drink beer, eat hamburgers and party in downtown Hamilton, Ont., to support his effort to buy the Phoenix Coyotes out of bankruptcy and move the hockey team north of the border.

Taking on the holiday-declaring role usually reserved for mayors and provincial premiers, Balsillie named Friday Canada’s “Make It Seven” day, in honor of his effort to bring a seventh National Hockey League team to the puck-happy nation.

“Make It Seven day is all about providing a voice to Canadian hockey,” he said. “Canadians have proven themselves to be the best hockey fans in the world. They need to be heard.”

One of Canada’s richest men, Balsillie has offered $212.5 million for the Coyotes. Earlier this week a bankruptcy judge stymied his first attempt to buy the team, but the Research In Motion Ltd. founder vowed to continue his fight in and out of court.

The league has so far opposed Balsillie’s offer and is seeking a buyer that will keep the team in Arizona. A bankruptcy judge said any buyer couldn’t move the team without the league’s permission.

To celebrate Make It Seven day, fans of the Hamilton Maybe-Somedays will hold a noon rally in the shadow of the team’s proposed home, Copps Coliseum.

Canadians who can’t make it down to the rally can still support Balsillie – if they’re hungry for some beer and barbecue.

Patrons ordering a Labatt Blue beer at Canadian chain Prime Restaurants will receive a Make It Seven bumper sticker. FirstOntario Credit Union is holding barbeques at 17 branches to pitch Balsillie’s message while raising money for youth hockey teams.

Another sponsor of Balsillie’s effort, Home Hardware stores, will be handing out Make It Seven window signs to those who make a donation to kids’ hockey programs.

Ohio County Asks Judge To Keep GM Plant Open

Posted: June 19th, 2009, 9:31am PDT

An Ohio county is asking a bankruptcy judge for a little more time before it says goodbye to its local General Motors Corp. plant.

The Richland County Commissioners sent a letter to Judge Robert E. Gerber asking him to conduct the case “along a time line that will allow our community time to adjust to a loss of $190 million from our local economy.”

The commissioners are asking Gerber to prevent GM from closing its Mansfield, Ohio, stamping plant next month and instead require the auto maker to keep the plant running until December 2010. The plant’s closure will cost the area 1,100 jobs.

The extra 18 months will allow workers time to seek out government-funded retraining in hopes of becoming “marketable in a depressed economy.”

The letter outlines the struggles facing many Midwest communities whose economies are tied to manufacturing. Richland County lost 10,000 manufacturing jobs in the past 30 years when companies like Westinghouse, Peabody Barnes and National Seating left town. The county’s unemployment rate is 13.2%, and it will increase when the GM plant closes.

The county said it invested heavily to keep the GM plant open. The auto maker received tax abatements when it expanded the plant in the late 1980s, and more than $3 million in local and state dollars were spent in 2004 to train new tool and die workers. The company later outsourced that work.

The Daily Docket: Survival Of The Fittest

Posted: June 19th, 2009, 6:00am PDT

General Motors Corp. executives and advisers are hoping to complete the auto maker’s bankruptcy sale by mid-July, earlier than was initially expected, according to The Wall Street Journal.

In a letter to WSJ, billionaire investor Wilbur Ross defends the U.S. government’s decision to favor the auto maker’s workers over unsecured bondholders, saying he’s made similar decisions as a private investor in bankruptcy restructurings. “Bankruptcy is Darwinian economics with cash defining who is the fittest,” he writes.

The new CEO of Chrysler Group LLC, Sergio Marchionne, is signaling that he plans to set a different tone for the auto maker, WSJ reports.

The U.S. Supreme Court on Thursday upheld a $500 million in insurance settlement stemming from the bankruptcy of Johns Manville Corp., once the largest producer of asbestos in the world, according to the Associated Press.

The Canadian government turned down Nortel Networks Corp.’s request for aid before it sought protection from its creditors in Canada and the U.S., the company’s CEO said Thursday, the Canadian Press reports.

An ad hoc committee representing people injured by GM and Chrysler vehicles launched an ad campaign Thursday protesting plans to leave personal-injury lawsuits behind with the “old” GM and Chrysler, according to the Washington Post.

SemGroup LP suitor John Catsimatidis is calling for a court order forcing the troubled energy company to withdraw its Chapter 11 plan proposal on the grounds the plan lacks authorization by the management committee. Read the Daily Bankruptcy Review story here.

Debbie Reynolds’ Hollywood Museum Enters Chapter 11

Posted: June 18th, 2009, 2:07pm PDT

Associated Press

The California non-profit organization that actress Debbie Reynolds founded to build a museum for her collection of Hollywood memorabilia - including Judy Garland’s blue dress from “The Wizard of Oz” and the white dress Marilyn Monroe wore over the subway grate in “The Seven-Year Itch” - has filed for Chapter 11 bankruptcy protection, Bankruptcy Beat has learned.

The Hollywood Motion Picture and Television Museum, which owns the artifacts of Hollywood’s Golden Age that Reynolds collected over several decades, sought Chapter 11 protection to halt a lawsuit that its lender filed against it, according to the organization’s bankruptcy lawyer, Peter Susi. In an interview Thursday, Susi told Bankruptcy Beat that there’s a dispute over how much the lender is owed on a $1 million-plus loan. Filing for Chapter 11 protection automatically halts pending lawsuits against a company.

This isn’t the first time Reynolds has been involved in a bankruptcy proceeding. The actress herself (known for her roles in such films as “Singin’ In The Rain” and “The Unsinkable Molly Brown,” as well as recent turns in the TV show “Will & Grace”) sought Chapter 11 protection in 1997 along with her eponymous Las Vegas hotel, which had displayed some of her movie collectibles. The hotel couldn’t generate enough cash to cover its expenses, according to the Los Angeles Times, and was later sold to the parent company of the World Wrestling Federation, Titan Sports Inc.

The goal of the current filing, Susi said, is to resolve the litigation and find a home for the collection, which Reynolds began acquiring in the 1970s as the major movie studios began selling off their costumes, sets, equipment and props. The collection includes pieces from all eras of film history, ranging from outfits worn by silent film stars Rudolph Valentino and Mary Pickford to the white tuxedo Tom Hanks wore in “Big.”

The non-profit (whose chief executive is Todd Fisher, Reynolds’ son, and whose board members include Reynolds’ daughter, actress Carrie Fisher, director George Lucas and Hollywood legends Shirley MacLaine and Elizabeth Taylor) is currently constructing a building in Pigeon Forge, Tenn., (also home to Dollywood) that was slated to open this spring.

“They very much want to display this stuff and not have it scattered to the four winds,” Susi said. “It’s been a lifetime putting it together.”

Suge Knight, The Remix

Posted: June 18th, 2009, 1:22pm PDT

Last month, Bankruptcy Beat reported that an ex-wife of former West Coast hip-hop impresario Marion “Suge” Knight was heading to bankruptcy court seeking $40,000 in domestic support payments.

Well, the baby-mama drama continues for the founder of the Death Row Records (both Knight and Death Row filed for Chapter 11 bankruptcy in 2006; the hip-hop label’s assets have since been sold off to a Canadian entertainment company). Another woman, Tammie Hawkins, is seeking $18,000 in child support payments she says have racked up since December. Hawkins, who said she began a relationship with Knight in April 1994 and had a child with him in May 2005, said the payments were ordered by a Los Angeles Superior Court to the tune of $3,000 per month.

But according to the official in charge of Knight and Death Row’s bankruptcy estates, Trustee R. Todd Neilson, bankruptcy laws don’t call for payment of domestic support claims that arise after a person or business has entered bankruptcy protection. In court papers, Neilson said even if the law did allow such claims, theirs wouldn’t be eligible because the women haven’t taken the proper steps to document their claims with the bankruptcy court.

Neilson is slated to face off with Hawkins and Knight’s ex-wife, R&B singer Michel’le Toussaint, at a June 30 hearing before the U.S. Bankruptcy Court in L.A.

Recipe For Success Eludes Manhattan Eatery

Posted: June 18th, 2009, 10:10am PDT

Merkato 55, a trendy eatery in Manhattan’s Meatpacking district, is having an identity crisis.

Over the past few months, the restaurant has changed its name - from Merkato 55 to Le 55 – and its cuisine - from African to Italian. But none of the facelifts were able to prevent the inevitable: Last week, Merkato 55 sought bankruptcy protection in Manhattan, indicating that it owed money to its landlord and York State Department of Taxation and Finance.

The Gansevoort Street restaurant had a solid debut in February 2008, opening up under the wings of star chef Marcus Samuelsson (he’s profiled on Starchefs.com) and quickly being designated as a critic’s pick by New York Magazine. But Samuelsson, best known for his Scandanavian restaurant Aquavit, eventually jumped ship, according to Crain’s New York Business and Eater.com. Without its celebrity chef, Merkato 55 flailed, though it seemed to be finding its way recently, thanks to a new reputation as a popular boozy brunch spot.

Still, it ultimately was unable to stay out of bankruptcy court. Perhaps Fernanda Motta, the Sports Illustrated bikini model who owns a stake in the restaurant, shares some blame for that. She was recently quoted in the New York Observer complaining about the risk the carb-heavy menu poses for her figure. “I cannot come here,” she told the paper, “because I love Italian food.”

The Daily Docket: Eddie Bauer Enters Chapter 11

Posted: June 18th, 2009, 7:32am PDT

Retailer Eddie Bauer Holdings Inc. sought Chapter 11 bankruptcy protection Wednesday with plans to sell its assets to an affiliate of private-equity firm CCMP Capital Advisors LLC or a higher bidder at auction. Read the Daily Bankruptcy Review story here.

Chapter 11 has emerged as the hottest venue for buying, trading and breaking up big-name companies, according to The Wall Street Journal.

Chrysler is restarting production this month at seven of its 12 assembly plants, which have been idle since the auto maker filed for bankruptcy, WSJ reports.

Dura Automotive Systems Inc. Chief Executive Tim Leuliette said Wednesday he expects a number of auto suppliers to file for bankruptcy protection this summer, according to WSJ.

One of the biggest losers in the Extended Stay bankruptcy may be the U.S. taxpayer, according to Deal Journal. The Federal Reserve holds $744 million of the company’s junior debt and $153 million in the senior debt that the central bank assumed after the collapse of Bear Stearns.

Judge To Blixseth: Everything Must Go!

Posted: June 17th, 2009, 12:53pm PDT

Edra Blixseth’s move to keep control of her estate during her personal bankruptcy case failed Tuesday, as a judge stood by his ruling last month that her assets be liquidated in order to pay off her $157.7 million debt load. Everything must go - two Mercedes, $2.7 million worth of fine art, furniture valued at $6 million, $470,000 in jewelry…

According to court documents, Judge Ralph B. Kirscher of the U.S. Bankruptcy Court in Butte, Mont., said Blixseth’s argument in favor of switching her Chapter 7 liquidation back to a Chapter 11 restructuring didn’t cut it. So now, instead of keeping control of her belongings while working on a plan to pay creditors, Blixseth must turn over the reins to her estate to Trustee Richard J. Samson so he can start selling off the pieces.

For those looking to snatch up the leopard-print furniture, bronze lions and 18-century French furniture that grace Blixseth’s Rancho Mirage, Calif., property (which also boasts a 240-acre golf course), stay tuned.

Coyotes Judge: Sports Leagues’ Fears Overblown

Posted: June 17th, 2009, 8:48am PDT

Fears that allowing the Phoenix Coyotes to relocate through a bankruptcy sale would “wreak havoc” on professional sports were a little overstated, Judge Redfield T. Baum said in a decision he issued Monday.

While Baum ultimately denied a request a to allow the National Hockey League’s Coyotes to relocate to Canada, he seemed bemused by briefs from the nation’s three other major professional sports leagues urging him to side with the NHL and block the sale.

Attorneys for the National Football League said allowing the Coyotes to move has the “potential to undermine or disrupt the business of professional hockey, football and other major league sports.” Major League Baseball and the National Basketball Association filed similar briefs.

Baum said he “struggles” with such assertions, pointing out that the professional sports leagues appear to be relatively healthy even though each has had a team “make a quick and unapproved move” to another city. The judge pointed to the Baltimore Colts middle-of-the-night move to Indianapolis in 1984 as one of his examples.

“Financially challenged sports teams have the same rights and obligations as any business that becomes a debtor in the bankruptcy court,” Baum said in his decision. “The rule of law will decide…if any league rules are unenforceable.”

The Daily Docket: Lyondell Lawsuit Looms

Posted: June 17th, 2009, 6:58am PDT

Creditors of Lyondell Chemical Co. are prepared to file a lawsuit against its bank lenders, former shareholders and owner, Leonard Blavatnik, over the company’s $22 billion 2007 leveraged buyout. Read the Daily Bankruptcy Review story here.

The executive who loaded Lehman Brothers Holdings Inc. with toxic property investments is part of a group chosen by Lehman to take over the collapsed investment bank’s real-estate private-equity arm, according to The Wall Street Journal.

The Obama administration has turned down a request by auto-parts suppliers for up to $10 billion in new aid, WSJ reports. The suppliers are now lobbying Congress.

Ratings agency Standard & Poor’s says auto-parts supplier Cooper-Standard Automotive Inc. may have to file for Chapter 11 bankruptcy protection, according to Crain’s Detroit Business.

Donald Trump has offered to buy namesake Trump Entertainment Resorts Inc. out of bankruptcy, according to WSJ.

A judge has rejected Edra Blixseth’s bid to reorganize her finances in bankruptcy and says the Yellowstone Club co-founder must sell her houses, cars and other properties, the Associated Press reports.

Group Seeks More Bankruptcy Judges

Posted: June 16th, 2009, 1:37pm PDT

The bankruptcy boom we’ve seen over the past year hasn’t just increased the workload for restructuring attorneys and advisers. It’s also strained bankruptcy judges, leading a group of judges to call on Congress to appoint more of their peers to the nation’s federal bankruptcy courts.

Testifying before a U.S. House Judiciary Committee subcommittee Tuesday, U.S. District Court Judge Barbara M.G. Lynn of the Judicial Conference of the United States urged Congress to address the reality that many courts “can no longer operate as effectively” because of the heavy workloads they’ve been forced to take on. Specifically, the conference — which is tasked with creating the policy governing how courts are administered — is requesting 13 new permanent bankruptcy judgeships in 10 judicial districts, making 22 existing temporary judgeships in 15 districts permanent (including five in the popular Delaware court) and extending two temporary judgeships for an additional five years.

“The need for these judgeships is critical, with filings increasing to near-record levels and the bankruptcy courts in peril of losing many of their judicial resources. It is time to pass judgeship legislation to alleviate the overcrowded dockets and assure that the bankruptcy system operates efficiently, especially in our current economic circumstances,” Lynn said in her testimony.

She added that current methods to determine whether judges’ caseloads are at an appropriate level don’t take into account the changes wrought by the 2005 amendments to the Bankruptcy Code as well as the complex Chapter 11 filings like Chrysler and Circuit City that “barely existed” when the formula was developed in 1991. The conference is currently considering ways to improve this formula in order to better determine which courts are equipped to handle their caseloads and which aren’t.

Lynn said the conference understands the current budget climate and doesn’t take its request lightly, warning that “the cost to society of an overburdened bankruptcy system, especially in this economic climate, is enormous.”

Opus South Condo Owners Go Back To Basics

Posted: June 16th, 2009, 12:27pm PDT

Forget poolside cabanas, private tennis courts and pampering spa treatments. Condominium owners at Opus South Corp.’s luxurious La Serena development are probably happy just to have electricity these days.

They’re learning to savor the simple things in life, thanks to developer Opus South’s Chapter 11 filing. Strapped for cash, Opus South is having trouble paying “critical expenses,” like its water and sewer bills for the 51-unit complex located on Perdido Key near Pensacola, Fla. The company has been forced to seek emergency relief in bankruptcy court, saying its only option is to borrow $68,000 from Wachovia Bank. “Unless Wachovia is authorized to immediately make protective advance payments for the critical expenses,” Opus South said in court papers, “the health, safety and welfare of the residents living at the La Serena Project will be jeopardized.”

Fortunately, there aren’t that many residents to worry about. Opus South was only able to sell 18 of its 51 units, which range from 1,766 to 4,000 square feet and feature views of a local river and the Gulf of Mexico. Its inability to fill the condominium is at the root of the problem; the company says it just isn’t generating enough money each month to cover day-to-day expenses.

Perhaps the residents of La Serena can take comfort in the fact that they’re not the only ones who ended up with different homes than they bargained for. Residents of Opus South’s Waters Edge development, for example, were unable to take dip in the community’s pool last month, after Opus South said it was unable to order “necessary supplies” for the facility. The company was also expecting cable TV service and water for the development to be cut off, and it said it had no money to pay the only two workers capable of repairing the development’s heating and cooling system. Fortunately, Wachovia stepped in, agreeing to make the necessary payments to “preserve and maintain the value of the Waters Edge project.” The bank also promised to pay up to $65,000 to cover “delinquent expenses” for another Opus South development in St. Petersburg, Fla.

The Daily Docket: GM Inks Deal For Saab

Posted: June 16th, 2009, 7:06am PDT

Swedish car maker Koenigsegg Group AB has agreed to buy General Motors Corp.’s Saab Automobile AB unit, according to The Wall Street Journal.

Before GM filed its Chapter 11 petition, it paid $54 million to the restructuring team at New York law firm Weil, Gotshal & Manges LLP, bringing its pre-bankruptcy tab up to nearly $120 million. Read the Daily Bankruptcy Review story here.

Federal prosecutors filed with U.S. District Judge Denny Chin statements from 113 alleged victims of Bernard Madoff’s Ponzi fraud. Read the statements, via WSJ, here.

Chrysler reactivated one of its Detroit assembly plants Monday, WSJ reports.

A bankruptcy judge has rejected the proposed sale of the Phoenix Coyotes hockey team to a Canadian billionaire who would move the team to Ontario, the Associated Press, via the Arizona Republic, reports.

Syms Corp. and Vornado Realty Trust emerged as the winner for Filene’s Basement’s assets Monday, as the company’s second auction in less than two weeks finally drew to a close. Read the DBR Small Cap story here.

Blixseth vs. Blixseth

Posted: June 15th, 2009, 1:36pm PDT

Associated Press

Edra Blixseth

Here’s the plot: A one-time billionaire and his wife split. He gets the private island in the Turks & Caicos, she gets the celebrity-favored Montana ski resort and the French chateau. The ski resort topples into bankruptcy, burdened by millions of dollars in debt on a loan that sets off accusations of greed and mismanagement. She follows, burdened by millions of dollars of her own debts. Oh, yeah, and we can’t forget the voodoo dolls.

No, it isn’t the storyline to a particularly juicy soap opera or cable reality show. It’s the real-life drama between Tim and Edra Blixseth, a battle that was supposedly settled last August but has heated up again. Faithful Bankruptcy Beat readers have followed the saga, which centered around the exclusive Yellowstone Club in Big Sky, Mont., recently sold to a new owner out of bankruptcy. Now, tempers and words have reached a fever pitch, with the former spouses going on a publicity spree to tell the world how the other has done them wrong.

In court papers filed in Edra’s Chapter 7 liquidation last Thursday and in a press release, Tim describes how Edra has “secretly – and through layers of fraud and illegal conduct – devised a successful scheme to undermine the club’s interests in furtherance of her goal to ‘ruin’ me for her own personal satisfaction and her hoped-for financial gain.” He pointed out such examples of this alleged scheme as Edra’s “wild, out-of-control spending” during the divorce and the divorce celebration party he says she hosted, at which guests were invited to take out their frustrations on voodoo dolls resembling Tim.

Edra (who acknowledged that the alleged party did, in fact, occur) gave a rare interview to the New York Times, saying that for years she’s “kept her mouth shut, and I’m not doing it anymore.” According to Edra, instead of a red sports car or unfortunate dye job, the $375 million Credit Suisse loan that drove Yellowstone Club into bankruptcy “was the beginning of Tim’s midlife crisis.” After that, Edra – the club’s chief operating officer to Tim’s chief executive – said she could no longer fulfill her role of “holding him accountable.”

As for rumors that their split and feud are meant to deter creditors, Edra bluntly says that’s not the case. “I would rather feel the cold steel of a revolver in the roof of my mouth and pull the trigger than to ever think about living a day with that man again.”

They won’t have to live together, but they may find themselves under the same roof again on Tuesday, when a Montana bankruptcy is slated to consider Edra’s request to regain control of her bankruptcy proceeding, which – surprise, surprise – Tim vehemently opposes.

GM Paid Weil $54M Before Bankruptcy

Posted: June 15th, 2009, 11:48am PDT

Reuters

Harvey Miller

At Bankruptcy Beat HQ, we’ve been checking the General Motors court docket pretty obsessively for the past two weeks for the auto maker’s applications to hire the law firms and financial advisers that are working on its bankruptcy. The lawyer and advisers have, of course, already been working on the company’s restructuring, but the court must still approve their hiring.

GM finally filed the applications on Friday with the U.S. Bankruptcy Court in Manhattan. Weil, Gotshal & Manges, home of bankruptcy superlawyer Harvey Miller, racked up $54 million in fees in the six months before GM sought Chapter 11 protection. The firm’s partners will charge up to $950 per hour for their work on the case. (Daily Bankruptcy Review’s Jacqueline Palank kindly summarizes the filing in this story.)

Restructuring advisers from AlixPartners and Evercore Partners Inc. have already made $62.2 million. Do the math, and you’ll see that GM paid at least $116.2 million to lawyers and advisers before it entered bankruptcy protection on June 1. It’s not cheap to go broke, as loyal Bankruptcy Beat readers know, but it’s a rare case that cost nearly $120 million before it even made it to court.

You can check out Weil’s application here. AlixPartners and Evercore are here and here.

Although the firm isn’t immune to the general downturn in the legal industry, Weil’s bankruptcy practice is booming. The firm is working on the massive Lehman Brothers bankruptcy and snagged the Chapter 11 case of mall giant General Growth Properties Inc. And just this morning, the firm filed Extended Stay Hotels’ Chapter 11 petition.

The Daily Docket: Six Flags Enters Chapter 11

Posted: June 15th, 2009, 6:15am PDT

Six Flags Inc.’s bankruptcy-restructuring plan calls for lenders to swap their debt for ownership of the struggling theme-park chain, The Wall Street Journal reports.

The New York Times chats with Corrine Ball, the Jones Day lawyer who led Chrysler LLC’s bankruptcy restructuring.

Billionaire investor Carl Icahn is considering making a bid for pieces of Delphi Corp., which is trying to exit Chapter 11 protection after nearly four years, the New York Post reports.

Bally Total Fitness Holding Corp. has signed an agreement on a plan to exit from bankruptcy, a deal in which senior lenders, including JPMorgan Chase & Co., will get most of the equity in the health-club operator. Read the Daily Bankruptcy Review story here.

Indian mining company is expected to increase its offer to bring copper giant Asarco LLC out of bankruptcy, according to WSJ.

Auto suppliers are reinventing themselves amid an industry downturn that’s already forced a number of parts manufacturers out of business, WSJ reports.

RiseUp Files For Chapter 7

Posted: June 12th, 2009, 2:07pm PDT

RiseUp Publications LLC, publisher of a weekly race-relations magazine that was briefly inserted into the Washington Post, New York Daily News, Chicago Tribune and other major newspapers, filed for Chapter 7 bankruptcy protection in Kansas City.

The Chapter 7 filing, which means the company is liquidating, comes just a year after the now online-only RiseUp launched.

The magazine created by Janice Ellis, a Kansas City business women and former mayoral candidate, received attention from the likes of Newsweek upon its founding, as the publication launched while Barack Obama was moving toward a presidential nomination.

While Obama’s campaign sparked a national discussion on race relations, Ellis said on the publication’s Web site that the inspiration for the publication came from her own experiences.

“I started RiseUp because I wanted to provide a readily accessible tool to help us solve some of the problems we face as a society when it comes to race relations,” she said.

A related company, Ellis Management Marketing Group Inc., also filed for Chapter 7 bankruptcy on Wednesday. Both companies listed assets of less than $50,000 and debts between $1 million and $10 million.

While a press release touting the magazine’s launch in June 2008 said the publication would appear in at least dozen newspapers, the company quickly pared back to the Web site and an e-magazine.

Ellis told Folio magazine that the printed edition of RiseUp suffered from the same economic problems and cutbacks in ad spending that that caused some of the newspapers that distributed RiseUp to file for Chapter 11 protection, including the publishers of the Tribune and Chicago Sun-Times.

RiseUp was also facing a $2.2 million lawsuit from its printer, the Kansas City Star.

Bankruptcy Beat Snapshot: H. Jeffrey Schwartz

Posted: June 12th, 2009, 12:52pm PDT

For all the commotion over the identity of General Motors and Chrysler’s bankruptcy lender, it’s not the first time the U.S. government has taken such a key role in a Chapter 11 restructuring. Just ask H. Jeffrey Schwartz.

Schwartz, the new chair of DLA Piper’s restructuring practice, was there when aviation-security firm International Total Services Inc. filed for bankruptcy protection just two days after Sept. 11, 2001. Before the Transportation Security Administration, firms like ITS screened passengers before they boarded their flights.

When the company ended up in Chapter 11 protection, Schwartz said, the newly created TSA took the unprecedented step of providing it with a bankruptcy loan that would fund its operations until the federal agency could train and deploy its own workers.

Schwartz said the bankruptcy judge in the case, the late Conrad B. Duberstein, was more than pleased to be the one who signed the order approving the government’s loan and protecting the national interest. The World War II veteran “was called back to national service, in effect,” Schwartz recalled, making the judge “the happiest man I’ve ever seen in my life.”

But getting to Chapter 11 was, at first, no small feat. Schwartz, then on ITS’ board of directors, said the company had to file its bankruptcy papers – which ITS officials were working on as Sept. 11 happened – in the Brooklyn bankruptcy court because, as there aren’t any airports in Manhattan, it didn’t have any operations there. This was before lawyers could go online to upload their documents to the court docket - papers had to be filed in person. But there was no getting from Manhattan to Brooklyn immediately after Sept. 11. “They couldn’t get across to file,” Schwartz said. “So we didn’t file until Sept. 13.”

The company eventually paid all creditors in full, something Schwartz deemed “a miracle.”

Before the happy ending, however, there was a moment that struck fear into his heart. When the planes struck the World Trade Center, not only did Schwartz have to confront the terrible reality of the day’s events, but he also was left pondering a frightening question.

“The question is: Did the terrorists breach our checkpoints? There were four breaches,” he said. “I’m sitting there thinking, is the FBI going to arrest me today for some kind of criminal negligence because our employees somehow acted so negligently that they permitted the terrorists to come through our checkpoints?”

Fortunately, his company’s checkpoints weren’t among those breached. Still, Schwartz said, that stint in his career “put the most gray hair on my head.”

Boogying Down, Bankruptcy Style

Posted: June 12th, 2009, 9:26am PDT

John Good

Michael Richman is most definitely working for the weekend.

From Monday to Thursday, he’s been submerged in a world of court documents and conference calls, leading the charge to form an official committee of non-institutional bondholders in General Motors’ Chapter 11 case. But by Friday night, he’ll have just one objective: to rock out.

Richman, an attorney with Patton Boggs, is heading to Traverse City, Mich., for a gig with his band, the Indubitable Equivalents. The venue? The American Bankruptcy Institute’s Central States Bankruptcy Workshop, of course.

A former president of the industry group, Richman is the man behind the so-called ABI house band, which takes its name from the Bankruptcy Code (Section 1129(b)(2), to be precise). Trained as a classical pianist, Richman was eventually forced to choose between the courtroom and the stage.

“I thought of playing professionally at one point but the pull of the law was too strong,” he said.

But recently, Richman’s discovered he can have it both ways. About four years ago, he convinced the ABI to sponsor some homegrown talent for the entertainment portion of a popular bankruptcy conference: they provided the equipment, and Richman rounded up the attorneys, valuation expert, judge and ABI staffer who now make up the 12-member band.

“We’re just a bunch of bankruptcy guys that love to play rock music together,” he said.

Since 2004, the group has performed everywhere from the Rocky Mountain Bankruptcy Conference in Denver, Colo., to the Knitting Factory in Manhattan. While the band is open to playing for those not fluent in Chapter 11, it definitely gets an extra kick out of performing for its peers.

“When you play in front of the bankruptcy people, there’s a different kind of emotion that flows from the band to the crowd and back,” Richman said. “It really feels like we’re fantasy rock stars.”

Take that first show for instance. Richman says the winning combination of alcohol and low expectations made for an awesome debut for the Indubitable Equivalents.

“You put those two things together and we blew them away,” he said.

There was also the shock of seeing someone who’s usually on the other side of the courtroom – or behind the bench, in the case of Detroit chief bankruptcy judge Steve Rhodes – jamming to “Thunder Road” and “Free Bird.”

“You just enjoy the music because it’s good music,” said Liz Vrato, an Indubitable Equivalents fan and business development executive at the Garden City Group. “But then you take a step back and think ‘that’s the chief judge of Michigan there playing up on stage, that’s the chair of a restructuring group in D.C.’”

And it’s not just the folks on stage who let loose during an Indubitable Equivalents concert. Richman assures us that the entire bankruptcy crowd is quite capable of getting down.

“The audience has made it clear to us that they want to be on the dance floor,” Richman said.

The Daily Docket: GM Nears Saab Deal

Posted: June 12th, 2009, 7:08am PDT

A deal to sell General Motors Corp.’s Saab Automobile AB could come as soon as Friday, according to The Wall Street Journal.

U.S. News & World Reports summarizes the GOP’s financial regulatory reform package.

Creditors of Tousa Inc. are suing the failed homebuilder’s board of directors for signing off on the company’s ill-fated decision to take on some $500 million in debt amid the collapse of the Florida real-estate market. Read the Daily Bankruptcy Review story here.

A federal judge approved a $37.5 million settlement between Sun-Times Media Group Inc. and shareholders who sued the publishing company for fraud allegedly committed when Conrad Black was at the company’s helm, Crain’s Chicago Business reports.

A former MGM Grand executive got initial clearance from Nevada gaming regulators to take the helm of the Tropicana Las Vegas, which is about to exit bankruptcy protection, according to the Las Vegas Sun.

Billionaire investors George Soros said credit default swaps are “instruments of destruction” that should be outlawed, according to Reuters.

Seinfeld Theory Argued In Coyotes Case

Posted: June 11th, 2009, 2:51pm PDT

Associated Press

Forget case law, attorneys for Jim Balsillie turned to “Seinfeld” to demonstrate that the National Hockey League is attempting to block the BlackBerry mogul from buying the Phoenix Coyotes out of spite.

Attorneys from Lewis and Roca LLP referenced a scene from the famous 1990s sitcom as they explained that the league’s ill-will toward their client caused the NHL to immediately dismiss Balsillie’s application to buy the team. Balsillie has offered $212.5 million to buy the Coyotes out of bankruptcy on the condition that he can move the team to Hamilton, Ontario.

The NHL said Balsillie couldn’t purchase the team because the relocation would violate league rules but later said it would consider the proposed deal as part of its fiduciary duties to the Coyotes.

The lawyers, however, said the NHL’s change-of-heart doesn’t make up for the fact that it first refused to consider Balsillie’s bid out of spite, much like when Jerry Seinfeld tried to change his reason for returning a crested blazer in “The Wig Master.”

In court papers, Balsillie’s attorneys quoted from the episode:

Jerry: Well, I want to return this jacket and she asked me why and I said for spite and now she won’t take it back.
Bob (store manager): That’s true. You can’t return an item based purely on spite.
Jerry: Well, so fine then . . . then I don’t want it and then that’s why I’m returning it.
Bob: Well you already said spite, so…

According to the Associated Press, Judge Redfield T. Baum of the U.S. Bankruptcy Court in Phoenix didn’t buy the spite argument but was amused by the Seinfeld reference.

The NHL and Balsillie have a tumultuous past. The league has twice blocked the Canadian billionaire from buying U.S.-based franchises after it became apparent that Balsillie intended to move the team north of the boarder.

Balsillie’s attorneys borrowed the Seinfeld argument from a Maryland Appeals Court decision in a lawsuit involving author Tom Clancy and his bid to remove his name from a series of books in which his ex-wife held an interest. (Here’s Law Blog’s post on the decision.)

Gym Members Find Themselves In A Crunch

Posted: June 11th, 2009, 1:17pm PDT

There’s some grunting going on at Rock Creek Sports Club, and it’s not necessarily coming from burly weight-lifters. Two dozen members of the Silver Spring, Md., gym are taking a note from the pages of the countless protesters who head to nearby Washington, D.C., writing to the Manhattan bankruptcy court to oppose the sale of their gym memberships to the L.A. Fitness chain.

Rock Creek Sports Club is owned by AGT Crunch Acquisition LLC, which operates the high-end Crunch health-club chain. AGT Crunch filed for Chapter 11 bankruptcy protection in May to sell most of its 30 locations to two private-equity firms, subject to higher bids at an upcoming auction. But left out of the sale are gyms that don’t carry the Crunch name, like Rock Creek. L.A. Fitness International LLC has stepped up to bid $300,000 for Rock Creek but, because it operates its own gym just two miles away, its offer calls for shutting Rock Creek’s doors and transferring its memberships (which numbered nearly 1,880 as of April 30) to its own facility.

But the members say they’re not going to sit back and let this happen. And they’re not afraid to diss the would-be buyer. One reason for opposing the sale listed in a letter to the court: “If I wanted to be a member of L.A. Fitness, I would have joined their club.” The members also say Rock Creek “is unique among health clubs in the area because it is a small neighborhood gym. It provides a family- and community-oriented atmosphere that is not available at other clubs in the area.”

Instead, Rock Creek members say they’re “very interested in other offers” from potential buyers that would maintain its current location and staff. The letter closed with a threat: “If the sale to L.A. Fitness is approved I will instruct my credit card company/bank to refuse charges from L.A. Fitness beginning 7/1.”

In court papers, AGT Crunch said L.A. Fitness will be able to offer “substantially similar services” to Rock Creek members. While it doesn’t look like L.A. Fitness has masseuses on-site like Rock Creek, both offer an array of classes like cycling, yoga, kickboxing, Pilates – even belly-dancing and boot-camp conditioning.

Court papers show that rival bids are due June 19, and the court will consider approving a sale on June 24.

Tribune Creditors Follow The Money To McCormick Foundation

Posted: June 11th, 2009, 9:11am PDT

Associated Press

Irked creditors are following the money from the 2007 leveraged buyout of Tribune Co. right to the stately acres and 27-hole golf course at the mansion-turned-museum commemorating the life and times of deceased Chicago Tribune publisher Robert R. McCormick, new court documents show.

The non-profit Cantigny Foundation that runs the 500-acre estate sold nearly $184 million worth of Tribune stock in connection with the deal. The LBO that saddled Tribune Co. with billions in debt meant a nice bump to the Cantigny Foundation endowment, allowing it to further its mission of providing the public the opportunity to hike, golf and examine the artifacts of the First Infantry Division of the U.S. Army. (McCormick was Colonel McCormick.)

Also in the cross-hairs of creditors in Tribune’s Chapter 11 case is the billion dollar-plus McCormick Foundation, which sold $1.5 billion worth of company stock in the LBO transactions, for a $963 million profit, according to tax records. It dishes out millions annually to civic charities around the country.

Creditors have been asking the foundations for information about Tribune’s financial state at the time of the LBO, which came about a year before Tribune collapsed in bankruptcy. Papers filed Wednesday in a Delaware bankruptcy court don’t say exactly why creditors are probing the merger. However, highly technical portions of the Bankruptcy Code provide that anyone who comes near a company a year before it goes belly-up and walks away richer is going to get banged on like a dinner gong by creditors. Whether the banging will produce any cash for creditors is another question.

Foundation attorney Leonard S Shifflett declined to answer creditor questions and invited them to file a formal Rule 2004 motion with the court, which is kind of a bid for a discovery order when there’s not really a lawsuit.

“Such a motion will give the Foundation an opportunity to explain to the Court why, in the case of the Foundation, such a requested order would be inappropriate,” wrote Shifflett, of Quarles & Brady, in a May 19 letter.

Shifflett did not immediately respond to requests for comment Thursday, nor did a spokeswoman for the foundation.

Former ‘Sopranos’ Star Ordered To Pay Up

Posted: June 11th, 2009, 8:48am PDT

After slimming down and signing a deal to endorse weight-loss products, Vito Spatafore wound up six feet under. After slimming down and signing a deal to endorse weight-loss products, Joe Gannascoli, Spatafore’s portrayer on the hit show “The Sopranos,” was hit with a lawsuit in bankruptcy court and ordered to pay his fair share of $260,000 in damages. Lucky for Gannascoli, art doesn’t always imitate life.

A federal bankruptcy judge in New Jersey last month found in favor of dietary supplement maker NVE Inc. in its lawsuit against Gannascoli for his failure to live up to his endorsement deal. According to NVE, the company brought Gannascoli on board in 2003 after his use of NVE products helped him lose weight. The contract required the actor’s participation in 12 NVE events, 12 radio appearances, four television commercials and four print ads. Through the years, Gannascoli received more than $300,000 from NVE, including a $150,000 “celebrity fee” upon signing the contract.

But according to NVE, the actor only completed a portion of his personal appearances, went on one radio show (Howard Stern) and didn’t work on any TV or print ads. The company also alleged that at a trade show, Gannascoli “socialized with competitors” of NVE rather than working the crowd on NVE’s behalf. NVE said it continued making payments to him despite his “irresponsible behavior” because it believed he’d eventually come around. But he didn’t, NVE said, and eventually the company discovered Gannascoli was accepting payments from NVE while simultaneously accepting payments from rival JEC Nutrition and H57 Hoodia to endorse their products. NVE sued Gannascoli and the two competitors in July 2006, and all three denied the company’s allegations. Gannascoli countersued NVE for continuing to air his radio ads after he said he terminated his endorsement deal with NVE.

But on May 26, bankruptcy Judge Novalyn L. Winfield ruled that Gannascoli, JEC Nutrition and H57 are jointly liable for the $260,000 in damages she awarded to NVE.

The Daily Docket: Chrysler Sale Closes

Posted: June 11th, 2009, 6:50am PDT

The “New Chrysler” completed its partnership with Fiat SpA on Wednesday, The Wall Street Journal reports.

Delphi Corp.’s plan to sell its assets hit a snag Wednesday after a judge required the auto supplier to conduct an auction and provide more details about its proposed sale. Read the Daily Bankruptcy Review story here.

A senior Obama aide defended the president’s auto industry rescue Wednesday, saying the administration has acted strictly as an investor in overseeing the bankruptcy reorganizations of General Motors and Chrysler, WSJ reports.

The National Law Journal thinks the U.S. Supreme Court may have to deal with GM’s bankruptcy this summer.

Crescent Resources LLC, a real-estate developer owned by Duke Energy Corp. and Morgan Stanley’s real-estate fund unit, filed for Chapter 11 bankruptcy protection, according to WSJ.

Two companies are suing Lehman Brothers Holdings Inc. for more than $190 million, alleging that the failed investment bank misled them into investing in auction-rate securities then left them holding millions of dollars in assets that they can’t sell. Here’s the DBR story.

An Excuse To Skip Those Pool Parties

Posted: June 10th, 2009, 2:23pm PDT

Swimmers may hesitate before they splash into the water this summer now that a bankruptcy court dispute has slowed delivery of pool chemicals.

Chemtura Corp., a leading maker of pool and spa chemical products, filed a lawsuit in bankruptcy court demanding that a vendor immediately deliver raw materials the company ordered, saying otherwise the industry could face a shortage of algae and bacteria-fighting agents.

Without the supplies Chemtura, “will no longer be able to fulfill the orders of its key customers, who themselves will run out of product during the busiest part of the year,” the company said in court documents.

Chemtura, which is operating under Chapter 11 protection, alleges Occidental Chemical Corp. has breached its contract for failing to deliver a type of chlorine and other necessary chemicals.

Chemtura said it would run out of supplies this week. The company has asked for a restraining order that would force Occidental to immediately deliver a fresh batch of supplies.

Occidental countered, in separate court papers, that Chemtura failed to accurately forecast its needs and the vendor is now busy supplying products to other customers.

Chemtura “cannot convert what are anticipated to be short (if any) delays” in chemical supply shipments into violations of bankruptcy rules, especially considering that Chemtura “is responsible for the scheduling jam it says it is in,” Occidental said in court papers.

Chemtura sells pool cleaning products under brand names such as BioGuard, Aqua Chem and Pool Time.

Delphi And The ‘Guys In Suits’

Posted: June 10th, 2009, 11:49am PDT

Associated Press

In all the hustle and bustle over General Motors’ bankruptcy filing, you may have missed big news in the Chapter 11 case of its former parts unit and largest supplier – Delphi Corp. On June 1, after GM filed its own bankruptcy petition, Delphi announced it had finally reached a deal on a new plan to end its nearly four-year-old Chapter 11 case. Delphi, GM, the Treasury Department and Platinum Equity, the private equity firm that’s agreed to buy Delphi, are in court today in New York to seek approval to move forward with the deal.

There’s just one problem: Delphi’s bankruptcy lenders are having none of it. They’re accusing GM, Delphi, Platinum and the Treasury Department of rigging the deal in secret and leaving them out of the loop. They want rival bidders to have a chance to make an offer for Delphi, but the plan proposed by the company doesn’t allow for the usual bankruptcy-auction process. Daily Bankruptcy Review’s David McLaughlin is covering the court hearing and says it appears that Judge Robert Drain is also confused about the decision to bypass an auction.

“As far as I’m concerned, they’re just guys in suits,” said Drain. “Why can’t other guys in suits pay more?”

For its part, Delphi claims that the reason for the auction-less sale is GM’s insistence that it approve the buyer. GM, you see, is essentially funding the sale with a $2 billion cash injection. The auto maker has also agreed to take on $1.6 billion of Delphi’s pensions. Platinum itself will contribute $250 million in cash and another $250 million loan to fund the deal. GM is also providing a $500 million loan.

Drain, however, isn’t sure why Platinum is the only buyer GM will sign off on.

“I don’t know what makes Platinum acceptable to GM and why Platinum is unique,” he said. “Unless I hear more, there’s something going on here that doesn’t to me make sense…Unless I’m missing something, I don’t see why there shouldn’t be an opportunity for someone to come out of nowhere or somewhere” and bid.

UPDATE: Drain is requiring Delphi to conduct an auction.

2ND UPDATE: Platinum sent us a statement from its CEO, Tom Gores: “Platinum Equity is uniquely equipped to help Delphi in ways no other investor can. The automotive sector is in a period of extraordinary transition. Financial investment is critical, but true solutions for the industry will be about more than money. Struggling companies need partners with strong operational capabilities, a deep understanding of their business and a track record of creating real value.”

The 11 Words You Can Say On ION Stations

Posted: June 10th, 2009, 10:44am PDT

Those seven naughty words the late comedian George Carlin identified back in the 1970s as the ones you could never say on the air are still taboo, at least on television stations owned by broadcaster ION Media Networks, which filed for bankruptcy protection last month.

If you don’t know what the words are we’re not going to tell you. But you can take a look at ION Media’s Standards & Practices if you want to know what can’t get away with and, perhaps more surprisingly, what you can.

Carlin’s routine, which satirized broadcast indecency rules, eventually led to a 1978 Supreme Court ruling upholding a ban by Federal Communications Commission that remains in effect.

ION included the off-limits list in a lawsuit against a film distributer that supplied the broadcaster with seemingly wholesome fare like “Kenny Rogers Christmas” and “Sabrina The Teenage Witch.” RHI Entertainment Distribution LLC provided ION with movies and mini-series broadcast and sold the advertising time covering those broadcasts. ION is suing the distributor for money it says RHI owes it under the deal.

Formerly known as Paxson Communications Corp., ION had recently shifted its network focused on family-friendly religious content to a network that appeals to a broader audience.

Maybe that’s where “Passion of Ayn Rand” comes in, although Bankruptcy Beat can’t figure out if it’s supposed to be a romantic comedy or horror flick.

ION, which says it’s the owner of the U.S.’s largest group of broadcast television stations, filed for bankruptcy protection last month after reaching a debt-for-equity deal with a group of its lenders that slashes some $2.7 billion in debt off the company’s books.

The Daily Docket: Chrysler Stay Lifted

Posted: June 10th, 2009, 6:53am PDT

The Supreme Court on Tuesday lifted the stay that was blocking Chrysler LLC’s sale to a company managed by Italy’s Fiat SpA, The Wall Street Journal reports.

WSJ profiles Thomas Lauria, the White & Case lawyer who represented dissident lenders in Chrysler’s bankruptcy.

Former General Motors board member and Chrysler executive Jerry York called the bankruptcy filings by the two auto makers “absolutely necessary,” Reuters reports.

Michigan is working to remake itself amid the auto industry’s downturn, the New York Times reports.

Congressional Republicans are poised to propose financial regulation reforms that would expand the Bankruptcy Code to deal with failing financial firms, according to Reuters.

The Fontainebleau Las Vegas filed for bankruptcy protection Tuesday after lenders refused to keep funding the $3 billion construction project, the Miami Herald reports.

A judge has consolidated two bankruptcy cases involving Bernard Madoff’s investment firm and personal assets, according to the Associated Press.

Unsecured creditors moved to block Hayes Lemmerz International Inc.’s $200 million bankruptcy loan on the grounds the deal is too costly and dooms them to get little or nothing back on their debts. Read the Daily Bankruptcy Review story here.

Stay Classy, Sacramento

Posted: June 9th, 2009, 2:33pm PDT

These are changing times for the retail industry, which has been battered by the economic downturn and corresponding drop in consumer spending. Some malls are taking it all in stride, swapping Sharper Image for Brookstone and Kohl’s for Mervyn’s without a second thought. But at least one shopping center is having a tough time letting go.

Country Club Shopping Center in Sacramento, Calif., is refusing to welcome proposed new tenant Forever 21 to a space formerly occupied by West Coast department store Gottschalks. The company placed its leases and some property on the auction block on May 28 as part of its bankruptcy proceedings, and Forever 21 – known for selling the latest styles at cheap prices to the younger set – walked away with the Country Club Shopping Center lease, among others.

Or so it thought. The transaction still requires approval from a bankruptcy judge, and the owner of the mall, known as 2401 Butano Drive LLC, is trying to stop the sale from going through. The lease requires the tenant to be a “first-class retail department store,” the owner said in court documents.

“Landlord’s search of available Forever 21 resources does not provide any comfort,” the mall owner continued. We’re not sure exactly what “resources” they speak of – the fabulous finds section of Forever 21’s Web site? This 20% off ruffle-trim tube top? But either way, the landlord certainly seems resistant to allowing a purveyor of corsets and four-inch heels to set up shop in a space once dedicated to friendly-family shopping.

Forever 21 lacks “comparable quality, use, character and most importantly, customer traffic generation,” the landlord said, adding that its leases with many other “junior-anchor” tenants, like Ross Stores Inc. and Bed Bath & Beyond, require the anchor tenant to uphold certain standards. Because of such co-tenancy agreements, if the successor to Gottschalks doesn’t occupy enough square feet or attract a sufficient number of shoppers, the other retailers can jump ship.

“If Forever 21 were to assume this lease, the impact to the value of the shopping center could be catastrophic, especially in the current retail market where retail tenants are looking for any excuse to terminate their leases,” the owner said. “Landlord fears that junior anchors, and thereafter the remaining tenants, will likely head for the doors and landlord will have no means to stop them.”

Gottschalks, for its part, claims that Forever 21 has a right to assume the lease, stressing that the phrase “first-class retail department store” was never defined in the lease agreement.

Ex-Yellowstone Owner Fights Chapter 7

Posted: June 9th, 2009, 9:46am PDT

The Yellowstone Club’s former owner is fighting the bankruptcy court-ordered liquidation of her personal assets, arguing that she shouldn’t be punished for having “poured her heart and soul” into the Chapter 11 restructuring of the luxurious Montana development to her own financial detriment.

As Bankruptcy Beat reported last week, Edra Blixseth filed for Chapter 11 bankruptcy several months into Yellowstone Club’s own restructuring. A bankruptcy judge recently decided to convert her filing to a Chapter 7 liquidation, a move that handed control of Blixseth’s assets to an independent bankruptcy trustee. Judge Ralph B. Kirscher ordered the switch out of concern that Blixseth’s lack of insurance for her assets put creditors at risk and demonstrated how Blixseth “has abused the bankruptcy process for her own benefit without accepting any of the responsibilities required by the Bankruptcy Code and Rules.”

But Blixseth isn’t going down without a fight. Not only did she dispute the judge’s claim that she tried to take all the perks of the bankruptcy filing without the responsibilities, but she made a “heartfelt promise” that she would work hard to assure as “positive outcome as I did in the Yellowstone Club case.”

In court papers filed late Friday afternoon, Blixseth said she now has insurance to protect all her assets. She included a game plan describing how, if she’s handed back control of her assets, she’d sell off or otherwise maximize the value of various properties and work to collect payments owed to her, including current and back-spousal support under the divorce settlement she finalized with ex-husband Timothy Blixseth last year. She added that she has a bankruptcy lender that “stands ready” to fund a restructuring plan if the case is switched back to Chapter 11. She argued that the difference between a restructuring and liquidation is monumental – the former could bring in between $131 million and $176 million and pay all creditors in full, while the latter would result in “losses of tens of millions” of dollars.

The Daily Docket: Chrysler Sale In Limbo

Posted: June 9th, 2009, 6:56am PDT

The U.S. Supreme Court delayed the sale of Chrysler LLC to Fiat SpA while it decides to hear an appeal of a bankruptcy court judge’s order approving the deal, The Wall Street Journal reports.

Writing for SCOTUSblog, Akin Gump’s Troy D. Cahill says Justice Ruth Bader Ginsburg’s one-sentence temporary stay order is the “ conventional and relatively common” way individual justices maintain the status quo pending a decision on a stay application. Here’s a link, via SCOTUSblog, to the order.

Meanwhile, the Supreme Court Monday said it will decide whether a controversial new bankruptcy law violates the free speech of lawyers, according to the Associated Press.

Barclays Capital Inc. is firing back at claims that it may have shortchanged Lehman Brothers Holdings Inc. when it bought Lehman’s broker-dealer business, saying Lehman has no basis for revisiting the deal. Read the Daily Bankruptcy Review story here.

Companies on the verge of default may be more likely to file for bankruptcy protection because bondholders who hold credit default swaps may be less likely to support out-of-court restructurings, Moody’s Investors Service said Monday (read the Reuters story here).

Baker & Hostetler LLP has risen to prominence after an attorney at the firm, Irving Picard, was named trustee of Bernard Madoff’s collapsed investment firm, WSJ reports.

A Tale Of Two Facebook Pages

Posted: June 8th, 2009, 2:45pm PDT

National Hockey League Commissioner Gary Bettman might want to think twice before he tries to out-social-network the guy who introduced the world to the BlackBerry.

As evidence that the Phoenix Coyotes should stay in Arizona rather than be sold to Research In Motion Ltd. co-founder Jim Balsillie and moved to Canada, Bettman, in court papers, pointed to the passion of the “Save the Coyotes” campaign and its Web site, savethecoyotes.com.

But Balsillie appears one step ahead with his MakeItSeven.ca page that has become a social-networking juggernaut in hockey-hungry Canada.

The spirited pro-Phoenix page has bells and whistles, including Twitter feeds, a Facebook group, and “A Species on the bRink” YouTube video.

MakeItSeven has similar features, but also includes images of a renovated Hamilton, Ont., arena and financial backing from Labatt Breweries of Canada and Home Hardware stores.

Save the Coyotes is asking for donations via PayPal.

While both sites feature passionate fans, if Internet popularity has a role in deciding where the team plays, the Coyotes will be lacing up their skates next season in Hamilton.

The MakeItSeven Facebook group boasts 20,825 fans compared to Save The Coyotes Coalition’s 1,235 members.

As the Internet battle rages on, the court proceeding continue Tuesday when a hearing on if the Coyotes can be sold to a buyer that would move them is scheduled at the U.S. Bankruptcy Court in Phoenix.

Visteon Creditors Prepare For A ‘Spaghetti Western’ Bankruptcy

Posted: June 8th, 2009, 1:48pm PDT

Visteon Corp.’s bankruptcy is shaping into a “spaghetti Western” case — low budget and high violence, according to the word in the room Monday in Delaware, where unsecured creditors convened to seek seats on the official Chapter 11 committee.

The seats went to the Pension Benefit Guaranty Corp., Law Debenture Trust Co., Freescale Semiconductor Inc., Central States Pension Fund, K&S Wiring Systems, Siemens Product Lifecycle Management and Nissan Trading Corp.

In a somewhat ominous sign, the first word out of the committee was that it wouldn’t even interview for the post of financial adviser Monday. That cleared half the room at the Doubletree hotel in Wilmington, Del., where professional advisers had convened to court the big creditors, looking to get hired.

Visteon has permission to use cash for a while longer, but creditors are looking for a shootout over financing between term lenders, owed $1.5 billion, and car makers, who may or may not need to keep the company alive.

Ford Motor Co.’s offer of $125 million in bankruptcy loans won’t go far in propping up the parts maker, according to the creditor scuttlebutt. The company needs two or three or four times that amount to have a decent shot of surviving the turmoil in the automotive sector, they’re estimating.

The financing from Ford is conditional on other big customers coming through to finance Visteon’s Chapter 11 proceedings, Ford says.

How much support Visteon can get from other car makers is still up in the air. Creditors think there are others that, like Ford, will suffer if Visteon goes under, taking with it their sources of air conditioners, lighting systems and other necessities. They also suspect Visteon is soft-pedaling how dependent it really is on support from Ford, which spun it out in the first place.

Creditors who are likely to be caught in the crossfire are guessing the term lenders likely have more stomach for a bankruptcy bloodbath than Ford and the other car makers. For trade creditors, it’s a cliffhanger all the way.

Prominent Publishing House Enters Chapter 11

Posted: June 8th, 2009, 12:44pm PDT

The small Manhattan publishing house that has published books by famous foodie James Beard, film director Ingmar Bergman, Israeli president Shimon Peres and other authors from around the globe filed for Chapter 11 protection several months after the death of its owner.

Arcade Publishing Inc. on Friday filed for bankruptcy in Manhattan. Despite an “extraordinary reputation,” a number of factors have “conspired” to force the publisher into bankruptcy, according to vice president Jeannette Seaver. In court papers, Seaver said the challenges that Arcade faces as a small, independent publisher have been compounded by the economic downturn. The publisher has also struggled since the Jan. 5 death of president Richard Seaver, Jeannette Seaver’s husband.

The New York Times remembered Richard Seaver, who unexpectedly passed away at age 82 from a heart attack, as “an editor, translator and publisher who defied censorship, societal prudishness and conventional literary standards to bring works by rabble-rousing authors like Samuel Beckett, Henry Miller, William Burroughs and the Marquis de Sade to American readers.” Before establishing his own prominent publishing house, Seaver worked for Grove Press, known for publishing Beckett, Jack Kerouac and D.H. Lawrence’s controversial “Lady Chatterley’s Lover.” Seaver met wife Jeannette in Paris in the 1950s, when he was a Fulbright scholar at the Sorbonne; during his career, Seaver went on to translate more than 50 books originally written in French.

Richard and Jeannette wrote on Arcade’s Web site that they founded the company in 1988 amid “choppy waters” with the goal of bringing new writers from all over the world to the North American readers. Though the waters remain choppy today, Jeannette Seaver said she’s hopeful that Arcade, “given the opportunity… will be able to propose, confirm and consummate a plan of reorganization that will be in the best interest of its estate and all of its creditors.”

The Daily Docket: Chrysler And The Supremes

Posted: June 8th, 2009, 6:26am PDT

A group of Indiana pension funds opposed to Chrysler LLC’s bankruptcy sale is asking the Supreme Court to put the deal on hold after the 2nd U.S. Circuit Court of Appeals on Friday affirmed a bankruptcy judge’s decision to approve the sale, The Wall Street Journal reports.

E-mails show that the Obama administration pushed an alliance between Chrysler and Fiat SpA despite Chrysler’s worries about Fiat’s financial health, WSJ reports.

Tribune Co. and its creditors are in the early stages of negotiating a reorganization plan that would transfer control of the media company to its senior lenders, owed nearly $9 billion, according to the Chicago Tribune.

A bankruptcy judge Friday approved a comprehensive environmental settlement between Asarco LLC, the federal government and various states a key step in the copper miner’s bid to exit bankruptcy after nearly four years under court protection. Read the Daily Bankruptcy Review story here.

Lawyers for a group of Bernard Madoff’s Ponzi scheme victims are asking the bankruptcy court to reject the way their losses are being calculated, the New York Times reports.

An affiliate of Houston-based Men’s Wearhouse won an auction to purchase Filene’s Basement out of bankruptcy with a $67 million bid, according to the Associated Press.

Heart-Shaped Lawsuit

Posted: June 5th, 2009, 1:34pm PDT

Ultra Stores Inc., which filed for bankruptcy in April, is gearing up for a legal battle against an unlikely character: Dr. Quinn Medicine Woman.

Well, not the fictional female doctor who finds adventure – and love! – in the Wild, Wild West. We’re talking about Jane Seymour, the former actress who spends more time these days painting and designing jewelry than treating snake bites and influenza. Recently, Seymour designed the Open Hearts Collection for Sterling Jewelers Inc., which operates such mall favorites as Kay Jewelers and Jared the Galleria of Jewelry. But soon after Kay started selling the oddly shaped necklaces, bracelets, earrings rings and even keychains, Ultra debuted its line of similarly necklaces, complete with the tagline “open your heart.”

Sterling Jewelers was none too pleased. Convinced that Ultra was trying to tap into the “commercial success” its Jane Seymour designs have wrought, it filed a lawsuit against Ultra, accusing the company of copyright infringement.

“Ultra has intentionally and deliberately attempted to confuse consumers as to the source of the necklace designs,” Sterling said in the lawsuit.

Seymour’s designs are trademarked, but we can’t help but think she may have borrowed a bit of inspiration from these classic Elsa Peretti pieces and Paloma Picasso designs both from Tiffany. We’re pretty sure the Elsa Peretti necklace, coincidentally titled “Open Heart,” was around back before Seymour traded her stethoscope for a paint brush.

More Bad News For Ex-Yellowstone Owner

Posted: June 5th, 2009, 11:43am PDT

Associated Press

Edra Blixseth

Now that the bankruptcy court has approved a restructuring plan that puts Yellowstone Club into the hands of a new owner, we here at Bankruptcy Beat are turning our attention to the posh mountain retreat’s former owner.

We discovered that Edra Blixseth recently lost control of her own bankruptcy proceeding, which she kicked off more than four months into Yellowstone Club’s restructuring. On May 29, Judge Ralph B. Kirscher (the same judge who oversaw the club’s Chapter 11 proceeding) converted her Chapter 11 case to a Chapter 7 liquidation. The ruling handed the reins to Blixseth’s estate to an independent official called a bankruptcy trustee, who will be tasked with selling off Blixseth’s assets (like $2.7 million in fine art and five luxury cars including a Rolls Royce Phantom and an Aston Martin) and distributing the proceeds to creditors.

Blixseth had defended her stay in Chapter 11, arguing that Yellowstone Club’s bankruptcy was demanding most of her attention. But by mid-May, with the club’s case wrapping up, Blixseth’s attorney said Blixseth would now be “turning her attention to her own case.”

But Kirscher sided with a federal bankruptcy watchdog, Acting U.S. Trustee Robert D. Miller Jr., in ordering the move to Chapter 7. Miller argued that the switch was warranted because Blixseth ignored his “repeated requests” to provide proof that millions of dollars in assets were properly insured. In Kirscher’s ruling, he recounted a court hearing on the matter, when Blixseth told him that the request for proof of insurance was a “blessing” because she hadn’t realized that some insurance was canceled. She added, Kirscher reported, that her goal in the bankruptcy “was to take care of everyone.”

Kirscher said Blixseth’s lack of “an honest effort” to preserve the value of her assets put her creditors at risk. Through this failure, he said, Blixseth “has abused the bankruptcy process for her own benefit without accepting any of the responsibilities required by the Bankruptcy Code and Rules.”

We reached out to Blixseth’s lawyer but haven’t heard back.

The Daily Docket: GM To Finance Delphi Purchase

Posted: June 5th, 2009, 6:47am PDT

General Motors Corp. has agreed to finance a private equity firm’s buyout of auto parts supplier Delphi Corp., according to The Wall Street Journal. GM will provide more than $2.5 billion of the $3.6 billion Platinum Equity needs to buy Delphi.

Chrysler LLC dealers launched a long-shot bid to save their businesses Thursday, complaining that the auto maker’s plan to shut them down was in some cases retaliation for butting heads with the company. Read the Daily Bankruptcy Review story here.

Small auto parts suppliers are struggling amid the bankruptcies of Chrysler and GM and bigger suppliers like Visteon Corp. and Metaldyne Inc., WSJ reports.

The New York Times chats with Albert A. Koch, GM’s chief restructuring officer and vice chairman of turnaround firm AlixPartners.

GM expects to start turning a profit again in 2011 and estimates the “New GM” will be worth as much as $48 billion, the Detroit Free Press reports.

A top lawmaker is accusing Chrysler of failing to disclose and act on a $35 million offer for its Dodge Viper brand, according to WSJ.

Kramer Levin Snags GM Creditors Committee

Posted: June 4th, 2009, 2:12pm PDT

Kramer Levin Naftalis & Frankel LLP has cemented itself as the go-to creditors’ counsel in auto bankruptcy cases.

The New York law firm has been chosen to represent the unsecured creditors committee in General Motor Corp.’s Chapter 11 case. The selection comes on the heels of Kramer Levin taking on the same role in Chrysler LLC’s bankruptcy case. The firm also represented the unsecured creditors committee in the bankruptcy cases of auto suppliers Dana Corp. and Dura Automotive Systems Inc.

Kramer Levin attorneys will see some familiar faces when they sit down with GM’s creditors. The United Auto Workers union and the Pension Benefit Guarantee Corp. sit on both GM’s and Chrysler’s creditors committees.

GM’s 15-member committee also includes the agent for its bondholders, three dealerships and auto suppliers Denso International America Inc. and Inteva Products LLC.

Leading the team of Kramer Levin attorneys representing GM creditors are: Kenneth H. Eckstein, Thomas Moers Mayer, Kenneth P. Kopelman, Thomas E. Molner, P. Bradley O’Neill, Robert T. Schmidt, Amy Caton, and Bankruptcy Beat’s favorite comic-book collector, Adam C. Rogoff.

GM: Chapter 1

Posted: June 4th, 2009, 1:13pm PDT

Bloomberg News/Landov

General Motors has launched a new ad offensive that invites Americans to “see, follow and join our reinvention.” The campaign includes a slick TV commercial, which began running on Wednesday, that’s both a mea culpa and a promise to do better.

Watch for yourself, but if you’re busy, we’ll summarize: “Let’s be honest, no company wants to go through this,” an announcer says at the sun rises over New York City (home of GM’s bankruptcy case). GM goes on to explain how it got itself into this mess and how it’s going to get out of it. The company doesn’t use the words “bankruptcy” or “Chapter 11,” and it wants the viewer to know “this is not about going out of business; it’s about getting down to business” and “the only chapter we’re focused on is Chapter 1.”

The TV spot complements the new GM “Reinvention” ads that are popping up all over the place. The ads invite people to a Web site that offers a surprising amount of information about the auto maker’s restructuring plans. (And, if you click on enough links, it’ll bring you to the site that houses GM’s bankruptcy-court documents.)

Reactions to the new ad campaign are…mixed. Slate called it “pathetic” and suggested GM just keep quiet for a while, while the New York Times asked if the auto maker can “make up for decades of mistakes and misfires in a minute.” The commercial reminds BNET of a “30 Rock” joke. And from The Daily Show’s Jon Stewart: “Nothing says ‘rebirth of the American car’ like people taking the subway and a one-legged man who would rather run.”

Tumult Continues For D-Day Memorial

Posted: June 4th, 2009, 9:31am PDT

Associated Press

On Saturday, people will pause at a Bedford, Va., memorial to remember the thousands of American and other Allied troops who lost their lives on Normandy Beach 65 years ago. They’ll walk among bronze sculptures as air jets shoot water into the air to mimic the enemy gunfire that felled the troops before they even reached land. But the private organization that runs the National D-Day Memorial must confront another legacy besides the sacrifices made in one of the most storied battles in World War II – years of financial distress that threaten the memorial’s future.

The National D-Day Memorial Foundation, which runs the $25 million National D-Day Memorial, “is on the brink of financial ruin,” the Associated Press reported. Despite a trip to bankruptcy court to restructure its debt, the foundation is still grappling with a host of challenges, including reduced donations amid the recession and an inability to draw visitors given its great distance from any major city. The foundation’s president insists the memorial’s only chance of survival is to be taken over by the National Park Service or by a college or university. But no takers have emerged for the outdoor museum. (UPDATE: On Friday, Rep. Tom Perriello, D-Va., introduced legislation to make the memorial a national park.)

The memorial’s past is scarred by a seemingly constant debt load and allegations of fraud, previous reports from the AP show. After opening in 2001, the foundation was $7 million in debt thanks to construction costs. In November 2002, it sought Chapter 11 protection from creditors clamoring for payment. The filing came several months after the foundation’s former president, Richard B. Burrow, was indicted on four counts of fraud as a result of a federal investigation into the foundation’s finances. Burrow, who pleaded not guilty, went to court twice and both proceedings ended in mistrials, leading federal prosecutors to drop their case against him.

The foundation emerged from bankruptcy protection in June 2003 with a plan to raise money to pay off its debts, by then reduced to about $3.56 million. Donations took care of the rest of the deficit by 2006. But the foundation now brings in just $600,000 from visitors each year to cover $2.2 million in expenses. It has just $300,000 available to pay operating expenses and an endowment of $400,000. Layoffs and reduced hours will help bridge the gap but foundation officials say that won’t be enough.

Foundation President William McIntosh, 65, said he wants to ensure the memorial will live on before his contract ends next year. “It is in a very good position to move to the next level, to open a new chapter on its story,” he said.

The Daily Docket: GM, Chrysler Defend Dealer Cuts

Posted: June 4th, 2009, 7:23am PDT

Executives of General Motors Corp. and Chrysler LLC defended plans to trim their dealer networks at a congressional hearing Wednesday, The Wall Street Journal reports. Chrysler goes to court Thursday to seek approval to cut its ties with hundreds of dealerships.

Chrysler LLC won court approval Wednesday for a key settlement in which former owner Daimler AG will forgive nearly $2 billion in loans to the auto maker and pay $600 million into its pension plans. Read the Daily Bankruptcy Review story here.

Ford Motor Co. could be at a competitive disadvantage when rivals GM and Chrysler exit bankruptcy protection, according to USA Today.

In the midst of a recession that’s driven many companies into Chapter 11 bankruptcy protection, U.S. lawmakers are considering amending the Bankruptcy Code to improve restructuring companies’ chances of survival. But such measures, experts say, have taken a back seat to other legislative goals. Here’s the DBR story.

The number of businesses seeking bankruptcy protection dipped 8% over the last month, but filings still remain far above levels seen in 2008, according to DBR.

A new Harvard University study found that medical bills and lost wages for the sick and their caregivers contributed to 62% of all bankruptcies filed in 2007, the Los Angeles Times reports.

Now Departing: GM’s Corporate Jets

Posted: June 3rd, 2009, 2:58pm PDT

The “new” General Motors Corp. will have fewer brands, fewer dealers and seven fewer corporate jets.

The auto maker is seeking the use the powers of the bankruptcy court to break leases on its fleet of executive aircraft, including two Gulfstream V and five Gulfstream G350 jets.

It’s an unceremonious dismissal for a luxurious fleet that drew the ire of Congress when then-Chief Executive Rick Wagoner and his Big Three buddies flew in private jets to Washington to ask for a tax-payer bailout.

“It’s almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo…I mean, couldn’t you all have downgraded to first class or jet-pooled or something to get here?” Rep. Gary Ackerman, D-N.Y., asked at a hearing last November.

The jets, as it turned out, lasted longer at GM than Wagoner. He was forced out as CEO in March.

Chrysler LLC, which filed for Chapter 11 protection on April 30, moved to break leases on its corporate jet fleet last month.

GM filed the prices and lease payments for its jets under seal, but the company is likely giving up a fleet once valued at nearly $250 million.

A new Gulfstream G350 jet sells for about $30 million, depending the on the level of features. The aircraft is capable of reaching any point in the continental United States from Washington, non-stop.

The Gulfstream V, which is no longer produced, could handle GM’s international travel needs with nearly twice the range of the G350. It was called the first long-range business jet when it debuted in 1995. The jet sold for about $50 million.

The aircraft could seat up to 19 passengers, but is more comfortable for eight, leaving plenty of room for couches, a conference table, a shower and other amenities.

Before GM dumps the jets, maybe it should ask its soon-to-be largest shareholder if it could use them. The C-37A military jet is a modified version of the Gulfstream V that the U.S. government uses to shuttle top officials.

Aloha Means Goodbye

Posted: June 3rd, 2009, 11:59am PDT

Associated Press

Hawaii’s already-struggling tourism industry took another hit with two recent Chapter 11 filings, the latest in a string of bankruptcies and shuttered companies that began in 2008. Hawaii Superferry Inc., which sought to provide high-speed passenger and vehicle ferry service between the state’s four main islands, and the Lotus at Diamond Head, a boutique hotel in Waikiki, each sought Chapter 11 protection last week.

According to the Honolulu Advertiser, Hawaii Superferry’s filing came after a state Supreme Court ruling caused the company to shut down in March, leaving it without revenue to help it service the $2.9 million that just came due. The ruling declared as unconstitutional the state law that allowed Hawaii Superferry to operate without completing an environmental impact study. As for the Lotus at Diamond Head, the Honolulu Star-Bulletin reports that the filing heads off a June 12 foreclosure auction that the hotel’s lender won the right to hold after the hotel defaulted on a $5 million loan.

The two companies join a growing list of other tourism-related businesses that have filed for bankruptcy in recent months, namely iconic retailer Hilo Hattie, commercial airline Aloha Airlines and helicopter tour operator Air Kaua’i.

Of those five companies, three have halted operations: Hawaii Superferry, Aloha Airlines and Air Kaua’i. And Hilo Hattie, which entered Chapter 11 protection in October, is fighting to hang on, according to the Star-Bulletin. The seller of those bright Hawaiian shirts and dashboard hula girls has a $1 million offer for its seven stores from rival retailer Maui Divers Jewelry, which bankruptcy Judge Robert J. Faris, at a June 22 hearing, will weigh against ordering the retailer’s liquidation.

The Daily Docket: 2nd Circuit Takes Chrysler Appeal

Posted: June 3rd, 2009, 7:22am PDT

The 2nd U.S. Circuit Court of Appeals late Tuesday agreed to hear an appeal of Chrysler LLC’s sale to a company controlled by Italy’s Fiat SpA, according to The Wall Street Journal. Oral arguments will begin Friday.

SemGroup LP has picked up support for its bankruptcy-exit plan from unsecured creditors but is still at odds with oil producers, an attorney for the troubled energy company said Tuesday. Read the Daily Bankruptcy Review story here.

J.G. Wentworth won confirmation of its prepackaged Chapter 11 balance sheet restructuring, clearing the way for the settlement-buyer to exit bankruptcy just weeks after filing for protection. Here’s the DBR story.

U.S. distressed debt has become the best performing asset class, with returns of 39.5% year-to-date, according to Reuters, via DealBook.

The Phoenix Business Journal chats with Research In Motion Chief Executive Jim Balsillie, who’s trying to buy the NHL’s Phoenix Coyotes out of bankruptcy.

Greenberg Traurig is facing a malpractice investigation by the bankruptcy estate of failed law firm Heller Ehrman, the Recorder reports.

Balsillie Says He Can Afford Coyotes, But Phoenix Can’t

Posted: June 2nd, 2009, 2:50pm PDT

Reuters

Blackberry mogul Jim Balsillie touted his substantial personal wealth and Canada’s love of hockey while painting Phoenix as a city with a struggling economy that couldn’t care less about the sport, in documents filed with National Hockey League seeking to purchase the Phoenix Coyotes out of bankruptcy and move the team to Hamilton, Ontario.

In his application to buy the Coyotes, Balsillie assured league officials that he’d have no problem coming up with the $212.5 million he offered for the team. The application said Balsillie’s personal net worth exceeds C$3 billion ($2.78 billion).

The application sent to the league was also filed with the U.S. Bankruptcy Court in Phoenix. The Coyotes filed for Chapter 11 protection on May 5. A court hearing to determine if the team can relocate is scheduled for June 9.

The relocation application described Hamilton as a location where a NHL team would thrive, saying that 66% of Hamilton area residents strongly support brining an NHL franchise to the city.

Meanwhile, the application documents the Coyotes’ failure to capture the hearts (and dollars) of Arizona sports fans.

The application cited a survey that said only 20% of Phoenix-area residents follow the NHL on a regular basis, while 53% of those surveyed said they follow the National Football League and 45% said they are fans of Major League Baseball.

That lack of interest has led to sparse attendance at hockey games. Last season, the Coyotes ranked 28 among 30 NHL teams for attendance. And while the average paid attendance last season was 14,866, nearly 4,000 of those ticketholders often didn’t actually show up to the game, meaning the team missed out on parking, food and merchandize revenue.

The team has never been profitable since it moved to the Valley of the Sun from chilly Winnipeg in 1996.

Balsillie’s application also questioned if the Phoenix area can financially support the Coyotes in addition to three other professional teams and Arizona State University athletics.

Phoenix has the 9th highest rate of foreclosures in the country and a 7.7% unemployment rate in April. Balsillie says these numbers show that the region doesn’t have the economic muscle to support its least favorite sports team.

Balsillie, however, didn’t mention that Hamilton’s unemployment rate climbed to 8.8% in March, as the city struggles with the contracting steel and manufacturing industries.

Nascar Hits Speed Bump With GM Bankruptcy

Posted: June 2nd, 2009, 10:20am PDT

Associated Press

People across the country are feeling the impact of General Motors’ bankruptcy filing: plant workers in Michigan, car dealerships in California and, of course, the Nascar fans in Texas.

Yes, Nascar fans are experiencing the sting of bankruptcy just like everyone else. Both GM and Chrysler were major sponsors of the racing league (some estimates put Nascar’s investment at $125 million) and their restructurings could spell trouble for Nascar.

GM has already cut back on its sponsorships, dropping four of its 12 deals last July, and more contracts could end up on the chopping block as the company navigates its bankruptcy proceedings. Plus, with the U.S. taking a 60% stake in GM, the company could be more prone to scrutiny from government officials like Massachusetts Congressman Barney Frank, who has questioned whether companies should be spending their government money on sports promotions, according to ESPN.

Still, prominent figures in the sports industry say they’re confident this isn’t the end of GM’s longstanding relationship with Nascar.

“My Plan A is Chevrolet. My Plan B is Chevrolet. And my Plan C is Chevrolet,” Nascar team owner Rick Hendrick told ESPN’s Ed Hinton on Sunday, when asked what he would do if GM could no longer pony up the promotional spending it has showered on his team for years.

Hendrick seems to have convinced Hinton, who argued in his column that no matter who owned the car company, it would still be inextricably intertwined with Nascar.

“The government, no matter how recalcitrant, will have no choice but to understand that if GM wants to sell cars it must race,” Hinton wrote.

The Daily Docket: A Brand New Day

Posted: June 2nd, 2009, 7:15am PDT

The Wall Street Journal chronicles the fall of General Motors.

In a WSJ op-ed, Paul Ingrassia offers his theory on what went wrong at the iconic American car company.

Meanwhile, GM announced a tentative deal to sell its Hummer brand, WSJ reports.

Delphi Corp., GM’s former parts unit that’s been languishing in bankruptcy for years, unveiled a new plan to exit Chapter 11 protection by selling most of its assets and jettisoning its pension liabilities. Read the Daily Bankruptcy Review story here.

Pardus Capital Management halted investor redemptions early last year so it could conduct an orderly liquidation of its positions. Visteon Corp.’s bankruptcy filing last week is an example of market turmoil that’s complicating that strategy, WSJ reports.

Manic Monday: A GM Roundup

Posted: June 1st, 2009, 2:55pm PDT

Reuters

As expected, General Motors Corp. entered bankruptcy protection Monday. It now has more than $170 billion in debts. It was dropped from the Dow Jones Industrial Average. Sixty percent of it will be controlled by the U.S. government. But thank goodness, at least NASCAR will still be involved.

President Barack Obama says the government is getting involved financially only to help the company get back on its feet, according to the Wall Street Journal. GM’s restructuring plan, Obama says, is achievable and “will give this iconic company a chance to rise again.”

The government’s control over GM is not without its critics, however. According to the Detroit Free Press, Republican National Committee chairman Michael Keele called the government’s 60% stake in GM a “handout to the union cronies who helped bankroll [Obama’s] presidential campaign.” Despite Obama’s insistence that the government will not influence managerial decision, Thomas Donohue, president and chief executive of the U.S. Chamber of Commerce, is concerned the government may influence “production, product, workforce, and management decisions in ways that could…put politics and special interests above sound business strategy, and disrupt our nation’s trading relationships across the world.”

Exactly how severely GM’s bankruptcy will affect the U.S. economy is unclear, but millions of Americans will be personally affected, whether it be financially or emotionally. Investors will lose big bucks. The UAW may have to ratify its contract yet again. At least a dozen dealers will shut down, suppliers will cut back and thousands of people will lose their jobs.

GM’s iconic status is no doubt tugging on many heartstrings; it seems nearly everyone’s lives have been affected by GM at some point. In a New York Times photo gallery of readers’ cars, Richard Roberts said he was “20 years old and one happy puppy” when he got his 1954 Corvette. According to the NYT’s James G. Cobb, “The GM cars of my memories were, like most folks’, thoroughly unexceptional. Yet for many of us, the cars left such an impression that years later they remain part of our identity, like long-gone relatives or once-beloved pets.” USA Today notes that GM’s bankruptcy filing “is prompting a lot of introspection about the downfall of what had been America’s largest and most admired corporation.”

NYT says that the bankruptcy of GM, a “once-proud auto giant that helped to define the nation’s car culture and played a part in creating the American middle class,” was part of something that Obama said would be difficult for Americans but would ultimately result in a stronger, more viable company. But right now, according to CNN, the mood inside GM’s iconic Detroit headquarters is rather grim.

Divine Intervention Sought For GM

Posted: June 1st, 2009, 1:08pm PDT

When it comes to the fate of General Motors and its employees, some people are appealing to a higher power than a bankruptcy judge. The leader of Detroit’s Roman Catholic community sent out a prayer in a press release today seeking a little divine intervention for the troubled company.

Archbishop Allen H. Vigneron of the Archdiocese of Detroit offered this prayer for GM: “The news concerning General Motors adds to the disruption and uncertainty already faced by many of our fellow citizens. All of those impacted by these latest developments are in my prayers. I invite the Catholic faithful to join with me as we implore the Blessed Virgin Mary, Mother of Perpetual Help, for her comfort in these times of economic distress. And we humbly ask for her intercession with Jesus, her Son, to strengthen all of those bearing the burdens of the challenges before us.”

Vigneron’s prayers might get a little help at the end of the month when he heads to Rome for a special ceremony with Pope Benedict XVI. Vigneron told the Detroit News that in an audience with the pontiff, he’ll ask Pope Benedict to keep Motor City’s residents in his prayers amid the economic crisis that’s hit their town especially hard.

“The first thing I will ask is for the pope to pray for all of us,” he said.

BearingPoint, PGA Reach A Deal

Posted: June 1st, 2009, 9:43am PDT

The BearingPoint Inc. name will be scratched off the benefactor’s pavilion and the dining chalet at upcoming golf tournaments now that consulting firm and PGA Tour Inc. have ironed out their differences.

Call it a sponsorship mulligan.

Only six months after signing a marketing deal, professional golf’s top circuit agreed to release BearingPoint from its obligations in exchange for a $4 million unsecured claim in the McLean, Va., company’s bankruptcy case.

BearingPoint’s bankruptcy case, which has led to the company being sold off in parts to former competitors, eliminated the firm’s need to promote itself at high-profile golf tournaments.

The PGA Tour, however, most likely won’t recover the full amount it’s owed as unsecured creditors rarely recover 100% in bankruptcy cases. The tour was listed as BearingPoint’s sixth-largest unsecured creditor in the company’s February Chapter 11 bankruptcy filing.

In December 2008, BearingPoint signed an agreement with the PGA to have its name attached to the benefactor’s pavilion at the Barclays Tournament in August and to provide the dining chalet at the Tour Championship in September.

The two sides agreed to clear each other of their respective obligations and liabilities, according to court papers. No word however of who will now protect benefactors from raindrops or serve hot dogs along the 18th green.

The Daily Docket: GM Steers Into Chapter 11

Posted: June 1st, 2009, 7:06am PDT

General Motors filed for Chapter 11 bankruptcy protection Monday, as expected. Judge Robert Gerber, who handled the Adelphia Chapter 11, has been assigned GM’s case.

A bankruptcy judge late Sunday said Chrysler LLC can move forward with the sale of its assets to a new company managed by Fiat SpA, The Wall Street Journal reports.

Auto parts suppliers are worried about GM’s bankruptcy, according to the Washington Post.

Visteon Corp. has big customer Ford Motor Co. signed up to provide a “substantial” bankruptcy loan, but other customers are wary of putting up money to fund production for their rivals, an attorney for the company said Friday. Read the Daily Bankruptcy Review story here.

National Hockey League Commissioner Gary Bettman said the league was within “20 minutes” of completing a deal to resolve the Phoenix Coyotes’ financial woes when it filed for Chapter 11 bankruptcy protection, USA Today reports.

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