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WSJ.com: Bankruptcy Beat (72)

Philly Newspapers Ad Sparks Creditors’ Ire

Posted: August 31st, 2009, 1:04pm PDT

A new advertising campaign in the Philadelphia Inquirer seems to have missed its mark with at least one reader.

Ben Logan, an attorney for unsecured creditors in Philadelphia Newspapers LLC’s bankruptcy case, was none too happy to discover that the publisher had taken to its own pages to tout its reorganization plan.

“It’s highly inappropriate,” Logan said after a hearing in Philadelphia bankruptcy court on Friday.

The “keep it local” advertisements – which ask questions like “why will out-of-town corporate ownership be a disaster?” – could discourage other bidders from throwing offers into the ring, Logan said, thereby stifling competition and the possibility of a higher price tag for the media company’s assets.

“It’s not a publicity campaign in favor of the sale process,” said Logan, a partner at O’Melveny & Myers LLP. “It’s a publicity campaign in favor of the sale to the stalking-horse bidder.”

Philadelphia Newspapers’ choice for stalking-horse bidder (a judge must still approve the auction rules) is a group of local investors led by homebuilder Bruce Toll. The investors, many of whom were involved with the 2006 leveraged buyout of Philadelphia Newspapers, are offering to pump $35 million in cash into the company and fund a $17 million letter of credit.

Philadelphia Newspapers isn’t the only group that has aligned itself with the offer from the local investors. Unions representing hundreds of Philadelphia Newspapers employees have joined the cause too, launching their own advertising campaign in support of the bid. And, like the earlier ads that appeared in the Inquirer, the unions aren’t afraid to take a few jabs at the lenders also vying for the company.

“It is clear that to the Out-of-Town Creditors, the employees of The Inquirer and Daily News and their families are nothing more than numbers on a balance sheet,” the ad reads.

William Jefferson Files For Bankruptcy

Posted: August 31st, 2009, 10:30am PDT

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Former U.S. Rep. William Jefferson and his wife, Andrea Jefferson, have filed for Chapter 7 bankruptcy protection, as the former congressman readies himself to face a forfeiture hearing in his federal corruption case.

In the Chapter 7 petition, filed last week with the U.S. Bankruptcy Court in New Orleans, the Jeffersons list assets and debts in the $1 million to $10 million range. Among the Jeffersons’ creditors is law firm Trout Cacheris, which is defending William Jefferson in his criminal case.

According to the Times-Picayune, Jefferson, formerly a Democratic congressional representative of Louisiana, faces the forfeiture hearing because a jury found that he and his family received $470,000 and more than 30 million shares of stock proceeds as from criminal activities. Earlier this month, he was convicted on 11 of 16 federal corruption charges.

Jefferson has been the subject of a criminal investigation for more than four years. According to the Washington Post, the investigation began in March 2005 and became public knowledge on Aug. 3, 2005, after FBI agents raided his homes in New Orleans and Washington, where they found $90,000 cash in his freezer.

The Daily Docket: Freedom To Enter Chapter 11

Posted: August 31st, 2009, 6:28am PDT

Freedom Communications Inc., the owner of the Orange County Register, is expected to file for bankruptcy protection this week, The Wall Street Journal reports.

Chemical company Huntsman Corp. has agreed to buy Tronox Inc. out of bankruptcy for $415 million, according to WSJ.

Much of Tribune Co.’s top management could remain in place when the media company exits bankruptcy protection, the New York Times reports.

The publisher of the Philadelphia Inquirer has agreed to independent oversight of an auction that will determine who controls two of the country’s major newspapers. Read the Daily Bankruptcy Review story here.

Lehman Brothers’ European businesses plan to file claims for as much as $100 billion in the U.S. bankruptcy case of their former holding company, Financial Times reports.

Chrysler Group LLC, which emerged from bankruptcy protection in June, is looking beyond its longtime ad agency, Omnicom Group, according to WSJ.

The Internal Revenue Service has filed $3 billion in claims in Nortel Networks Corp.’s Chapter 11 case, Reuters reports.

Lehman to Chicago Schools: Pay Up!

Posted: August 28th, 2009, 2:36pm PDT

It’s back-to-school time, and Lehman Brothers Holdings Inc. is celebrating by seeking to force the Chicago Board of Education to pay it about $1.2 million under a soured derivatives deal.

The Chicago school board isn’t too happy about that. It says Lehman defaulted on the derivatives deal – an interest rate swap tied to variable rate bonds issued by the board – when it filed for bankruptcy protection in September 2008.

Lehman hasn’t made any payments to the board since the bankruptcy filing but is demanding the board pay up. And that has the board steamed.

“Their failure to perform excuses our failure to perform,” said Jeff J. Friedman, a partner at Katten Muchin Rosenman LLP who represents the school board.

Under the deal, the board made semiannual payments to Lehman at fixed rate while the bank maid monthly variable rate payments to the school board, allowing the board to hedge its exposure to interest rate fluctuations and to control its borrowing costs. Lehman wants the school board to pay it the so-called cure costs so it can transfer the contract to a third party.

The school board is asking the bankruptcy judge overseeing Lehman’s case for a ruling declaring that it owes Lehman nothing. It also wants Judge James Peck of the U.S. Bankruptcy Court in Manhattan to block Lehman from transferring the swap agreement.

NHL’s Commitment To Arizona: One Season

Posted: August 28th, 2009, 1:59pm PDT

After fighting a deal to move the Phoenix Coyotes to Canada at every turn, the National Hockey League says if it succeeds in buying the team, its going nowhere – for the next 10 months.

The NHL, which is offering $140 million for the team, says it will only promise to its lease at Jobing.com Arena in Glendale, Ariz., until June 2010. An NHL acquisition of the team may only delay relocation for a season, unless the league finds a buyer willing to make a long-term commitment to hockey in the desert.

“If no ultimate buyer emerges in Glendale” the league may “reject the [lease] and the Glendale contracts effective as of the end of the team’s 2009-10 season,” according to court papers detailing the league’s proposed purchase agreement.

The “no guarantees” approach marks a departure from past statements by NHL Commissioner Gary Bettman, who has said he was blindsided by the Coyotes bankruptcy filing and subsequent deal to sell the team to Canadian businessman Jim Balsillie. The BlackBerry mogul wants to move the team to Hamilton, Ont.

“We fix the problems. We don’t run out on cities,” Bettman said shortly after the Coyotes filed for Chapter 11 protection.

The NHL’s plan is to acquire the team and play the upcoming season in Arizona while looking for a buyer. The lease provision exists to allow the league to run a “professionally conducted relocation sales process” if no viable local bidders emerge.

“The NHL believes this gesture will send a clear message to the fans and business people in Arizona on whose goodwill, support and trust the team relies for its success, that the team is back in business in Glendale,” the league said in court papers.

The league earlier failed to convince Chicago White Sox owner Jerry Reinsdorf to buy the team out of bankruptcy.

The NHL could face off against Balsillie’s $212.5 million bid at a Sept. 10 court-supervised auction for the team. The league, however, is trying to have Balsillie’s bid tossed before the auction.

The New, Adventurous Eddie Bauer

Posted: August 28th, 2009, 9:36am PDT

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Down jackets for the summit push? A base camp knife for impromptu backcountry repairs? This isn’t your grandma’s Eddie Bauer.

Or maybe it is. The retailer, which completed its bankruptcy sale to Golden Gate Capital earlier this month, is returning to its mountaineering roots. The chains’ “First Ascent” line – featuring insulated pants and packs designed for multi-day adventures – gets climbers from base camp to summit and then back again, according to its Web site.

Though the Eddie Bauer brand is more often associated with turtlenecks than tundra these days, it wasn’t always so. Jim Whittaker, the first American to reach the top of Mount Everest, wore Eddie Bauer gear on his journey. And Eddie himself was an “authentic adventurer,” current president and chief executive Neil Fiske said in a recent statement.

Still, it’s going to take more than a press release to get hard-core mountain climbers into a store stacked high with sweaters and slacks. So the company is taking its promotional efforts one step further, opting to sponsor the Adventure Travel Trade Association’s 2009 Adventure Travel World Summit.

“It helps provide additional legitimacy for Eddie Bauer and its reentry into the adventure travel arena,” Chris Doyle, vice president of the ATTA, said in an interview. Doyle, who once headed up Eddie Bauer’s public relations department, now helps to oversee an organization that counts travel agents, airlines, tour guides and tourism boards as its members. They facilitate excursions that range from bird-watching hikes in Trinidad and Tobago to trips to the Polar ice caps.

“These are the people that are bringing millions of travelers out into adventure worldwide,” Doyle said.

It’s no surprise, then, that Eddie Bauer is hoping to get into their good graces. As part of its sponsorship of the annual Adventure Travel World Summit – taking place this October in Quebec – the retailer is decking out attendees in its First Ascent gear as they take on a “day of adventure.” Held right before the actual conference begins, the day of adventure sends participants off on, well, a day of adventure: whale watching, sea-kayaking or repelling off of a suspension bridge. And this year, they’ll be doing it all in Eddie Bauer merchandise. Turtlenecks not included.

Non-Profit’s Bankruptcy Another Blow To Newspapers

Posted: August 28th, 2009, 8:41am PDT

Like many of the newspapers it sought to serve, the Foundation for American Communications has found itself in bankruptcy. The non-profit organization that aimed to educate journalists about the beats they cover filed for Chapter 7 bankruptcy liquidation this week after charitable contributions “evaporated.”

Court papers show that the foundation, also known as FACS, filed its petition with the U.S. Bankruptcy Court in Los Angeles on Tuesday, reporting up to $50,000 in assets and between $100,000 and $500,000 in debts. FACS joins a long list of newspaper-related companies that have filed for bankruptcy - like Tribune Co., publisher of the Chicago Tribune and the Los Angeles Times, and Philadelphia Newspapers LLC, which puts out the Philadelphia Inquirer and Daily News. While FACS didn’t have the massive debt loads that drove those companies to court, it shares with them an additional source of blame for its troubles.

“Ultimately, the recession dried up FACS funding,” Mark Silverman, the chairman of FACS board, said in a statement Wednesday.

“Contributions simply evaporated at the start of this year,” added Chief Executive Robert E. Wood, “and we were unable to continue producing background learning opportunities for newspeople.”

Many non-profits have been suffering as individual donors cut back or altogether stop giving, faced with financial troubles of their own. But the fact that FACS counted on corporate donors in two struggling industries - automotive and print media - couldn’t have helped its cause. For example, Ford Motor Co. has contributed $100,000 or more since 2005, while Chrysler has ponied up between $50,000 and $99,999 and General Motors has donated between $10,000 and $24,999. As for newspapers, the Gannett Foundation (USA Today and local newspaper publisher Gannett Co.’s charitable arm) has been a big donor, as has major publisher McClatchy Co. And it’s probably safe to say that insurer American International Group wasn’t a big help as it dealt with a government bailout.

Founded in 1976, FACS hosted educational seminars, provided online resources and made a rolodex of scholars and experts available to help improve the quality of the stories that journalists produce. Its lack of funding is evident when comparing the number of seminars it hosted this year to last. In 2008, FACS hosted 20 – covering a wide range of topics from airline economics to the conversion to digital television. This year, it hosted just one in January - its fifth annual (and especially timely) “What Drives Detroit” event delving into the economic and technology challenges that the auto industry faces.

The Daily Docket: Trump Dealt A Setback

Posted: August 28th, 2009, 7:10am PDT

With suitors circling, Trump Entertainment Resorts Inc. Thursday lost its exclusive right to steer itself out of bankruptcy in a deal with Donald Trump and senior lender Beal Bank. Read the Daily Bankruptcy Review story here.

Chrysler Group LLC has agreed to assume legal responsibility for injuries drivers suffer from defects in vehicles produced before the auto maker emerged from bankruptcy protection on June 10, The Wall Street Journal reports.

Billionaire investor Wilbur L. Ross says he’ll invest in troubled financial institutions now that the Federal Deposit Insurance Corporation has decided not to impose strict capital standards on private equity buyers, according to DealBook.

The trustee liquidating Bernard Madoff’s firm is asking a bankruptcy judge to decide if his victims are entitled to any of the phony profits listed on their account statements, according to the New York Post.

Republic Airways Chief Executive Bryan Bedford is meeting with Frontier Airlines workers, the Denver Post reports.

A bankruptcy judge Thursday approved Michael Vick’s plan to repay more than $20 million he owes to creditors ahead of the quarterback’s first NFL game since 2006, the Boston Herald reports.

Giants Look To Recover $300M Lehman Fumble

Posted: August 27th, 2009, 1:03pm PDT

New York Giants

The New York Giants have taken a jarring $300 million hit from the collapse of Lehman Brothers Holdings Inc.

Giants Stadium LLC – a company set up by the Mara and Tisch families, the owners of the National Football League team – have filed a claim in U.S. Bankruptcy Court in Manhattan seeking to recover $301.8 million from the failed investment bank. John Mara, the Giants president and co-owner, signed off on the claim.

The company believes it’s owed the money from derivatives contracts it entered into back in 2007 with a Lehman Brothers unit related to the financing of a new football stadium. The interest-rate swap was terminated after Lehman collapsed in September of last year.

The Giants and the New York Jets are building a new $1.6 billion stadium in New Jersey that will serve as the home for both New York metro-area football teams. The new 82,500-seat New Meadowlands Stadium, is supposed to be ready in time for the 2010 season. (Check out photos of the project here.)

The stadium is being funded by owners of the two teams, but the carnage on Wall Street and the freeze in the credit markets has made financing for the eagerly anticipated project a challenge.

The Giants turned to the auction rate market, selling $650 million in auction-rate securities in August 2007 to help finance the stadium. But when that market collapsed, the team had to sell personal seat licenses to help fund the project. The Jets, owned by Johnson & Johnson heir Robert “Woody” Johnson, also tapped its fans to buy seat licenses to raise cash for the new stadium.

It’s unclear what effect, if any, the scrapped derivatives deal will have on the stadium’s completion. A spokesman for the team declined to comment and a spokewoman for the stadium project couldn’t be reached. Lehman declined to comment.

Lehman’s September 2008 bankruptcy filing ranks as the largest ever. The firm, which had a portfolio of more than 900,000 derivative contracts before its collapse, is in the process of unwinding its derivatives book and selling its “in-the-money” contracts.

The restructuring firm helping to wind down Lehman’s business said in July that the investment bank has collected nearly $6 billion from its huge portfolio of derivative contracts since the Chapter 11 filing.

Feds May Take Over D-Day Memorial

Posted: August 27th, 2009, 9:31am PDT

Associated Press

We’ve heard of government bailouts for the auto industry and banks. Now, federal officials are considering coming to the rescue of another financially troubled organization – the non-profit running the memorial commemorating D-Day.

According to the Associated Press, the National Park Service is evaluating whether it can and should add the National D-Day Memorial in Bedford, Va., to the roster of national parks, monuments and other historic sites it’s responsible for, like the Lincoln Memorial, Statue of Liberty and Yellowstone National Park.

As Bankruptcy Beat previously reported, the privately run National D-Day Memorial Foundation has been on the brink of bankruptcy for awhile. Donations have dried up amid the recession, and few visitors have paid a visit to the memorial, which isn’t located near a major city. And the $600,000 generated in visitor fees isn’t nearly enough to cover the $2.2 million in annual operating expenses.

This past June, as the foundation honored the 65th anniversary of the Allied troops’ invasion of Normandy, France, during World War II, its president urged the NPS to come to its rescue. The local congressman, Democrat Tom Perriello, introduced legislation to do just that. While the bill is pending, Perriello and Foundation President William McIntosh’s dreams have come one step closer to becoming reality.

The NPS is now considering whether a presidential proclamation can put the outdoor memorial under its jurisdiction. That method, however, has generally been used for U.S. historical sites, while the memorial commemorates an event that happened overseas. Such evaluations would normally take two years; this one is expected to be completed in two months. And while lawmakers’ prodding and extensive publicity may give the D-Day Memorial an edge, the odds aren’t in its favor - just five to 10% of such studies result in the NPS taking over the site.

“The real question is ‘What is the appropriate vehicle for keeping this park open?’” said Terry Moore, an NPS official, at a news conference. “It may or may not be the National Park Service.”

The Daily Docket: Creditors Seek Tribune Probe

Posted: August 27th, 2009, 7:14am PDT

Tribune Co.’s bondholders have asked a U.S. bankruptcy judge to let them investigate Sam Zell’s 2007 buyout of the media company, The Wall Street Journal reports.

Chrysler Group LLC is suing its former parent, Daimler AG, to prevent it from halting shipments of diesel engines and other key components, according to WSJ.

The future of Asarco LLC rests in the hands of a Texas bankruptcy judge after a two-week long confirmation hearing in the Arizona mining company’s case drew to a close Tuesday night. Read the Daily Bankruptcy Review story here.

Taylor, Bean & Whitaker Mortgage Corp.’s collapse, in part, stemmed from its inability to allay auditors’ concerns about how it was accounting for foreclosed houses, WSJ reports.

The Mashantucket Pequot Tribal Nation, the owner of the Foxwoods Resort Casino in Connecticut, is trying to restructure its debt, according to DealBook.

New Jersey gaming regulators Wednesday cleared the way for lenders led by Carl Icahn to take over the Tropicana Casino & Resort in Atlantic City, N.J. Read the Daily Bankruptcy Review story here.

Always Take the Cash

Posted: August 26th, 2009, 12:09pm PDT

Gabriele Stabile

The collapse of Lehman Brothers Holdings Inc. last September resulted in some huge losses for everyone from New York hedge funds to Norwegian pensioners.

But the bankruptcy of what was the nation’s fourth-largest investment bank also wiped out a big chunk of the collective net worth of the company’s more than 25,000 employees. Especially those employees who received their bonuses and performance awards in Lehman stock.

Take Joseph Gregory, Lehman’s former president. Gregory, once second in command at the investment bank, has filed a claim against Lehman’s bankruptcy estate for a whopping $233 million in deferred compensation in the form of performance- and restricted-stock grants.

Gregory, a longtime friend of Chief Executive Richard Fuld Jr., resigned in June of last year, a day after Lehman said it expected to lose $2.8 billon for the quarter.

Gregory couldn’t be reached for comment. Lehman Brothers declined to comment on Gregory’s claim. The bankruptcy court has set a Sept. 22 deadline for creditors looking to recover money from Lehman to file their claims.

Lehman’s Sept. 15, 2008, bankruptcy filing ranks as the largest ever. Since then the company has been unwinding its derivatives book and selling assets, including its broker-dealer business.

Bryan Marsal, the head of the restructuring firm that is helping to wind down Lehman’s business, said in July that Lehman’s U.S. units are sitting on more than $12 billion, up from about $3 billion when it collapsed last September. Much of Lehman Brothers’ obligations, such as its derivatives contracts, have seen a resurgence in market value this year.

Kennedy and the Code

Posted: August 26th, 2009, 11:18am PDT

Associated Press

A lot of ink has been spilled today about Sen. Ted Kennedy’s legislative contributions, but we would be remiss if we didn’t do our part and recall the role he played in shaping the 2005 Bankruptcy Code amendments.

DealBooks reminds us that the Massachusetts senator, who lost his battle with brain cancer late Tuesday, crafted a provision that essentially banned companies in Chapter 11 from paying bonuses to top executives to keep them from quitting.

The 2005 amendments to the Code were largely aimed at consumers, but some of the changes targeted troubled businesses. One such change was Kennedy’s amendment to block executives, or insiders, from getting so-called “retention bonuses” in bankruptcy.

Here’s what Kennedy had to say on the subject in 2005:

“(T)his legislation that we have before us cracks down unfairly on large numbers of hard-working families that are in dire financial straits because of a sudden serious illness or because their loved ones are fighting in Iraq. Yet, this bill blatantly ignores the real abuses in our bankruptcy laws: the corporate abuses that have become epidemic in recent years. It is the worst corporate misconduct since before the Great Depression.

Some of these companies were brought down by outright criminal activities. Many more of them were driven into bankruptcy by the greed and mismanagement of a small group of reckless insiders who ignored their responsibility to their employees and their stockholders alike.

Current law on corporate bankruptcy is grossly inadequate in dealing with these problems. Often, the very insiders whose misconduct brought the company down do very well in bankruptcy. The people who suffer the most are the innocent victims, the employees, the retirees.”

After the law changed, companies found it very difficult to pay bonuses to top managers while restructuring in Chapter 11. But bankruptcy lawyers found ways around the law. These days, most bankruptcy bonus plans are tied to performance targets such as earnings or sale proceeds. These incentive-based plans also have their critics, but they often pass muster with bankruptcy judges.

The Daily Docket: Colonal BancGroup Enters Chapter 11

Posted: August 26th, 2009, 6:36am PDT

Colonial BancGroup Inc., whose banking unit was recently shut down by the U.S. and sold to BB&T Corp., has filed for Chapter 11 bankruptcy protection, the Associated Press reports.

Masry & Vititoe, the personal-injury law firm that handled the water contamination case featured in the movie “Erin Brockovich,” has filed for Chapter 11 protection. Read the DBR Small Cap story here.

New York hedge fund Atalaya Capital Management won the Creative Loafing newspaper chain at a bankruptcy auction Tuesday, the AP reports.

MLB.com reports that Chicago White Sox owner Jerry Reinsdorf has withdrawn his bid for the Phoenix Coyotes.

A judge Tuesday said auto-parts supplier Lear Corp. could pay up to $20 million in bonuses to top executives once it restructures and exits bankruptcy. Read the Daily Bankruptcy Review story here.

The rising number of defaults by U.S. hotels has given birth to an industry for groups taht operate hotels seized by lenders, The Wall Street Journal reports.

Company Cleared To Test Swine Flu Vaccine Fighting Off Liquidation

Posted: August 25th, 2009, 11:47am PDT

As a new White House report raises the possibility that up to 50% of the U.S. population could contract swine flu this season, one drug maker has come a step closer to distributing a vaccine. That is, if the involuntary bankruptcy filing against it doesn’t get in the way.

Protein Sciences Corp., of Meriden, Conn., is a privately held vaccine maker that last week won federal approval to kick off clinical trials of its vaccine for the H1N1, or swine flu, virus, the Hartford Courant reported. That means Protein Sciences’ PanBlok vaccine will be tested on humans as soon as the next few weeks. Such trials have already started in Australia, where winter - and flu season - are underway.

The Food and Drug Administration’s stamp of approval doesn’t mean it will be smooth sailing for Protein Sciences, however. The company was hit with an involuntary Chapter 7 bankruptcy filing last month by three creditors owed $11.7 million. The creditors - Emergent Manufacturing Operations Meriden LLC, PSI-BV and Impact Clinical Trials - said they sought Protein Sciences’ liquidation because they’ve “lost faith” in its managers. Protein Sciences is trying to fight off the creditors, accusing them of attempting to grab the company’s valuable vaccine technology on the cheap, but the bankruptcy court will have the final say after a trial that’s slated to begin Friday.

In the meantime, Protein Sciences is gearing up to launch the six-month clinical trials before the summer’s end, a target the company’s chief executive admitted to the Courant was “optimistic.” If the company hits that mark and the trials are successful, the earliest that Protein Sciences could win federal approval to sell the vaccine is mid-2010.

The government could, however, decide to expedite the testing process, as it’s done for other pharmaceutical companies. According to ABC News, the U.S. Centers for Disease Control and Prevention expects that 45 million doses will be ready by Oct. 15 - the date White House experts believe that H1N1 infections will peak. The estimate is a substantial reduction from the 120 million doses that were originally expected to be ready by that time. Those experts further predict that in a worst-case scenario, the outbreak will cause between 60 million and 120 million Americans to take ill - and between 30,000 and 90,000 deaths.

Philadelphia Inquirer Advertises Its Future

Posted: August 25th, 2009, 8:43am PDT

In a world where print media is battling for survival, Philadelphia Newspapers still harbors one distinct advantage over its competitors as a publisher in bankruptcy protection: free advertising.

Page C8 in Friday’s issue of the Philadelphia Inquirer was emblazoned with a full-page “advertorial.” The headline, set in big, bold letters, reads: “Why is this plan good for The Inquirer?” (Notably, there was no section titled, “Why is this plan bad for The Inquirer?”)

The plan in question is a $92 million reorganization proposal filed by Philadelphia Newspapers on Thursday afternoon. The plan contemplates the sale of the company to a group of local investors, including homebuilder extraordinaire Bruce Toll of Toll Brothers, in exchange for a $35 million cash infusion and $17 million in credit.

The ad/op-ed features bullet points touting the benefits of local ownership – expanded coverage! investigative reporting! tax revenues! – and then this question: “Why will out-of-town corporate ownership be a disaster?”

The answers offered up are almost as scary as the question itself. There will be drastic job cuts, drastic reductions in news and less money for local civic organizations, according to the ad. The Inquirer could become a ward of the bankruptcy court if its heavy debt load pushes it back into Chapter 11 protection, say the authors, who we’re assuming are, in fact, Philadelphia Newspapers, mainly based on their use of the pronoun “we.”

But there is still hope, the ad promises. (Cue the theme from “Rocky.”)

“We could’ve said that we gave it our best shot and reluctantly handed over control to the creditors – hedge funds and money managers in New York, Beverly Hills and overseas – as happened in Minneapolis and is expected to happen in Chicago and Los Angeles,” the authors write. “But we made a commitment. To you. To the region. To our neighbors.”

Before you start tearing up and smudging the newsprint, Philadelphia Newspapers urges you to fill out a little form included at the bottom of the page. You’re supposed to cut along the dotted lines and send it off to “Keep It Local” (PO Box 37651, Philadelphia, PA) to indicate your support for, yes, keeping it local. And for the more tech savvy of the bunch, there’s even an online forum to express your support.

The Daily Docket: Taylor Bean Enters Chapter 11

Posted: August 25th, 2009, 6:40am PDT

Taylor, Bean & Whitaker Mortgage Corp., once one of the nation’s largest independent home-loan providers, filed for Chapter 11 protection Monday, less than three weeks after the company was forced to shutter its mortgage lending operations, which “crippled the company’s business operation.” Read the Daily Bankruptcy Review story here.

The Wall Street Journal’s Law Blog reports that the Bureau of Prisons released a statement that Bernard Madoff has not been diagnosed with cancer and is not terminally ill.

Citadel Investment Group filed a claim trying to recover as much as $470.5 million that it thinks it’s owed from contracts tied to Lehman Brothers before its collapse, WSJ reports.

Blackberry mogul Jim Balsillie has submitted a proposal to buy the Phoenix Coyotes and immediately move them to Hamilton, Ont., the Associated Press reports.

According to WSJ, the recession is forging a class of winners that have cash cushions and a willingness to spend.

Can You Pay My Bills?

Posted: August 24th, 2009, 1:39pm PDT

If the answer’s no, then cut ‘em loose. And unlike Destiny’s Child, we’re not talking about a man.

After getting tangled up in the aftermath of a legendary hip-hop feud with millions of dollars at stake, Akin Gump Strauss Hauer & Feld LLP has had enough. The law firm is seeking bankruptcy-court permission to cut ties with the creditor it’s representing in the Death Row Records bankruptcy case because more than $1.4 million in legal fees and expenses have gone unpaid for the past two years.

Akin Gump had represented Conquest Media LLC, which became a creditor of Death Row in April 2007 when it purchased two claims totaling $224.3 million from Michael and Lydia Harris. The Harrises, who later divorced, claim to be co-founders of the label with Marion “Suge” Knight and sued him to recover the money they said they invested in the label. The resulting $107 million judgment is what pushed Death Row into bankruptcy in 2006. During the Chapter 11 proceedings, Knight and the Harrises sued each other – with Knight seeking to throw out the Harrises’ claims and the Harrises’ seeking to protect them.

After several years of legal wrangling, Death Row, the Harrises (he ended up in prison, she wrote a tell-all book) and Conquest struck a settlement that won bankruptcy-court approval in June 2008. The settlement said that Conquest would hold a $30 million general unsecured claim and a $15 million lower-priority unsecured claim, setting conditions to ensure that Conquest wasn’t paid at the expense of other unsecured creditors.

But back to the present. Akin Gump, which says it has “vigorously” and “steadfastly” stuck with Conquest through the drama, says it hasn’t been paid for that work for the past two years. While Death Row’s assets have been sold, the label’s bankruptcy estate still has a lot of creditor issues to work out, and Akin Gump says it wants to cut its losses now.

“Because of Conquest Media’s failure to meet its financial obligations to Akin Gump and the likelihood that the ongoing bankruptcy and related proceedings will continue to drag on, Akin Gump has no choice but to withdraw as counsel to Conquest Media,” the firm said in court papers.

The Daily Docket: Reader’s Digest Seeks Chapter 11

Posted: August 24th, 2009, 6:56am PDT

Reader’s Digest entered Chapter 11 as part of a prepackaged bankruptcy approved by most of its lenders, The Wall Street Journal reports.

According to WSJ, Tribune Co. Friday sold the Chicago Cubs and related assets to the Ricketts family in a deal valued at $845 million.

Philadelphia Newspapers LLC is accusing its pre-bankruptcy lenders of engineering a financing pact that hijacks the publisher’s restructuring process and places it in the hands of the lenders. Read the Daily Bankruptcy Review story here.

Michael Vick will punt into U.S. Bankruptcy Court in Newport News, Va., Thursday, but he’ll be back in Philadelphia in time for the Eagles’ exhibition game that night, ESPN reports.

Six Flags Inc. plans to emerge from bankruptcy largely the property of lenders, with a capital structure dialed down to fit a grim economic scene and rewards for top leaders worth $55 million or more, new court documents say. To read more of this DBR story, click here.

The U.S. and General Motors Co. will resume inter-governmental talks after the auto maker’s board rejected a proposal to sell its Opel unit, WSJ reports.

Coyotes Hometown Says Don’t Pay Gretzky Claim

Posted: August 21st, 2009, 2:46pm PDT

The City of Glendale, Ariz., is attempting to block hockey legend and Phoenix Coyotes coach Wayne Gretzky from collecting his $9.3 million claim in the team’s bankruptcy case.

Glendale, home to the Coyotes’ rink Jobing.com Arena, said in court papers that the debts owed to Gretzky are “not enforceable obligations.” Few other details are available because most of the city’s protest was filed under seal.

The city did, however, ask for a final determination over what is owed to Gretzky before a planned Sept. 10 court-supervised auction for the team. “The amount and priority of the creditors of the [team] may be altered significantly if the Gretzky claims are disallowed or capped,” city attorneys said in court papers.

Glendale is fighting to keep the Coyotes playing in the Phoenix suburb and has sought to derail the proposed $212.5 million sale of the club to Blackberry mogul Jim Balsillie, who would move the team to Canada.

The city has worked to secure Chicago White Sox owner Jerry Reinsdorf as a buyer for the Coyotes. Reinsdorf has offered less cash for the team, but has pledged to keep the Coyotes skating in Arizona. How Reinsdorf’s $148 million offer for the team would treat Gretzky’s claims has not been made clear.

Balsillie, however, specifically took care of the National Hockey League’s all-time leading scorer, promising to make good on deferred compensation owed to Gretzky. The Coyotes coach and minority owner reportedly even offered to take a pay cut to help out the finically struggling team. And for his part, Gretzky, a.k.a. “The Great One,” has said, “For me, it’s Phoenix or bust.”

Recession Scares Morbid Industries Into Liquidation

Posted: August 21st, 2009, 1:21pm PDT

If the gory Halloween masks that Morbid Industries Inc. sells are any indication, the newly liquidating company did not come to a peaceful or easy end. But it wasn’t an ax to the head or an evil doctor that did it in. It was – cue creepy music – the recession.

The Worcester, Mass., maker of Halloween-themed items filed for Chapter 7 liquidation Wednesday, according to the Boston Herald, blaming its demise on the recession, its debt load and other pressures. Morbid Industries, which reported $100,000 to $500,000 in assets and debts in its bankruptcy petition, will now wind down its operations and start selling off assets to pay creditors.

According to the Herald, James Werme and Mark Arvanigian founded the company less than 10 years ago to celebrate their favorite holiday. Their aim, as Werme says on the company’s Web site, was to sell products that “make your guests flee in fear as they discover all the great Morbid products you’ve brought home.” Sure enough, the goodies we stumbled across online were scary enough to make us concerned about having nightmares, and they would probably make a small child burst into tears or run away. (That could be a good thing if you want to discourage trick-or-treaters from ringing your doorbell).

You can check out some of the less-disturbing items here – like the Dr. Nefarious mask, a goblin dude, a barbarian helmet and a caveman mask. Our personal favorite is the skull disco ball – perfect for the ghoul who just wants to get down tonight.

Forget Speidi; Meet Markus and Indrani

Posted: August 21st, 2009, 9:50am PDT

Watch out, Heidi and Spencer. “Real Housewives,” take cover. And “Real World” kids, you don’t stand a chance. There’s a new reality show in the works – that is, if it doesn’t fall apart amid the unscripted real-life drama of lawsuits and bankruptcy that’s currently unfolding.

High-profile photographers - and exes - Markus Klinko and Indrani have shot record covers for David Bowie and Beyoncé and just about any other celebrity you can think of, from Kate Winslet to Keanu Reeves to Jay-Z. They’re also the subjects of a new “docu-series” that the Bravo TV network is planning to air next year. According to the network, the series promises “a taste of the fast-paced world of high fashion and celebrity photography” by following the work of Markus and Indrani, “two former lovers working together 18 hours a day in incredibly high-stress environments, filled with deadlines, stretched budgets…”

Stretched budgets is right; both Markus’ and Indrani’s studios sought Chapter 11 protection from an angry creditor earlier this week. In court papers, both studios - Markus Klinko Photography Inc. and Double Exposure Studios LLC - say they turned to the bankruptcy court because they could no longer afford to defend themselves in a lawsuit the creditor filed to collect on its claim.

Creditor All Points Capital Corp., which leased and financed certain photography and equipment to Klinko’s studio, as well as a “luxury convertible Porsche sports car,” first sued Klinko and his studio in 2007 after the studio didn’t make its required payments under the financing and lease agreements. All Points sued Klinko in 2007 to force him to pay up. Despite a New York Supreme Court judge’s ruling in May 2008 that the studio owed All Points more than $335,000 (on which the judge slapped a 9% annual interest rate), the creditor says Markus Klinko Photography has refused to pay up. So All Points filed the latest lawsuit this past April, bringing Indrani and Double Exposure into the fold.

Wait, it gets better. All Points is accusing Indrani (also known as Julia I. Pal-Chaudhuri) of forming Double Exposure last year to be the “alter-ego” of Klinko’s studio, effectively shielding it from All Points’ collection efforts. The duo’s argument that they don’t have enough funds to pay up (both reported assets $0 to $50,000 in their bankruptcy petitions) doesn’t cut it, All Points said, because surely they’ll be compensated for their new TV show. Think the bankruptcy court would let a film crew in? Hey – we’d watch it!

The Daily Docket: Philly Newspapers Files Plan

Posted: August 21st, 2009, 6:48am PDT

Philadelphia Newspapers filed a plan Thursday to sell itself to a group of local investors led by a real-estate executive who was a key investor in the company’s 2006 leveraged buyout. Read the Daily Bankruptcy Review story via The Wall Street Journal.

According to WSJ, Tribune Co. says it will probably get new owners as it leaves Chapter 11 protection, which people familiar with the matter say will probably put the company in its lenders’ hands and shrink most of its debt.

The Chicago Tribune reports that the sale of the Chicago Cubs to the Ricketts family has been called “imminent” by sources familiar with the case.

According to the New York Post, Charter Communications Inc.’s efforts to restructure its debt have reached an impasse, which could result in Chairman Paul Allen’s payment of more than $1 billion in extra taxes.

Several major law firms have lined up to challenge the Federal Deposit Insurance Corp.’s proposed requirements for private-equity funds that want to buy stakes in failed banks, the Am Law Daily reports.

The publisher of Reader’s Digest magazine could enter bankruptcy protection as early as next week after making a deal to hand the company to its senior lenders, WSJ reports.

Where’s Schwarzenegger When You Need Him?

Posted: August 20th, 2009, 1:40pm PDT

Richard Foreman/Warner Bros.

Derek Anderson and Victor Kubicek produced the latest installation of the “Terminator” movies with Christian Bale cast in the plum role of resistance leader John Connor. But I bet they wish they can call upon Arnold Schwarzenegger, who famously played the butt-kicking cyborg in previous Terminator movies, right about now.

The owners of the “Terminator” franchise rights have sought bankruptcy protection for three of their companies amid a fight with an investor. Anderson and Kubicek filed bankruptcy petitions on Monday for Halcyon Holding Group LLC, Dominion Group LLC and T Asset Acquisition Company LLC in the U.S. Bankruptcy Court in Los Angeles.

According to the Los Angeles Times, the bankruptcy filings were made the same day that the two men filed a lawsuit against Santa Barbara hedge fund Pacificor, which financed their $30 million purchase of the “Terminator” rights in 2007 and lent their Halcyon production firm $9 million.

Even though “Terminator Salvation” sold $370 million worth of tickets, Anderson and Kubicek claimed they couldn’t make a payment to the hedge fund because of a lien it placed on Dominion Holdings, a company through which they earned their producing fees on the movie.

“If it were not for these allegedly illegal liens that compromised Halcyon’s liquidity, the company would not have had to file for Chapter 11 protection,” Halcyon’s bankruptcy counsel, Scott F. Gautier of Peitzman, Weg & Kempinsky LLP, said in an emailed statement to the Los Angeles Times.

A New Frontier

Posted: August 20th, 2009, 12:39pm PDT

Marshall Huebner

In these dark times, as defaults continue to rise and liquidations soar, there are bright spots.

Take, for example, the bankruptcy sale of Frontier Airlines to fellow regional carrier Republic Airways. About 16 months after Frontier sought Chapter 11 protection, a period that saw the near collapse of the U.S. economy and a sharp drop in consumer spending, the airline is poised to fly out of Chapter 11 under the wing of a strong regional carrier with ambitious plans.

Conventional wisdom would have put long odds on Frontier’s chances. The perpetually plagued airline industry has seen more than its share of crash landings in recent years (ATA, Independence, MAXjet), and things only got worse after the U.S. economy took a nosedive last fall. But Denver-based Frontier managed to survive. Bankruptcy Beat recently chatted with Marshall Huebner, the Davis Polk & Wardwell attorney who piloted the carrier through its Chapter 11 case, about what it took to keep the airline flying.

Huebner, who also led Delta Air Lines through its bankruptcy case, said Frontier is a “remarkable success story, almost entirely because of its people.” Denver, he says, was determined to keep its local carrier alive.

“The loyalty of the Denver community to its hometown airline, coupled with the Frontier’s intense determination that it simply would not be vanquished, were both genuinely amazing to experience,” he said.

Huebner cites the airline’s successful “Send Flip to Mexico” ad campaign launched in 2006. The ads featured local “rallies” to send Flip the Dolphin, one of the animals that grace Frontier’s planes, to Mexico when the airline increased its service to the country. The ads (watch them on YouTube) were a huge hit. (You’ll recall that Frontier recently won an Emmy for its newest animal-themed ad-campaign, which trumpets the carrier’s refurbished fleet.)

“It may seem like a campy example, but it shows how Frontier deeply understands its community and its community in turn understands them,” Huebner said. “And that energy has really fueled them through some pretty trying circumstances.”

In spite of the community’s commitment to the airline and Frontier’s drive to stay in business, Huebner said he wasn’t always sure the carrier would make it.

“There were periods, especially when we were looking for financing early in the case, when it was not clear that we were going to be able to pull this off,” he said. “The determination to avoid it was always there. Did we always have complete confidence that it was definitely going to reorganize? No. There were some reasonably tight times in the case.”

The turning point, he says, came after the airline secured bankruptcy financing. “I think that when we secured our first (debtor-in-possession) loan, and people stepped forward to lend us money despite the environment, that began the march upward,” he said.

Huebner believes Frontier is positioned for success with Republic’s backing. Republic won an auction for Frontier earlier this month, beating out the deep pockets of discount giant Southwest Airlines. Frontier’s executives got a hero’s welcome when they returned to Denver last week to a “water-cannon salute” and hundreds of cheering employees, according to Deal Journal.

“Frontier has proven its ability to compete successfully against two of the biggest airlines in the United States from a position of great weakness, with all the cost and baggage of Chapter 11,” he said. “Frontier’s going to come out of bankruptcy having addressed its balance sheet, and I think it has every reason to believe that, no longer hampered by Chapter 11 and with the support and balance sheet of Republic behind it, it’s going to do extraordinary things.”

The Daily Docket: Sterlite Ups Bid For Asarco

Posted: August 20th, 2009, 6:41am PDT

India’s Sterlite Industries Ltd. has raised its offer to buy U.S. copper miner Asarco LLC out of bankruptcy by about $500 million, raising the stakes in a bidding war with Grupo Mexico SAB, The Wall Street Journal reports.

The daughter of the late co-founder of General Growth Properties Inc. sued the family trust and its lawyers for malpractice and breach of fiduciary duty, blaming them for $300 million in investment losses, according to WSJ.

The BBC is producing a TV movie about the collapse of Lehman Brothers Holdings Inc., which filed for bankruptcy protection last September, according to DealBook.

Saab has exited the Swedish equivalent of Chapter 11 bankruptcy, DealBook reports.

Bankruptcy experts say restructuring companies are more frequently attempting to reinstate their top level of debt because it allows them to continue to access loans from senior lenders at the rates and terms they negotiated before filing for Chapter 11. Read the Daily Bankruptcy Review story here.

BlackBerry mogul Jim Balsille, who’s trying to buy the Phoenix Coyotes out of Chapter 11, is fighting back against the National Hockey League, saying it lets “convicted criminals” own NHL teams, the Toronto Star reports.

New Owners Revive Death Row

Posted: August 19th, 2009, 2:02pm PDT

PR Newswire

The resurrection of the legendary Death Row Records from bankruptcy is underway. The hip hop label’s new owner announced plans to not only re-release a classic album but also to produce a film powered by the label’s arsenal of songs.

It looks to be a busy fall for Toronto-based WIDEawake Entertainment Group Inc., which purchased Death Row’s assets out of Chapter 11 protection this past January. In September, Death Row is re-releasing the label’s first-ever album, Dr. Dre’s “The Chronic.” According to the Hollywood Reporter, “The Chronic Re-Lit” will include the 16 original songs that launched Dr. Dre and Death Row, plus seven new songs and unreleased video of the rapper and other artists.

In October, a new Death Row films unit will begin shooting “Sons 2 the Grave” in Toronto. The movie’s plot line centers around a “young basketball phenom returning to an embattled inner-city ghetto after two gunshots cut short his dream of an NBA career,” according to the Reporter.

“This film embodies what we’re trying to do with Death Row, to tell human stories that don’t always have happy endings, and that allow us to learn from violence and disenfranchised lives, but not glorify it,” said Lara Lavi, chief executive of WIDEawake and Death Row. For its score, Lavi said the film will rely on the thousands of Death Row songs, many of which haven’t been released.

As Lavi told Bankruptcy Beat not long after the sale won bankruptcy-court approval, there are other plans to share those songs with fans. Death Row recently said it would license songs to other films, as well as to television shows like “CSI” and to video game producers like EA Games. By the time the holidays roll around, the label hopes to have boxed sets ready of some of those unreleased songs, which include tracks by such hip-hop heavy-hitters as the late Tupac Shakur and recent reality-TV star Snoop Dogg.

Lucky Dog: Dykstra Values Pooch at $10,000

Posted: August 19th, 2009, 9:36am PDT

PR Newswire

Former slugger Lenny Dykstra claims his legal adversaries are barking up the wrong tree, but if he does have to liquidate to pay off his debts, a $10,000 German Shepherd may be available to creditors.

The one-time Philadelphia Phillies center fielder who filed for Chapter 11 protection on July 7 included the pooch on a list of his assets filed with the bankruptcy court last week.

The dog, as it turns out, ranks above several of Dykstra’s other assets. He places a higher value on the canine than his clothing, his personal effects and his ownership interests in several businesses.

Dykstra did note that his assets should all be considered half-owed by his wife, Terri Dykstra, who recently left the former all-star.

It must be hard to put a value on man’s best friend – especially while going through a divorce and a bankruptcy – but Dykstra has spoken highly of the German Shepherd before, according to the Philadelphia Inquirer.

On a June episode of HBO’s “Real Sports With Bryant Gumbel,” Dykstra showed a photo of a German Shepherd and said he intended to buy it for $10,000. We’re assuming it’s the same pup.

“That’s a world champion,” he said on the show. “That’s the only dog I’ll buy.”

The value of Dykstra’s assets, dog included, are of particular interest to creditors because the U.S. Trustee, the Justice Department official charged with monitoring bankruptcy cases, is seeking to convert Dykstra’s Chapter 11 case to a Chapter 7 liquidation.

While Chapter 11 would allow Dykstra to work out a debt-repayment plan to compensate his creditors, Chapter 7 would require him to simply sell off his assets.

Dykstra’s most valuable assets are a pair of multi-million dollar California homes. Dykstra listed his total assets at $24.6 million and his debts at $37.1 million.

The same court documents show that Dykstra has turned in the keys to a $367,000 Maybach, an ultra-luxury car, and $53,000 Porsche. Among his debts are millions owed to various creditors for the use of private jets and related services.

The Daily Docket: Chrysler Creditors Sue Daimler

Posted: August 19th, 2009, 6:56am PDT

Chrysler’s creditors say German auto maker Daimler AG intentionally defrauded them through a restructuring of Chrysler on the eve of its 2007 sale. Read the Daily Bankruptcy Review story here.

Struggling parts maker American Axle & Manufacturing Holdings Inc. said Tuesday that General Motors Co. has agreed to provide it with as much as $210 million in funding, according to The Wall Street Journal.

Grupo Mexico SAB hasn’t made any preparations for a strike if it wins the right to take copper mining subsidiary Asarco LLC out of bankruptcy, according to Bloomberg.

The judge overseeing the bankruptcy of Philadelphia Newspapers on Tuesday described the investigation of an unauthorized taping of a meeting between the company and its senior lenders as a “fine mess,” the Philadelphia Inquirer reports.

Former executives of Six Flags Inc., which is operating under bankruptcy-court protection, have offered to come back and manage the company, Reuters reports.

A partnership led by Tishman Speyer Properties has defaulted on the debt tied to one of the largest office portfolios in the Washington, D.C., area, WSJ reports.

Lang Bleeds Green and Gold

Posted: August 18th, 2009, 2:24pm PDT

Associated Press

If sub-zero temperatures, last year’s 6-10 season and Brett Favre’s messy departure can’t temper a cheesehead’s devotion to the Pack, it’s no surprise that bankruptcy won’t, either. Just ask The Lang Cos., the Delafield, Wis., maker of calendars, stationery and greeting cards that’s suing a former executive in bankruptcy court to recover the Green Bay Packers season tickets he allegedly made off with.

The dispute centers around seats 9-12 in section 119, row 43 of Lambeau Field. According to the complaint, filed with the Delaware bankruptcy court Monday, former Lang Chief Financial Officer Timothy Toepel transferred Lang’s three-game season ticket package to his own name and refuses to transfer it back. Lang is asking the bankruptcy court to serve as referee, demanding that Toepel hand over the tickets.

It’s a touchy subject because, as Lang notes, season tickets have been sold out since 1960. Three decades often go by before fans on the waiting list get a hold of the coveted pieces of paper admitting them to the Frozen Tundra.

“Accordingly, tickets such as the Gold Package are of great value both monetarily and in status for business marketing and other purposes,” Lang said. (The Gold Package, as many Wisconsinites can tell you, refers to the tickets to Packers home games that used to be played in Milwaukee at the old baseball stadium.)

According to Lang, businesses that hold season tickets must appoint an individual contact to serve as liaison between the ticket holders and the team. That was Toepel, who had the right to request the transfer of the tickets to another company – or person. In May 2007, Lang claims, Toepel put in a request to transfer the tickets to himself without Lang’s knowledge or permission. When Lang discovered what had happened, the company told Toepel to sign the tickets back over to Lang. According to Lang, Toepel said “no.” He attributed his refusal to the Packers’ policy not to process paperwork until after the season is finished, but he promised to submit the request “as soon as the season ends.”

In an email Tuesday, Toepel said that the transfer was, in fact, approved by an authorized Lang officer. He said he has “repeatedly offered to return the season tickets upon settlement of monies owed to me.” The former employee claims to be owed $137,682.67 in unpaid vacation, salary and separation pay. According to Toepel, in 2007 and 2008 he personally paid for the season tickets and delivered them to the company. Toepel said he paid for this year’s tickets and will fork them over if he receives all the funds he’s owed.

He had this to add about the company and its private-equity majority owner: “The Packer tickets have value, but I would much rather that Catterton Partners and Lang Holdings Inc. settle my claim which they have had over two years to do prior to filing for bankruptcy.”

Florida Charity Finds Itself In Need

Posted: August 18th, 2009, 12:39pm PDT

A non-profit organization that provides services to the poor could use a little help itself these days.

The James E. Scott Community Association, an 84-year-old social-services agency nicknamed JESCA, has been struggling with a financial crisis of its own, even as it continues to try to assist Miami’s most impoverished infants, teens and senior citizens.

The association’s path to an August bankruptcy filing has been paved with bounced checks, delayed employee pay and a foreclosure threat that finally pushed it over the edge, according to the Miami Herald. The organization now finds itself weighed down by $3.35 million in debt.

JESCA’s weak balance sheet has been bad news for the South Florida residents that depend on the association’s good will. The agency has had to cut its staff to 15 from 60 and trim its once robust roster of charitable programs to three from eight, according to the newspaper. The association used to have a contract with Head Start, for example, but the school readiness program cut its ties with JESCA last November amid concerns about its financial stability.

Still, the interim chairman of JESCA’s board said he believes the association can reorganize in bankruptcy protection. And it wouldn’t be the first time JESCA came back from the brink of financial devastation. In the 1990s, the agency’s leader siphoned funds from the organization and used them to buy a host of goodies, ranging from the cars and jewelry to a nose job.

The Daily Docket: Reader’s Digest To Enter Chapter 11

Posted: August 18th, 2009, 6:40am PDT

The publisher of Reader’s Digest magazine said it will file for bankruptcy protection to restructure its debt, according to The Wall Street Journal.

Grupo Mexico SAB said Monday it will again raise its offer to buy subsidiary Asarco LLC out of bankruptcy, agreeing to pay $2.2 billion in cash to defeat a rival offer from Vedanta Resources PLC. Read the Daily Bankruptcy Review story here.

Commercial lender CIT Group Inc. lost $1.68 billion in the second quarter and again warned it might have to file for bankruptcy protection if it fails to restructure its business, the Associated Press reports.

General Motors Co. has reached a deal to sell its Saab Automobile AB unit to Swedish sports car maker Koenigsegg Group AB, according to WSJ.

Tribune Co.’s creditors want to probe Sam Zell’s leveraged buyout of the media company, the Chicago Sun-Times reports.

Banks continued to tighten lending standards to businesses and households, according to the Federal Reserve’s periodic survey of banks released Monday, according to WSJ.

Lawyer Aims to Bring ‘Fiegenomics’ to Washington

Posted: August 17th, 2009, 1:29pm PDT

Iowa bankruptcy attorney Thomas Fiegen came out swinging on Friday when he declared his candidacy for the 2010 U.S. Senate race, peppering his announcement speech with buzzwords such as “unemployment,” “foreclosure,” “health insurance” and “recession.”

These are terms the 51-year-old, who holds a law degree and a master’s in economics, knows well. Fiegen said most of his clients have been referred to him amid a dismal year that has seen sales drop between 40% and 50%. “For companies that are experiencing that kind of downturn, they cannot get skinny enough fast enough to make up for the drop in sales,” said Fiegen.

After being confronted on a daily basis with struggling families and small-business clients, the former Iowa state senator said he decided to run for U.S. Senate to help “clean up the national economic mess.”

To be sure, Fiegen is facing an uphill battle, challenging Senate stalwart Chuck Grassley, who was first elected in 1980. But the Cedar Rapids, Iowa, attorney is putting to good use his knowledge gained from more than 20 years of practicing bankruptcy law to create a platform of economic policy and reform he has dubbed “Fiegenonomics.”

“Every day, I meet with small-business people and understand their challenges,” said Fiegen, whose law firm caters to farmers and small-business owners. “I have been an ally of labor and I know what it takes for businesses to make a profit. I see both sides.”

Indeed, Fiegen can also empathize with his clients. In the 1980s, creditors called in the loans they made to his family farm, but he says the trial ultimately helped him build a successful legal career. Now, he hopes his experience helping families and businesses dig their way out of debt will help him build a future in politics.

“The thing I like most is giving people hope,” Fiegen said. “The Senate is an extension of that, but instead of one business at a time, it will be all businesses in Iowa and the United States.”

Friday Fashion Flop

Posted: August 17th, 2009, 12:11pm PDT

Bloomberg

Friday wasn’t a good day for fashion. The luxury German fashion house Escada put its U.S. unit into Chapter 11 protection, while women’s ready-to-wear designer Ellen Tracy was hit with an involuntary bankruptcy liquidation filing by several creditors.

As Daily Bankruptcy Review reported Monday, Escada (USA) Inc.’s Chapter 11 filing on Friday followed parent company Escada AG kicking off insolvency proceedings in Munich on Thursday after a failed debt exchange with its bondholders. The move will help both arms of the design house, known for its red-carpet-appropriate gowns, restructure in concert.

Also on Friday, four creditors owed $3.8 million sought to push New York clothing maker Ellen Tracy LLC into Chapter 7 bankruptcy. In court papers, the creditors - Chinamine Trading and Excellent Jade Ltd. of Hong Kong and Shanghai Mandarin Fashion Ltd. and Shanghai K&J Apparel Co. of China - accused Ellen Tracy of not paying its debts as they came due. The company, whose clothes have been showcased on such supermodels as Cindy Crawford and Christy Turlington and are carried in stores like Bloomingdale’s, has 20 days to contest the filing.

Ellen Tracy, founded in 1949 as a blouse company, was acquired from Liz Claiborne Inc. last year by a group of investors including Hilco Consumer Capital LLC, Windsong Brands LLC and Brand Matter LLC. Liz Claiborne, Dow Jones Newswires previously reported, decided to part with Ellen Tracy after completing a strategic review of the brand.

The Daily Docket: CIT Avoids Bankruptcy, For Now

Posted: August 17th, 2009, 6:46am PDT

CIT Group Inc.’s tender offer for its $1 billion floating-rate notes due Monday was successful, giving the lender a little more time to avoid bankruptcy, The Wall Street Journal reports.

U.S. banks that failed in the past two years were in worse shape than those that collapsed during the industry’s last crisis, and it’s straining the FDIC, according to WSJ.

A group of manufacturers is trying to push women’s clothing company Ellen Tracy into bankruptcy, Reuters reports.

Chrysler Group LLC is planning to produce the Italian auto maker’s Fiat 500 subcompact at a Chrysler plant in Mexico, WSJ reports.

Lear Corp.’s revamped plan to pay $20 million in bonuses to top executives is again coming under fire from the U.S. government, which says the auto supplier is making it too easy for management to qualify for the payouts. Read the Daily Bankruptcy Review reports.

An Iowa bankruptcy attorney is planning to challenge five-term Republican Sen. Chuck Grassley in 2010, according to the Sioux City Journal.

Patent Fight Rages On In Bankruptcy Court

Posted: August 14th, 2009, 1:57pm PDT

Judge Kevin J. Carey of the U.S. Bankruptcy Court in Wilmington, Del., who is overseeing Spansion’s Chapter 11 case, denied Tessera’s bid to look at Spansion’s books at a hearing Tuesday, according to Ethan Horwitz, a lawyer at King & Spalding representing Spansion.

Earlier this year, the U.S. International Trade Commission ruled in favor of Tessera in a closely watched case involving patents associated with computer chip packaging (which allows a chip to communicate with the system’s components and protect the chip from damage). Overturning an earlier ruling, the commission issued a ban on the import of the infringing chips, which are used in everything from cell phones to automobiles. It also said companies had to stop selling products using the chips.

But Tessera says Spansion has continued to infringe on its patents by selling the products even after the ITC issued its ruling. It argues a probe of Spansion’s business was necessary to determine the extent of the ongoing infringement of its patents.

The company has denied violating the ITC order and says Tessera is trying to use the bankruptcy probe to gain an advantage in the patent dispute.

Spansion says the ITC’s rulings would cost it $500 million in sales and force it to shut down production facilities. In July, Spansion appealed the ruling to the U.S. Court of Appeals for the Federal Circuit. That appeal is pending.

The appeal likely signals this won’t be the last word on the patent fight between the two Silicon Valley companies. Indeed Carey’s bankruptcy court ruling was “without prejudice,” meaning Tessera can renew its bid for an investigation in the future. Stay tuned.

Credit Woes Soil Clean Tech Firms

Posted: August 14th, 2009, 1:37pm PDT

Yuliya Chernova is a reporter for Dow Jones’ Clean Technology Insight, a daily newsletter covering developments in the clean technology and alternative energy markets.

The “clean-tech” label is no vaccine against default. That’s what companies in the renewable energy sector are finding out, despite the stimulus package and the much-touted commitment from the U.S. government to promote clean sources of power.

This week, two companies in the sector announced that financial stresses are forcing them to seek buyers or fold.

In the case of SkyPower, a large Canadian renewable energy developer, the company had the misfortune of being backed by Lehman Brothers. All was well over the years as the investment bank pumped $300 million in equity to support SkyPower’s wind and solar project development efforts and obligations for loans. But once Lehman filed for bankruptcy, SkyPower didn’t have enough revenue to repay loans it got to buy wind turbines.

The lender syndicate, led by HSH Nordbank, which itself ran into much trouble in the recession, refused to extend forbearance, and SkyPower entered restructuring through a Canadian court procedure called the Companies’ Creditors Arrangement Act. This allows large corporations in Canada to restructure without filing for bankruptcy.

“SkyPower was a healthy business. The Lehman bankruptcy has had a devastating impact on the business,” said Kerry Adler, SkyPower’s president and chief executive, in an interview with Dow Jones’ Clean Technology Insight. It’s now trying to find a buyer for its more than a thousand megawatts of projects, power-purchase agreements, and hundreds of turbines.

Fuel-cell component developer PolyFuel Inc., meanwhile, said it will cease operations and pursue a liquidation of assets. The Mountain View, Calif., company had a promising technology, making methanol-fueled engineered membranes for use in portable fuel cells. The Department of Energy just awarded $5 million to the company to pursue development, but because the company couldn’t find investors for the next round of financing, it had to take this hard route.

“The DOE grants were a great endorsement for our team; it’s a shame we won’t be able to take advantage of that,” said Jim Balcom, chief executive of PolyFuel.

The company, he said, was caught in a perfect storm of developing technology in an industry that’s relatively far from full-scale commercialization, while also getting caught up in a bear market.

Other pre-revenue companies in the clean technology sector are facing similar troubles. Several solar companies that are publicly listed, like DayStar and XsunX, have issued warnings that they might not be able to continue as going concerns.

I Got Your Tropicana Trademark Right Here

Posted: August 14th, 2009, 8:43am PDT

Associated Press

As they say in Camden, ge-hed, back Carl Icahn into a corner in bankruptcy court and see what happens.

Icahn leads the group of investors that bought part of Tropicana Entertainment out of bankruptcy, meaning he picked up the New Jersey side of the casino empire that was for a brief and not so shining moment the property of hotelier William J. Yung III.

Yung’s cost-cutting cost Tropicana Entertainment its New Jersey gaming license, triggering defaults in billions worth of debt and plunging the company into Chapter 11, where it was chopped in two.

It’s taking some time for the Icahn investing group to reel in the goods – the Tropicana Atlantic City Casino. Technically, they own the Trop AC, but technically, Tropicana Entertainment can’t run the Trop AC until New Jersey gaming regulators say it can.

This they are likely to do by Friday, since Icahn, unlike Yung, knows how to hire lawyers to stand hat in hand before the New Jersey Casino Control Commission. The commission is expected to say whether the Icahn group can take Trop AC back under the Tropicana Entertainment corporate roof, or whether it will have to set up a separate company to run the thing.

In the meantime, the Icahn-led investors have been entertaining themselves battling over rights to use the name Tropicana in Las Vegas. The Tropicana Las Vegas Casino and Resort went to a lending group led by Onex Corp., very nice, very Canadian company, in the bankruptcy case.

The Tropicana trademark, however, is registered to Tropicana Entertainment LLC, a/k/a Icahn and the Jersey boys. And they’re not giving it up to the folks in Vegas without a fight, or maybe $10 million a year, a licensing rights figure bandied about earlier in the case.

The Icahn-led group wants Onex’s Tropicana Las Vegas Inc. slapped with sanctions for suing in Nevada to establish its rights to use the Tropicana trademark. The Clark County court suit violated the automatic stay of Chapter 11 bankruptcy, the Icahn group claims in court papers.

The nice Canadians are pleading self-defense. In court papers, they say the Jersey boys “explicitly threatened Tropicana Las Vegas with ‘peril’ should it continue to operate as it has since the dawn of casino gaming in Las Vegas.”

They never paid for it before, so why start now? Tropicana Las Vegas would like to know.

So what, Tropicana Las Vegas has used the Tropicana name for 50 years, the Icahn group said in court papers. Like that’s a law. Fuggedaboutit.

This is all up for discussion Thursday in the bankruptcy court in Delaware where, Tropicana Las Vegas will have you know, the New Jersey side of the house has already run up $60 million worth of bills for lawyers and professionals.

The Daily Docket: Southwest Loses Frontier Auction

Posted: August 14th, 2009, 6:57am PDT

Republic Airways Holdings Inc. is set to buy Frontier Airlines Holdings Inc. out of bankruptcy after it outbid Southwest at an auction for the carrier, The Wall Street Journal reports.

The Federal Reserve is putting pressure on struggling lender CIT Group Inc. to come up with a survival plan, WSJ reports.

A judge said Thursday that Chrysler’s creditors can sue its former parent, Daimler AG, which the creditors accuse of stripping Chrysler of its most valuable assets in 2007. Read the Daily Bankruptcy Review story here.

The collapse of Lehman Brothers has claimed another victim: alternative energy company SkyPower, according to DealBook.

Jefferson County, Ala., struggling to avoid bankruptcy, has made little progress on negotiations over its billions in sewer system debt, WSJ reports.

The trustee in Lou Pearlman’s bankruptcy case plans to drop more than a third of the lawsuits that seek to retrieve money from victims of the Pearlman’s Ponzi scheme, according to the Orlando Sentinel.

A bankruptcy judge Thursday approved the sale of SemGroup’s refined petroleum terminals to the U.S. subsidiary of a Chinese commodities conglomerate, the Tulsa World reports.

NHL Wants Coyotes to Fly US Air

Posted: August 13th, 2009, 1:13pm PDT

Getty Images

The National Hockey League is asking a bankruptcy judge to require the Phoenix Coyotes to fly US Airways to away games, rather than use a more luxurious charter service controlled by the hockey team’s majority owner, Jerry Moyes.

The league said the team, which filed for bankruptcy protection in May, shouldn’t use the same flight arrangements as last season, when the Coyotes spent $2.6 million to charter Swift Air LLC jets.

According to court papers, Moyes is fighting with league and team General Manager Don Maloney to keep the Coyotes flying with Swift Air, part of his transportation business empire. The NHL said the US Airways deal represents “a substantial savings,” although the exact cost of the service was not specified in court papers.

“The US Airways service was reviewed and supported by the team’s own management,” Alan A. Meda, an attorney for the NHL, said in an interview. Other professional sports teams use a similar service, he said.

If the league succeeds in forcing the switch, some Coyotes, such as 6-foot-3, 225-pound goalie Jason LaBarbera, may not be happy about squeezing into coach-sized seats.

With US Airways, the team would fly on planes similar to what the airline uses for its scheduled service, so most seats would be standard size, Meda said. That stands it contrast to Swift Air’s Boeing 737, which is fitted with 68 first-class seats and luxury amenities such as power outlets and extensive catering services.

But sorry hockey fans, those hoping to sit next to Coyotes star Shane Doan on that next Phoenix-to-Edmonton flight won’t be so lucky. Under the US Airways deal, the Coyotes would fly on charter flights limited to the players and team personnel.

(The headline on this post has been corrected. The team would fly on chartered flights arranged by US Airways under the NHL’s proposal.)

Credit Crunch, Part II?

Posted: August 13th, 2009, 12:50pm PDT

Just as many of us were starting to breathe more easily after reading of upside earnings surprises among some companies and economic data that aren’t as bad as earlier in the year, Standard & Poor’s Ratings has issued a sobering report on refinancing.

Among companies that are either classified by S&P as “Weakest Links” or that have bonds trading at distressed levels, a substantial $695 billion in debt will come due between now and 2014.

The report, written by Diane Vazza, managing director and head of global fixed income research at S&P, warns that “as lending dries up, companies with upcoming principal payments face a heavy burden and the possibility of default.”

Media and entertainment companies in this group face the heaviest refinancing burden, with $140 billion of debt coming due. Financial companies are second on the list with $117 billion.

One feature of this debt that could hold implications for any bankruptcies among the companies in question is that much of the maturing debt is secured. Among borrowers in the B and CCC/C rating categories, 70% of the maturing debt in 2014 will be secured, compared with 33% in 2009.

“The relative ranking of this debt in later years bodes well for investors in the event of default, as their assets should possess better recovery prospects,” Vazza writes.

Hammer to IRS: U Can’t Touch This

Posted: August 13th, 2009, 8:53am PDT

Kalahari Resort/PR Newswire

Dust off those gold chains and harem pants (those are in again, right?). MC Hammer’s back, and he’s got a message we’ve all heard before. This time, however, the rapper’s plea isn’t hitting the radio waves but is directed toward one particular source – the IRS.

Hammer (real name: Stanley Burrell) issued a statement Wednesday decrying the agency’s bid to collect $625,000 in back taxes he allegedly owes from 15 years ago. Hammer, who filed for bankruptcy protection in 1996 and saw his assets liquidated, says he’s already paid the IRS all the taxes he owed. But in the past year, he claims the IRS “wrongly” decided that he owed more. The rapper-turned businessman (he has his own Dance Jam record label and currently appears on the A&E Network show “Hammertime”) is vowing to fight the IRS’ “nonsense.”

“I am contesting this claim through my tax attorneys and my case is making its way through the IRS appeal process,” Hammer said. “I hope to be successful.”

The Daily Docket: Escada Files For Bankruptcy

Posted: August 13th, 2009, 6:43am PDT

German fashion company Escada AG filed for bankruptcy after it failed to line up financing, The Wall Street Journal reports.

Lehman Brothers Holdings Inc. wants a U.S. judge to hold Japan’s Shinsei Bank Ltd. in contempt of court for taking steps that Lehman says threaten its right to collect nearly $500 million from an affiliate. Read the Daily Bankruptcy Review story here.

Lawyers for Detroit’s Greektown Casino and the company’s creditors want to speed up hearings on bankruptcy-exit plans for the company, the Detroit News reports.

The New York Times explores what Madoff deputy Frank DiPascali might know that makes him such a valuable witness for prosecutors.

Five employees of the beleaguered Detroit public school system, which is weighing a bankruptcy filing, were charged Wednesday with multiple felonies, according to WSJ.

Auf Wiedersehen, Jerry Tam

Posted: August 12th, 2009, 2:09pm PDT

Associated Press

Designer Jerry Tam has been auf’d twice now. The “Project Runway” contestant was eliminated with supermodel Heidi Klum’s catchphrase and air kisses in the very first episode of the reality show’s fifth season, and now, he and his women’s clothing fashion design firm have filed for bankruptcy liquidation.

Court papers show that Tam and his company, Jerry Tam LLC, filed for Chapter 7 protection in Manhattan Tuesday, closing the door on his three-year-old Form label. The Butte, Mont., native reported $1,900 in assets and $106,473 in debts, while Jerry Tam LLC listed $6,200 in assets and $2.2 million in debts.

It’s been a tough road, the designer told Crain’s New York Business. Tam drained his savings account to start his label five years ago and since then, despite the line being carried in just a few New York boutiques, his clothes have gained attention from national publications like Vogue and Elle. According to Tam’s Website, the line aims to dress the “modern metropolitan woman” in classic and sophisticated clothing influenced by modernism. You can check out his pajama-esque spring/summer 2009 collection here and the colorless black, gray and white fall/winter 2009 line here.

Despite the positive press, there were too many insurmountable challenges. Tam told Crain’s that the bankruptcy was a result of the economic downturn, an inability to secure financing and barely generating sales (”near $0,” he said) during the last season. While it’s no doubt heartbreaking to dismantle a company you poured your life - and cash - into, Tam can take comfort in the fact that he’s in stylish company – even giants in the fashion industry are teetering on the brink of bankruptcy (Escada) or have fallen in (Christian LaCroix).

Bankruptcy Beat Snapshot: Jay Goffman

Posted: August 12th, 2009, 12:40pm PDT

Skadden

Green Acres’ Oliver Wendell Douglas has nothing on Jay Goffman.

Goffman, the co-head of Skadden, Arps, Slate, Meagher & Flom’s corporate restructuring practice, spends his days in high-pressure negotiations. But when he gets the chance, he says “good bye city life” and heads to the blueberry farm he co-owns in Oregon’s Willamette Valley.

“It’s a different world than New York,” said Goffman, who doesn’t mind getting up in the early hours to experience working the land, caring for the animals and running a working farm. “It’s humbling to see people who have the skills to grow things from the ground up. It’s a good life lesson.”

Goffman’s adventures in agriculture began about 10 years ago when Delford Smith, founder of Evergreen International Aviation, approached him about purchasing a farm together. Evergreen operates several businesses, including an agricultural enterprise, and although Goffman had no experience in running a farm, he did not hesitate to accept Smith’s proposal.

Thus Chance’s Delford, an organic farm located about an hour southwest of Portland, Ore., was born. The 120-acre farm is named after Goffman’s 10-year-old son, Chance, and Smith and grows blueberries, grapes, blackberries and some fruit trees – peaches and apples – as well as hazelnut trees, Christmas trees and nursery stock. Although Evergreen Agriculture takes care of the farm, Goffman and Smith personally cover the costs, and they are happy to pay a bit more to ensure that no pesticides or other chemicals are used. Instead, Chance’s Delford uses only organic material, a situation that suits just fine the farmer who tends to the property and lives on the farm with his family.

Goffman travels to the farm every couple of months and tries to visit with his family each summer. The farm provides him with the opportunity to de-stress and, he hopes, soon will provide a source of income.

“It’s just starting to get a positive cash flow,” said Goffman, who splits the farm costs 50/50 with Smith. Goffman and company dedicated the first few years to planting, irrigation and developing the farm’s foundation and infrastructure. It required a lot of input from varying resources with little to no product output. The experience taught him about patience and long-range planning. It also helped him appreciate how hard his clients work to run their businesses and the importance of learning from others. It is a lesson that crosses professional barriers.

“To be successful in whatever you do, you have to be listening and learning from other people,” Goffman said. “You learn more from listening than from talking.”

Chance’s Delford is a long way from Skadden’s Times Square office, but Goffman has found a way to keep the farm close in spirit. About seven years ago, he used more than 100,000 plants from the farm’s nursery stock to landscape his home in Sands Point, N.Y. The thriving plants are the best part of the house, he said.

“It’s nice to look around at the colors and plants and recognize that we grew them,” he said. “It’s a good feeling for a guy who grew up in New York and spent most of his life as a lawyer.”

The experience with Chance’s Delford is not one the 51-year-old would readily trade. Goffman embraces the role he plays in creating and growing something other people can use. It helps him remember that he is more than the sum of his professional parts.

“Each of us is more than just what we do every day in our career,” he said. “We all have many different interests, and if we are open to it, we can fill our lives with a variety of experiences that help make us better people.”

Lawyer’s Wild Ride Ends In Liquidation

Posted: August 12th, 2009, 8:32am PDT

Convicted fraudster and disbarred lawyer Michelle Shepherd is the latest attorney to crash and burn after living life in the fast lane, so it’s appropriate that among the assets up for grabs at her bankruptcy auction is a drag racing car.

While the several millions of dollars that the former North Carolina lawyer (she was disbarred in June 2008) admitted to scamming her clients out of are small peanuts compared to the $400 million that Marc Dreier’s clients and investors lost as a result of his Ponzi scheme, the disgraced attorneys share a few common ties. Both have 20-year prison sentences (the maximum for Shepherd, with a 15-year minimum). Both were forced into bankruptcy proceedings by their creditors. And both were ordered to sell off their most valuable property in order to pay off their debts.

It’s no Hamptons summer home, but a Chevy Camaro with a 2400-horsepower engine for drag racing will be on the block at the bankruptcy court-ordered Aug. 19 auction in West Jefferson, N.C. According to auctioneer Iron Horse Auction Co.’s Web site, other Shepherd and Shepherd-related assets include a race-car hauler, a 2002 collectors’ edition Pontiac TransAm convertible, a 2008 Lexus SUV, a Flagstaff camper, a tractor with air conditioning and a radio and a Remington rifle. But even amid all that need for speed, Shepherd’s assets show a softer side, including a Thomas Kinkaid oil print and another painting entitled “Victorian Lady.”

The Daily Docket: Lehman, AIG Face Off

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

Lehman Brothers Holdings Inc. is asking a bankruptcy judge to force American International Group Inc. to pay it millions of dollars under credit-default swaps it sold to the investment bank, in a dispute that pits two of the firms at the heart of the financial meltdown against each other. Read the Daily Bankruptcy Review story here.

The Federal Reserve is getting actively involved in the bankruptcy case of Extended Stay Hotels, which owes the central bank $900 million, according to The Wall Street Journal.

The judge in General Growth Properties Inc.’s bankruptcy has rejected a bid to dismiss several properties from the company’s Chapter 11 case, WSJ reports.

A key lieutenant of convicted Ponzi-scheme operator Bernard Madoff pleaded guilty to multiple counts of fraud Tuesday, according to WSJ.

A bankruptcy filing is said to be “imminent” for mortgage lender Taylor, Bean & Whitaker Mortgage Corp., WSJ reports.

Newspaper publisher Journal Register Co. has emerged from Chapter 11 bankruptcy protection, according to the Associated Press.

Michigan businessman Tom Celani filed a bid Tuesday to take Greektown Casino out of bankruptcy, the Detroit News reports.

A U.K. court ruling Tuesday could weaken the position of junior creditors looking to get paid in European restructuring cases, according to WSJ.

Instant Art on the Auction Block

Posted: August 11th, 2009, 2:45pm PDT

Getty Images

Thought you took some pretty cool pictures with your Polaroid camera? Take a look at what Ansel Adams did.

The famous photographer took hundreds of instant shots, capturing the natural beauty of tree roots, frozen lakes and cloudy skies in places like Yosemite National Park and Northern California. Today, 627 of them belong to Polaroid Corp., catalogued alongside the work of artists like William Wegman and Chuck Close.

The “iconic collection,” featuring some 60,000 photographs, had thus far been spared from the bankruptcy auction block. The company sold the majority of its assets to a joint venture of Hilco Consumer Capital Corp. and Gordon Brothers Brands LLC for $87.6 million in April, but excluded the art collection from the transaction.

Now, though, it looks like the 60-year-old collection’s turn on the auction block has finally arrived. Polaroid is asking the U.S. Bankruptcy Court in Minneapolis for permission to hire Sotheby’s Inc. to organize an auction and, possibly, private sales of the photographs.

Polaroid said that its own attempts to find buyers for the art had attracted interest from individuals, investors and institutions, but that it had yet to receive any formal bids. It’s hoping that with Sotheby’s help, it can generate some more money for the company’s creditors.

Polaroid’s photography collection dates back to the birth of Polaroid founder Edward Land’s first instant camera in the late 1940s. The company had encouraged artists to experiment with its new medium and, in return, gained a valuable tool in its quest to make “Polaroid” a household name.

“Over the years, the collection has been utilized to support the ‘Polaroid’ brand worldwide,” Polaroid said in court papers filed Friday.

Currently housed in Boston and Le Musee de l’Elysee in Lausanne, Switzerland, the photographs have been displayed in museums around the world.

Dykstra May Be Forced To Liquidate

Posted: August 11th, 2009, 9:23am PDT

Associated Press

Former Philadelphia Phillies slugger Lenny Dykstra could be forced to sell off his assets to pay his debts in bankruptcy.

The U.S. trustee, the Justice Department official charged with monitoring bankruptcy cases, is seeking to convert Dykstra’s Chapter 11 case to a Chapter 7 liquidation. While Chapter 11 would allow Dykstra to work out a debt-repayment plan to compensate his creditors, Chapter 7 would require him to simply sell off his assets, including possibly a Thousand Oaks, Calif., house he purchased in 2007 from hockey legend Wayne Gretzky for $17.4 million.

Dykstra, the hard-charging center fielder turned financial guru, filed for bankruptcy protection last month to prevent lenders from foreclosing on the house.

The U.S. trustee asked the court to convert the bankruptcy to a liquidation or assign an agent to oversee the case after Dykstra claimed in court papers that the house was insured when, in fact, the coverage was canceled due to lack of payment.

“This type of dishonest conduct warrants the appointment of another fiduciary for a debtor in bankruptcy,” the trustee, S. Margaux Ross, said in court papers.

Dykstra’s attorney fired back in documents filed Monday, saying the three-time All Star believed his mortgage lender, J.P. Morgan Chase & Co., had paid for insurance on the house.

“Mr. Dykstra should have been more careful to confirm that there was insurance but that does not lead to a finding of fraud, dishonesty incompetence or gross mismanagement,” the attorney said.

The Daily Docket: Asarco Contest Heats Up

Posted: August 11th, 2009, 6:54am PDT

A new bidding war erupted for Asarco LLC Monday, as rival suitors Vedanta Resources Plc and Grupo Mexico SAB increased their offers to take the Arizona mining company out of bankruptcy. Read the Daily Bankruptcy Review story here.

Distressed-debt deals are soaring amid the recession, according to The Wall Street Journal. About 140 such deals have been struck so far during 2009, compared with 102 in all of 2008.

Southwest Airlines upped its bid to buy Frontier Airlines out of bankruptcy protection by 50%, to $170 million, USA Today reports.

Struggling lender CIT Group Inc. delayed filing its quarterly report with the Securities and Exchange Commission as it works to avoid a bankruptcy filing, according to WSJ.

General Motors is on track with plans to complete the sale of its Swedish unit, Saab Automobile AB, by the end of September, WSJ reports.

Maguire Properties Inc. Chief Executive Nelson Rising said Monday that the company isn’t considering bankruptcy, according to WSJ.

Unsecured creditors of failed law firm Heller Ehrman want the firm’s former partners to cough up $106 million, ABA Journal reports.

Judge Slams Fee Deals In Energy Partners Case

Posted: August 10th, 2009, 1:48pm PDT

It’s not the kind of comparable financial data Chapter 11 professional types generally like to see being tossed around when their fees are up for discussion:

“The men and women of our nation’s armed forces, who risk their lives to preserve and protect the abundant freedoms of this country, earn an annual salary that barely exceeds Tudor Pickering’s proposed $25,000-per-day appearance fee,” wrote Judge Jeff Bohm in a 40-page ruling in Energy Partners Ltd.’s Chapter 11 case.

Bursting the upscale bankruptcy bubble of the corporate Chapter 11 set, the Houston judge nixed fee agreements Tudor, Pickering, Holt & Co. LLC, an energy investment and merchant banking boutique, and Houlihan Lokey reached in Energy Partners bankruptcy. He chided both firms for “arrogance.”

By “arrogance,” Bohm meant that the firms swore “under oath that they will render services only if they immediately receive a nonrefundable fee aggregating $1.0 million.”

Neither Tudor Pickering nor Houlihan Lokey responded to requests for comment on Bohm’s July 28 ruling.

The judge confirmed the Energy Partner’s bankruptcy-exit plan on Aug. 3, but labeled “outrageous” the fee deals between the two of the official committees in the company’s Chapter 11 case. Tudor Pickering was advising the committee representing shareholders in the oil and gas company’s bankruptcy, while Houlihan Lokey worked for the official committee representing unsecured noteholders.

“Excessive and unwarranted expenditures and ‘spare no expense’ attitudes are what frequently land companies in bankruptcy in the first place,” wrote Bohm.

Such rulings generally touch off rounds of quiet mutterings about naïve judges who don’t understand how things really work in the realm of bankruptcy professionals, where the “market rate” for professional service in big Chapter 11 proceedings is the highest figure you can get past a New York or Delaware judge.

Finlay Makes ‘Hot List’ Days Before Bankruptcy

Posted: August 10th, 2009, 10:57am PDT

Finlay Enterprises’ bankruptcy filing probably comes as a bit of a shock to readers of Stores Magazine.

Just days ago, the publication crowned the jewelry chain operator a “hot retailer,” awarding it the eighth spot on its annual list of 100 “hot” companies. The “definitive ranking of the fastest-growing retail chains” (their words, not ours) judges companies based on their acquisitions, sales rates and new store openings.

Presumably, that would preclude companies teetering on the edge of bankruptcy, as Finlay has been for so long. But the magazine decided to feature a company that’s sailing toward liquidation.

Stores didn’t just plop Finlay in the top 10 without crunching some numbers first. It did the math – it just doesn’t seem to be the right math. In calculating the company’s sales growth from 2007 to 2008, the magazine said it removed the figures pertaining to all of the leased jewelry counters Finlay’s operated in department stores like Macy’s and Lord & Taylor. The problem is, those figures account for the majority of Finlay’s sales. Stores was left with a peachy 38.4% sale increase in Finlay’s specialty chains, like Bailey Banks & Biddle.

This isn’t the first time a questionable company has made its way onto a “hot” list. You may recall that Entrepreneur magazine made the same mistake last year in its “Hot 100” list of fastest-growing companies, placing Agape World Inc., now under bankruptcy protection and facing allegations of fraud, at number 73.

The Daily Docket: Nortel May Lose Its CEO

Posted: August 10th, 2009, 6:34am PDT

Nortel Networks Corp. Chief Executive Mike Zafirovski is planning to leave the company, which is selling its assets in bankruptcy, within weeks, according to The Wall Street Journal.

Six Flags Inc.’s unsecured creditors are seeking to investigate the relationship between the company and Daniel Snyder’s Red Zone LLC investment vehicle, which won control of the theme-park operator in a 2005 proxy fight. Read the Daily Bankruptcy Review story here.

Maguire Properties Inc., one of the largest office-building owners in Southern California, is planning to hand over seven buildings that have more than a $1 billion in debt to creditors, WSJ reports.

General Motors and eBay Inc. are announcing that hundreds of the auto maker’s California dealers will start selling new cars and trucks through the online auction Web site, according to the Associated Press.

The National Hockey League is asking a bankruptcy judge to throw out BlackBerry mogul Jim Balsillie’s bid to buy the Phoenix Coyotes out of bankruptcy, AP reports.

The value of casinos in Atlantic City, N.J., are plummeting amid the recession, according to AP.

Lawyer Takes Blame in Coyotes Snafu

Posted: August 7th, 2009, 2:10pm PDT

Associated Press

Attorneys for Phoenix Coyotes majority owner Jerry Moyes apologized, in bankruptcy court papers, for a mistake that resulted in their client staring down a contempt of court citation.

The City of Glendale, Ariz., asked the bankruptcy court to hold Moyes in contempt after documents filed on his behalf revealed details of negotiations between the city and prospective Coyotes bidder Jerry Reinsdorf. Those details were subject to a confidentiality agreement.

Attorneys from Phoenix law firm Jennings, Strouss & Salmon PLC say that exposing the details was not a sinister plot, but an attorney’s mistake.

Peter W. Sorensen, a partner at the firm, intended to hide the confidential information from public view, but when he sent the documents, “Sorensen forgot to direct that the appendix be filed under seal,” according to court documents.

Sorensen realized his mistake 90 minutes later, but by that point the Arizona Republic had already reported the contents of the documents.

“Counsel deeply regrets its error and makes no effort herein to minimize the importance of its mistake,” the law firm said in court papers. “However, Mr. Moyes played no role whatsoever in counsel’s oversight.”

Glendale is trying to reach a deal with Reinsdorf, a Chicago sports mogul, to keep the team playing in the Phoenix suburb. Moyes, however, is seeking to sell the Coyotes to BlackBerry mogul Jim Balsillie, who would move the franchise to Canada.

J.P. Morgan’s Compiling A WaMu Who’s Who

Posted: August 7th, 2009, 1:25pm PDT

Associated Press

No one doubts the largest banking collapse in U.S. history, that of Washington Mutual Bank, or WaMu, spawned enough legal trouble to keep lots of law firms busy for years. There are court cases in Delaware, Texas and Washington, D.C., contests closely watched by investors who lost billions.

J.P. Morgan Chase & Co., which is being beset on almost all sides over its $1.9 billion bargain buy of the tottering, home loan-stuffed thrift, says it needs to know exactly who is besetting it and how much money they have on the line.

In a filing with the Delaware court presiding over the Chapter 11 case of Washington Mutual Inc., WaMu’s bereaved and bankrupt parent, J.P. Morgan is demanding a list of the parent company bondholders that are chasing it, along with data on when they bought their bonds and how much they paid.

The group first appeared in October 2008, represented by Thomas Lauria of White & Case LLP. By November, David Rosner of Kasowitz Benson Torres & Friedman had chimed in. Fox Rothschild is also carrying the standard for the group.

There’s a bankruptcy rule that lawyers representing multiple clients have to disclose to the court the names and holdings of their clients. This rule is pretty much enforced only when one creditor, like J.P. Morgan, gets mad at the other creditors and decides to make an issue of it. Otherwise, everyone pretty much looks the other way while hedge funds stampede through bankruptcy court under cover of informal groupings. Similar fights have cropped up in other recent bankruptcy cases, including Chrysler’s Chapter 11 restructuring. Coincidentally, Lauria was representing lenders that were fighting to keep their identities secret in the auto maker’s bankruptcy.

On Friday, Rosner said in an email that his firm is, indeed, co-counsel with White & Case and will comply with the rule about disclosing who’s in the Washington Mutual Inc. bondholder group.

Top Chef Contestant Abandons Ship

Posted: August 7th, 2009, 10:35am PDT

Brian Malarkey is packing up his knives and going, just like Top Chef host Padma Lakshmi told him to. But this time, Malarkey isn’t walking off the set of a TV show, as he did two years ago after getting cut from the cooking reality series. Instead, he’s bidding farewell to Oceanaire, an upscale seafood chain that recently sought bankruptcy protection in Texas.

Oceanaire, which serves delicacies like fresh oysters and whole Dover sole, had a hard time staying afloat amid decreased demand for high-end products due to the economic downturn. The company is shuttering some locales, but the San Diego restaurant that Malarkey works in appears to have been spared. He told the local NBC affiliate that his Oceanaire will remain open, but it will have to find a way to go on without its celebrity chef.

“I’m taking an extended family leave of absence,” he told the channel. NBC reported that he wouldn’t disclose what kitchen he might be working in next or if he has plans to open a restaurant of his own.

He didn’t cite the bankruptcy filing as one of his reasons for leaving, but it couldn’t have helped. While vague about his future plans, he did say that he was looking forward to spending time with his 10-month-old son, Huntington O’Neil.

Top Chef follows a group of chefs vying for the cash, prizes and fame that come with the title. Malarkey only made it to the top four, but he still seems to have garnered a following in his corner of California. NBC noted that he had won several awards, including the title of “best local chef.”

Celeb Makeup Favorite Swept Into Bankruptcy

Posted: August 7th, 2009, 8:47am PDT

What do Kiss, Pat Benatar, Barbra Streisand, Reneé Zellweger and former President Bill Clinton have in common? They’ve all been made up by Paula Dorf, the celebrity makeup artist whose eponymous high-end cosmetics business filed for Chapter 11 protection this week.

Paula Dorf Cosmetics Inc. said it’s still suffering the effects of delayed shipments of the packaging for the company’s products – delays that stretch back to 2003 and eventually caused the supplier to default. The default then kept the company from shipping its eye shadows, mascaras and makeup brushes, siphoning off its cash flow. And despite the fact that Dorf’s products are the favorites of beauty editors and celebs alike, the economic downturn was powerful enough to slash sales by about 25% this year.

Now in Chapter 11, Paula Dorf Cosmetics said it’s preparing to start talks with a lender that may be “more flexible” than its last lender, whom the company has already paid off. Paula Dorf Cosmetics added that it believes the revenue it will continue generating will be enough to meet its current obligations. The company said it believes it will be able to work with its creditors to propose a restructuring plan.

Dorf, according to Women’s Wear Daily, introduced her cosmetics line in 1996 after kicking off her career as a makeup artist for commercials and music videos, including the Bangles’ “Walk Like an Egyptian” (try getting that out of your head today). She’s even appeared on the screen herself, playing the makeup artist that beautifies Barbra Streisand’s character in the film “The Mirror Has Two Faces.”

Outside the entertainment industry, she’s touched up the mugs of some famous politicos, including Clinton and daughter Chelsea, whom the Washington Post’s gossip column in 2001 spotted dropping a couple of Benjamins on Dorf cosmetics in a trendy Georgetown store (Chelsea’s trip, the Post said, came not long before her dad’s second inauguration). Even fashion magazines’ current (only?) favorite D.C. trendsetter, Michelle Obama has tried out Dorf’s goods. The First Lady’s make-up artist, Ingrid Grimes-Myles, dished to the Daily Mail that as Obama hopped from one inaugural ball to the next, she was wearing Dorf sheer lip tint in “Innocence,” a warm light brown color.

The Daily Docket: Asarco Fight Heats Up

Posted: August 7th, 2009, 6:47am PDT

Grupo Mexico SAB’s plan to regain control of subsidiary Asarco LLC and take the Arizona copper-mining company out of bankruptcy is facing an uphill battle as bondholders are lining up to defeat the proposal. Read the Daily Bankruptcy Review story here.

Company liquidations in England and Wales hit record levels in the second quarter, according to The Wall Street Journal.

When General Motors emerged from Chapter 11 protection, it was freed of obligations to clean up polluted properties at discarded plants, according to the Detroit Free Press.

Auto-parts supplier Accuride Corp., one of Indiana’s largest companies, warned that it might have to file for bankruptcy protection, according to the Indianapolis Business Journal.

The Boscov’s department-store chain, which filed for bankruptcy protection last year, is getting a $43.7 million loan from the Department of Housing and Urban Development, the Burlington County Times reports.

The Detroit school system may not file for Chapter 9 bankruptcy protection after all, the Chicago Tribune reports.

DBSI Investigator Issues First Report

Posted: August 6th, 2009, 9:43am PDT

“Serious cash flow problems and operating losses.” Accounting ledger entries that are “confusing and misleading” because they don’t “fully, fairly and accurately reflect the transactions they purport to describe.” “Very few corporate formalities.”

In his first report about real estate company DBSI Inc., bankruptcy court-appointed investigator Joshua R. Hochberg’s words paint a picture of a massive web of closely connected companies that were primarily controlled by one individual that defrauded investors by putting their money to work not as they were promised.

Hochberg, a partner at McKenna Long & Aldridge LLP in Washington, D.C., was directed to investigate the Idaho company amid allegations that it defrauded investors out of $500 million, of which DBSI founder and president Douglas Swenson is alleged to have taken $160 million for himself. (The company has said these allegations are “without merit.”) While his investigation continues, the lawyer filed an interim report. So rather than force you, dear reader, to peruse the 100-plus-page document yourself, Bankruptcy Beat has summarized a few of Hochberg’s key findings. (You can read it here if you want to, though.)

A large focus of the report is DBSI’s use of nearly $90 million that a subsidiary raised in a notes offering in early 2008. While investors were promised their funds would be used to make loans or to acquire, develop and/or finance real estate assets, Hochberg said that’s not what happened. With little cash available, DBSI and its affiliates used the proceeds to continue their daily operations and pay off existing debts. Hochberg added that in its accounting books, the company concealed the true use of the funds through “confusing and misleading” ledger entries.

One example that Hochberg cited was the use of $29.3 million of proceeds from the notes offering. These funds were booked as loans to a company called Stellar Technologies LLC, in which Swenson and others connected to DBSI hold a majority of interests in the company and manage its operations. After “extensive tracing” of this alleged loan, Hochberg said he discovered that $18.3 million of the loan was “promptly transferred to DBSI Inc.’s checking and operating accounts,” where it was “almost immediately” used to cover general operating expenses. Just the remaining $9 million was likely retained by Stellar, Hochberg said.

Hochberg also found that Swenson, DBSI and several other executives exerted control over the dozens of DBSI affiliates that are currently under bankruptcy protection as well as those that aren’t, running them as a unified business in which funds were commingled. The transfer of funds between these businesses wasn’t accurately portrayed on their books, as Hochberg pointed out DBSI’s use of an intermediary company to “obfuscate the true source and use of funds that were transferred between entities.”

Obama Thinks Innovation Can Rise From Monaco’s Ashes

Posted: August 6th, 2009, 6:57am PDT

Getty Images

The corpse of a company that made some of the biggest, gas-guzzling vehicles consumers could buy will now be used as a breeding ground for energy-efficient technologies, thanks to a little help from the U.S. government.

Speaking at an old Monaco Coach plant Wednesday, Barack Obama announced that Navistar Inc., which purchased most of the assets of the RV-maker out of bankruptcy, will receive a $39 million grant from the government. If all goes according to plan, the money will transform the graveyard of towable trailers and luxury motor homes into an oasis of battery-powered exploration. (Keeping in mind, of course, that Navistar currently describes itself as “a manufacturer and marketer of medium and heavy trucks and mid-range diesel engines” - albeit one that’s trying to reduce emissions.)

The grant is part of a $2.4 billion program designed to help America ditch its clunkers and manufacture its own hybrid vehicles.

“I don’t want to have to import a hybrid car, I want to build one here,” Obama said, according to the Los Angeles Times. “I want the technologies to be developed here in America.”

The Daily Docket: GM, Chrysler IPO Race Begins

Posted: August 6th, 2009, 6:48am PDT

Ron Bloom, President Barack Obama’s top auto industry adviser, said Wednesday he expects General Motors Co. will return to profitability and hold an initial public offering before Chrysler Group LLC, according to The Wall Street Journal.

American Axle & Manufacturing Holdings Inc.’s chief executive said Wednesday that the auto supplier’s “primary objective” is to restructure out of court, but he gave no assurance that the company can avoid bankruptcy, WSJ reports.

Jewelry retailer Finlay Enterprises Inc. has filed for Chapter 11 bankruptcy protection in New York.

A bankruptcy judge Wednesday authorized Cooper-Standard Automotive Inc. to draw $35 million against a loan from a syndicate led by Deutsche Bank AG after lenders agreed to chop the cost of the borrowing by some $4.4 million. Read the Daily Bankruptcy Review story here.

Tribune Co. plan to pay up to $70 million in performance-based bonuses to managers and “key employees” had drawn the ire of labor unions that represent the media company’s rank-and-file workers, according to the Los Angeles Times.

A Phoenix bankruptcy judge said Wednesday that BlackBerry mogul Jim Balsillie can take part in the Sept. 10 auction for the Phoenix Coyotes, the Phoenix Business Journal reports.

Law firm Hughes Hubbard & Reed has hired two new lawyers for its corporate restructuring practice, including a partner from Gibson, Dunn & Crutcher, according to DealBook.

Greenbrier Takes GM’s Place On PGA Tour

Posted: August 5th, 2009, 2:43pm PDT

Associated Press

In the world of bankruptcy, one company’s loss is another’s spot on the PGA Tour.

The Greenbrier, the West Virginia resort that was purchased out of bankruptcy in May, was awarded a tournament on golf’s top circuit Wednesday, replacing the General Motors-sponsored Buick Open on next season’s schedule.

GM used the powers of bankruptcy to withdraw from its sponsorship of the tournament, as it has with everything from race cars to baseball stadiums. Without GM’s support, the PGA Tour pulled the plug on the 51-year-old Buick Open, played just outside the one-time company town of Flint, Mich.

That opened the door for businessman Jim Justice to lure the Tour, which features stars such as Tiger Woods and Phil Mickelson, to his West Virginia mountain resort. Justice, who likes to say he was born in Greenbrier’s shadow, said being awarded the tournament completes a goal he set shortly after buying the resort.

“Players and fans alike will be stepping into the American story and experiencing a true national treasure,” Justice said in statement released by the PGA.

Justice purchased Greenbrier in a surprise move and has since worked vigorously to raise the profile of the resort that once served as a congressional bunker. In addition to charming Tour officials, Justice recently announced plans to bring a casino to the property.

Next year’s tournament, The Greenbrier Classic, will see professional golf return to the resort for the first time since seniors tournaments were held there in the 1980s. The Greenbrier also hosted the 1979 Ryder Cup Matches, the premier international team golf competition.

The Greenbrier Classic will be played on The Old White Course, a par 70 course built in 1914.

“The Old White Course will make a tremendous tournament course in a traditional sense and The Greenbrier will provide a great experience for both the players and the fans,” golf legend Tom Watson said in statement. The five-time British Open champion serves as Greenbrier’s “Golf Professional Emeritus.”

Watson, coincidentally, also lost his GM sponsorship in the auto maker’s bankruptcy purge.

Appeals Court Issues Chrysler Sale Opinion

Posted: August 5th, 2009, 12:59pm PDT

Associated Press

Nearly two months after Chrysler’s controversial bankruptcy sale closed, the 2nd U.S. Circuit Court of Appeals has issued an opinion on its decision to allow the sale to move forward.

In the opinion released Wednesday, the 2nd U.S. Circuit rejected arguments made by a group of Chrysler’s lenders that the auto maker’s sale was an attempt to subvert Chapter 11 rules. The court also said the lenders, a group of Indiana pension funds, didn’t have standing to challenge the U.S. government’s decision to use money from the Troubled Asset Relief Program to fund the sale of Chrysler’s assets.

Judge Dennis Jacobs, the 2nd Circuit’s chief judge, said the sale was the only way for Chrysler to avoid liquidation, which would have meant far lower recoveries for all creditors, including the lenders. In the opinion, Jacobs said Chrysler was rapidly losing value in Chapter 11 and needed to sell its assets quickly to avoid irreparable damage.

“With its revenues sinking, its factories dark, and its massive debts growing, Chrysler fit the paradigm of the melting ice cube,” Jacobs wrote. “Going concern value was being reduced each passing day that it produced no cars, yet was obliged to pay rents, overhead, and salaries.”

There’s a whole lot more – 53 pages to be exact. You can read the full decision here.

It’s Payday In Lehman Chapter 11

Posted: August 5th, 2009, 12:19pm PDT

The big payday for Weil, Gotshal & Manges LLP has finally arrived.

The New York law firm leading Lehman Brothers through its bankruptcy court slog won court approval Wednesday for its first bill in the case – $55 million.

The bill is part of $96 million in fees approved by the judge overseeing the case after a three-month review by a committee chaired by Kenneth Feinberg, the Obama administration’s Wall Street pay czar. The fees, minus a 10% holdback pending final approval, will be paid to 15 law firms and financial advisers for work between Sept. 15, 2008, and Jan. 31. Weil tops the list, followed by law firm Milbank, Tweed, Hadley & McCloy LLP, which represent Lehman’s unsecured creditors and racked up a $12 million bill.

Feinberg’s committee found relatively few problems with the fee applications. According to a report it filed with the court, it found just $223,262 in “inappropriate fees.” It also recommended guidelines for future billing: no car service after before 8 p.m., working meals limited to $20 per person and explanations for billing more than 18 hours in a day.

Postville, USA

Posted: August 5th, 2009, 8:30am PDT

Associated Press

The city of Postville, Iowa, home of a troubled kosher meat processor that was recently bought out of bankruptcy by SHF Industries, is rounding the media circuit.

Following in the footsteps of “La Historia de Nuestras Vida,” a play written by and about seven men who were arrested in Agriprocessors Inc.’s May 2008 immigration raid, “Postville U.S.A.: Surviving Diversity in Small-Town America” spotlights the people who have lived and worked in a town that became fraught with drama after the raid tipped off a domino of troubles.

According to the Jewish Telegraphic Agency, the book is “an analysis of what went wrong 20 years after the Brooklyn-based Rubashkin family created what would become the nation’s largest kosher meatpacking plant.” University of Northern Iowa sociologists Mark and Michele Devlin Mark Grey and Michele Devlin and former Postville City Council member Aaron Goldsmith studied the city for more than 10 years, providing a timeline leading up to the Agriprocessors raid and the problems that followed.

According to the JTA, one of the book’s chapters gives an eyewitness account of the raid from start to finish. But although Agriprocessors’ pre-bankruptcy owners’ “greed” was a factor, the authors say, Postville’s fall was the result of more than that. Factories that used to be unionized began hiring immigrants (and paying them much less than the unionized workers) in the 1980s when the economy began to slow, and federal agencies often resettled people into towns like Postville.

“This is America’s new heartland,” Devlin told the JTA. “Twenty to 40 percent of the population in these towns are immigrants. The towns can cope with the influx from Mexico and Central America - they all speak Spanish. But when they get people from Sudan, Somalia, Micronesia, Palau and the inner cities, it’s a big deal for these little towns. They’re overburdened and under-resourced.”’

The authors say Postville was handling it all very well until the immigration raid “ripped hundreds of families apart and pushed Agriprocessors into bankruptcy.” According to the Associated Press, the raid “tore deeply at the city’s social fabric” and “separated families as workers were jailed and then deported.”

Since the raid, Postville’s population has fallen to 1,800 residents from about 3,000, and Agriprocessors now staffs only about 100 of the 1,000 who worked there before the raid, the AP notes. The book says that some of the people still living in Postville have been detained to testify in the Sept. 15 trial of former Agriprocessors executive Sholom Rubashkin and three other managers, who have been charged with counts including harboring illegal immigrants and child-labor fraud.

The Daily Docket: GM Wants To Be No. 1

Posted: August 5th, 2009, 6:37am PDT

The new chairman of General Motors Co. says the auto maker must be No. 1 in U.S. sales, according to The Wall Street Journal.

Business and consumer bankruptcy filings shot up in July compared to the same period last year, reflecting the growing financial stress both are under amid a downturn in the U.S. economy. Read the Daily Bankruptcy Review story here.

New York City claims Lehman Brothers, which filed for bankruptcy protection last September, owes is $627 million in corporate and other taxes dating back to 1996, according to the New York Times.

A new judge has been assigned to the bankruptcy case of Philadelphia Newspapers LLC, which owns the Philadelphia Inquirer, the Philadelphia Daily News and Philly.com, the Inquirer reports.

A U.S. Bankruptcy Court judge may hold Phoenix Coyotes owner Jerry Moyes in contempt of court for “willfully violating” a confidentiality order issued by the judge in the team’s bankruptcy case, the Associated Press reports.

Kirkland & Ellis has hired Patrick J. Nash Jr. away from rival Skadden Arps Slate Meagher & Flom to join the firm’s restructuring practice, according to the Chicago Tribune.

Journal Register Punts Sweet Eagles Suite

Posted: August 4th, 2009, 2:04pm PDT

Associated Press

Journal Register Co. executives are likely to be watching Donovan McNabb and the Philadelphia Eagles on television next season, rather than from a posh 30-yard-line skybox.

The Yardely, Pa., newspaper publisher canceled its suite lease at the Eagles’ Lincoln Financial Field earlier in its bankruptcy case and is now squabbling over how much it owes the National Football League team.

The Eagles are seeking to sack Journal Register with a bill for $758,045, the full amount that remains unpaid on the suite contract through 2013. Journal Register is asking that the amount be lowered to $149,838, the total still owed for the 2009 season, according to court documents.

The publisher said the football team should be able to resell the suite to recover the remaining amount. Either way, the Eagles, as unsecured creditors, are likely to recover only pennies on the dollar on their claim in Journal Register’s bankruptcy case.

Journal Register is forfeiting some premium accommodations. The suite included three televisions, a refrigerator, a private restroom and a balcony filled with a dozen theater-style seats. The annual rate for the skybox exceeded $206,000 in the final year of the company’s contract.

Executives and their guests will also miss out on VIP-worthy benefits that would make the typical football-watching bleacher bum drool in his $12 beer.

Journal Register officials received two field passes for every Eagles home game, exclusive access to five training camp sessions, and two tickets annually to an Eagles’ road game, including airfare, hotel and a dinner reservation with a former player.

While Journal Register personnel will lose the dream treatment going forward, they did already have the opportunity to cash in on perhaps the best perk: A trip for two to Super Bowl XXXVI in New Orleans.

Cardinals Protest Tax to Save Coyotes

Posted: August 4th, 2009, 9:47am PDT

Associated Press

The National Football League’s Arizona Cardinals, who are neighbors to the Phoenix Coyotes in Glendale, Ariz., filed papers in the hockey team’s bankruptcy case opposing a special sports taxing district.

A ticket tax, or some similar tool, has been mentioned as a way for the city of Glendale to recoup financial concessions it might need to make to keep the Coyotes playing in the city.

Last season’s NFC Champions, the Cardinals are “opposing any special taxing district, or any similar plan that might impact the Cardinals and its fans,” attorneys for the team said in court documents. The Cardinals play their games in the hallowed halls of University of Phoenix Stadium, which is housed in the same mega sports and entertainment complex as the Coyotes’ home rink, Jobing.com Arena.

Glendale officials are fighting to keep the Coyotes playing in the city-owned arena, rather than scampering north to Canada.

The Cardinals, who until last season also shared the title of perennial losers with the Coyotes, said they needed to voice their concern over ticket taxes after reading about possible incentives Glendale might toss at Jerry Reinsdorf, the Chicago sports mogul who is the National Hockey League’s hand-picked suitor for the Coyotes.

The football team presumably fears that ticket taxes may be applied to all professional teams that play in Glendale.

Reinsdorf has said he would keep the team in the Phoenix suburb, near where his Chicago White Sox play spring training games, but he wants to renegotiate the team’s lease with Glendale.

Reinsdorf, the city and the NHL are trying to fend-off a rival offer from BlackBerry mogul Jim Balsillie, who has promised more money for Coyotes creditors contingent on moving the team to Hamilton, Ont. Reinsdorf will have an extra month to negotiate with Glendale as Judge Redfield T. Baum on Monday pushed back a court auction for the team to Sept. 10.

The Daily Docket: Trump Returns to ‘The Donald’

Posted: August 4th, 2009, 6:32am PDT

Donald Trump has reached a deal to regain control of the Atlantic City casino that bears his name, according to The Wall Street Journal. Trump Entertainment Resorts Inc., which filed for Chapter 11 bankruptcy protection earlier this year, Tuesday said it has agreed to sell the company to Trump and BNAC Inc., an affiliate of Beal Bank Nevada.

General Motors Co. may be forced to lay off thousands more hourly workers after the auto maker’s latest buyout program fell short, WSJ reports.

Cooper-Standard Automotive Inc. has lined up a $175 million bankruptcy loan that sets the auto-parts maker up for a short, expensive ride through Chapter 11. Read the Daily Bankruptcy Review story here.

Tribune Co.’s sale of the Chicago Cubs is still up in the air, according to the New York Times.

Ruth Madoff, the wife of convicted Ponzi-scheme operator Bernard Madoff, has agreed to provide the trustee liquidating her husband’s business with a monthly accounting of her income and spending, according to WSJ.

Meanwhile, nearly $22 million in real estate owned by Madoff is about to go on the market, CNN reports.

The Arena Football League is expected to announce that it’s folding, according to ESPN.

Bankruptcy Beat Snapshot: Skip Di Massa

Posted: August 3rd, 2009, 12:55pm PDT

Duane Morris

About eight years ago, Skip Di Massa found himself waiting tables.

The attorney, who chairs Duane Morris’ bankruptcy practice, usually spends his days fighting for his creditor clients in bankruptcy court. But there he was, running from the kitchen to the dining room of Le Castagne, an upscale Italian restaurant in the heart of downtown Philadelphia, shifting his focus from lawsuits and legal briefs to lunch specials.

“You’ve got to take this entrée out to table 32,” the manager of the restaurant implored Di Massa when he walked into the kitchen that day, he recalled. Three waiters hadn’t shown up for work and another had been fired – which left Di Massa, one of the eatery’s owner, balancing his two loves – Italian food and bankruptcy law – in one work day.

These days, things run much more smoothly at Le Castagne, leaving little work for Di Massa in the 100-seat restaurant. On a recent Thursday, he could be found sipping a glass of white wine and tucking into a mozzarella, tomato and prosciutto appetizer as he dined with a fellow Duane Morris partner and took in the view of Chestnut Street from the restaurant’s open front windows.

“You know what I really love?” he asked. “After a day where I fight with people all day long and my stomach’s all twisted up, I’ll come in and just see how things are going. I sit at the bar, have a glass of wine and I see people start to roll in, and they’re laughing and talking and people are having a good time. It just brings me down off of a hard day. It’s a great thing to see.”

The story of Le Castagne began in 2001, when Di Massa - known as Rudolph J. Di Massa Jr. on his birth certificate and business cards only - partnered with the owner of another Philadelphia restaurant, La Famiglia. Di Massa had been frequenting La Famiglia for years, taking clients out to lunch in its elegant dining room, when he realized he might want to have a place of his own to entertain them. The son of Italian immigrants immediately turned to the food of his ancestors.

“It was a natural choice,” he said.

Le Castagne – which means “chestnut” in Italian – opened on the last day of August in 2001, less than two weeks before Sept. 11. The business immediately felt the impact.

“People just stopped going out,” Di Massa said.

The restaurant was able to continue plugging along through a slow fall during which few people felt like splurging on decadent dishes like gnocchi with white truffle sauce (one of Di Massa’s favorites). Through it all, the attorneys of Duane Morris made sure to make the two-and-a-half block walk from their office to the eatery as often as they could.

“What’s been very heartwarming to me is that so many partners in the firm, so many associates in the firm have been very supportive,” he said, noting that he still spots his colleagues here often.

Di Massa’s bankruptcy experience has aided him in less visible ways as well. The attorney is well versed in the nature of creditor-debtor relationships and, unsurprisingly, is good at preparing for the worst.

“You have to know, you need to seen the signs when your debtor is in trouble,” he said.

Though it is definitely not immune to the challenging economic environment, Le Castagne has surely come a long way from the days where it had to turn to its owner for help with the noontime rush. In fact, Di Massa is so confident in the abilities of his current staff, he’s exploring a new venture: cooking for his family. The attorney recently had a wood-burning oven, imported from Italy, installed in his home and intends to make pizza-making his next big endeavor.

Booted from Luxury’s Lap

Posted: August 3rd, 2009, 12:23pm PDT

Amid a recession that’s causing even the well-heeled to consider swapping couture for cost-cutting, some purveyors of luxury goods are turning to bankruptcy. The latest to fall? Mrs. John L. Strong & Co., the favorite stationer of stars and socialites alike, and art gallery owner Max Lang, which both sought Chapter 11 protection in Manhattan on Friday.

Mrs. John L. Strong & Co. filed for bankruptcy protection after it failed to secure additional funding, according to court papers. The filing follows the late May shuttering of the Madison Avenue shop after 80 years of helping the rich and famous correspond in style. Over the years, the company has counted among its clients British royals (the Duke and Duchess of Windsor), presidents’ wives (Pat Nixon and Mamie Eisenhower), fashionistas (legendary “Vogue” editor Anna Wintour) and Hollywood celebs (Tom Cruise and Katie Holmes). Even those with a blue-collar image to uphold (Bruce Springsteen) couldn’t resist the charms of Mrs. John L. Strong’s monogrammed cards and lined envelopes. But, as the New York Times reported in May, a celebrated history wasn’t enough to withstand the recession, lack of funding and a failed bid to find a buyer.

Even after more than 20 years as a dealer in the international art market, mixing with trendy crowds at art fairs around the world, Max Lang is finding himself in financial trouble. Sales at his eponymous Chelsea modern and contemporary art gallery, despite boasting works by Andy Warhol, Jean-Michel Basquiat and Pablo Picasso, have slowed considerably amid the downturn. And without the ability to generate income, Lang said his debts continue to rack up. Among them: $42,000 a month in alimony and child support for ex-wife Cari Lang and their three children, an obligation Max Lang recently failed to get reduced.

The Daily Docket: Another Day, Another Supplier

Posted: August 3rd, 2009, 6:44am PDT

Auto-parts supplier Cooper-Standard Automotive Inc. filed for Chapter 11 bankruptcy protection Monday, listing debts of nearly $1.8 billion, The Wall Street Journal reports.

The board of the new General Motors Co. meets for the first time Monday, according to WSJ.

Meanwhile, Bloomberg reports that GM’s Opel unit may be forced into bankruptcy if the auto maker can’t reach a deal with the German government on the unit’s sale.

An arm of the Justice Department is calling for court-ordered investigation in Extended Stay Inc.’s bankruptcy case, saying there are “serious” fraud allegations involving the hotel chain’s top management. Read the Daily Bankruptcy Review story here.

CIT Group Inc., which recently inked a $3 billion rescue financing deal with its largest bondholders, will provide $1 billion of that money to a unit that gives credit to manufacturers and retailers, according to WSJ.

Jeffry and Barbara Picower, alleged to have made $5.1 billion from investing with Bernard Madoff, said they “are honorable people who were deceived” in response to a lawsuit filed against them by the trustee liquidating Madoff’s firm, WSJ reports.

WSJ interviews fashion designer Christian Lacroix, who put his brand into bankruptcy protection in May.

The biggest private-equity firms have $400 billion in debt coming due over the next five years, according to Financial Times.

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