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WSJ.com: Bankruptcy Beat (68)

Golf Clubs Hit Rough Patch

Posted: October 30th, 2009, 1:41pm PDT

It may have 170 members and a golf course designed by Arnold Palmer, but the Federal Club was the third golf club this week to hit the rough.

Following in the footsteps of Seven Falls Golf and River Club and Woodbury Country Club, the Glen Allen, Va., Federal Club filed for Chapter 11 protection Tuesday alongside Mountain Run, its companion upscale housing development. The companies, which entered bankruptcy under the names Mountain Run Golf Inc. and Mountain Run LLC, each listed assets of zero to $50,000 and debts of $1 million to $10 million in petitions filed with the U.S. Bankruptcy Court in Richmond.

Ray Tate, one of the companies’ owners, told the Richmond Times-Dispatch that the club will stay open for business while it reorganizes. “We hit the worst economy you could hit,” he said. “We needed some help.”

According to the Times-Dispatch, the club’s owners had hoped to sell land in the community to subsidize the golf club, which offers perks like full service locker rooms and a children’s splash poll, until the membership level reached its goal of 500. But membership hasn’t increased to hoped-for levels, and no one is building or buying houses. Only 58 homes have been built on Mountain Run so far, though the plan calls for 99.

Currently, the companies’ owners are trying to find new cash, which could include options like selling the property or finding new investors. “We needed to get some space to get this going the way it ought to go,” Tate said. “Do I like it? No. But we had to do something. I would love to find another equity investor.”

Lil Jon Bounces Back From Label’s Bankruptcy

Posted: October 30th, 2009, 11:07am PDT

Associated Press

After the stress of his record label’s bankruptcy led Lil Jon to take a break from recording new music, the rapper (and vintner) has bounced back, releasing a new single and nearly completing his first solo album.

Lil Jon, who with his Eastside Boyz released the hit song “Get Low” in 2003, has been working on his upcoming album “Crunk Rock” for the past five years. His progress was interrupted by the 2008 Chapter 11 bankruptcy filing of his record label, TVT Records, which he told the Associated Press was one of the toughest times of his musical career and led him to go on hiatus from recording. As Bankruptcy Beat has previously reported, Lil Jon (real name: Jonathan Smith) had taken a vocal role in the bankruptcy proceeding, objecting to the label’s asset sale to digital music distributor The Orchard. The buyer’s founder, Richard Goettehrer, told Bankruptcy Beat earlier this year that “the feeling between TVT and Lil Jon was not the best,” leading The Orchard to release him from his contract. According to Billboard, he signed with Universal Republic, under which he’ll be releasing his new album early next year.

In addition to the distraction of TVT’s bankruptcy, Lil Jon has also been distracted, in a good way, by the burgeoning success of his winery. Little Jonathan Winery won a silver medal in “some California wine competition,” he said. From its website, the winery sells a 2006 Chardonnay made with grapes picked from California’s Central Coast, a 2006 Monterey Merlot with “aromas of mulberry, cherry and plum” and a 2006 Paso Robles Cabernet Sauvignon whose “warm black cherry and cassis…provide a rich satisfying mouth feel.”

As to why Lil Jon used his full name in the winery’s name, the vintner told the AP it’s because the wine is “more mature.”

“I wanted to not just have a direct connection, but make it just a little bit more upscale than regular ‘Lil Jon,’” the vintner said in a story posted on the winery’s website. “This is not no ghetto Boone’s Farm, this is some real wine.”

But that’s pretty much all Lil Jon can tell you about his wine (which you can try for $15.99 for a minimum two-bottle order). After all, he’s “not like an expert, so don’t ask me no questions. I just like the taste.”

The Daily Docket: FairPoint Seeks Labor Cuts

Posted: October 30th, 2009, 6:31am PDT

FairPoint Communications Inc. is seeking $30 million in concessions from union workers in northern New England, the New Hampshire Union Leader reports.

Delphi said Thursday that it reached a settlement in a lawsuit it filed in bankruptcy court last year against hedge fund Appaloosa Management after it terminated a deal to invest in the auto-parts supplier, according to the Associated Press.

The National Post, the Canadian daily newspaper founded by Conrad M. Black, may shut down Friday as part of its parent company’s restructuring, the New York Times reports.

Senior lenders have offered up to $150 million worth of fresh loans to Visteon Corp., a troubled auto-parts maker that is pushing to get out of Chapter 11 in the first quarter of 2010. Read the Daily Bankruptcy Review story here.

Sitrick and Co., a Los Angeles public relations firm known for representing companies in financial distress, is expected to be acquired next month by consulting firm Resources Connection Inc., according to The Wall Street Journal.

Efforts to introduce a Chapter 11-style corporate restructuring law in Hong Kong have been revived, according to AmLaw Daily.

Michigan developer Ted Gatzaros is attempting to buy Greektown Casino out of bankruptcy by forming a coalition of unsecured investors that are expected to lose money in the casino’s Chapter 11 case, Crain’s Detroit Business reports.

GQ Ranks Elizabeth Warren Among D.C.’s Most Powerful

Posted: October 29th, 2009, 2:04pm PDT

Associated Press Elizabeth Warren

Being handpicked by Senate Majority Leader Harry Reid to keep an eye on the $700 billion that the U.S. government doled out to save the financial industry carries certain prestige and power. How much prestige and power? According to GQ, which recently released its list of the 50 most powerful people in Washington, more than a TV journalist but less than the head of a group that represents major Wall Street firms.

Harvard Law School professor and bankruptcy expert Elizabeth Warren took the 30th spot on GQ’s biennial list for her role as chair of the Congressional Oversight Panel on the Troubled Asset Relief Program. GQ attributed the ranking to her bully pulpit, which the magazine said she’s used “to become one of the biggest bullies on the issue of transparency in the Fed’s economic-rescue policies.” Not only does she have the chance to use her voice, GQ said, but Congress is listening: “Wherever you see movement toward disclosure of the Fed’s dealings with Wall Street or support for reining in credit card companies, Warren’s the force behind it.”

Warren beat out ABC chief Washington correspondent George Stephanopoulos (#31) but, alas, not Edward Yingling (#24), chief executive of the American Bankers Association, which is lobbying hard against greater financial regulation.

His Own Private Idaho

Posted: October 29th, 2009, 12:50pm PDT

A New York bankruptcy attorney is running for U.S. Senate. Against a popular incumbent. In Idaho.

William Bryk, a 54-year-old lawyer from Brooklyn and frequent candidate for public office, is throwing his hat in the ring to challenge Idaho’s senior senator, Republican Mike Crapo, according to the Spokesman-Review.

“I’m a firm believer in contested elections, and I don’t think that the organization of the Democratic Party in Idaho has shown that it’s able to find even a non-credible candidate for the U.S. Senate against the incumbent,” Bryk told the newspaper.

Bryk, according to the Spokesman-Review, has launched numerous, unsuccessful campaigns for state and national office. He has run as both a Democrat and a Republican. In 2000, he won the New Hampshire primary for vice president as a Republican. (New Hampshire has an open primary for vice presidential candiates.) In 2004, he filed to run for U.S. president as a member of the Federalist party.

Bryk focuses his legal practice on consumer-bankruptcy cases. He has written columns for the New York Press and New York Sun and has a blog, City of Smoke, which chronicles the history of New York.

The Daily Docket: GM to Tap Government Loan

Posted: October 29th, 2009, 6:30am PDT

General Motors Co. is expected to outline plans to draw down more U.S. government money it will use to aid Delphi Automotive LLP, The Wall Street Journal reports.

A bankruptcy judge Wednesday allowed GM’s bankruptcy estate to pay an investment banker and financial adviser more than $16 million, including a $13 million fee for its role in helping GM prepare for and emerge from bankruptcy, according to the Detroit News.

A Delaware bankruptcy judge has deferred action on Tribune Co.’s request to halt a lawsuit that accuses Chairman Sam Zellof misusing an employee stock ownership plan in the company’s 2007 leveraged buyout, the Associated Press reports.

A bankruptcy judge said telecommunications equipment maker Nortel Networks Corp. can sell certain assets to Hitachi Ltd. for $10 million, according to WSJ.

Chrysler has returned $5.5 million in bonds to an Indiana county to settle a dispuate over a transmission plant that one of the auto maker’s suppliers stopped building last year, the Associated Press reports.

A subsidiary of the Chickasaw Nation of Oklahoma has won a bankruptcy auction for Magna Entertainment Corp.’s Lone Star Park in Texas, according to the Dallas Morning News.

Philadelphia Newspapers LLC on Wednesday won preliminary court permission to prepare to poll creditors on its Chapter 11 exit plan, but the fate of the publishing operation still hangs on the outcome of a November auction. Read the Daily Bankruptcy Review story here.

The Pinnacle of Auctions

Posted: October 28th, 2009, 2:12pm PDT

Part one of Lehman Brothers Holdings Inc.’s art auction, set to be held this weekend, is expected to fetch a cool $760,000 to help the defunct investment bank pay off some of its debt. But it’s got nothing on the upcoming auction from the Yellowstone Mountain Club LLC.

The items that were supposed to furnish “The Pinnacle,” the resort’s never-built home that would have gone on the market for $155 million, will be auctioned off at Red Baron Antiques in Atlanta Nov. 6 through Nov. 8. According to the Bozeman Daily Chronicle, the more-than 300 items may yield $8 million or more. The auction will feature such goodies as a cased knife display, a pair of “Flamboyant [sic] Gothic throne chairs” and a “tasting room” originally from a Scottish castle.

“People buy this kind of furniture when they want you to know they’re rich,” Red Baron President Bob Brown told the Chronicle. “You can’t put $100 bills on your wallpaper, so that’s what you do.”

The Pinnacle, once dubbed the world’s most expensive home by Forbes magazine, was to have an area of 53,000 square feet and was to be built on 160 acres of land. But prospects for the home died out after former owner Tim Blixseth sold the land and the club filed for bankruptcy.

In July, CrossHarbor Capital Partners LLC bought the club out of Chapter 11 bankruptcy protection and obtained The Pinnacle’s furnishings. According to CrossHarbor partner Matt Kidd, the firm is selling the collection because it thinks that selling everything will be easier than finding places to put it. “It doesn’t really fit into our business plan,” Kidd said. “It isn’t needed for what we’re planning for the club.”

Lender Agrees to Forgive Flight Students’ Debt

Posted: October 28th, 2009, 9:22am PDT

Hundreds of students at a helicopter flight school won’t have to repay most of the debt they took out in order to pay for training they never received as a result of the school’s liquidation, thanks to a new legal settlement.

According to the Associated Press, Student Loan Xpress agreed to forgive $112.7 million in student loans it made to aspiring helicopter pilots who signed up for training at Silver State Helicopters. The Nevada-based school abruptly shut its doors in February 2008 and filed for Chapter 7 bankruptcy liquidation, leaving hundreds of students on the hook for loans to fund training they wouldn’t receive.

The deal, which a federal judge in Florida approved in connection with a class-action lawsuit, covers students in 12 states. The $112.7 million represents 75% of the amount of loans that the majority of Silver State’s 2,700 students took out. The amount of loan forgiveness that each individual student will receive depends on how much training they received.

According to the Las Vegas Sun, Silver State’s shutdown and liquidation last year were the result of the company’s failure to produce enough cash flow to cover its operating expenses. In a letter to employees, Silver State owner Jerry Airola also said that the company felt the effects of the collapse of the lending industry “full force.”

Airola currently faces some hot water himself in his school’s bankruptcy case, according to the Sun. The bankruptcy official tasked with liquidating Silver State’s assets has sued Airola and others to recover funds the official alleges were fraudulently transferred. In the suit, the trustee said Airola struck a deal to recapitalize the company that resulted in a $10 million payout to him. This deal made Silver State vulnerable to bankruptcy, the official alleged. Airola’s attorney has said the lawsuit’s allegations are without merit.

The Daily Docket: Icahn Turns Up the Heat on CIT

Posted: October 28th, 2009, 6:28am PDT

Billionaire investor Carl Icahn launched a campaign to derail CIT Group Inc.’s restructuring plan, The Wall Street Journal reports.

The Treasury Department and a key House Democrat have reached a deal on legislation that would give the government new powers to police the country’s largest financial firms, including the ability to seize and break up failing companies. The proposal would require financial firms with more than $10 billion in assets to pay for the unwinding of a collapsed competitor, according to WSJ.

Troubled consumer lender GMAC is seeking billions of dollars in additional federal aid, the New York Times reports.

FairPoint Communications Inc. won court approval Tuesday to begin borrowing on a $75 million loan, overcoming opposition from bondholders that stand to be largely wiped out in the company’s bankruptcy case. Read the Daily Bankruptcy Review story here.

The $845 million sale of the Chicago Cubs, Wrigley Field and other assets from bankrupt Tribune Co. to the Ricketts family closed Tuesday, the Associated Press reports.

Philadelphia Newspapers’ senior lenders let the company’s restructuring offer lapse Tuesday, according to the Philadelphia Inquirer.

Coyotes in Canada?

Posted: October 27th, 2009, 2:18pm PDT

Associated Press

The Phoenix Coyotes could still be destined to play home games in Canada even after team owner Jerry Moyes agreed to sell the franchise to the National Hockey League.

Ice Edge Holdings LLC, a group that previous proposed to buy the Coyotes out of bankruptcy, plans to submit a new bid to the NHL as soon as the league has control of the club, the Toronto Globe and Mail reported.

A key component of Ice Edge’s earlier proposal was for the Coyotes to play a handful of home games in Saskatoon, Sask.

A bankruptcy judge thwarted Moyes’ attempt to sell the Coyotes to BlackBerry mogul Jim Balsillie, who promised to move the team to Hamilton, Ont. After a contentious fight in bankruptcy court, Moyes struck a deal on Monday to sell the team to the NHL for $140 million. The league plans to sell the Coyotes to a new owner that would keep the team in suburban Phoenix.

Ice Edge appears to be first in line for a shot at buying the team. It withdrew its original bid in September after it was unable to finalize a new lease agreement with the City of Glendale, Ariz., owner of the Coyotes home rink, Jobing.com Arena.

The group’s first proposal would have sent the team to Saskatoon for five regular-season games in an attempt to boost revenue by playing in front of sold-out crowds in hockey-hungry Canada. The Coyotes have for years struggled to fill seats in balmy Arizona.

Ice Edge representatives met Monday with NHL commissioner Gary Bettman to discuss buying the Coyotes, and the group has an agreement in principal with Glendale for a new lease, the Globe and Mail reported.

The wildcard in the deal appears to be former Coyotes coach Wayne Gretzky. “The Great One” was an investor in Ice Edge’s original offer, but it’s not known if he’d participate in the new deal.

Bankruptcy Judge To Congress: Change Examiner Law

Posted: October 27th, 2009, 10:04am PDT

Associated Press Judge Robert Gerber

Judge Robert Gerber on Monday ordered an examiner to investigate claims that LyondellBasell Industries’ financing talks are riddled with conflicts of interest, but not before making some harsh remarks about the examiner statute and calling on Congress to change the law.

First some background on examiners: They’re court-appointed attorneys, often with subpoena power, who investigate various issues in a bankruptcy case on behalf of the court, like claims of fraud at a company or the events that led to its downfall. In LyondellBasell’s case, the examiner will be looking into the chemical company’s efforts to secure financing to exit bankruptcy. Creditors say the talks with potential investors, including big names like Apollo Management and Kohlberg Kravis Roberts & Co., are under a cloud due to conflicts of interest.

Examiner reports have been crucial to unraveling the biggest bankruptcy cases, including those of Enron and Refco, both of which were plagued by complex fraud claims. On the horizon is the long-awaited examiner report in Lehman Brothers. The examiner in that case, a former U.S. attorney, is due to report his findings early next year.

The problem, as Gerber sees it, is that although judges can determine the scope of an examiner’s work, the section of the Bankruptcy Code governing examiners makes their appointment mandatory when a party in a case requests one and a company’s unsecured debts exceed $5 million. That’s a tiny amount in major bankruptcy cases, making the appointment inevitable.

Ruling from the bench on Monday, Gerber said the mandatory appointment is “terrible bankruptcy policy” and has been “abused.” He said judges should have discretion to decide when an examiner is appropriate and when it is “merely a litigation or negotiating ploy.”

The judge also criticized the U.S. Trustee’s office, an arm of the Justice Department that monitors bankruptcy proceedings, for supporting the appointment by citing the $5 million threshold without commenting on what the examiner should look into. Both LyondellBasell and its creditors were divided over the scope of the investigation.

“There’s no focus on what the examiner should properly do,” Gerber said about the government’s response.

Bankruptcy Beat readers: Is Gerber right? Should judges’ hands be tied when it comes to appointing examiners?

The Daily Docket: Judge Orders Lyondell Probe

Posted: October 27th, 2009, 6:50am PDT

A judge Monday ordered an investigation into steps taken by LyondellBasell Industries AF to finance its exit from bankruptcy, a process creditors say is riddled with conflicts of interest. Read the Daily Bankruptcy Review story here.

Four months after exiting bankruptcy, Chrysler is about to reveal plans for a new product line heavy on vehicles from Italian partner Fiat SpA, The Wall Street Journal reports.

The restaurant chain Max & Erma’s Inc. has filed for Chapter 11 bankruptcy protection, according to the Associated Press.

Phoenix Coyotes owner Jerry Moyes agreed to sell the team, which filed for bankruptcy protection earlier this year, to the National Hockey League for $140 million, Bloomberg reports.

A trustee has been appointed to oversee the liquidation of Thornburg Mortgage after it was discovered former executives were using staff and equipment to launch a start-up venture, according to Reuters.

Chicago businessman James Tyree completed his purchase of Sun-Times Media Group, according to the Associated Press.

The Demise of a Deal-Maker

Posted: October 26th, 2009, 1:23pm PDT

Denny Hecker has traveled a long journey. First, he was a boy whose business strategy involved “taking two nickels and turning them into a 50-cent piece.” Then, he became a man running a business empire that yielded enough 50-cent pieces to buy him multiple homes, a personal jet and other expensive toys. Now he’s facing multiple lawsuits, a grand jury probe and a bankruptcy proceeding, plus $767 million in debt. In a new profile, the St. Paul Pioneer Press dug through hundreds of documents and talked to the man himself to in an attempt to understand how everything unraveled.

In a two-part series published yesterday and today, the Minnesota newspaper extensively chronicles the rise and fall of a local boy and onetime car salesman who eventually acquired more than a dozen car dealerships and 200 other businesses, including a number of struggling companies he sought to turn around. Hecker tells the paper that although his love of deal-making brought him the trappings of luxury, it also led to his downfall.

“I made a living out of buying and selling things,” he said. “That’s really been the characteristic of my financial success and, quite frankly, my financial demise. I personally took a shot at a deal … and it didn’t work. It’s been painful and costly to me.”

You can read part one of the series here and the second part here.

Broke and Almost Famous

Posted: October 26th, 2009, 9:03am PDT

The International Association of Financial, Sport and Celebrity Advisers is taking it upon itself to address what it says is an “alarming” number of Americans that file for bankruptcy each year.

The group is starting its quest to save the masses from financial ruin with a one-hour docudrama starring former “Eight is Enough” and “Charles in Charge” star Willie Aames, who filed for bankruptcy protection in 2007. The show, which will air on VH1 next month, will illustrate how the former child star went broke and how, with the help of renowned financial and life coach Sarano Kelley, he can regain financial stability.

The cameras were rolling earlier this year as Aames, who once played costumed hero “Bibleman” and most recently did stints on VH1’s “Celebrity Fit Club,” held a two-hour sale of belongings that marked his life. Coach Kelley told The Kansas City Star that the sale was aimed at teaching Aames how to “learn how to let go of the past.”

“Aames joined over 850,000 Americans who filed for business and/or non-business bankruptcy in 2007,” the IAFSCA, a Washington, D.C., group of professional coaches and financial advisers, said in a statement Friday. With the figure rising to more than one million at the end of 2008, “the need for an American financial education lesson plan is crucial and immediate.”

“The IAFSCA is responding to these alarming numbers,” Kelley said. “We will use Aames’ ‘Broke and Famous’ story to reach millions nationwide on Nov. 5.”

The Daily Docket: Capmark Enters Chapter 11

Posted: October 26th, 2009, 5:57am PDT

Capmark Financial Group Inc., a developer of commercial properties, has filed for Chapter 11 protection, The Wall Street Journal reports.

According to WSJ, Fairpoint Communications says it will file for Chapter 11 protection with a plan that will reduce its debt by two-thirds.

According to the Detroit News, General Motors Corp.’s bankruptcy estate is being charged $23 million for work leading up to its bankruptcy case.

One of the top beneficiaries of Bernard Madoff’s Ponzi scheme was found dead, the Times of London reports.

Taylor, Bean & Whitaker Mortgage Corp., once the nation’s largest non-bank mortgage lender, is asking a bankruptcy judge to let it sell a portfolio of more than 1,900 foreclosed properties to a investment fund founded by Wall Street legend Lewis Ranieri. Read the Daily Bankruptcy Review story here.

Chain restaurants have been feeling the burn of the sour economy, but they’ve still be opening up new restaurants, the Philadelphia Business Journal reports.

Lender’s Failure Squeezes Dairy Farmers

Posted: October 23rd, 2009, 1:47pm PDT

Associated Press

Cockroft Dairy Farm this week became the seventh dairy in Colorado to file for bankruptcy protection in 2009. The farm is the fifth among those with ties to the failed New Frontier Bank.

The collapse of the Greeley, Colo., agricultural lender, which closed in April, has added to the woes of the state’s farmers, who are also suffering from dairy prices that have plunged to their lowest levels since the 1970s.

State agriculture officials fear that several more dairies will seek bankruptcy protection. Many Colorado farms depended on loans from New Frontier to finance their businesses, especially when dairy prices fell.

Federal regulators seized New Frontier’s assets after they criticized it for unsound lending practices. Regulators held an auction for the bank’s loans in September but weren’t able to milk much value from those assets.

The Federal Deposit Insurance Corp. only salvaged an average 27 cents on the dollar for the loans. One set of bank notes valued at $5 million sold for just $122,778.

DSB Bankruptcy Hurts U.S. Speedskaters

Posted: October 23rd, 2009, 8:54am PDT

Associated Press Athletes compete in the U.S. Olympic speedskating trials Thursday.

The aftershock of a bankruptcy in the Netherlands has rippled across the Atlantic to touch U.S. Speedskating, leaving the team without one of its key sponsors just months before the 2010 Olympic Winter Games.

This week, a Dutch court declared DSB Bank NV bankrupt after the bank’s collapse, which followed a run on deposits and the government’s refusal to provide a capital infusion. DSB’s failure leaves U.S. Speedskating - the organization that governs the sport in the U.S. and builds the team that represents in the U.S. at the Olympics - with a $300,000-plus budget shortfall and requires it to come up with a new financial plan for the remainder of the 2009-2010 season, according to the Los Angeles Times. DSB (whose logos decorate speedskaters’ apparel) had sponsored U.S. Speedskating since 2006.

“It is our mission to ensure our U.S. Speedskating Olympic Team has everything they need to be successful and we will continue toward that end,” Brad Goskowicz, U.S. Speedskating’s president, said in a statement. “The impact will be seriously felt and we will be seeking additional sponsor opportunities.”

With the Winter Games slated to begin in Vancouver in less than four months, U.S. Speedskating has been discussing the impact of the lost sponsorship with the U.S. Olympic Committee. Once that’s known, USOC spokesman Bob Condron told the L.A. Times that “we’ll make some decisions after that.

The Daily Docket: CIT, Goldman Ink Deal

Posted: October 23rd, 2009, 6:32am PDT

CIT Group Inc., teetering on the edge of bankruptcy, has reached a tentative deal with Goldman Sachs Group Inc. over a disputed “make whole” payment on a $3 billion loan, The Wall Street Journal reports.

The Treasury Department said Thursday that Chrysler Financial will close its doors by the end of 2011, according to the Detroit News.

JPMorgan Chase & Co. “is really sweating” over $3.7 billion that was in accounts at Washington Mutual Bank when JPMorgan took it over, an attorney for WaMu’s former parent said Thursday. Read the Daily Bankruptcy Review story here.

W.R. Grace & Co., which filed for Chapter 11 protection in 2001, has pushed its bankruptcy exit off until next year, the Baltimore Sun reports.

The governors of New Hampshire, Maine and Vermont are urging FairPoint Communications to keep its customers in mind as it contemplates filing for bankruptcy protection, according to the Nashua Telegraph.

A judge has ruled that Donald Trump, who is trying to regain control of Trump Entertainment Resorts Inc., must disclose details about the investment he and his partners still hold in the company, Bloomberg reports.

Bankruptcy Bust?

Posted: October 22nd, 2009, 2:49pm PDT

Getty Images

The wreckage of collapsed companies has provided plenty of work for bankruptcy professionals and vulture investors for more than a year now, but there’s reason to think the party might be coming to an end.

Standard & Poor’s on Wednesday cut in half its default forecast for junk-rated companies in the U.S. The ratings agency said its outlook for September 2010 is 6.9%, down sharply from an earlier projection that the rate would hit 13.9% in June 2010.

S&P said companies are taking advantage of the rally in credit markets to refinance debt, while banks have shown a willingness to give struggling companies more breathing room as way to prevent their own losses.

So far this year, 231 companies across the globe (168 in the U.S.) have defaulted, affecting more than $550 billion in debt, nearly double the 126 defaults in all of 2008, according to S&P. The default rate hit 10.8% in September.

But the report wasn’t all positive. Analysts warned many defaults are only being postponed beyond September 2010, writing that the projected drop in the default rate “conveys a greater sense of foreboding than it does genuine relief.”

“An avalanche of low-rated originations during the credit boom indicates considerable default risk still resides in the pipeline,” the report said.

So, Bankruptcy Beat readers, is the bankruptcy boom coming to an end?

Celebrating A Century

Posted: October 22nd, 2009, 11:54am PDT

Filene’s Basement has a lot to celebrate – in addition to being bought out of bankruptcy by new owners, the discount retailer of designer clothes is celebrating its 100th anniversary. And it’s not doing so quietly. The Boston Globe reports that Filene’s has kicked off its biggest advertising campaign in a decade as well as handing out gift cards and commemorative T-shirts to customers this week.

The ad campaign - conducted through print and television ads, as well as a six-minute excerpt from a Filene’s documentary that will play in the retailer’s stores - will also serve to remind customers that the retailer is still alive and kicking, according to Marcy Syms of Syms Corp., the discount retailer that snatched up Filene’s assets from the company’s Chapter 11 proceeding earlier this year in a deal Sym’s valued at more than $60 million.

“We want to make sure that we reach as many people as possible to let them know Filene’s Basement is still here and we are stronger than ever,” Syms told the Globe. “We are the place where bargains were born and never go out of style.”

Filene’s started as a literal basement in Boston as the brainchild of Edward A. Filene, who seized an opportunity to sell leftover merchandise from his father’s upstairs department store. By the mid-1990s, the chain grew to 56 stores but eventually downsized. Filene’s, which used to be a sister company of discount shoe retailer DSW, filed for Chapter 11 protection in May after being squeezed by the decline in consumer spending. Syms was later declared the winner for substantially all the chain’s assets - including 22 store leases, inventory and trade name - and consummated the sale in mid-June.

The Daily Docket: U.S. Stake in GM Worth $25B?

Posted: October 22nd, 2009, 7:03am PDT

Steven Rattner, the former head of the Obama administration’s auto task force, said Wednesday that the government’s stake in General Motors Co. is worth about $25 billion, the Detroit Free Press reports.

Nortel Networks retirees are urging the Canadian government to change the country’s bankruptcy law to protect pensions, according to the Toronto Star.

Already in prison for securities fraud, Adelphia Communications Corp. founder John Rigas and his son, Timothy, must stand trial again, this time on charges of tax fraud, a federal appeals court in Philadelphia said Wednesday. Read the Daily Bankruptcy Review story here.

Chicken producer Pilgrim’s Pride Corp., which is operating under Chapter 11 bankruptcy protection, reported a $56.71 million profit for the fiscal fourth quarter ended Sept. 26, Reuters reports.

Fresh out of bankruptcy, Filene’s Basement is launching its biggest advertising campaign in a decade to celebrate its 100th anniversary, according to the Boston Globe.

FairPoint Communications Inc. is asking its union employees in northern New England for pay cuts and other concessions as it seeks to avoid bankruptcy, the Burlington Free Press reports.

ABI Poll Casts Doubt on Bonus Reforms

Posted: October 21st, 2009, 1:39pm PDT

Bloomberg News

Most respondents to a recent American Bankruptcy Institute poll say changes to U.S. bankruptcy law intended to limit the payment of executive bonuses by companies in Chapter 11 were largely ineffective.

Congress put strict limits on bankruptcy bonuses designed to simply retain top executives when it overhauled the Bankruptcy Code in 2005, but 54% of those who respondent to an online survey last month said the changes failed to limit the compensation, according to ABI.

The ABI “Quick Poll” asked respondents if the 2005 change, which was added to the bankruptcy-reform legislation by the late Sen. Edward Kennedy, “has been effective in limiting excessive executive compensation.”

ABI says 37% of respondents disagreed strongly with the statement, and 17% said they somewhat disagreement. Only 24% of respondents agreed to any degree with the statement.

The poll was open to any visitor of ABI’s Web site. The Alexandria, Va., organization counts 12,300 attorneys, judges and other bankruptcy professionals among its members.

Judge: Some Lawyers Aren’t Smart Enough For Chapter 11

Posted: October 21st, 2009, 10:34am PDT

U.S. Bankruptcy Judge Alan Jaroslovsky in California is leveling some harsh words at lawyers who are in over their heads in Chapter 11 cases.

In a letter posted on his Web site, Jaroslovsky, who is based in Santa Rosa, complains there has been a “spate” of individual Chapter 11s filed by attorneys “who have neither the experience nor the education nor the competence to venture into Chapter 11.”

The judge cited “rampant errors” and “frequent malpractice” in such cases, often used by wealthy individuals and small business owners, and said the failure by attorneys to understand the difference between Chapter 13, also used by individuals, and Chapter 11 is creating “serious liability exposure” for lawyers.

Then this choice line: “Forget about trying to fix your compensation. You will be paid what I allow, period.”

A judge since 1987, Jaroslovsky is apparently not shy about taking aim at the local bar. In a letter last year titled “Reflections On A 341 Hearing,” he blasted lawyers who hire “some boob” to appear with clients during creditor meetings, known as 341 Hearings.

“These lawyers should be ashamed of themselves,” he wrote.

The Daily Docket: Investors Up Bid for Philly Papers

Posted: October 21st, 2009, 6:46am PDT

The investors backing the plan to bring Philadelphia’s two daily newspapers out of bankruptcy have sweetened their offer in a bid to keep the papers out of the hands of lenders, The Wall Street Journal reports.

Bankrupcty-court papers indicate that a partnership connected to the New York Mets may have actually made $48 million from its dealings with convicted fraudster Bernard Madoff, according to WSJ.

Bondholders of LyondellBasell Industries AF are seeking court permission to file a lawsuit tied to the financing of the merger that created the chemical company, the latest move by creditors to attack the $22 billion buyout. Read the Daily Bankruptcy Review story here.

The Maryland Racing Commission is voicing concern about the bankruptcy auction Magna Entertainment Corp.’s three racing properties in the state - Pimlico Race Course, Laurel Park and the Bowie Training Center, the Baltimore Sun reports.

The Detroit City Council voted to reject a $15.3 million settlement with Greektown Casino, which is trying to exit bankruptcy protection, according to the Detroit News.

A new report finds that Nevada businesses lead the U.S. in past-due bills, the Las Vegas Sun reports.

Senior-housing developer Erickson Retirement Communities LLC, which filed for Chapter 11 bankruptcy protection on Monday, is scrambling to reassure its 23,000 residents that their entrance-fee deposits aren’t in jeopardy, according to WSJ.

Fees Draw U.S. Trustee’s Ire In Hawaiian Telcom

Posted: October 20th, 2009, 1:41pm PDT

The Justice Department is questioning why Lazard Freres & Co. is being paid $2,527.38 per hour for its work in Hawaiian Telcom Communications Inc.’s bankruptcy case.

For 237.4 hours of work between April 1 and June 30, the investment bank submitted a bill for $600,000, an amount the U.S. Trustee says “far exceeds” rates charged by other professionals working on the phone company’s Chapter 11 case.

“Simply put, the amount of time Lazard is devoting to this case is not commensurate with its interim compensation,” Acting U.S. Trustee Tiffany Carroll said in papers filed with the Honolulu bankruptcy court.

A Lazard spokeswoman declined to comment.

In February, the court authorized Lazard to serve as Hawaiian Telcom’s financial adviser. Under its deal with the company, Lazard would collect a $200,000 monthly fee that would be offset against a $4 million restructuring fee that advisers are slated to collect at the end of the case.

At the time, Lazard was charged with exploring sale and merger possibilities for Hawaii’s largest phone company. Now that case is headed toward a standalone reorganization, the trustee is asking if Lazard’s services are even necessary.

“The flat monthly rate appears to have contemplated a greater level of participation by Lazard than has actually occurred,” Carroll said.

She also complained the bill was high considering that 46% of the work was done by supposedly lower-paid associates and analysts, and that 45 of the hours billed were for either “travel” or “update” conference calls.

Fake Watches Pulled From Hecker Auction

Posted: October 20th, 2009, 11:37am PDT

One expects to see fake Rolexes on the streets of New York City. But at the bankruptcy auction of a former auto dealership mogul and one-time big spender? Not so much.

Yet that’s exactly what happened in the effort to auction off Denny Hecker’s assets, according to Minneapolis TV station WCCO. Bankruptcy Beat previously reported that as part of Hecker’s bankruptcy case, the former owner of Advantage Rent-A-Car and of 26 auto dealerships was slated to put a host of his personal items on the block Monday, including 58 watches. While the watches included Rolexes and other luxury brands, there were also several Minnesota Vikings watches. Yet most of the watches didn’t go on the block Monday as scheduled, thanks to a local watch aficionado who days earlier had showed up to check out the goods.

“When we got there we began looking at a lot of the different watches, and immediately bells began going off in my head,” Jim Nash told WCCO. After calling the watch manufacturers with the serial numbers, Nash found out that some were phonies. Hecker’s lawyer acknowledged that some are replicas.

As a result, auctioneer Fred W. Radde & Sons Inc. pulled 54 watches off the block and off its Web site. The four Vikings watches were still put for up sale, as was a Callaway NFL alumni watch.

“To be fair to everyone, due to the fact that there has been some doubt cast on the authenticity of a few watches, the Bankruptcy Trustee has decided NOT to auction the watches at this time. We believe this doubt will greatly affect the majority of the watches that are indeed authentic!” the auctioneer said on its Web site.

The Daily Docket: Icahn Steps Into CIT Fray

Posted: October 20th, 2009, 7:03am PDT

Billionaire investor Carl Icahn offered to underwrite a $6 billion loan to CIT Group Inc., The Wall Street Journal reports.

Lehman Brothers Holdings Inc.’s European unit paid bankruptcy administrators and lawyers $363 million in the year after the investment bank collapsed, according to Bloomberg.

The New York Times previews Andrew Ross Sorkin’s “Too Big To Fail,” which was released Tuesday. In the excerpt published on the paper’s Web site Tuesday, Sorkin chronicles efforts to try to save Lehman Brothers before it filed for bankrutpcy protection last year.

One of the biggest developers of retirement communities, Erickson Retirement Communities LLC, filed for Chapter 11 bankruptcy protection Monday after reaching a deal to sell its assets, WSJ reports.

Grupo Mexico’s plan to retake control of Asarco LLC hit a roadblock Monday when U.S. District Court Judge Andrew S. Hanen indicated he’ll consider a broad array of issues before ruling in the case, according to WSJ.

A Michigan businessman has withdrawn his plan to bring Greektown Casino out of bankruptcy, the Detroit Free Press reports.

Several months after a sale of WorldSpace Inc. collapsed, the company said a unit of Liberty Media Corp. may now be interested in acquiring it. Read the Daily Bankruptcy Review story here.

Jeweler Seeks to Cut Ties With DAR

Posted: October 19th, 2009, 1:28pm PDT

After more than 100 years, jeweler J.E. Caldwell & Co. will no longer serve as the official jeweler of the Daughters of the American Revolution. As part of its liquidation, retailer is requesting bankruptcy-court permission to sever ties with the non-profit women’s service organization.

Finlay Enterprises, which operated J.E. Caldwell and other jewelry chains like Bailey Banks & Biddle and Carlyle & Co., said the insignia merchandise agreements with the DAR and related organization the National Society of the Children of the American Revolution are no longer necessary now that all of Finlay’s stores are being liquidated.

J.E. Caldwell was founded in 1839 by James E. Caldwell in Philadelphia, just one block from Independence Hall - the site of the signing of the Declaration of Independence and the Constitution. In 1892, the jeweler began its relationship as the official jeweler of DAR, whose members must prove that they’re descendants of the patriots who participated in the American Revolution. Today, J.E. Caldwell offers everything from membership pins (a standard, gold-filled insignia pin with the member’s name engraved on the back runs for $85, while the same pin surrounded by various gems will cost $1,500) to gifts (there’s a $10 Christmas ornament and a $132 crystal bowl).

DAR Administrator Stephen Nordholt said the organization has been following the bankruptcy proceeding and will “undoubtedly” launch a search for a new jewelry provider.

In addition to the DAR and NSCAR contracts, Finlay is also seeking to reject nearly a dozen billboard advertising agreements and Carlyle & Co.’s sponsorship of a Duke vs. University of North Carolina tournament. Finlay’s request is slated for a Dec. 15 hearing before the U.S. Bankruptcy Court in Manhattan.

Lehman Deal: Pearls Before Swine?

Posted: October 19th, 2009, 12:16pm PDT

Associated Press

In the frantic hours before Barclays Plc sought bankruptcy court approval to buy most of Lehman Brothers Holdings Inc.’s assets last year, executives at both firms were concerned the deal would fall apart if the U.K. bank acted “like pigs” in picking over Lehman’s carcass.

In recently unsealed court documents, former Lehman executive Alex Kirk describes his fear that Barclays would walk away from the deal if it couldn’t wring additional unencumbered assets from the investment bank. But Kirk, one of the key negotiators on Lehman’s side of the deal, was also concerned a bankruptcy judge wouldn’t approve the deal if Barclays was too “piggish.”

“Rich Ricci just told me he won’t blow up this trade by being a pig,” wrote Kirk in an email to his boss, Herbert “Bart” McDade, just hours before the sale hearing on the evening of Sept. 19, 2008.

As markets tanked in the days following Lehman’s bankruptcy, Ricci, chief operating officer Barclays Capital and one of the bank’s key negotiators on the Lehman deal, demanded the investment bank put up more assets as a cushion. While the British bank hasn’t denied getting a great deal on Lehman’s business, Ricci says he stopped looking for more assets after Kirk told him there was nothing left.

“And I said something like to him, well, fine, we’re not going to be - we’re not going to be pigs and go after every last nickel,” Ricci said in a deposition last month.

Representatives for Barclays and Lehman declined to comment.

Judge James Peck of the U.S. Bankruptcy Court in Manhattan approved the sale of Lehman’s broker-dealer business to Barclays at a marathon hearing just days after the U.S.’s fourth-largest investment bank failed.

Although Peck, concerned that Lehman’s assets were rapidly deteriorating in value, signed off on the sale, he later agreed to let Lehman’s estate and its creditors revisit the deal in a bid to recover billions of dollars in assets from Barclays.

Lehman says the bank reaped an $8.2 billion windfall and possibly more from the sale of its broker-dealer business days after the investment bank filed for bankruptcy protection.

Included in that windfall, according to Lehman’s lawyers, was a $5 billion undisclosed “haircut,” or discount, off the book value of Lehman securities transferred to Barclays plus another $2.7 billion added to the deal at Barclays’ demand during the sale hearing.

The Daily Docket: CIT Amends Exchange Offer

Posted: October 19th, 2009, 6:30am PDT

Struggling business lender CIT Group late Friday amended the terms of its debt-exchange offer, according to The Wall Street Journal.

The Catholic Diocese of Wilmington, Del., has filed for Chapter 11 bankruptcy protection ahead of a sex abuse trial, the Associated Press reports.

DSB Bank was declared bankrupt by a Dutch court on Monday, according to DealBook.

Stallion Oilfield Services filed for Chapter 11 bankruptcy protection, Reuters reports.

The city of Glendale, Ariz., has spent $2.1 million on outside consultants to keep the NHL’s Phoenix Coyotes from relocating, according to the Associated Press.

Access Industries is moving to stop a possible court probe into a proposal for Access to join Apollo Management and others to pump new money into its LyondellBasell Industries AF and take it out of bankruptcy. Read the Daily Bankruptcy Review story here.

We Win, You Win

Posted: October 16th, 2009, 2:05pm PDT

Associated Press

Despite a losing record when it comes to profitability, the Phoenix Coyotes on Friday announced that if they win certain games, they’ll give away tickets for free.

The hockey team that’s earned more buzz in recent months for its bankruptcy and attempted sale than for what it’s done on the ice is launching a new promotional campaign called “Join the Pack.” As part of that campaign, fans who go to one of five designated “We Win, You Win” home games will be handed a voucher that, if the Coyotes win, will entitle them to attend a future Coyotes home game for free.

This won’t be the first or last time the Coyotes turn to price-slashing to fill the stands. Not only are there other “Join the Pack” deals to come, but the Coyotes already drastically reduced ticket prices for their home opener a few weeks ago. With the top tickets marked down to $25 from $330, it’s no wonder the game sold out.

While the Coyotes haven’t made any profits since they moved to Arizona from Winnipeg in 1996, the team said they want fans to “experience great NHL hockey at reasonable prices.” Perhaps a more telling rationale, given the fight over whether a buyer must keep the Coyotes in Arizona or can move the team, is to bond the team to the community, creating a fan base that will continue buying tickets and maybe even fight for the team to stay put.

“Now more than ever, we believe it is important to show our appreciation to our great fans. We want everyone throughout the state of Arizona to feel as though they are a part of the Coyotes family and to know that we are committed to providing them with a great product that they can be proud of,” said Douglas Moss, the Coyotes’ president and chief operating officer. “Our ‘Join the Pack’ promotion also serves as a call to action, encouraging people to support the team by purchasing tickets and experiencing Coyotes hockey live at Jobing.com Arena.”

Producer Fights to Release ‘Six Wives’

Posted: October 16th, 2009, 11:59am PDT

Associated Press Andie MacDowell

If you were looking forward to seeing a movie in which a man’s disappearance while skydiving causes his current wife and five former wives to argue about his funeral arrangements, you might have to wait a while longer.

That’s because the group that owns “The Six Wives of Henry Lefay” (which stars Tim Allen and Andie MacDowell, among others) has filed for bankruptcy protection. Riverview, Fla., film entity Six Wives LLC entered Chapter 11 Wednesday after its lender, Aramid Entertainment Fund, said the film was in “nonmonetary default,” according to the Tampa Tribune. Aramid, which is based in the Cayman Islands, killed the rights to overseas distribution.

By entering bankruptcy protection, Six Wives wants to prevent Aramid from selling the movie out from under it, said Rich McIntyre, who’s representing the company. However, the company is also trying to win court approval to release the film in the U.S., he said.

According to documents filed in U.S. Bankruptcy Court in Tampa, Six Wives has about $12 million in assets and $7.2 million in debts, as well as about 30 creditors, including Allen, MacDowell and 20th Century Fox Film Corp. Aramid is owed $4.46 million.

Police Official Moonlights As Bankruptcy Lawyer

Posted: October 16th, 2009, 10:39am PDT

Lots of people moonlight, usually because the second job is something they enjoy doing or because they simply need the extra cash. There are the weekend band gigs, teaching foreign language lessons and late-night shifts behind the wheel of a cab. But for a Baltimore Police Department official, the side job of choice is working on bankruptcy cases.

The Baltimore Sun reported that Kim Y. Johnson, whose role as director of the department’s Equal Employment Opportunity Commission makes her a member of the police force’s command staff, recently won the police commissioner’s approval to continue moonlighting on civil legal proceedings, including bankruptcies. However, she’s not allowed to work on cases involving Baltimore police or criminal cases, which she had done in the past.

Last March, the Sun reported that in the five years since Johnson had gone to work for the city, she has taken on more than 100 bankruptcy cases and defended criminal suspects (including a client whom the police charged with marijuana possession). But the city didn’t become aware of her legal work until January, when they launched an internal investigation and told her to hold off from this work as long as investigation went on. But by June, she was back in court, filing 11 bankruptcy cases since then. Johnson, whom the city paid $94,000 in the last fiscal year, also worked on local court cases, including a divorce.

This isn’t the first time this busy bee drew scrutiny for her moonlighting. Current Baltimore Mayor Sheila Dixon in 2004 (when she was City Council president) opposed Johnson’s extra jobs and sought an investigation, which didn’t happen.

The Daily Docket: Charter Plan Gets Thumbs Up

Posted: October 16th, 2009, 6:44am PDT

A judge Thursday said he will approve Charter Communications Inc.’s bankruptcy restructuring plan, which hands control of the cable company to a group of bondholders including Apollo Management and Oaktree Capital Management. Read the Daily Bankruptcy Review story here.

Lehman Brothers Holdings Inc. paid its lawyers and financial advisers $402.9 million in the year following its September 2008 collapse, according to documents filed in the failed investment bank’s Chapter 11 case, The Wall Street Journal reports.

A four-month investigation into Extended Stay Inc.’s pre-bankruptcy dealings may cost between $3.9 million to $4.85 million, court appointed examiner Ralph Mabey said, Reuters reports.

The Phoenix Coyotes will be back in court later this month to discuss what it will take to sell the team to the National Hockey League and get it out of bankruptcy, according to the Arizona Republic.

Investors are suggesting that bankruptcy may be an option for Japan Airlines, DealBook reports.

California bankruptcy lawyer Irving Sulmeyer of Sulmeyer, Kupetz, Baumann & Rothmann died Sept. 26 at the age of 82, according to the Los Angeles Times.

Lynn Tilton Goes to Washington

Posted: October 15th, 2009, 1:33pm PDT

Reuters

As chief executive of a private-equity firm that invests in distressed companies and works to turn them around, Lynn Tilton knows a thing or two about rolling up your sleeves and getting down to work to solve a problem. But Tilton, whose Patriarch Partners LLC has plucked up struggling companies both in and out of bankruptcy, says the weak economy and rising unemployment rate warrant something more than what she’s already doing every day.

“Saving America one company at a time, one job at a time is not enough,” Tilton said Thursday morning at the National Press Club in Washington, D.C., where she pitched a new public-private investment program that aims to fill the capital void she says small and middle-market companies are current facing. (You might recognize Tilton and Patriarch from the bankruptcy cases of fire truck maker American LaFrance and as the failed buyer of Polaroid; Patriarch also owns retailer Spiegel and make-up brand Stila.)

Arguing that job loss is not only causing “true hopelessness” throughout the U.S. but is dooming our chances of a true economic recovery, Tilton said her proposal seeks to save small to mid-size companies from liquidation. As major employers – Tilton’s figures suggest that together they employ about 80% of the U.S. workforce – she believes that giving these businesses the working capital they desperately need and currently aren’t getting will ensure there’s a company left to hire back workers and to spur the economy’s recovery. Otherwise, she said, companies are gone forever, and laid-off workers have “no place to go back to” in their shrunken industries.

You can read about her proposal here, but to quickly summarize, it would tap unused funds from government’s Troubled Asset Relief Program already set aside for the public-private investment programs like the one she’s pitching. Private investors would take more risk than the government in order to protect taxpayers. Tilton said she’s discussed her proposal with Treasury officials and with members of the U.S. House and Senate and is now “ramping up” her advocacy. She said while there’s been concern about the political ramifications of her proposal, there’s been “no pushback” to the goal of stemming job losses and creating new jobs.

Despite Tilton’s 28 years of private-equity and other financial experience, she claims a special understanding of Main Street and the “anger” and “resentment” that currently lurk there.

“I walk around this country. I walk through the manufacturing towns. I speak to people,” she said. “Although I’m considered a Wall Street woman, I’ve long seen the world from a perspective much distinct.”

Fee-for-All

Posted: October 15th, 2009, 10:42am PDT

Bloomberg News

Not bad for a year’s work: the army of lawyers, financial advisers, investment bankers and consultants working on Lehman Brothers’ Chapter 11 case raked in a cool $402.9 million in the year following the investment bank’s September 2008 collapse.

Unsurprisingly, the biggest payout went to Alvarez & Marsal, the firm that’s winding down Lehman’s operations. The firm was paid nearly $170 million between Lehman’s Sept. 15, 2008, bankruptcy filing and the end of September 2009. Lehman paid its bankruptcy law firm, Weil, Gotshal & Manges, about $98.6 million.

You can view a firm-by-firm breakdown of the fees on page seven of this document. All told, 23 firms took home $402.9 million in fees and expense reimbursements through September 2009.

Winding down Lehman, once the fourth-largest U.S. investment bank, is a massive undertaking. Fee experts have estimated that the bankruptcy could cost between $800 million and $1.4 billion. Lehman’s estate is covering the costs of its own professionals, those of its unsecured creditors committee and an independent examiner. The $402.9 million also includes $267,000 paid to the law firm representing the committee charged with reviewing the fees in the Chapter 11 case.

Most of the firms working on the case are providing run-of-the-mill bankruptcy and legal services, but Lehman, which is preparing to auction off its extensive art collection next month, has also paid art consultant Kelly Matthew Wright $38,000 over the past year. Lehman also paid Natixis Capital Markets Inc., a derivatives consultant, more than $6 million.

The Daily Docket: U.S. Clears Pilgrim’s Pride Deal

Posted: October 15th, 2009, 6:48am PDT

The Federal Trade Commission and Department of Justice have cleared Brazilian been producer JBS SA to buy Pilgrim’s Pride Corp. out of bankruptcy, according to the Associated Press.

A judge ruled that loans made to Tousa Inc. ahead of the home builder’s bankruptcy filing were “fraudulent transfers,” The Wall Street Journal reports.

Detroit’s Greektown Holdings LLC is asking a bankruptcy judge to reject a competing turnaround plan that would transfer the company to a Michigan investor and a Connecticut-based investment firm, the Bloomberg reports.

The Treasury Department is prepared to foreclose on a $262 million escrow account that Chrysler’s bankruptcy estate is using to pay lawyers and financial advisers, according to the Detroit Free Press.

Magna Entertainment Corp. can put its Maryland racing venues - including Pimlico, the famed home of the Preakness Stakes - on the auction block, a judge ruled Wednesday. Read the Daily Bankruptcy Review story here.

Federal prosecutors accused a former manager of defunct meatpacker Agriprocessors Inc. of cheating a bank, laundering money and destroying evidence during opening arguments in his trial in Sioux Falls, S.D., Wednesday, WSJ reports.

Back to Basics

Posted: October 14th, 2009, 1:36pm PDT

Getty Images

Everything old is new again – even Polaroid film.

Instant photography, once tossed by the wayside in favor of those new-fangled digital cameras, is set to have a reincarnation of sorts. Polaroid film and cameras will return to the shelves in 2010, according to a statement from Summit Global Group, which entered into a five-year licensing deal for the brand.

Polaroid had discontinued production of its instant photography line last year, a move that happened to coincide with its second stay in bankruptcy court. But the instant photography faithful refused to take no for an answer. Austrian businessman Florian Kaps launched what he dubbed the “Impossible Project,” rounding up a small group of Dutch scientists in a quest to re-launch the famous film.

Apparently, impossible really is nothing. (Thanks, Adidas). The new owner of Polaroid’s assets, a joint venture between Gordon Brothers and Hilco Consumer Capital, finalized a licensing deal with Summit in June, aiming to generate $1.3 billion in retail sales. And Summit selected none other than the Impossible Project, which owns a former Polaroid factory in the Netherlands, to manufacture the classic products.

Un-Break My Bank Account

Posted: October 14th, 2009, 11:43am PDT

Associated Press

Toni Braxton’s comeback from her 1998 bankruptcy filing is in jeopardy, with the R&B and pop singer now facing foreclosure on her home in the Century City area of Los Angeles.

The Grammy-winning songstress, who once said that “no woman should go without an AmEx card,” hasn’t been keeping up with her mortgage payments to Bank of America, according to the Examiner. This news follows a recent lawsuit that City National Bank brought against Braxton seeking $675,000 on a promissory note that came due in April. She’s also been locked in a battle with her insurer, suing to collect under a cancellation policy after health problems forced her to cancel a 2006 concert in Las Vegas. But the insurer has accused Braxton of failing to disclose a pre-existing condition (she has heart disease and has become an advocate for prevention) and counter-sued with its own demand for funds.

Braxton’s widely publicized 1998 Chapter 7 filing followed her attempt to get out of her recording contract with La Face Records, according to the Los Angeles Times. She had blamed her empty piggy banks on a shoddy contract that paid her mere cents per album (although, as People revealed in a post-bankruptcy interview, she also had a penchant for pricey Tiffany jewelry and other luxurious goods). She went on to sign a new recording contract, release new albums and take new gigs on Broadway, playing Belle in “Beauty and the Beast” and the title role in “Aida.”

Now, the picture is looking less rosy. In addition to her mounting financial problems, Braxton also reportedly is facing a delayed album release date. “Pulse” was supposed to be released in November, according to Billboard, but is now expected to hit the shelves in February 2010. But it’s not all bad news for Braxton; she’s slated to receive the “Breakthrough Spirit” award from the Children’s Cancer & Blood Foundation at a fundraising gala to benefit kids who need medication, chemotherapy and other treatments for cancer or blood disorders.

The Daily Docket: Bi-Lo Sale Challenged

Posted: October 14th, 2009, 6:17am PDT

Bi-Lo LLC’s plan to sell most of its stores to a Belgian company is being challenged by creditors who won court permission to file their own reorganization plan for the grocery chain. Read the Daily Bankruptcy Review story here.

Detroit’s Greektown Casino may be out of bankruptcy by New Year’s Eve under reorganization plan that would hand control of the company to its senior lenders, the Detroit News reports.

The U.S. Supreme Court Tuesday agreed to hear the appeal of former Enron Corp. Chief Executive Jeffrey Skilling, who is trying to overturn his conviction and 24-year prison sentence, The Wall Street Journal reports.

Chrysler Group LLC isn’t planning to rehire nonunion engineers, designers or purchasing people who took buyouts last November, according to the Detroit Free Press.

Some analysts believe that Ciena Corp. will be outbid at an auction for Nortel Networks’ optical and Ethernet assets, according to The Wall Street Journal.

A judge yesterday approved an outline of LandAmerica Financial Group Inc.’s plan to repay creditors, the Richmond Times-Dispatch reports.

Former Edmonton Oilers owner Peter Pocklington, in jail on bankruptcy fraud charges, has been bailed out by his former general manager, Glen Sather, the Vancouver Sun reports.

City Puts Heat on Lehman Over Fire Hazard

Posted: October 13th, 2009, 1:19pm PDT

PR Newswire Goats creating a firebreak in the western part of California’s Sacramento Valley.

The city of Oakland, Calif., says a vacant housing development financed by a unit of Lehman Brothers Holdings Inc. could help fuel a wildfire in the hills east of the San Francisco Bay.

Oakland officials, including the city’s assistant fire chief, say the property, called Oak Knoll, is overgrown with vegetation and littered with piles of debris and abandoned buildings, creating “tinderbox” conditions that could fuel a major wildfire.

Oak Knoll is one of a number projects undertaken land developer SunCal Cos and backed by Lehman Brothers Holdings Inc. that are under bankruptcy protection in California.

The property has sat vacant for a year following Lehman’s collapse last fall.

SunCal previously employed a company called Goats R Us to provide fire control at the 167-acre property. Herds of goats are often used by California landowners to clear brush and other vegetation, said Alex Katz, a spokesman for Oakland’s city attorney John Russo.

Katz says the goats do a good job of clearing the property, and the city itself uses them to clear its own land. But Lehman’s bankruptcy put a halt to the practice.

“There are real tinderbox conditions up at Oak Knoll, and this is fire season,” said Katz.

The city says it will cost $6.7 million to complete the job of removing more than 90 buildings, cleaning up trash and abating asbestos at the SunCal site.

Last week Lehman, which pumped more than $2 billion into SunCal projects prior to its September 2008 collapse, said it would pay $500,000 to fund urgent cleanup and maintenance costs at Oak Knoll. Those funds will be used for property-wide weed abatement, repairing fences and a team of armed security guards to keep out trespassers.

“It’s a good start, but that’s all it is,” said Katz. “We believe there are more pressing needs because of the fire danger.”

Fire prevention is no laughing matter in California, especially for residents of East Oakland, says Al Auletta, a manager with the city’s redevelopment agency. Oak Knoll, the site of a former Navy hospital, is just nine miles from the catastrophic Oakland Hills firestorm of 1991, which killed 25 people and resulted in $35 billion in losses.

Auletta says it costs about $1,000 for goats to clear one acre of vegetation. He says it would cost about $260,000 for the goats to graze twice a year at Oak Knoll.

A SunCal spokesman said no decision has been made about whether to use goats for clean up work at Oak Knoll.

Both Lehman and Chapter 11 trustee Steven Speier, who is in charge of a number of SunCal projects under bankruptcy protection including Oak Knoll, declined to comment.

A hearing on the fight over Oak Knoll’s maintenance is scheduled for Thursday in U.S. Bankruptcy Court in Santa Ana, Calif.

Bankruptcy Plus Divorce Equals Major Drama

Posted: October 13th, 2009, 11:59am PDT

Associated Press Earlier this year, the Minnesota State Patrol launched a criminal investigation into Denny Hecker Automotive Group.

Bankruptcy cases generally don’t involve bitter divorces, complaints about mistresses and boy-toys, multiple homes, Rolexes, furs, expensive cars and plastic surgery. Unless you’re Denny Hecker.

In Minnesota, Hecker is in the middle of a particularly contentious liquidation of his personal assets as a result of the collapse of his business empire. The former owner of 26 auto dealerships, the Advantage Rent-A-Car chain and other businesses is simultaneously going through a nasty divorce battle with estranged wife Tamitha Hecker, which has devolved into a he-said, she-said fight over their financial situations and personal conduct.

The latest news from the land of 10,000 lakes is that a state district court judge has ordered Denny Hecker to explain just how he’s been able to burn through a minimum of $25,000 a month while calling himself bankrupt and unemployed. According to the Minneapolis Star Tribune, Hecker has two weeks to document what he has said is the generosity of his friends and business associates. With such information, the judge plans to determine whether Tamitha Hecker’s request for $7,500 in monthly support (the estranged spouses have two kids, ages 14 and 7) should be granted.

While covering the twists and turns of the Heckers’ legal woes, the Star Tribune has reported that Tamitha Hecker hasn’t bought Denny Hecker’s claim that his pockets are bare. She pointed to $13,000 on six round-trip, first-class plane tickets that ferried her ex, his mistress and their respective kids to Hawaii this August. He also treated his mistress to steakhouse dinners nearly every day, Tamitha Hecker alleged, plus scheduled a $9,500 facelift. Denny Hecker defended the latter charge, saying that he consulted the plastic surgeon regarding damage to his neck from the tumor he had removed last year. He also denied that the plane tickets cost $13,000 and said he didn’t frequent high-end steakhouses with his mistress. He shot back at her for heading to Arizona to visit her “boy-toy.” And he argued that his estranged wife doesn’t need his help, what with the $200,000 in cash she has stored in a safety deposit box, not to mention a dozen Rolex watches, half a dozen fur coats and at least $1 million in jewelry she can sell.

Nearly a dozen Rolex watches are in fact headed to the auction block, but they’re not Tamitha’s. The watches – along with a Cartier travel clock, 18-karat men’s diamond ring and portraits signed by golfers Arnold Palmer, Tiger Woods and Jack Nicklaus – will be up for grabs at a public auction of Denny Hecker’s assets on Oct. 19 in New Germany, Minn.

Don’t expect to see Tamitha Hecker’s possessions on the block; she reportedly promised the trustee in charge of her ex’s estate that she wouldn’t touch the money or goods. Apparently that doesn’t exclude wearing them. The Star Trib spotted her at a recent court hearing with “a dazzling yellow-and-white diamond ring” on one hand and “a more subdued but equally sparkling diamond ring” on the other.

The Daily Docket: Cubs Enter Chapter 11

Posted: October 13th, 2009, 6:39am PDT

The Chicago Cubs baseball franchise filed for bankruptcy-court protection Monday to complete the $845 million sale of the team to the family of financier Tom Ricketts, The Wall Street Journal reports.

The chief executive of troubled business lender CIT Group Inc. will step down at the end of the year, according to DealBook.

Commercial real estate company Capmark Financial Group Inc. is preparing to file for bankruptcy protection, Reuters reports.

Embattled race-track operator Magna Entertainment Corp. is putting some of thoroughbred horse racing’s most famous venues – including Pimlico, Santa Anita and Gulfstream – back on the auction block. Read the Daily Bankruptcy Review story here.

General Motors Co. Chief Executive Frederick “Fritz” Henderson says he’s confident that the auto maker will be able to unload Hummer and Opel soon, WSJ reports.

The Hawaiian resort industry is taking a serious beating as the hotel industry in the U.S. faces its most severe downturn since the Great Depression, according to WSJ.

The Art of the Matter

Posted: October 12th, 2009, 1:29pm PDT

via Bloomberg Roy Lichtenstein’s 1982 “I Love Liberty” screenprint from the Lehman Brothers Holdings Inc. corporate art collection is expected to fetch as much $25,000 at Philadelphia’s Freeman’s Auctioneers on Nov. 1.

Care for an homage to the Statue of Liberty worth $15,000 or a $2,500 set of hand-signed lithographs of vegetables? How about a $1,000 watercolor painting of an albacore? If so, you’re in luck; Lehman Brothers Holdings Inc. is holding a massive art auction to raise money to pay off some of its debt.

To score of these prized beauties, all you’ll have to do is show up at the Freeman’s gallery in Philadelphia on Nov. 1 with some cash to burn. According to the New York Post, Freeman’s is attempting to auction off hundreds of paintings, photographs and drawings for about $760,000. The Nov. 1 auction is part one of about $1.1 million worth of art Lehman is hoping to sell over the next several months.

U.K. bank Barclays Plc, which purchased Lehman’s North American broker-dealer business, had a one-year option to buy the art. But it passed on the option to purchase the works that had lined offices, executive dining rooms, club houses and storerooms.

Lehman will ask the Manhattan bankruptcy court this week to change its order approving the sale to Barclays. Lehman says Barclays earned a “windfall” of at least $8.2 billion when it bought the broker-dealer unit, and it’s seeking to force Barclays to return the billions it said were transferred during a hasty sale held just days after Lehman’s Sept. 15, 2008, collapse.

Linens ‘N Things: Canadian Edition

Posted: October 12th, 2009, 1:02pm PDT

Linens ‘n Things, whose brand name was bought out of its bankruptcy liquidation and now sells its products online, is ready for a rebirth in traditional brick-and-mortar stores. But Bankruptcy Beat readers who missed perusing the retailer’s selection of bedding, kitchenware and questionable novelty items like this in person will need a passport. The company recently announced it would start selling a special line of home goods across the border, at the Home Outfitters chain in Canada.

Starting next spring, shoppers at Home Outfitters will be able to browse Linens ‘n Things-branded bed, bath, home décor and seasonal products. The retailers expect the brand, which apparently has a “vast following” amid our hockey-loving northern neighbors, will generate more than $100 million in sales for the six years it’ll be carried in Home Outfitters stores (which, with 69 locations, is heralded as Canada’s largest home goods store).

According to Linens officials, the sale is a stepping stone for the retailer as it looks to the day when Americans can shop ‘til they drop without a computer mouse or a trip to a foreign country.

“Our expansive assortment at Home Outfitters creates a launching pad from which we can expand Linens ‘n Things branded goods into other markets, including the United States,” said Stephen Miller, co-chief executive of the retailer with James Salter. Miller and Salter’s respective companies, Gordon Brothers Brands LLC and Hilco Consumer Capital Corp., picked up the Linens name from the pieces of its bankruptcy in February.

The Daily Docket: Fretting Over Fontainebleau

Posted: October 12th, 2009, 6:42am PDT

Potential suitors considering buying the unfinished Fontainebleau Las Vegas out of bankruptcy are facing the possibility that the casino project may not be worth the money it would cost to complete it, The Wall Street Journal reports.

Corinne Ball, the Jones Day attorney who guided Chrysler through bankruptcy, writes about the auto maker’s controversial sale in Chapter 11 in DealBook.

The new chief executive of Energy Partners Ltd. thinks the company, which recently emerged from Chapter 11 protection, can become one of the stronger independent oil-and-gas exploration firms in the Gulf of Mexico, according to New Orleans CityBusiness.

The Denver Post details the tough choices that helped save Frontier Airlines.

Jim Tyree, the financier who’s buying the Chicago Sun-Times out of bankruptcy, believes the publisher may turn a profit in the first half of 2010, according to Bloomberg.

Demands for a pair of high-profile companies to renegotiate bankruptcy loans secured in the darkest days of the financial crisis suggest that junior creditors are beginning to push for refinancing in hope of saving businesses from the auction block and increasing their returns. Read the Daily Bankruptcy Review story here.

Coyotes Sell Out Home Opener

Posted: October 9th, 2009, 1:57pm PDT

Associated Press Phoenix Coyotes goalie Ilya Bryzgalov, right, is congratulated by teammate Scottie Upshall after shutting out the Pittsburgh Penguins 3-0 in Pittsburgh Wednesday.

The Phoenix Coyotes are out to prove that bankruptcy didn’t cost them their fans – with the help of super cheap tickets and free T-shirts.

After a May bankruptcy filing raised the specter that Arizona hockey fans wouldn’t even have a team to cheer on the ice this season, the Coyotes sold out their home opener Saturday night against the Columbus Blue Jackets.

A rousing show of support for a financially beleaguered team? Well, tickets discounted as much as $305 may have played a role. In hopes of filling Jobing.com Arena, the Coyotes sold lower bowl tickets for $25 and upper deck seats for $15. The best tickets in those sections usually sell for $330 and $40, respectively.

Each fan coming to the game will receive a white Coyotes T-shirt as part of the “Welcome Back Whiteout.” The team’s fans typically wear all white for playoff games, something they haven’t seen the past six seasons, in a tradition that stretches back to the franchise’s time in Winnipeg.

Hockey returning to suburban Phoenix wasn’t in the cards when Coyotes owner Jerry Moyes filed for bankruptcy protection with a plan to sell the team to BlackBerry mogul Jim Balsillie, who promised to move the franchise back to Canada.

A bankruptcy judge rejected Balsillie’s offer to buy the team, but the Coyotes’ future in Phoenix is far from certain. The same judge also denied the National Hockey League’s effort to buy the franchise, leaving the Coyotes in bankruptcy limbo for now.

Whether a local buyer comes forward to keep the team in Glendale, Ariz., may depend on how filled the arena is for the other 40 homes games this season. The team has never turned a profit since moving to Arizona in 1996.

Open Your Books to Chapter 22

Posted: October 9th, 2009, 1:35pm PDT

Experts are warning that the number of companies needing a second trip to bankruptcy court may pile up if they don’t play their cards right the first time around.

Speaking Thursday at the Turnaround Management Association’s annual conference in Phoenix, Professor Edward Altman of New York University’s Stern School of Business said 2008 set a record in that 19 companies sought Chapter 11 protection a second time, which is known as a Chapter 22 in the restructuring industry. Altman, who’s been tracking the number of Chapter 22s since 1984, said 2009 is already on track to top last year’s record. There were 15 such filings through August and a handful since then. (Previous highs include 17 in 2000 and 2003.)

Altman says there are two main reasons that companies’ first restructurings don’t work: there’s too much debt left on their balance sheets and they haven’t boosted their profitability enough.

“They don’t look like a healthy company when they come out,” he said.

A Chapter 22 may be in the cards for the publisher of the Minneapolis Star Tribune, according to Joseph A. Bondi, an Alvarez & Marsal managing director.

Star Tribune Holdings recently emerged from Chapter 11 protection after handing control of the company to its senior lenders. Bondi said the restructuring, in which lenders agreed to swap $392 million in debt for most of the company’s new stock and a $100 million secured note, was basically just a reshuffling of existing debt. And Bondi also said that the publisher is projecting that advertising revenue won’t decline next year, an assumption he says doesn’t match up with what industry analysts are predicting. Coupled with the company’s new capital structure, this advertising forecast could prove troublesome.

“You have a highly leveraged capital structure,” Bondi said, “and I’d keep my eye on that for a Chapter 22.”

A spokesman for Star Tribune declined to comment on what he called “unprofessional speculation.”

Follow the Money

Posted: October 9th, 2009, 11:44am PDT

What a good man. Even though Edward H. Okun is serving a 100-year sentence for bilking clients out of millions of dollars, the former owner of 1031 Tax Group wants to make sure that creditors aren’t charging the tax shelter’s bankruptcy estate more than they’re owed.

From his jail cell at Northern Neck Regional Jail in Warsaw, Va., Okun wrote a five-page letter to the U.S. Bankruptcy Court in Manhattan, pointing out what he called “glaring errors” in the list of creditors’ claims incorporated into 1031 Tax Group’s creditor-repayment plan.

For example, he says there are no documents supporting the claim that Joyce Greene is owed $2.8 million. “Could be phony,” he said. And many of ASM Capital’s claims appear to be “too high,” as it doesn’t take into account payments that have already been made, he said.

“Someone has not done their job,” Okun wrote in the hand-written letter, recommending that a full audit be conducted.

“That is the only way you can follow the money,” he wrote. Okun also asked the bankruptcy court to reject the creditor-repayment plan.

Despite his pleas, the judge overruled his objection and approved the plan at a hearing Wednesday, attorney Jonathan Flaxer said in an interview Thursday.

Flaxer represents Gerard A. McHale, who was tapped in 2007 to oversee 1031 Tax Group in response to allegations of fraud and mismanagement by Okun.

Clients had placed money with the qualified intermediaries overseen by Okun’s 1031 Tax Group in order to take advantage of Section 1031 of the Internal Revenue Code, which allows investment-property owners to defer the capital gains taxes due on property they sell if the proceeds are held by qualified intermediaries and used within a specified time frame to purchase new property.

Okun was accused of using the money clients placed in the qualified intermediaries to fund a lavish lifestyle that involved mansions, race cars, yachts, a jet and a helicopter. In August, he was sentenced to serve 100 years in prison, but he continues to maintain his innocence.

Sparks Fly In Chrysler Debate

Posted: October 9th, 2009, 9:59am PDT

Associated Press

There wasn’t any chair-throwing, but a debate involving two opposing lawyers in the Chrysler bankruptcy case got pretty heated Thursday.

Arguing over whether the government’s powerful role in the Chrysler bankruptcy proceeding signals the end of a key tenet of the Bankruptcy Code, Jones Day trial lawyer Thomas F. Cullen Jr. and White & Case’s restructuring head Thomas E. Lauria again took up their adversarial roles in a debate that at several points got a bit rowdy and led Cullen to ask: “Are we on Jerry Springer?”

Lauria, you’ll recall, led a group of Chrysler’s lenders who fought the sale of the auto maker to a company controlled by Italy’s Fiat SpA. Lauria, called a “terrorist” by a government lawyer, had argued that the sale was an attempt to avoid playing by the rules of Chapter 11 and wrongly rewarded junior creditors ahead of the senior creditors. The U.S. Bankruptcy Court in Manhattan and the 2nd U.S. Circuit Court of Appeals rejected Lauria’s argument, which was the hot topic that Lauria, Cullen and others revisited Thursday at the Turnaround Management Association’s annual conference in Phoenix.

Lauria said the precedent set by Chrysler is “troubling” because it’s “a flag in the ground” signaling that creditor priority won’t always be honored in bankruptcy proceedings. Cullen countered that Chrysler was a unique company in a desperate situation and pointed out that several courts didn’t buy Lauria’s argument.

While rehashing the arguments that caused a lot of hand-wringing this summer, Lauria and Cullen managed to laugh at themselves. In one exchange, Cullen called Lauria “Mr. Lauria,” to which Lauria interjected “you can call me Tom.” Cullen laughed and said he had gone into courtroom mode. “Mr. Lauria,” however, is better than other names Lauria has been given, something he also laughed about Thursday when introducing himself: “Some say I’m a terrorist.”

The Daily Docket: $100M Deal In ABFS Case

Posted: October 9th, 2009, 6:42am PDT

Investment banks that aided defunct mortgage provider American Business Financial Services Inc. have agreed to pay $100 million to settle a lawsuit that accused them of providing “financial cover and credibility” for a subprime lender that was hiding “staggering losses.” Read the Daily Bankruptcy Review story here.

Japanese fashion design firm Yohji Yamamoto Inc. has filed for bankruptcy protection, The Wall Street Journal reports.

The judge overseeing the Fontainebleau Las Vegas bankruptcy case Thursday appointed an examiner to try to sell the stalled project instead of converting the case into a Chapter 7 liquidation, according to the Las Vegas Review-Journal.

A bankruptcy judge in New York has frozen the assets of Beverly Hills money manager Stanley Chais, who is accused of funneling client money to Bernard L. Madoff’s firm, the Los Angeles Times reports.

General Motors Co. is expected to seal a deal as early as Friday to sell its Hummer unit to China’s Tengzhong Heavy Industrial Machinery Co. for $150 million, according to WSJ.

‘Bank Minded. Wild at Heart’

Posted: October 8th, 2009, 1:08pm PDT

Associated Press

Wait till they hear about this one at WaMuTruth.com, WaMuStory.com and the other online rallying points for those who lost billions in the largest banking collapse in U.S. history, that of Washington Mutual Bank.

Grieving parent Washington Mutual Inc. is peddling intellectual property it no longer needs now that its main business is beating up JPMorgan Chase & Co. Last year, JPMorgan took WaMu off the hands of worried regulators in a lightning-quick, allegedly dirt-cheap deal, setting off legal brawls.

In the meantime, Washington Mutual Inc., WaMu’s former owner, is disposing of trademarks and domain names in the U.S. Bankruptcy Court in Wilmington, Del.

Nothing using the WaMu name is going on the auction block just yet. Anyone hoping to buy the rights to the Internet domain WaMusucks.com, for example, is out of luck. Washington Mutual Inc. owns that particular piece of Web real estate, and creditors so far have not been able to bring themselves to part with it.

But Washington Mutual’s “Bank Minded. Wild at Heart” trademark is for sale, according to a filing in the U.S. Bankruptcy Court in Wilmington, Del.

The “Wild at Heart” trademark was not linked to WaMu’s chancy home lending operation. It refers to banking services for the arts and entertainment crowd, including sporting events and concerts.

“Bank Smile Repeat” is also up for sale, as is “Smiling All the Way to the Bank.” Guess they don’t need that anymore at Washington Mutual Inc., which was driven to Chapter 11 shortly after panicked depositors withdrew more than $16 billion from WaMu in a 10-day period.

Then there’s a line of goods that are a little frightening, given that the entity that owns them is the lawsuit-proof bankrupt parent of the biggest banking flop of 2008: trademarks and Web domains that offer protection against identity theft. Washington Mutual Inc. is selling its ID Theft Inspect trademark, and a batch of identity theft-related Web domain names: identitytheftinspect.com, idtheftinspect.com.

We’re Gonna Party Like It’s Your Birthday

Posted: October 8th, 2009, 11:44am PDT

Kristina Doss

Muzak may be trying to resolve its bankruptcy case, but that’s not going to stop the player of elevator music from having some fun. The company is celebrating its 75th birthday.

The festivities include the company’s first industry conference focusing on music and branding, as well as its annual National Convention, located at the company’s Fort Mill, S.C., headquarters. According to a press release, the music and branding conference, called The General George Squier Brainery: A Focused Discussion on the Art, Science & Sound of Music Branding, will look at “the transformation of music, the music industry, and music branding - from legal to cultural considerations, media consumption to retail behavior.”

“We’re thrilled to be able to bring the full spectrum of the music industry, brand managers, designers, advertising and retail executives together in one room,” said Shawn Moseley, Muzak’s manager of industry relations. “At Muzak, we’re passionate about music and its power to create lasting experiences. Now, we’ll have the opportunity to really jump into this topic with both feet.”

At the company’s annual convention, employees from across the country will come together for “intensive discussions about new products, services and plans,” and it will end with live performances by The Constellations and Benji Hughes.

Muzak, which boogied into Chapter 11 protection in February with nearly $500 million in debt, last month unveiled its bankruptcy-exit plan. The plan, which the company said took “countless meetings and conversations” to engineer, intends to eliminate more than half of its debt.

Judge Disagrees with Congress on Bonuses

Posted: October 8th, 2009, 8:54am PDT

Bankruptcy Judge Christopher Sontchi doesn’t see eye to eye with the U.S. government when it comes to executive bonuses.

At a hearing Wednesday in the Chapter 11 case of auto parts-maker Visteon Corp. in Wilmington, Del., Sontchi reminisced about the days before the 2005 overhaul of the Bankruptcy Code. Back then, companies could dole out bonuses designed solely to convince executives to stick around through the bankruptcy case.

“I think retention plans would make sense, but I’m not in Congress,” Sontchi said.

Indeed, Congress had other ideas when it instituted the legislative changes four years ago. The revamped Code sets strict standards for companies hoping to distribute extra payments to “insiders.” Companies must show that the insiders, often the same individuals who helped to craft the bonus plans in question, have met specific targets and aren’t just being paid to perform their normal duties.

Sontchi seems to believe that there is still a place for retention bonuses, suggesting that simply keeping the same top team in place during a bankruptcy proceeding has merits that shouldn’t be disregarded. He also declined to put much stock in the idea that bonuses should, or can, enhance performance.

“I don’t have an issue with the concept that people may or may not work hard” because of an incentive program, he said after Visteon’s chief financial officer testified that the proposed bonuses wouldn’t alter his behavior.

Of course, while Sontchi may disagree with Congress’ decision, he’s bound to uphold it. Ultimately, the judge denied Visteon’s bid to hand 12 executives $8.1 million in bonuses, saying that the plan lacked sufficient targets and was “primarily retentive in effect.”

“Congress has told me that even though I may think retention plans to insiders make sense, they don’t,” he said, “and they’ve set a bar to getting a retention plan approved.”

The Daily Docket: Tyree Inks Deal With Sun-Times Union

Posted: October 8th, 2009, 6:30am PDT

Chicago financier Jim Tyree reached a deal with the largest union at Sun-Times Media Group Inc., a deal that boosts his efforts to buy the company out of bankruptcy protection, the Chicago Tribune reports.

Truck-parts maker Accuride Corp. has filed for Chapter 11 bankruptcy protection, according to the Indianapolis Star.

Former Enron employees let go around the time of the company’s 2001 bankruptcy filing could get money retrieved from executive bonuses by Christmas, the Houston Chronicle reports.

Chrysler Group LLC will unveil its five-year business plan on Nov. 4, according to the Detroit Free Press.

Meanwhile, General Motors’ chief executive says the auto maker is falling short of some goals it’s supposed to meet by the end of the year, The Wall Street Journal reports.

A judge Wednesday sent Visteon Corp. back to the drawing board for the second time, urging it to revamp an executive bonus program that has already been slashed by $22 million. Read the Daily Bankruptcy Review story here.

Delphi Corp.’s former steering business has named itself Nexteer Automotive, according to the Detroit Free Press.

Control Battle Erupts Over Trump Casinos

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

Associated Press

Daily Bankruptcy Review’s Peg Brickley reports from Camden, N.J., where a bankruptcy judge is hearing arguments on which restructuring plans for Trump Entertainment Resorts Inc. should be put to a creditor vote.

Arguments over who will occupy the boss’s chair when the casino operation that bears Donald Trump’s name come out of bankruptcy are holding up a deal with creditors, Michael Walsh, an attorney for Trump Entertainment Resorts Inc. said Wednesday.

The issue of control “is the biggest stumbling block” in settlement talks that are under way “at the very, very highest level,” said Walsh, who’s with Weil, Gotshal & Manges.

Speaking at a hearing in the U.S. Bankruptcy Court in Camden, Walsh said it’s not economics that are getting in the way of settling the Chapter 11 clash that has produced two salvage scenarios for the distressed casinos.

Donald Trump and Beal Bank, the company’s lead secured lender, have allied in a bid to take charge of the enterprise. They won the company’s support with an offer to plow $100 million in new cash into the Atlantic City Trump properties.

The other proposal comes from bondholders owed $1.25 billion, who say they’ll put up $225 million in new money.

The question of who will be in control when Trump Entertainment emerges with a revamped balance sheet is getting in the way of a settlement, the company’s attorney said.

“What we have here is a company that needs direction, a company that needs a strategy to go forward,” Walsh said. Without naming names, Walsh said there are “at least three if not more people, all wanting to be in control,” of Trump Entertainment.

Donald Trump and his daughter, Ivanka Trump, quit the company board on the eve of the February bankruptcy filing, when out-of-court restructuring talks with bondholders broke down.

They have complained in court filings that the casinos were not properly run after Trump Entertainment emerged from its last pass through Chapter 11, in 2005, with Donald Trump in a reduced role.

The Daily Docket: Delphi Departs

Posted: October 7th, 2009, 6:39am PDT

Delphi Corp. emerged from Chapter 11 bankruptcy protection Tuesday after a drawn out, contentious four-year restructuring, The New York Times reports.

Hedge-fund manager Thane Ritchie says he was blocked from meeting with unions at Sun-Times Media Group Inc. ahead of a deadline to make an offer to buy the newspaper company out of bankruptcy, the Chicago Tribune reports.

General Motors’ chief executive plans to deliver an update Wednesday on the company’s progress since it emerged from bankruptcy protection in July, according to The Wall Street Journal.

Ciena Corp. has offered to buy Nortel’s Ethernet networking business for $521 million in cash and stock, the Baltimore Business Journal reports.

Bondholders upped the ante Tuesday on Donald Trump and Beal Bank, adding $50 million to the pile of new money they’re prepared to plunge into Trump Entertainment Resorts Inc. Read the Daily Bankruptcy Review story here.

Questex Media Group Inc., which produces publications, trade shows and conferences for a host of industries, sought bankruptcy protection Monday with plans to sell its assets to its lenders, WSJ reports.

Financial communications firm Sage Holdings has acquired Donlin Recano & Co, a bankruptcy administration and claims management firm, according to Reuters.

Freedom Fights Bankruptcy Disclosure

Posted: October 6th, 2009, 2:12pm PDT

If there’s one thing newspapers hate, it’s secrecy. Except, of course, when their own operations are under the microscope. That’s the case for The Orange County Register, whose parent company is wrangling with creditors in a Delaware bankruptcy court.

Freedom Communications Inc. is locking horns with creditors over confidential documents. The creditors committee says the company marked as confidential more than a million pages it provided to the committee during discovery, including schedules of baseball games, blank pieces of paper, poetry and pornography.

Poetry? Pornography? Judge Brendan Shannon is wondering the same thing, according to a story on the Register’s Web site. He delayed ruling on the dispute Monday. Creditors say Freedom’s use of confidential documents will force them to file their own court papers under seal and possibly close court hearings to the public.

Freedom lawyer Robert Klyman told Shannon the newspaper, which is partly owned by private-equity firms Blackstone Group and Providence Equity Partners, marked everything confidential because it doesn’t have the resources to review all the documents.

Delphi’s Miller: Bankruptcy Is A ‘Clumsy Tool’

Posted: October 6th, 2009, 12:07pm PDT

Brian Harkin for The Wall Street Journal Robert S. “Steve” Miller

As auto-parts supplier Delphi Corp. prepares to end its four-year stay in bankruptcy, Robert S. “Steve” Miller, the turnaround pro hired at the start of the Chapter 11 case to shepherd the company through its restructuring, is speaking out.

Delphi’s bankruptcy restructuring was one of the more complicated we’ve seen in recent years. The company had to streamline its operations dramatically and slash labor costs, all the while dealing with an auto-industry shakeout that ultimately led its former parent, General Motors, to seek Chapter 11 protection. To make matter worse, a plan to bring the company out of bankruptcy fell apart last year, raising serious questions about the company’s ability to survive.

In an interview with The Wall Street Journal’s Joann Lublin, Miller says it may have been a “blessing in disguise” that Delphi didn’t exit bankruptcy protection last year. You’ll recall that Delphi had a $2.55 billion bankruptcy-exit deal with a group of investors led by hedge fund Appaloosa Management. But the deal fell apart in April 2008, sparking angry recriminations, lawsuits and talk of liquidation. Miller, though, said that the longer stay in bankruptcy may have prevented a return to Chapter 11 because Delphi was able to ride out problems in the auto industry under court protection.

“We might have been forced into a second bankruptcy because of the serious decline in the automotive markets,” he said.

However, Miller calls bankruptcy a “clumsy tool” that’s “extremely” costly. “We spent over $100 million a year for professional fees,” he said. “Nothing could have allowed us to get it done any quicker. The external environment kept changing. Our labor unions didn’t want to deal with this expeditiously.”

Miller, who also oversaw the restructuring of parts supplier Federal-Mogul, suggests that bankruptcy judges should have more authority to “do things in the best interest of the enterprise value of the company.”

You can read the full interview here.

The Daily Docket: Canwest to Enter Bankruptcy

Posted: October 6th, 2009, 7:03am PDT

Canadian media giant Canwest Global Communications Corp. plans to file for bankruptcy protection under a deal with key lenders, the Associated Press reports.

The Wall Street Journal interviews Robert S. “Steve” Miller, the turnaround expert who helped guide Delphi Corp. through its Chapter 11 case.

No new suitors stepped forward to challenge Chicago financier Jim Tyree’s $26 million bid to buy Sun-Times Media Group Inc., the Chicago Tribune reports.

A group of current and former employees of Lyondell Chemical Co. are seeking $25 million in deferred compensation, according to the Houston Chronicle.

Ciena Corp. is in talks to buy Nortel Networks’ optical networking and carrier Ethernet assets, WSJ reports.

General Growth Properties Inc., the nation’s second-largest mall owner, wants to pay up to $47.5 million in bankruptcy bonuses to employees and top executives, including the chief executive trying to orchestrate the company’s turnaround. Read the Daily Bankruptcy Review story here.

Pornography and Section 363

Posted: October 5th, 2009, 2:27pm PDT

Associated Press Judge Robert E. Gerber

What do bankruptcy sales and obscenity have in common? Good question. Let’s ask Manhattan Bankruptcy Judge Robert E. Gerber, who shepherded General Motors through a government-backed bankruptcy that led to the company’s quick, controversial sale under Bankruptcy Code Section 363 earlier this year.

“The standard we need to apply to 363 is like Potter Stewart’s analysis of pornography: We know it when we see it,” said Gerber, referring to the former Supreme Court justice’s view on obscenity.

Speaking Friday at an American Bankruptcy Institute seminar in Washington, Gerber said judges must be able to use their own discretion in approving so-called 363 sales if they’re necessary to save a company from “dying on the operating table.”

The GM and Chrysler bankruptcy cases brought 363 sales into the national spotlight. Creditors argued that the government-backed sales violated the rights of senior creditors and amounted to an improper use of bankruptcy law.

Gerber, however, defended the GM sale, saying the company would have liquidated had the U.S. government not stepped in to orchestrate a transaction that handed control of the new General Motors Co. to a union-run health-care trust, the U.S. and Canadian governments and the auto maker’s unsecured creditors. Thousands of jobs would have been lost, he said.

Gerber said the GM and Chrysler 363 sales broke no new ground. He said such sales have been a big part of all but a few of the major cases he’s overseen in his nine years on the bench.

“These cases did not usher in a new model,” Gerber said. Asset sales in bankruptcy are “nothing new.”

Parent of Olympics Retail Manager Enters Chapter 11

Posted: October 5th, 2009, 10:36am PDT

VANOC/COVAN

Just like the athletes from around the world who are training for the 2010 Olympic Winter Games in Vancouver, Canada, also gearing up for the games are the retailers who’ve won contracts to set up shop amid the coastal city’s snowy slopes. That includes XP Events, which will build and manage the 60-plus retail kiosks, whose U.S. unit filed for Chapter 11 bankruptcy protection last week.

Denver-based XP Entertainment LLP, which does business as XP Events, filed for bankruptcy protection in Denver on Sept. 30 after lender Bank of America refused to extend the company’s line of credit, according to the Denver Business Journal.

“We are disappointed [but] optimistic,” said Chairman Tripp Wall. “This will protect our assets and our employees, and we will emerge as a fundamentally stronger company.”

XP Events said the filing won’t affect its retail concessions contract with the Vancouver Olympics organizing committee because that contract is held by XP Canada, an XP Events affiliate that has its own lender.

XP Events, which also managed the sale of licensed merchandise at the 2008 Summer Olympics in Beijing and several NBA All-Star games, is slated to design, build and operate more than 60 retail kiosks at competition and non-competition venues (15 in all) throughout the Olympic and Paralympic Winter Games, from Feb. 12 until March 21.

In a Feb. 18 statement announcing the contract, Vancouver organizing committee director Dennis Kim heralded XP Events’ reputation “for creating some of the most compelling in-venue retail shopping spaces in the international sporting and entertainment event industry.”

In addition to retail management unit XP Events, the XP group of companies includes XP Apparel, which is the primary licensee of the U.S. Olympic Committee’s brands, selling clothing with the Team USA and USA 5-ring logos. It also has licensing agreements with Little League Baseball, the Tour de France and FIFA World Cup Soccer.

The Daily Docket: Consumer Filings Top 1 Million

Posted: October 5th, 2009, 6:49am PDT

Consumer bankruptcies topped one million for the first time since the Bankruptcy Code was overhauled in 2005, The Wall Street Journal reports.

The administrator for Lehman Brothers Holdings Inc.’s operations in London plans to seek permission to dole out assets directly to creditors if enough hedge funds are willing to go along with the plan, WSJ reports.

CIT Group would have to pay Goldman Sachs $1 billion if it files for Chapter 11 protection, the Financial Times reports.

A group of noteholders is suing the banks that financed Basell AF’s buyout of Lyondell Chemical Co., saying it loaded up the combined company with billions of dollars in debt and now threatens noteholders’ ability to recover what they’re owed. Read the Daily Bankruptcy Review story here.

The New York Times examines how private-equity firm Thomas H. Lee Partners profited while mattress company Simmons spiraled toward bankruptcy.

The trustee liquidating Bernard Madoff’s firm sued four more relatives of the convicted fraudster Friday in a bid to recover at least $199 million on behalf of thousands of burned investors, USA Today reports.

The heads of Chrysler Group LLC’s Dodge and Chrysler brands have resigned, according to WSJ.

Former Museum Of Julia Child, Robert Mondavi For Sale

Posted: October 2nd, 2009, 12:58pm PDT

Associated Press

The late Julia Child enjoyed a renaissance this summer, with the film about a modern-day blogger’s bid to make her way through the recipes of the chef’s legendary “Mastering the Art of French Cooking” cooking up renewed interest in Child and her recipes. Unfortunately, the attention came too late for the food, wine and arts museum she started with vintner Robert Mondavi; the museum, called Copia, filed for Chapter 11 bankruptcy in December and is now liquidating its assets.

As part of the museum’s liquidation, everything is up for grabs, according to a press release. That means the 17-plus acres of land smack dab in Napa Valley and the two-story, 78,632-square-foot building that houses Child’s former restaurant, office space, a 270-seat theater, classrooms, a library, café, gift shop and 13,000 square feet of exhibition space. Everything but the kitchen sink is up for grabs – well, let’s rephrase that to say that everything but Child’s pots and pans are for sale. (The sink isn’t going anywhere.)

That cookware – “30 gleaming French copper pots and pans” that now belong to the Smithsonian – had caused a bit of a tiff between the legendary institution and Copia, according to Smithsonian magazine. While the Smithsonian’s National Museum of American History was the recipient of the contents of Julia and husband Paul’s kitchen, the exhibit it opened in 2002 didn’t include the pans among some 1,200 other artifacts. Copia had beaten the Smithsonian to the punch. But with news of Copia’s closure last year, Child’s estate told the museum that it could have the cookware, which Child purchased during her years in France.

The Daily Docket: Lehman Examiner Probes Fed

Posted: October 2nd, 2009, 5:37am PDT

The examiner investigating Lehman Brothers Holdings Inc.’s bankruptcy has been looking into whether the Federal Reserve improperly cut in front of other creditors, The Wall Street Journal reports.

The Lehman examiner also says ABN AMRO Inc. is frustrating his probe of one its employees, whom he believes spread a rumor that may have contributed to the naked short selling of Lehman stock. Read the Daily Bankruptcy Review story here.

CIT Group has launched a tender offer designed to slash bond debt by at least $5.7 billion, according to WSJ. If the offer fails, the business lender will file for bankruptcy protection.

NHL Commissioner Gary Bettman said Thursday that he believes a bankruptcy judge made the right call rejecting both offers to buy the Phoenix Coyotes, according to NHL.com. Bettman says “we’re actually starting to get calls from people who are expressing interest in the franchise.”

Alabama Gov. Bob Riley predicts severe economic development consequences if Jefferson County files for Chapter 9 bankruptcy protection, the Birmingham Business Journal reports.

FairPoint Chief Executive David Hauser said bankruptcy is “certainly very possible” for the phone company, according to the Burlington Free Press.

A federal judge has confirmed U.S. Shipping Partners LP’s bankruptcy-exit plan, the Associated Press reports.

Freestyle Music Park Gets Off to Rocky Start

Posted: October 1st, 2009, 2:02pm PDT

Freestyle Music Park may have wrapped up its first season, but it hasn’t yet finished taking care of business.

Freestyle was rebranded in April from former incarnation Hard Rock Park after being purchased out of bankruptcy in February by FPI MB Entertainment. The family-friendly, musically themed amusement park opened its doors for its inaugural season in late May to much fanfare but less-than-stellar attendance. In July, the lawsuits started coming.

According to the Myrtle Beach Sun News, Freestyle has been sued several times in the past few months over lack of payments; two of those suits were filed this week. In addition, more than a dozen mechanics liens have been filed against the park.

The two latest suits come from Thomas Supply Co., which is seeking about $4,000 for unpaid supplies, and two-man band Fab II, which is suing the park for $9,450 in unpaid performances. In all, the suits range from a $959.22 claim from Eck Supply Co. for unpaid materials to a $375,000 suit from Tetra Financial Group for leasing fees. A $1.4 million claim filed against FPI MB by the Brandon Agency was settled in August.

John Stine, director of sales and marketing for Freestyle, told the Sun News that the park regrets that vendors are filing lawsuits against the theme park. “We’re committed to filling all our commitments,” he said. “That’s our goal.”

Although heavy discounting boosted park attendance from July 4 until the season ended on Sept. 13, Stine said Freestyle had less money than was anticipated. Park officials say the rebranding cost $3 million.

“We had to overcome a lack of identity and brand in the marketplace,” Stine said. “We had to completely re-skin and overhaul the park to comply with the court rulings. … All of that took time and money.”

Reader’s Digest Paid Execs Millions Before Bankruptcy

Posted: October 1st, 2009, 12:03pm PDT

Reuters

In the 12 months before the publisher of Reader’s Digest filed for Chapter 11 bankruptcy protection, the company was struggling under the weight of a $2.2 billion debt load and faced declining circulation and advertising revenue. It was also paying out more than $28 million to its executives, directors and other insiders.

In the year before its Aug. 24 Chapter 11 bankruptcy filing, Reader’s Digest Association Inc. paid out a grand total of $28.5 million to 54 “insiders” (defined as directors, officers, executive committee members or holders of at least 5% of the company’s equity), according to a financial report the company recently filed in bankruptcy court. That includes $3.3 million in compensation for Mary G. Berner, the company’s president, director and chief executive. The second top-earning executive is Suzanne Grimes, who raked in $1.6 million as president of the unit that publishes food and entertaining-themed magazines, like ubiquitous Food Network star Rachael Ray’s magazine. Rounding out the top three is Chief Financial Officer Thomas A. Williams, who was paid $1.2 million. Six other executives surpassed the $770,000 mark (while earning less than $1 million).

The 54 recipients included 51 individuals and three asset management firms. Those firms, which received $4.5 million in management fees, include Ripplewood Holdings LLC, which bought the publisher in 2007 for $1.6 billion.

A representative of Reader’s Digest Association wasn’t available to comment Thursday.

Further running up Reader’s Digest Association’s pre-bankruptcy tab was the $26.1 million it paid 10 firms (including turnaround firm AlixPartners LLP, law firm Kirkland & Ellis LLP and investment bank Miller Buckfire & Co.) for bankruptcy and debt-related services.

The company spent a fraction of that on charitable contributions, donating $158,145 to 23 organizations like the Boys and Girls Club of America, Hudson River Museum, Ronald McDonald House, United Negro College Fund and Saddleback Valley Community Church, the Southern California mega-church whose pastor, Rick Warren, wrote the best-selling book “The Purpose-Driven Life.”

The Daily Docket: Sun Sets on Saturn

Posted: October 1st, 2009, 6:39am PDT

General Motors will wind down Saturn after former race-car driver Roger Penske backed out of a deal to buy the brand, The Wall Street Journal reports.

Canadian billionaire Jim Balsillie won’t appeal a bankruptcy judge’s decision to reject his bid to buy and relocate the Phoenix Coyotes, according to the National Post.

A new bankruptcy-risk model aims to challenge the Ed Altman’s Z-Score, which has been the industry standard for 40 years. Read the Daily Bankruptcy Review story here.

Frontier Airlines is set to exit bankruptcy protection on Thursday under the wing of Republic Airways, the Associated Press reports.

A bankruptcy judge said Station Casinos Inc.’s creditors can investigate possible fraud in a deal that took the company private in 2007, according to the Las Vegas Sun.

Two Los Angeles attorneys have been appointed to the bench of the U.S. Bankruptcy Court for the Central District of California, the Metropolitan News Enterprise reports.

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