EFH Faces More Opposition To Bankruptcy Finance Plan

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Coldwater Creek
Creditors Oppose
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Supplier Appeals
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IBM Objects to
ConnectEdu Bankruptcy
Sale Plan
Judge Approves
Long Beach Medical
Sale Worth $25 Million
Penn National Puts
Riverboat Casino
Into Chapter 11
Friday, May 16, 2014
2
EFH Faces More Opposition
To Bankruptcy Finance Plan
3
By Peg Brickley
4
Energy Future Holdings Corp.’s bid to revamp the balance sheet of one of its major
divisions is taking more fire from investors the company would like to see sign on to
the deal.
4
Financing is the key to the energy company’s debt restructuring for Energy Future
Intermediate, one of the two divisions that followed their parent company into bankruptcy. Two loans have been proposed, and bondholders are balking at both.
5
The trustee for investors in a nearly $2.2 billion junior debt issue is seeking an
emergency hearing on a bid to get a bankruptcy judge’s approval on a tender offer
that’s part of the financing.
AHEAD IN BANKRUPTCY
16-May
Manhattan: ConnectEdu
bid-rules hearing
19-May
Manahttan: MF Global
insurance hearing
19-May
Manhattan: Sbarro
confirmation hearing
19-May
Wilmington: Brookstone
disclosure statement hearing
19-May
Wilmington: Constar
exclusivity hearing
19-May
Wilmington: Savient
confirmation hearing
The junior bond trustee, Computershare Trust Co., joined criticism aimed at the
Energy Future Intermediate financing earlier this week by the trustee for senior
bondholders.
The trustee is asking for a rushed hearing on its motion to have a judge review the
tender offer, a debt exchange that is the first step in the refinancing. Investors have to
know by May 20 whether they’ll go along with the proposal or not, according to the
trustee’s lawyers.
A spokesman for Energy Future declined comment on the bondholder protests, which
target matters set to be discussed in June in the U.S. Bankruptcy Court in
Wilmington, Del.
The Dallas company filed for bankruptcy protection April 29 with a plan to get rid of
some of its $42 billion overload of debt. Lower-ranking creditors of the Energy Future
Intermediate division have signed up to back Energy Future’s restructuring, but the
company is facing resistance from the top ranking lenders.
Energy Future Intermediate owns an 80% stake in Oncor, a Texas transmission
business that is not involved in the bankruptcy.
The company wants to tackle the Intermediate division’s overloaded balance sheet by
refinancing the two top tiers of debt, in deals that would also settle claims to $1.4
billion worth of early payment premiums on the debt.
For Energy Future, the new loans would mean lower interest payments.
19-May
Wilmington: Tuscany International
confirmation hearing
Both the senior- and junior-bond trustees, who between them are responsible for
more than $6 billion worth of debt attached to the Intermediate division, fault the
refinance strategy for being rushed and allegedly tainted with misleading and inadequate disclosure.
20-May
Chicago: Budd Co. retiree
committee hearing
The junior-bond trustee said it’s offering alternative financing, a proposal that would
improve on the deal Energy Future wants to present for court approval.
20-May
Newark: Ashley Stewart
omnibus hearing
20-May
Newark: Dots IP
bid-rules hearing
20-May
St. Louis: Patriot
omnibus hearing
In court papers, the Intermediate division’s junior bondholders said they were cut out
of the pre-bankruptcy talks that allowed Energy Future to arrive in Chapter 11 with
some support for a strategy in place, and support from key stakeholders.
Write to Peg Brickley at [email protected].
Coldwater Creek Creditors Oppose Bankruptcy-Exit Plan
By Sara Randazzo
Coldwater Creek Inc.’s unsecured creditors are
opposing the liquidating retailer’s proposed plan to
exit bankruptcy, arguing that serious revisions need
to be made to ensure that creditors recover as much
money as possible in the case.
In a filing made Wednesday in U.S. Bankruptcy
Court in Wilmington, Del., a committee of unsecured
creditors asked a judge to slow down the rushed
timeline of the five-week-old case “before significant
estate resources are needlessly wasted.”
If given more time, the committee says it will work
with Coldwater on a new creditor-repayment plan,
one that allows creditors to pursue litigation against
the company’s former officers and lenders and that
gives the committee more control over the liquidation
process.
“Rome is not burning,” committee counsel Norman
Kinel told Dow Jones Thursday, “and we should have
an opportunity to fully investigate any potential causes
of action and to control those causes of action.”
An attorney for Coldwater Creek said Thursday that
the debtor has agreed to push back a hearing on the
company’s exit plan by a few weeks, until June 12—
a move that Mr. Kinel said is a “positive development” but still doesn’t satisfy their objections.
Coldwater Creek filed for bankruptcy on April 11 with
plans to close its roughly 330 stores. At the time, the
company said that it expected to earn between $90
million and $100 million in an auction of its inventory,
fixtures and intellectual property.
That price rose significantly following a 32-hour
auction in early May, with Hilco Merchant Resources
LLC and Gordon Brothers Retail Partners LLC
walking away as the victors for $161 million. The liquidators kicked off Coldwater Creek’s going-out-ofbusiness sale May 8.
The money has allowed Coldwater Creek to pay off
its prepetition and bankruptcy loan lender in full,
according to court filings, and should provide
enough money to pay off term loan lenders in full.
Equity holders are still expected to be shut out of
the case.
In light of that, the unsecured creditor committee
argues that they are now the only class of
creditors with an economic interest in how the
case concludes.
see Coldwater on page 3
GENERAL MOTORS
CHAIR OF THE
UNSECURED CREDITORS
COMMITTEE
LEHMAN BROTHERS
CO-CHAIR OF THE
UNSECURED CREDITORS
COMMITTEE
TRIBUNE
FRANK MCDONALD
[email protected]
972.383.3153
MEMBER OF THE
UNSECURED CREDITORS
COMMITTEE
STEVE CIMALORE
[email protected]
302.636.6058
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2
Optim Energy Supplier Appeals Lawsuit-Blocking Ruling
By Katy Stech
The coal supplier to one of Optim Energy LLC’s
Texas power plants is protesting a bankruptcy
judge’s decision to block the supplier from filing a
lawsuit that could reduce or even throw out Optim
Energy’s $700 million debt to its owner.
Walnut Creek Mining Co. filed an appeal Wednesday
in U.S. Bankruptcy Court in Wilmington, Del., challenging a decision from Judge Brendan Shannon,
who determined that the proposed lawsuit would be
too difficult to win when he rejected Walnut Creek
Mining’s permission to file it.
Walnut Creek Mining had threatened to sue Cascade
Investment LLC, which is Microsoft Corp. co-founder
Bill Gates’s investment company and which indirectly
owns Optim Energy, stating that it improperly got a
$700 million secured debt position when Cascade
Investment paid off an unsecured bank loan. In
bankruptcy, a secured debt gets paid before
unsecured debts like that of Walnut Creek Mining,
whose lawyers protested the move as “improper
attempt at financial alchemy.”
On Tuesday, Judge Shannon issued a 19-page
decision that concluded that “the many transaction
and financial arrangements that give rise to [Optim
Energy’s owner’s] secured claims were structured
and intended as debt obligations.”
The decision cited fine print from a June 2007
borrowing agreement between Optim Energy and
Wells Fargo bank. The deal came with the promise
that Optim Energy would pay back to Cascade
Investment, which guaranteed the deal, any money
that Cascade Investment paid Wells Fargo.
“There is no dispute that Cascade and [an affiliate]
as guarantors were obligated upon such an event of
default to pay the outstanding balance under the
Wells Fargo [loan],” Judge Shannon wrote.
Walnut Creek Mining, which says it is owed about $7
million, supplies most of the coal that powers Optim
Energy’s Twin Oaks plant in Robertson County,
Texas, which can produce 305 megawatts of power.
Since the case began, the supplier has threatened to
stop delivering brown coal, called lignite, from its
mine in Texas.
Optim Energy executives put the company into
Chapter 11 protection on Feb. 12, telling Judge
Shannon that it doesn’t have enough cash to “safely
and effectively” operate its plants. Optim Energy is
trying to find a buyer for its Twin Oaks plant, which
takes more than two million tons of lignite per year
from Walnut Creek Mining.
Optim Energy also own stakes in two natural-gas
powered plants: the 600 megawatt Altura Cogen
plant and 50% of the 550 megawatt Cedar Bayou
plant, both located in Texas.
Electricity prices began plummeting soon after
Optim’s founding in 2007, making it difficult for the
company to repay the money it borrowed to buy the
Altura Cogen plant in Texas and to build another.
Since 2008, the economic downturn and cheap
natural gas sent electricity prices lower. In earlier
court papers, Chief Executive Nick Rahn pointed out
the price of electricity in the market where Optim
sells has fallen roughly 40% in the last five years,
citing prices of about $63.24 per megawatt hour in
2008 and about $38 per megawatt hour as of
December 2013.
Mr. Rahn said Optim tried “aggressively” to manage
costs at its plants. The company has no employees
after it outsourced the power plant’s operations to an
outside management company, a move that helped
save $15 million a year.
Write to Katy Stech at [email protected].
Walnut Creek Mining’s three-page appeal notice
didn’t fully explain why it is appealing.
Coldwater
continued from page 2
The company’s current creditor repayment plan, filed
on the day it sought Chapter 11 protection, offers
“broad third-party releases” to the company’s
lenders, stockholders, former officers and directors,
and others, according to court filings. Mr. Kinel, a
partner at Lowenstein Sandler LLP, said that while
the committee still doesn’t know if they will have
causes of action against those parties, they hope to
eliminate the releases to leave that option open.
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If the current plan is approved, “the committee
would likely be out of business before the committee
has been able to do its business,” Mr. Kinel said.
Coldwater Creek was founded in Sandpoint, Idaho,
in 1984. The company reached its revenue peak of
$1.1 billion in 2006, but a heavy debt load weighed
on the women’s clothing retailer for years as it
struggled to survive the economic slowdown. At the
time of its filing, Coldwater employed 6,000 workers.
Write to Sara Randazzo at [email protected].
3
Small Cap
IBM Objects to ConnectEdu Bankruptcy Sale Plan
By Jacqueline Palank
ConnectEdu faces an objection to its bankruptcy
sale plans from International Business Machines
Corp., its partner in a quest to connect Montana
public schools.
ConnectEdu, a privately held technology company,
sought Chapter 11 protection on April 28 with the
goal of selling itself to the highest bidder at an
auction it hopes to hold later this month.
In court papers filed Wednesday, IBM urged a bankruptcy judge not to approve the auction proposal as
it currently stands. Specifically, the technology giant
fears that the proposal would allow ConnectEdu
“make an end run” around bankruptcy laws that
protect contracts in bankruptcy sales.
ConnectEdu in March announced that it and IBM
won a deal to build a system for Montana’s public
school system that will allow K-12 and postsecondary schools to securely share electronic student
data. School officials say the sharing of such data as
academic transcripts will ease the transition from
high school to college.
But right now, IBM says it has “no way of knowing”
whether the contract will be included in the sale of
the company’s assets or whether it will be thrown
out during the bankruptcy case. IBM also objects to
a sale timeline that would require it to file an
objection to a new owner taking over its contract
before it knows the identity of that new owner.
In court papers, ConnectEdu said its sale proposal,
including its procedures for handling its contracts, is
“fair and reasonable.”
At a hearing Friday, the Manhattan bankruptcy court
will consider the company’s auction plans, which
envision a May 23 bid deadline, May 27 auction and
May 29 sale hearing where the court will be asked to
approve the winning bid.
Founded in 2002, ConnectEdu offers technology that
seeks to help students make the leap from school to
the workforce. Last year, the company received a
grant of nearly $500,000 from the Bill & Melinda
Gates Foundation.
Chief Restructuring Officer Mark D. Podgainy said
the company’s Chapter 11 filing follows expansion
efforts that saw ConnectEdu take on “significant”
debt and confront increasing product development
and other costs. With insufficient revenue to cover its
costs and debt obligations, the company terminated
all but 10 of its 64 employees and sought bankruptcy
protection.
ConnectEdu’s estimated $33.7 million in total liabilities include $10.7 million in secured debt and $4
million in unsecured debt, according to court papers.
Its total assets are estimated at $17.7 million.
Write to Jacqueline Palank at
[email protected].
Small Cap
Judge Approves Long Beach Medical Sale Worth $25 Million
By Stephanie Gleason
A Long Island, N.Y., hospital devastated by Hurricane
Sandy received bankruptcy-court approval of two
sales of its assets that raised more than $25 million.
Judge Alan Trust of the U.S. Bankruptcy Court in
Central Islip, N.Y., approved the sale of Long Beach
Medical Center’s assets during a hearing Monday,
according to Long Island Medical’s attorney.
South Nassau Communities Medical Center
purchased the majority of the hospital assets, which
still aren’t fully operational since Hurricane Sandy, for
$10.25 million. A group called MLAP Acquisition I
LLC, formed by Michael Melnicke, Leo Friedman,
Alex Solovey and Pat DeBenedictis, purchased the
Komanoff Center for Geriatric and Rehabilitative
Medicine for $15.6 million plus $1.1 million in
assumed liabilities.
South Nassau had served as lead bidder for both
sets of these assets, offering $21 million. The funding
for the purchase came from a $22 million grant from
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the state of New York, which will allow South Nassau
to complete the sale and build an urgent-care facility
on the hospital grounds. The Dormitory Authority of
the State of New York is provided an additional $6
million grant to South Nassau Communities to lend
to Long Beach Medical to fund the Chapter 11 case
and help it continue operating.
Because it was bested in the nursing home auction,
South Nassau will also receive a $450,000 breakup
fee and repayment of $4.5 million in bankruptcy
financing provided to Long Beach Medical.
In October 2012, Hurricane Sandy wiped out the
facility’s boilers, electric system, fire alarms, communications and food services, and the 162-bed acutecare facility hasn’t reopened since.
However, Long Beach was able to reopen its nursing
home and continued operating a family health clinic
and a behavioral health clinic.
Write to Stephanie Gleason at
[email protected].
4
Small Cap
Penn National Puts Riverboat Casino Into Chapter 11
By Joseph Checkler
Penn National Gaming Inc. put its Argosy Casino into
bankruptcy Wednesday after Iowa gaming officials
said they wouldn’t reconsider a decision to close the
riverboat casino by July 1.
In petitions filed with the U.S. Bankruptcy Court in
Reading, Pa., two Penn National affiliates related to
the Sioux City, Iowa, casino listed between $50
million and $100 million in assets and between $1
million and $10 million in liabilities. The entities are
called Iowa Gaming Co. and Belle of Sioux City LP.
Penn National isn’t under court protection.
Penn National’s fight against the Iowa Racing and
Gaming Commission had simmered recently, with
the land-based Hard Rock Hotel & Casino Sioux
City scheduled to open this summer. The fight
escalated in April when the IRGC said Argosy would
have to close July 1, and the commission refused
to reconsider its decision despite a challenge from
Penn National.
In a statement emailed to Dow Jones, Penn National
spokeswoman Karen Bailey said the July 1 closure
“would destroy our business and harm the people
who depend upon it. We believe that bankruptcy will
help to preserve Argosy’s business while the
complex legal and financial implications of IRGC’s
decision are carefully sorted out.”
The Penn National affiliates said in court papers
that the Hard Rock would “replace” Argosy, but
IRGC Commissioner Brian Ohorilko told Dow Jones
that if a court decides to halt the July 1 closure, it is
possible both could operate at the same time.
He said if the gaming company is successful in
halting the closure, IRGC would continue overseeing the casino.
Province Inc.’s Paul Huygens, a financial adviser to
the two Penn National subsidiaries put into bankruptcy, said in a Wednesday court filing that Penn
National has 111 union workers among its 280
employees, some of whom have recently left or are
preparing to leave ahead of the closing.
Mr. Huygens said the IRGC expects the Hard Rock
casino to be larger and have more revenue than the
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Argosy. He also said the commission wants the Hard
Rock to hire Argosy employees. But, he said, 1,500
job applications have already been sent to Hard
Rock for only 500 jobs.
“Once the Argosy Casino is shut down, the debtors
effectively will have lost any meaningful opportunity
to vindicate their rights because the debtors will lose
their employees, customers and goodwill associated
with their business,” Mr. Huygens said in the filing.
Mr. Huygens said the two Penn National subsidiaries
plan to sue the gaming commission over its decision
to close the casino.
IRGC’s Mr. Ohorilko said, “We continue to believe
that we are following the Iowa law.” After Argosy’s
“sponsoring organization,” Missouri River Historical
Development Inc., decided not to renew its gaming
license, Mr. Ohorilko said IRGC thinks it was within
its rights to schedule the shutdown.
Argosy generated more than $50 million in net
revenue last year, according to court papers. The
company has no debt, and puts three percent
of its proceeds toward charitable and educational
endeavors. Both the company and the IRGC’s
Mr. Ohorilko said the casino has a strong regulatory
record.
Penn National, one of the country’s largest casino
operators, bought Argosy Gaming Co. in 2005 for
$2.2 billion. As part of the deal, it took over Argosy’s
contract with the MRHD. The 73,000-foot Argosy
Casino has 714 gaming machines, 16 gaming tables
and four poker tables.
The main bankruptcy case is No. 14-13904, and has
been assigned to Judge Richard E. Fehling.
Philadelphia law firm Stevens & Lee P.C. will serve as
the Penn Gaming affiliates’ bankruptcy counsel, with
Quinn Emanuel Urquhart & Sullivan LLP serving as
co-counsel.
Judge Fehling will hold a first-day hearing on Friday.
Among their initial requests, the Penn National affiliates want permission to continue accessing their
bank accounts and paying their employees.
Write to Joseph Checkler at
[email protected].
5
Small Cap
Mi Pueblo Wins Confirmation of Bankruptcy-Exit Plan
By Tom Corrigan
Mi Pueblo San Jose Inc., a Northern California
grocery store chain, received a judge’s approval to
proceed with a plan to exit Chapter 11 bankruptcy
protection, overcoming 29 separate objections.
Judge Arthur Weissbrodt of the U.S. Bankruptcy
Court in San Jose confirmed the plan at a hearing
Wednesday, overruling an objection from the U.S.
trustee, a federal bankruptcy watchdog, as well as
lingering opposition from creditors whose objections
hadn’t been resolved in negotiations prior to the
hearing.
“Last night was an important moment in Mi Pueblo’s
history,” the company said is a statement. “The
outcome of yesterday’s hearing will enable us to
implement our restructuring plan and lead us toward
a successful reorganization.”
Many of the chain’s supply vendors had balked at
both the limited time given to review the plan and a
provision that stipulated they won’t be paid $8.3
million they are owed for goods provided in the 20
days before Mi Pueblo’s bankruptcy filing. In the
days and hours preceding the confirmation hearing,
the company managed to resolve those objections.
“The overall goal was to reestablish our pre-bankruptcy credit terms with all of our suppliers,” said
Robert Harris, an attorney with Binder and Malter
who represents Mi Pueblo. “Everyone pulled together
here in an admirable way.”
The company said that a swift confirmation of its
Chapter 11 plan was necessary to secure a $7.5
million letter of credit that it needs to support its
workers compensation insurance.
Last week, the Mi Pueblo sought court permission to
proceed with a sale of the chain’s assets, if the
mounting objections by trade creditors continued to
threaten the finalization of its bankruptcy plan. The
company said in court papers that trade creditors are
better off under its current plan than through a 363
sale, but that such a sale would be a better alternative than liquidation.
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Under the now-confirmed plan, the newly reorganized company will be 50% owned by Victory Park
Capital Advisors LLC and 50% owned by Cha Cha
Enterprises LLC, which will contribute $19.2 million
in financing in addition to forgiving nearly $14 million
in various claims it holds against Mi Pueblo,
according to court papers.
Victory Park, which has already extended a bankruptcy loan worth nearly $33 million, will provide
Mi Pueblo with an additional $31.5 million. Cha Cha,
via its own plan, will receive $24.5 million from
Victory Park.
The plan also sets aside a pool of $200,000 for
general unsecured creditors and, according to
Mr. Harris, allows for some additional recovery in
the future.
Mi Pueblo—which stocks its 21 stores with imported
foods from Mexico, Central America and South
America for its primarily Hispanic customers—filed
for Chapter 11 bankruptcy protection in July 2013
after it was told to replace some of its 3,260
employees whose documentation came under
review during a U.S. Immigration and Customs
Enforcement audit.
According to the company’s disclosure statement,
the audit eventually led the chain to terminate 80%
of its workforce and replace them with less experienced employees, which the company says were
less efficient.
The stores struggled with higher payroll costs and
training expenses as new workers were brought on
board, court papers said. Though it recorded sales of
about $413.3 million in 2012 and was current on its
loan payments, it couldn’t keep up the profitability
ratios that were required in the loan’s borrowing
agreements.
-Sara Randazzo contributed to this article.
Write to Tom Corrigan at [email protected].
6
Small Cap
ReBar Owner Arraigned in Brooklyn Court
By Melanie Grayce West
The owner of a popular Brooklyn restaurant and
wedding spot called reBar was arraigned in
Brooklyn’s criminal court Thursday and charged with
grand larceny in the second degree and criminal tax
fraud in the second degree, according to a spokeswoman for the Brooklyn District Attorney.
Jason Stevens abruptly closed his restaurant last
Friday, emailing a handful of employees to say that
his restaurant in Brooklyn’s Dumbo neighborhood
was “bankrupt and closed.” Dozens of employees
did not receive their last paycheck, and engaged
couples were left in the lurch. The venue was booked
with events through next year, according to former
reBar staff.
Mr. Stevens’ lawyer, Allan Bahn, had no comment.
In the days since the restaurant’s closure, former
reBar employees and soon-to-be-married couples
scrambled to keep wedding dates, banding together
with the wider Brooklyn community to pull off lastminute arrangements.
The news of Mr. Stevens’ arrest was “sweet justice,
but it’s bittersweet,” said Brian Cavanaugh, who was
to have his wedding at reBar on June 7. Mr.
Cavanaugh, 28, who works for a foundation, and his
bride, Heather Epstein, 27, are still trying to pull off
their 70-person wedding, albeit a scaled-down affair.
The couple said they paid $19,000 to have their
wedding at reBar. “We know our money is gone,”
said Mr. Cavanaugh.
“Individually, it’s been devastating for all of us,” said
Mr. Cavanaugh of the other brides and grooms
affected by reBar’s closure. Together the couples
have created a community, he said, meeting up with
attorneys. “Out of this devastating experience is
coming some positive, especially with the Brooklyn
community. And that’s hopeful,” he said.
According to a spokeswoman for the Brooklyn
District Attorney, Mr. Stevens’ bail was set for
$300,000 cash and $100,000 bond. He was released,
and the case was adjourned.
Write to Melanie Grayce West at
[email protected].
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7
Blackstone to Buy Las Vegas Casino for $1.7 Billion
By Craig Karmin, Kate O’Keefe
and Eyk Henning
Private-equity firm Blackstone Group LP has agreed
to pay $1.7 billion to Deutsche Bank for The
Cosmopolitan of Las Vegas, the glimmering but
struggling 3,000-room hotel and casino on the Strip,
Deutsche Bank said on Thursday.
The German bank spent about $4 billion to build the
Cosmo, first as its lender and then as its owner after
the project’s developer defaulted during the financial
crisis. The sale represents one of the biggest losses
on a single project that Las Vegas has ever seen.
Deutsche Bank, which has been grappling with
falling profits and new banking rules, said in a written
statement that the sale will have a “positive impact”
on the bank’s Tier 1 capital ratio, which is a key
measure of balance sheet strength that compares
equity to assets weighted by riskiness. A spokesman
for Deutsche Bank, Germany’s largest bank, declined
to comment on the overall loss that it suffered.
The Cosmo, which opened at the end of 2010, has
two high-rise towers, an 1,800-seat theater, more
than a dozen restaurants, and a nightclub with 50foot ceilings that’s popular with Las Vegas’ night life
crowd. But many of its non-gambling amenities are
owned by third parties, and it’s had difficulty making
money on gambling because of its relatively floor
and its lack of a database of high rollers that its
rivals have.
Other bidders for the property included Australian
gaming company Crown Resorts, led by billionaire
James Packer. TPG Capital, Apollo Global
Management and Caesars Entertainment Corp. also
formed a venture to bid on the property, according to
people familiar with the bidding process.
It’s not clear what Blackstone plans to do to turn
around the Cosmo’s fortunes. The New York privateequity firm has scant experience in the casino
business beyond some small exposure in Puerto Rico.
While Blackstone’s real estate group has bought and
sold many hotels and hotel operating companies—
including Hilton Worldwide Holdings Inc.’s initial
public offering last year—the firm hasn’t run a large
Las Vegas gambling operation.
Deutsche Bank in 2012 formed an internal unit for
unwanted assets to cut its balance sheet and
improve its equity capital. The sale of the Cosmo will
increase Deutsche Bank’s Tier 1 capital ratio by five
basis points or 0.05%.
The lender’s ratio stood at 9.5% at the end of March,
slightly down from the end of last year. The bank has
set a target of at least 10% for the end of the first
quarter in 2015.
Chief Financial Officer Stefan Krause said in late April
that additional regulatory charges will weigh on the
bank’s core Tier 1 capital ratio this year and that
issuing new shares can no longer be excluded.
While the sale only marginally improves the bank’s
capital cushion, it helps with its program shedding
unwanted assets in the lender’s internal “bad bank.”
The unit reduced assets in the unit to 49 billion
euros, 132 billion euros mid-2012, when the new CoChief Executives Anshu Jain and Jürgen Fitschen
took over the helm.
Las Vegas’s group and convention business, which
was hit the hardest during the recession, is showing
signs of life. March saw 3.7 million visitors—the
highest monthly total ever. Hotel room rates are back
to prerecession levels and occupancy rates are
topping 90%.
Las Vegas hotels have made efforts to court younger
crowds with fine dining, art exhibits, cavernous
nightclubs and luxury shops, and the Cosmo’s
Marquee nightclub has become a popular attraction
in the city.
The Cosmopolitan was originally designed by
developer Ian Bruce Eichner to include luxury condominiums, but Mr. Eichner defaulted on a $760 million
loan in 2008.
Deutsche Bank foreclosed on the property, just as
construction had stalled because of the credit crisis.
Faced with the challenge of trying to sell an unfinished residential project in the teeth of a housing
market collapse, the bank opted instead to pour
billions of dollars to develop Cosmo as a stylish hotel
and casino. The property opened after delays and
budget overruns.
Write to Craig Karmin at [email protected].
But people familiar with Blackstone’s thinking said
that it is betting on the Las Vegas comeback story
that has been gaining momentum after a disastrous
period that started with the financial crisis.
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8
Appaloosa’s David Tepper Concerned About Market
By Rob Copeland and Gregory Zuckerman
A series of bullish bets helped David Tepper build a
$20 billion hedge-fund firm. But on Wednesday he
struck a cautious note, worried about slow U.S.
growth and the risk of a global economy that will
worsen unless the European Central Bank takes
aggressive action.
Mr. Tepper’s warnings are especially notable because
he built his firm, and fortune, with concentrated
wagers on certain assets appreciating. Though at
times he’s made bearish investments, he’s best
known for scoring huge paydays owning bank
investments in 2009 and going big on U.S. equities,
including airlines, in 2013.
Speaking at the annual SALT conference at the
Bellagio resort in Las Vegas, a gathering of wealthy
hedge-fund managers and investors, Mr. Tepper said
the investment environment has become more difficult.
But after a day that saw many fund managers trying
to convince investors on why they should put money
into their corners of market, Mr. Tepper had a
different take: Hold some cash in case the market
heads lower.
“The market is kind of dangerous right now,” he said.
“It’s a tough market.”
“You’re supposed to have some cash here,” he said.
A number of hedge funds in recent months have
argued that European markets are attractive, but only
if the ECB takes more steps to ease monetary policy
to help the European economy.
Mr. Tepper took a more bearish and blunt stance,
describing the ECB as being “really, really behind
the curve.”
“They’re waiting, waiting, waiting,” he said. “The
ECB better ease in June, I’m nervous.”
Behind Mr. Tepper’s anxiety: U.S. economic growth
in recent months has been slower than he and others
had expected.
“If the U.S. was at 4% (growth) I’d be a lot more
comfortable, I thought the U. S.would grow faster,
“he said.
The U.S. cannot lift up Europe and China on its own,
he added.
Mr. Tepper, who runs Appaloosa Management in
Short Hills, N.J., had other blunt advice for those
currently investing in equities.
“Don’t be too fricking long right now,” he said,
referring to bullish positions. “There’s times to make
money and there’s times not to lose money.”
Mr. Tepper said his staff has adopted a motto to
describe the world’s central banks: “coordinated
complacently.”
He said policy makers, and investors, aren’t adequately concerned with the possibility of falling prices.
“I am more worried about deflation than I am about
inflation,” he said.
Write to Rob Copeland at [email protected]
and Gregory Zuckerman at
[email protected].
Former Mexicana Airline Owner Said to Seek Asylum in U.S.
By Anthony Harrup
The former owner of bankrupt airline Mexicana, who
is wanted in Mexico in connection with the collapse
of the country’s former flagship carrier, has
requested political asylum in the U.S., Mexican
authorities said Wednesday.
Gaston Azcarraga, the former chairman of hotel chain
Grupo Posadas who led a group of investors in the
purchase of the airline from the Mexican government in
2006, was called by U.S. authorities because his visa
had expired and asked for asylum in the U.S., said a
spokesman for the Mexican attorney general’s office.
A spokeswoman for U.S. Immigration and Customs
Enforcement could neither confirm nor deny the report.
An eventual extradition of Mr. Azcarraga to Mexico
would first depend on whether a U.S. judge grants
the extradition request, the spokesman added. Mr.
Azcarraga couldn’t be immediately reached for
comment.
Mexicana was grounded in August 2010, unable to
meet hundreds of millions of dollars in liabilities, and
last month a Mexican court declared the airline
bankrupt and ordered its liquidation after several
failed attempts by different potential investors to
come up with a viable rescue plan. The airline’s obligations included severance for workers, bank debt,
and clients who were left holding tickets for
canceled flights.
Write to Anthony Harrup at [email protected].
A Mexican judge issued an arrest warrant for Mr.
Azcarraga in February on fraud charges related to
operations at Mexicana, and federal authorities
requested Interpol’s intervention to help locate him.
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9
Fannie-Freddie Overhaul Bill Passes Senate Committee
By Nick Timiraos
A Senate committee approved a bipartisan measure
to overhaul Fannie Mae and Freddie Mac on
Thursday, a first step in what is shaping up to be a
yearslong debate over revamping the nation’s $10
trillion mortgage market.
The measure won support from 13 of 22 lawmakers
on the Senate Banking Committee, with seven
Republicans joining six Democrats.
While the bill is supported by the White House,
analysts said Thursday’s vote figures to be a hollow
victory because it fell short of the larger majority
needed to compel Senate Majority Leader Harry Reid
(D., Nev.) to bring the bill up for a floor vote ahead of
November’s midterm elections.
The bill, sponsored by Sen. Tim Johnson (D., S.D.),
the committee’s chairman, and Sen. Mike Crapo of
Idaho, the panel’s top Republican, would construct a
new market system in which private investors would
take initial losses on mortgage securities that would
carry government reinsurance.
Fannie and Freddie don’t make loans but buy them
from lenders and issue them as securities, providing
guarantees to make bondholders whole when loans
default. Their infrastructure has made the 30-year,
fixed-rate mortgage widely available to American
borrowers. Fannie and Freddie remain in a government-managed conservatorship, and they can’t
escape federal control without an act of Congress or
their regulator.
A bipartisan consensus that the government needs
to play a significant role to ensure the wide availability of the popular 30-year, fixed-rate mortgage has
hardened over the past year. The overhaul proposal
marked a rare instance in which leaders of both
parties have worked together and with the White
House on an issue that Washington had largely
avoided in the years following the companies’ 2008
taxpayer rescues.
But expanding an initial centrist coalition of supporters hit a ceiling once lawmakers began wrestling with
the intricacies of replacing Fannie and Freddie, two
companies that provide the plumbing for the U.S.
mortgage market and have produced big profits over
the past year, reversing earlier losses.
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Six Democrats on the banking panel—who had
expressed concerns that the bill would raise costs
sharply for borrowers of modest backgrounds—
voted against the measure, effectively killing the bill’s
chances of moving through the Senate this year.
In the House, Republicans last year approved a
separate bill without any Democratic support to wind
down the firms and largely cede their roles to the
private sector. The House bill hasn’t generated
enough support for Republican leaders to bring it up
for a floor vote, a prospect that appears to await the
Senate bill.
The White House, which worked hard behind the
scenes to rally support for the bill, has said that
Fannie and Freddie should be replaced and their
functions separated to ensure that any successors
aren’t too big to fail in future crises.
Gene Sperling, who served as President Barack
Obama’s top economic adviser until March, warned
at a conference last month that doing nothing would
erode the public’s trust in the government.
“The worst thing to do is...let it rain horribly, ruin all
of your furniture, and then decide that when the sun
shines, nah, you don’t really need to do anything,” he
said at a conference in Los Angeles, remarks that
were directed at liberal interest groups.
Some real estate groups, small lenders, civil rights
and consumer groups have argued the companies
are too important to replace given the role they play
in the housing market and the private sector’s spotty
track record providing credit—too much during the
bubble, and too little after the bust.
Critics of the bill have had their worries amplified by
hedge funds and other deep-pocketed investors that
placed large bets on the firms’ deeply discounted
stock. Those groups have lobbied to restore the
companies in some fashion and have said that many
of the goals of the White House could be accomplished by restructuring the companies.
Write to Nick Timiraos at [email protected].
10
Beyond Bankruptcy
General Motors Recalls
Another 2.7 Million Vehicles
Dow Jones
Daily Bankrupty
Review
By Jeff Bennett
Published by Dow Jones & Co, Inc.
General Motors Co. initiated a new round of recalls totaling about 2.7 million
vehicles, as the company looks to identify and react to problems more quickly
after being grilled over safety shortcomings.
Editorial
The auto maker said Thursday it would take a charge of up to $200 million
during the quarter to cover costs for the recalls.
Patrick Fitzgerald,
Bureau Chief
[email protected]
GM said it had told the National Highway Traffic Safety Administration of five
more safety recalls covering about 2.7 million vehicles in the U.S., including 2.4
million passenger cars-including Chevrolet Malibus, Pontiac G6s and Saturn
Auras-for taillight problems.
The recalls also cover 477 of its popular Chevrolet Silverado and GMC Sierra
pickup trucks over a tie-rod issue; more than 140,000 Malibus from the 2014
model year over brake problems; about 140,000 Chevrolet Corvettes for loss
of low-beam headlights; and roughly 19,000 Cadillac CTS cars for windshieldwiper failures.
GM has now initiated about 20 recalls since the start of the year covering more
than 11 million vehicles world-wide, with the bulk in the U.S., including a major
recall over ignition-switch problems that has roiled the company.
The uptick in recalls comes as GM’s vehicle safety chief Jeff Boyer shifts recall
response to incoming consumer complaints and internal investigations and
away from the warranty claim data, which takes more time to collect.
“We are not waiting for trends in defects,” Mr. Boyer said. “We have also hired
35 to 40 more safety investigators to help us find potential problems before
they happen.”
GM now has nearly 60 investigators on staff, and Mr. Boyer has the authority
to hire more. Such a policy in 2005 would have allowed the company to spot
the faulty ignition switch issue faster.
GM engineers decided in 2004 to go ahead with the launch of the Chevrolet
Cobalt although they knew that a jarring of or too much weight on the ignition
key would cause the car to stall. The engineers decided a fix would be too
costly, so no changes were made.
Nicholas Elliott, Managing Editor
[email protected]
212.416.2029
Jacqueline Palank,
Deputy Bureau Chief
[email protected]
Melanie Cohen, Copy Editor
[email protected]
Peg Brickley, Reporter
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But consumer complaints of stalling cars started streaming into the auto maker
from dealers as early as March 25, 2005. In some instances, the auto maker
bought back the cars it had sold. Still, a formal recall wasn’t initiated until
February 2014. A total of 13 deaths have been linked to accidents caused by
the faulty ignition switch.
GM is conducting an internal probe over why it took so long to start the recall.
Congressional leaders have also chastised the company over the delay.
In the Malibu case, testing work was being conducted on a new model when
the brake problem was discovered in April 24.
Since the same braking system is used in the current Malibu, production was
halted at two plants May 2. The cars were tested and the results reviewed May
4. The same problem was found and dealers were informed May 7 to stop
selling the car. It is one of the fastest recalls GM has launched.
-Nathan Becker contributed to this article.
Write to Jeff Bennett at [email protected].
Copyright Dow Jones & Company, Inc.
All rights reserved. Copying and redistribution prohibited without permission
of the publisher. Dow Jones Daily
Bankruptcy Review is designed to
provide factual information with respect
to the subject matter covered, but its
accuracy cannot be guaranteed. Dow
Jones is not a registered investment
adviser, and under no circumstances
shall any of the information provided
herein be construed as a buy or sell recommendation, or investment advice of
any kind.
Dow Jones is a News Corp company.
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11
Nortel Legal Tab Boosts Pressure on Law Firms
With the legal bill for disassembling Nortel Networks
Corp. heading into billion-dollar territory, lawyers who
work on insolvencies are facing increasing pressure
to keep their billable hours under control, Canada’s
Globe and Mail reported.
Just before the launch this week of the joint CanadaU.S. trial to divide up what’s left of Nortel, the
Ontario Superior Court judge hearing the Canadian
side of the proceedings called the $1.3 billion bill for
legal and other professional fees “completely
shocking” in a pretrial hearing.
Lawyers and spokesmen for the Nortel pensioners
who have seen their benefits slashed have also criticized the costs, pointing at lawyers involved in the
case who charge rates of $800 to $1,000 an hour.
However, concern about the costs lawyers run up in
bankruptcies and restructurings has spread far
beyond the spotlight now shining on Nortel.
Lawyers say judges across the country are
becoming increasingly likely to challenge what
they see as “overlawyering” or runaway bills on
insolvencies.
David Jackson, a Winnipeg lawyer with Taylor
McCaffrey LLP who chairs the bankruptcy section of
the Canadian Bar Association, says increased
scrutiny ofinsolvency fees has been a major topic of
discussion at the insolvency bar conferences over
the past year.
by national law firm Borden Lander Gervais LLP in
the receivership of a cattle farm was “nothing short
of excessive.”
Ontario Superior Court Justice Andrew Goodman
knocked the bill down to $157,500, citing “a lack of
proportionality and reasonableness” in the firm’s fees
and rejecting assertions in affidavits from BLG lawyer
Roger Jaipargas that the work was justified.
“In my review of fees...there appears to be excessive
work done by senior counsel on routine matters,” the
judge ruled. The decision is under appeal. Mr.
Jaipargas declined to comment.
In an insolvency ruling released earlier this month,
Ontario Superior Court Justice David Brown
slashed by more than half the $73,000 in bills
from Ernst & Young Inc. and law firm McCarthy
Tetrault LLP.
He ends his ruling by calling for capped fees for
routine tasks in such cases and predicts that “we are
reaching the end of the era where the fees for professional services, such as the giving of legal or
insolvency advice, are calculated and billed on an
hourly rate basis.”
“There’s no question,” Mr. Jackson said. “I think
it’s an issue that has been not just of concern
to the courts and the judges but to all the other
stakeholders.”
Last year, e-mails surfaced in U.S. litigation over
bills in an insolvency that were charged by giant law
firm DLA Piper, and they made for water-cooler
conversation in law firms everywhere. In the emails, the firm’s lawyers appeared to brag about
running up the client’s bills. In one, a lawyer writes
that “random people [are] working full time on
random research projects in standard ‘churn that
bill, baby! mode.”
He says creditors and court-appointed monitors in
insolvencies, which are usually accounting firms, are
also paying closer attention to large legal bills.
Richard McLaren, a law professor at University of
Western Ontario, said judges are best positioned to
force insolvency lawyers to keep a lid on costs.
In two recent rulings in cases far removed from the
massive size and complexity of the Nortel trial,
judges have gone over bills closely.
“If the judges take the initiative and start being more
rigorous, that will push the lawyers to be more
vigilant themselves in terms of what’s going on in
their own firms,” he said. “That’s important, to really
change the behavior.”
In a decision out of London, Ont., from January, a
judge declared that $255,000 in legal fees charged
Friday, May 16, 2014 | dbr.dowjones.com
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12
International
Spain Launches $9.6 Billion Property-Loan Sale
By Art Patnaude
Spain has launched the sale of 6.95 billion euros
($9.6 billion) of residential home loans-nearly half of
them heavily delinquent-in one of the largest
mortgage deals in Europe this year.
The loans are held by Catalunya Banc SA, a onceprominent regional lender that the government
nationalized in 2011. Spain has struggled to return
Catalunya Banc to private hands, and the loan sale is
intended to make the bank more attractive to
potential bidders. The sale will add to a bulging
pipeline of loan sales in Europe.
Forty-three percent of the mortgages in the portfolio
sale—code-named Project Hercules—are nonperforming, meaning the loans are more than 90 days
overdue, according to a deal document reviewed by
The Wall Street Journal. Another 15% are sub-performing, meaning they are up to 90 days overdue,
the deal document shows.
Madrid-based investment bank Nmas1 Corporate
Finance SA, which is running the portfolio sale for
Spain’s bank-restructuring fund, sent the document
to potential buyers in recent days, according to the
deal timeline laid out in the document.
A spokesman for the investment bank, known as
N+1, declined to comment. A spokeswoman for
Spain’s bank-restructuring fund, known by its
Spanish acronym Frob, didn’t respond to a request
for comment. Catalunya Banc didn’t respond to a
request for comment.
Around 70% of the mortgages are in the province of
Catalonia. The rest are in Valencia, Madrid and other
regions. The deadline for investors to submit nonbinding offers is May 19. Binding offers are due June
30. While the bulk of the loans are tied to residential
property, a small portion of the portfolio has other
types of property loans, such as mortgages on
offices, the document shows.
Catalunya Banc took the second-biggest bailout,
after Bankia SA, in Spain’s bank cleanup. The country
has spent 12 billion euros in European bailout funds
to clean up the Barcelona-based lender.
Spain’s bank-restructuring fund, which is overseeing
the return of the lender to private hands, is trying to
whittle down Catalunya Banc to make it more
digestible to investors. The stakes are high. Two
previous attempts to sell the bank have failed.
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In addition to the 6.95 billion euro loan portfolio,
Spain is trying to sell Catalunya Banc’s branches in a
two-step process—the branches within Catalonia,
where the bank has a strong presence, and the
branches outside of its home region. The lender’s
bank branches carry the name CatalunyaCaixa.
Last week, Blackstone Group LP bought Catalunya
Banc’s real-estate-servicing unit for “a maximum of
40 million euros.” The exact amount to be paid
depends on whether certain conditions are met,
Catalunya Banc said in a news release last week,
without providing details on those conditions.
International investors have swooped into Spain,
Ireland and other European countries this year
seeking out distressed real-estate-loan portfolios
and assets. Blackstone in March said it had raised
5 billion euros for a European fund dedicated to
real estate.
There have been 29.8 billion euros of property-loan
sales in Europe so far this year, just shy of the 30.3
billion euros worth sold during all of 2013, according
to real-estate adviser Cushman & Wakefield Inc. The
firm now expects loan sales to hit 50 billion euros by
year-end.
The Hercules portfolio sale adds to the billions in
Spanish property loans already on the market.
Commerzbank AG is selling a 4.4 billion euro
portfolio, dubbed Project Octopus, of Spanish commercial-property loans.
There is likely to be an overlap of potential buyers for
Hercules and Octopus. A core group of investment
banks and U.S. private-equity firms have dominated
similar sales in recent months.
The large sizes of the portfolios have encouraged
these groups to team up on bids. Project Hercules is
likely to be no different, said Federico Montero, a
partner in corporate finance at real-estate adviser
Cushman & Wakefield.
U.S. private-equity firms focused on nonperforming
tranches include Blackstone, Lone Star Funds,
Cerberus Capital Management LP, Kennedy Wilson
and Apollo Global Management LLC.
Write to Art Patnaude at [email protected].
13
Sears Faces a Soft Market for Sale of Canadian Arm
Sears Canada Inc. is on the block with no obvious
buyer in sight, threatening to drag out its string of
weak financial results the Globe and Mail reported.
U.S. parent Sears Holdings Corp., controlled by
hedge fund manager Edward Lampert, said on
Wednesday it is contemplating the sale of its 51%
stake in its Canadian division among other “strategic
alternatives.” Sears Canada said it intends to cooperate with the process.
But the ailing retailer has already sold many of Sears
Canada’s best assets, including coveted store leases
at Toronto Eaton Centre and Vancouver’s Pacific
Centre, making an acquisition less appealing for a
rival. Major landlords have poured hundreds of
millions of dollars into buying those and other leases,
then selling some of the best ones to U.S. department store Nordstrom Inc. The flurry of activity
paved the way for it to launch here, starting this fall,
and set the stage for more intense competition for
incumbents.
In this tougher retail landscape, neither landlords nor
rivals seem enthusiastic to invest in Sears Canada,
industry sources say.
“I would draw the conclusion that the market is cool
to this transaction,” said David Tawil, president of
hedge fund Maglen Capital in New York. “But only
time will tell.”
Sears’ move to put its Canadian business up for sale
underlines the continuing weakness of its business.
But potential suitors ranging from Macy’s Inc. to
landlords are spooked by a soft domestic retail
market in which U.S. discounter Target Corp. has
struggled since its launch here in 2013.
Besides grappling with Sears’ poor financial performance, a would-be buyer also faces potential future
pension liabilities and a deal with U.S. financial
services player JPMorgan Chase & Co., which runs
Sears’ lucrative credit card business, that will need
to be renewed in a couple of years and could create
more headaches, industry sources said.
Some landlords may try to buy back a few of their
Sears store locations but they generally view a deal
as attractive only at a reasonable price and terms,
observers said.
Macy’s of Cincinnati is a department-store retailer in
the mid-market segment close to Sears Canada. But
the chief executive officer Terry Lundgren has “not
been interested in Canada and has been more interested in China,” Macy’s chief financial officer Karen
Hoguet told analysts on Wednesday.
Other U.S. chains, such as J.C. Penney and Kohl’s,
have shown interest in Sears in the past but are
focused on improving their U.S. operations, with the
American retail market generally performing better
than its Canadian counterpart.
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Copyright © Dow Jones & Company, Inc. All Rights Reserved.
Desjardins Securities retail analyst Keith Howlett said
he doesn’t expect Macy’s or Kohl’s to be interested
in anything more than acquiring some of Sears’ mall
store sites to enter Canada. “The process being
initiated by Sears Holdings will determine whether or
not these two retailers harbour long-term thoughts of
entering Canada.”
Even so, Sears shareholders have already benefited
from generous dividends that the company has
issued over the past year or so. “Sears Holdings has
been going through a systematic liquidation of its
assets for a number of years now,” Mr. Tawil said.
“Eddie Lampert has been able to orchestrate the
largest liquidation of all time outside of court restrictions or mandates.”
He said most liquidations involve insolvent
companies that are being restructured under a court
bankruptcy process, to the benefit of creditors. But
the Sears liquidation has benefited the retailer’s
shareholders, including the large dividends.
Despite uncertainty about potential buyers, some
European and Asian retailers are still interested in
coming to Canada some time in the future. British
cheap-chic chain Primark, which announced
recently it plans its first store overseas in the U.S.,
could consider Sears as a launching pad in
Canada, observers said. A company spokesman
could not be reached. Primark’s owners are part of
the wealthy Canadian Weston family, which owns
high-end fashion chain Holt Renfrew & Co., so it is
familiar with this country. The Galen Weston family
also controls Loblaw Cos. Ltd., Canada’s largest
grocery retailer.
Japanese-owned Uniqlo, which also sells affordable
fashions, is now looking for stores in Canada,
although it may not find the Sears locations in highprofile enough locations. Uniqlo has space blocked
off for it in Toronto’s high-performing Yorkdale
Shopping Centre, sources have said.
The remaining Sears stores are mainly in the suburbs
or smaller centres, and Uniqlo tends to look for highprofile urban locations for its first launches.
Besides rivals and major landlords and pension
funds, other potential Sears suitors include private
equity or retail turnaround groups such as Sun
Capital and Hilco or a domestic retailer, such as
Hudson’s Bay Co., wanting to foreclose new
entrants, Mr. Howlett said.
Mr. Howlett anticipates that Sears Canada will
declare a special dividend in 2014, no matter how its
exploration of strategic options progresses.
14
Best of Bankruptcy Beat
A WALL STREET JOURNAL BLOG PRODUCED BY THE EDITORS OF DOW JONES DAILY BANKRUPTCY REVIEW
EFH Unsecured Creditors
Form Ranks, Hire MoFo
A judge recently dismissed Dr. Dre’s request for
priority payment of a $3 million claim in the bankruptcy case of Death Row Records and its
founder, Marion “Suge” Knight.
Morrison & Foerster won the plum job of representing the official committee of unsecured creditors in
the Energy Future Holdings Corp. Chapter 11 case,
one of the biggest bankruptcies on record.
Reuters
Judge Denies Dr. Dre Claim
In Death Row’s Bankruptcy
Brett Miller led the team that pitched the law firm’s
qualifications to the newly named panel, made up
of three bond trustees, three trade creditors and
the Pension Benefit Guaranty Corp.
Federal bankruptcy trustees picked the Energy
Future unsecured creditors committee Monday at
a day-long session in Wilmington, Del., hotel
down the street from the U.S. Bankruptcy Court
in Delaware.
Dr. Dre wears a pair of Beats headphones as he attends the
MLB 2010 season opener between the New York Yankees and
Boston Red Sox in Boston in April 2010.
Lawyers for Andre Young, aka Dr. Dre, had argued
that the rapper was owed more than $1.8 million
in royalties and nearly $1.2 million in sales
proceeds from the unauthorized digital sales of
music he wrote, produced or performed. He
sought payment of these claims ahead of other
creditors, but U.S. Bankruptcy Court Judge
Vincent P. Zurzolo denied that request.
Mr. Young’s attorney in the case couldn’t immediately be reached for comment Wednesday.
The rapper can probably do without that $3
million. His Beats Electronics LLC, which makes
headphones speakers, has been nabbing
headlines as a target for a possible $3.2 billion
acquisition by none other than Apple Inc.
Also last week, Judge Zurzolo approved a plan to
make the first set of payments to Death Row and
Mr. Knight’s creditors since the label and its
founder sought court protection in 2006. Court
papers show that bankruptcy trustee R. Todd
Neilson, who is in charge of getting payments out,
has $6.3 million in cash on hand.
Reached Wednesday, an attorney representing Mr.
Neilson said the trustee won’t begin sending out
checks until it’s clear whether Mr. Young will
appeal the judge’s ruling on his claim. He has 14
days to do so.
Write to Jacqueline Palank at
[email protected].
Follow her on Twitter at@PalankJ.
Speculation was rife that there would be not two
committees of unsecured creditors. That’s because
unsecured creditors of one side of Energy Future’s
split business are happy with the company’s
restructuring proposal, while the unsecured
creditors of the other side have scorned it.
A single committee might have trouble juggling
competing agendas. Unsecured creditors of the
Energy Future Intermediate Holding division, the
happy side of the company, would want the case
to move fast, to lock in the signed deal that gives
them 35% of the reorganized company.
Unsecured creditors of the Texas Competitive
Electric side, the scorn side, need time to investigate, negotiate and attack, if necessary, to
improve their recovery.
The bond trustees that have seats on the panel
are from the scorn side. They include Wilmington
Savings Fund Society, trustee for the second-lien
notes, a $1.6 billion issue of secured debt; Law
Debenture Trust Co. of New York, trustee for $5.5
billion of unsecured bonds, and Bank of New York
Mellon, trustee for multiple issues of pollution
control bonds and subordinated debt, about $891
million worth, according to court records.
It’s not clear what side of Energy Future’s
business owes the money to the trade debtors,
but the happy side of the company is a holding
company whose business is to own an 80%
stake in Oncor, the Texas transmission business
that is not involved in the bankruptcy. Texas
Competitive Electric owns the energy-generating
and selling entities, which are not shielded from
the Chapter 11 proceeding.
Write to Peg Brickley at [email protected].
To find more Bankruptcy Beat posts or add a comment, visit us online at http://blogs.wsj.com/bankruptcy
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15
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92
92.25
5/14/14
-0.25
ENERGY FUTURE INTERMEDIATE HOLDING COMPANY LLC 9.75
10/15/19
81.95
81.95
5/14/14
0
10
12/1/20
105.6875
105.75
5/14/14
-0.0625
8.625
2/1/18
59
62
5/14/14
-3
5
8/15/15
98.131
98
5/14/14
0.131
GENON AMERICAS GENERATION LLC
9.125
5/1/31
100.002
103.53
5/14/14
-3.528
GENON AMERICAS GENERATION LLC
8.5
10/1/21
102
102.695
5/14/14
-0.695
10.06
12/30/28
112.75
113
5/5/14
-0.25
10.5
5/1/17
47.35
45
5/14/14
2.35
INTERFACE INC
7.625
12/1/18
106.55
106.75
5/6/14
-0.2
JAMES RIVER COAL CO
7.875
4/1/19
9.625
10
5/14/14
-0.375
MOMENTIVE PERFORMANCE MATERIALS INC
11.5
12/1/16
29.4
30.125
5/14/14
-0.725
MOMENTIVE PERFORMANCE MATERIALS INC
10
10/15/20
108
105.38
5/7/14
2.62
MOMENTIVE PERFORMANCE MATERIALS INC
9
1/15/21
72.75
73.75
5/14/14
-1
NINE WEST HOLDINGS INC
6.875
3/15/19
97.625
96.98
5/13/14
0.645
NINE WEST HOLDINGS INC
8.25
3/15/19
97.5
97
5/14/14
0.5
15
4/1/21
32.25
31.75
5/14/14
0.5
UNITED CONTINENTAL HOLDINGS INC
6.375
6/1/18
108.45
107
5/14/14
1.45
UNITED CONTINENTAL HOLDINGS INC
6
7/15/26
97.262
100
5/14/14
-2.738
UNITED CONTINENTAL HOLDINGS INC
6
12/1/20
106.845
106.845
5/14/14
0
UNITED CONTINENTAL HOLDINGS INC
6
7/15/28
96.875
95.769
5/14/14
1.106
US AIRWAYS HOLDINGS LLC
8.057
1/2/22
113.58
112.68
5/8/14
0.9
VITRO SAB DE CV
11.75
11/1/99
79.8
80
5/8/14
-0.2
Issuer
ACCURIDE CORP
CEDC FINANCE CORPORATION INTERNATIONAL INC
ENERGY FUTURE INTERMEDIATE HOLDING COMPANY LLC
EXIDE TECHNOLOGIES
GENCO SHIPPING & TRADING LTD
GENON MID ATLANTIC LLC
GLOBAL GEOPHYSICAL SERVICES INC
TEXAS COMPETITIVE ELECTRIC HOLDINGS CO LLC
Previous
Trade
Price
Previous
Trade
Date
Change
Source: MarketAxess, marketaxess.com
Composite high yield bond price indications are compiled from various market sources, some of which may make a market in or have financial
interest in the issues for which prices are provided. PRICES ARE INDICATIVE ONLY. The information contained herein does not represent a
solicitation to sell or buy the underlying issues. Dow Jones shall not be held liable for any reason for any errors or omissions, delays or inaccuracies in the indications or any decision made in reliance upon the indications. Dow Jones shall not be liable to any person for any loss of
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with respect to the indications and specifically disclaims any such warranty.
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