Delphi MAXjet Dura Bombay New Century Bankruptcy (Update1)
Delphi, MAXjet, Dura, Bombay, New Century: Bankruptcy (Update1)
By Bill Rochelle
Jan. 28 (Bloomberg) — MAXjet Airways Inc., the startup
airline that shut down and filed on Christmas Eve to liquidate in
Chapter 11, will appear in U.S. Bankruptcy Court in Delaware on
Feb. 1 asking for permission to conduct an auction of the assets
even though no buyer is yet under contract.
MAXjet wants initial bids by Feb. 6 and final bids on
Feb. 11. If more than one bid is submitted for an asset, there
will be a Feb. 15 auction.
The former airline says it will file a separate request to
approve the sale to the highest bidders.
The airline fired 296 employees and now has 74 on the
payroll. Among those remaining, 27 are required to maintain the
operating certificate from the Federal Aviation Administration
that;s among the assets being offered for sale.
Beginning operations barely two years ago, the Dulles,
Virginia-based all-business class airline had scheduled service
between London and New York, Las Vegas and Los Angeles. A court
filing listed assets of $66 million against debt totaling
$49 million as of Sept. 30.
The case is In re Maxjet Airways Inc., U.S. Bankruptcy Court
for the District of Delaware (Wilmington).
Other Updates
Plan Formally Approved, Delphi to Sell Bearing Business
The bankruptcy judge on Jan. 25 signed a confirmation order
formally approving the Delphi Corp. reorganization plan.
The judge announced at the conclusion of the confirmation
hearing on Jan. 22 that he would approve the Chapter 11 plan
intended to pay unsecured creditors in full with 77.3 percent of
the value coming from distributions of new common stock and the
other 22.7 percent attributable to creditors; ability to buy more
stock at a 35.6 percent discount.
To represent full payment, the stock must trade at the
$59.61 a share valuation assumed in the plan.
Delphi;s existing stockholders were said in the disclosure
statement to be receiving a package of new securities worth
$348 million. The existing stock closed yesterday at 16 cents a
share, up 0.5 cent in over-the-counter trading.
To put the plan into effect, Delphi still needs to negotiate
$5.8 billion in new secured financing.
In another action on Jan. 25, the judge gave Delphi
permission to hold an auction on Feb. 13 testing whether anyone
will beat an offer from private-equity investor Resilience
Capital Partners to buy the wheel-bearing business for a price of
up to $44.2 million.
Competing bids are due Feb. 11. The hearing to approve the
sale is set for Feb. 21.
The main bearing plant is a 1.3 million-square-foot facility
in Sandusky, Ohio, with 1,000 workers.
Delphi issued a Jan. 25 statement saying no one made an
offer to compete with Platinum Equity LLC for the worldwide
steering and halfshaft businesses. It has 9,700 employees and
generated $2.5 billion in revenue last year.
Delphi described the total consideration from the Platinum
sale as being $447 million, including $190 million in assumed
liabilities. Delphi would have received some of the benefit from
the restructuring agreement with General Motors Corp. even if the
sale didn;t occur.
Troy, Michigan-based Delphi filed under Chapter 11 in
October 2005, listing $19.1 billion in debt in its amended
schedules of property and liabilities.
The case is In re Delphi Corp., 05-44481, U.S. Bankruptcy
Court, Southern District New York (Manhattan).
T.G.I. Friday;s Restaurants Going to Auction in Late February
CCI of West Palm Beach Inc., the operator of 19 T.G.I.
Friday;s restaurants in Florida and New York, will auction the
locations on Feb. 26.
Under sale procedures approved by the U.S. Bankruptcy Court
in West Palm Beach, Florida, bids are due Feb. 21. The sale
approval hearing is to be held sometime around Feb. 28.
No buyer is yet under contract. If someone is willing to
sign a contract before the auction, the company is authorized to
provide a 2 percent breakup fee if another bidder walks out of
the auction as the winner.
The company has over $28 million in secured debt. Revenue
last year was more than $55 million.
CCI, the restaurant operator, isn;t to be confused with CCI
Group Inc., a developer of members-only resorts undergoing
Chapter 11 reorganization in New York.
CCI of West Palm Beach filed its reorganization petition in
August.
The case is In re CCI of West Palm Beach Inc., 07-16604,
U.S. Bankruptcy Court, Southern District Florida (West Palm
Beach).
Dura Increases Financing by $45 Million to $170 Million
Dura Automotive Systems Inc., the auto-parts maker that was
forced to renegotiate the reorganization plan creditors already
accepted, announced on Jan. 25 it has a replacement lender who
agreed to finance the Chapter 11 case at least until July 31.
The existing $105 million secured financing for the
reorganization was to expire on Dec. 31. The lenders granted an
extension until Jan. 31. According to Dura;s court filing, they
were unwilling to provide a longer extension. Dura decided the
best course of action called for finding a new lender.
Ableco Finance LLC will pay off the existing secured lender
while providing another $45 million and a $20 million letter of
credit facility, for a total of $170 million. The credit will
expire on July 31.
Ableco will have an expanded collateral package for the
enlarged loan. Ableco will have a security interest in all of the
stock of Dura;s foreign subsidiaries not themselves in bankruptcy
rather than the 66 percent securing the existing lenders.
With the imminent maturity of the existing loan, Dura will
be in the U.S. Bankruptcy Court in Delaware tomorrow asking for
approval of the new loan.
On Feb. 12 Dura will return to bankruptcy court asking for
authority to sell nine properties for $19.2 million. Almost half
the purchase price is represented by a plant in Jacksonville,
Florida.
Dura was forced twice to call off confirmation hearings
originally scheduled in December when banks couldn;t be lined up
to provide a required $425 million in secured financing.
Dura filed under Chapter 11 in September 2006 with 16,000
employees at 63 factories in 14 countries. The operations outside
the U.S. and Canada aren;t in reorganization.
The petition by Rochester Hills, Michigan-based Dura listed
$2 billion in assets and debt of $1.7 billion.
The case is In re Dura Automotive Systems, Inc., 06-11202,
U.S. Bankruptcy Court, District of Delaware (Wilmington).
Art Owner Wants to Learn Who Bought Artworks from Salander
Carol F. Cohen, one of the creditors who filed an
involuntary petition to start the bankruptcy of Salander-O;Reilly
Galleries LLC, is asking for permission to take an examination
under oath of Lawrence Salander, the gallery;s proprietor.
After Cohen gave 15 artworks to the gallery for safekeeping,
Salander sold them without permission and the money disappeared,
according to Cohen;s court filing.
Cohen filed a lawsuit in state court before the bankruptcy.
Cohen wants to examine Salander to find out who purchased the
art. The U.S. Bankruptcy Court in Poughkeepsie, New York, will
consider the matter at a Feb. 14 hearing.
The gallery is the bankrupt Manhattan art showplace under
investigation by the Manhattan district attorney after being sued
for improperly dealing with millions of dollars in artworks.
Creditors filed an involuntary Chapter 7 petition on Nov. 1
against the gallery. Lawrence Salander and his wife filed under
Chapter 11 on Nov. 2. The gallery switched the case to a Chapter
11 reorganization on Nov. 6.
The individuals; case is In re Lawrence B. Salander and
Julie D. Salander, 07-36735, and the gallery;s case is In re
Salander-O;Reilly Galleries LLC, 07-30005, both in the U.S.
Bankruptcy Court, Southern District of New York (Poughkeepsie).
Bombay Approved to Sell Trademarks for at Least $2 Million
Bombay Co., the liquidating 388-store home-furnishing
retailer, was given approval last week to sell the trademarks,
trade names, and other intellectual property to a joint venture
formed by affiliates of Gordon Brothers Retail Partners LLC and
Hilco Merchant Resources LLC.
The joint venture made an original offer of $1.25 million in
cash for the names. The partners were also were willing to
contribute $1.5 million to the enterprise to exploit the names
while giving Bombay a 25 percent interest in the joint venture.
At auction with competitive bidding, the cash price rose to
$2 million. The joint venture emerged from the auction as the
winner.
Hilco and Gordon Brothers were authorized in October to
liquidate Bombay;s inventory when no one would sign up to buy the
stores as a going concern.
Filing under Chapter 11 in September, Fort Worth, Texas-
based Bombay listed assets of $164 million and debt totaling
$109 million, including secured claims of $79.6 million and
unsecured claims of $28.6 million.
The case is In re Bombay Co., 07-44084, U.S. Bankruptcy
Court, Northern District of Texas (Fort Worth).
Lexington Jewelers Given Approval to Liquidate Inventory
Lexington Jewelers Exchange Inc., the Cambridge,
Massachusetts-based luxury-watch retailer also known as Alpha
Omega Jewelers, was authorized on Jan. 25 by the Boston
bankruptcy court to hire a joint venture between Tiger Capital
Consulting LLC and Gordon Company Inc. to liquidate the inventory
under an arrangement intended to generate $13.1 million.
At auction last week, no one submitted offers in competition
with the joint venture to liquidate the inventory and stores.
Lexington Jewelers filed on Jan. 2 to liquidate in Chapter 11.
The company has seven stores in the Boston area. Sales last
year were $25 million.
Book assets were $21.5 million while debt totaled
$31 million, including $18 million owing to the secured lender
and $12.7 million claimed by suppliers.
The case is In re Lexington Jewelers Exchange Inc.,
08-10042, U.S. Bankruptcy Court, District of Massachusetts
(Boston).
New Filings
Twin Tower 29-Story Florida Condo Project Files
Towers of Channelside LLC, the owner of a twin tower, 29-
story condominium project with 257 units, filed a Chapter 11
petition on Jan. 25 in Tampa, Florida.
The project, in Plant City, Florida, has more than
$72 million in secured debt, plus almost $12 million owing to
unsecured lenders.
The assets include deposits of $4.9 million that the project
owner says doesn;t belong to buyers. There is another $2 million
in deposits with disputed ownership, court papers say.
A filing says 89 units already were sold. The owner is
asking for permission to sell eight units and is remarketing the
remainder.
The case is In re The Towers of Channelside LLC, 08-00939,
U.S. Bankruptcy Court, Middle District of Florida (Tampa).
Utah Security System Provider Firstline Files in Salt Lake City
Firstline Security Inc., a provider of home-security systems
based in Orem, Utah, filed in Salt Lake City on Jan. 25 to
reorganize in Chapter 11, saying the assets and debt are both
between $10 million and $50 million.
Debt includes $12.1 million owing to the 20 largest
unsecured creditors. To read Bloomberg coverage, click here.
The case is In re Firstline Security Inc., 08-20418, U.S.
Bankruptcy Court, District of Utah (Salt Lake City).
Briefly Noted
New Century Financial Corp. in December filed a request to
extend the exclusive right for proposing a reorganization plan.
The bankruptcy judge in Delaware granted the request on Jan. 22,
extending so-called exclusivity until Jan. 28 while inviting New
Century to file a request for another extension. Before filing
last April to liquidate in Chapter 11, the Irvine, California-
based company was responsible for $60 billion in home loans in
2006 and generated $220 billion in loans since inception. The
case is In re New Century TRS Holdings, Inc., 07-10416, U.S.
Bankruptcy Court, District of Delaware (Wilmington).
Mesa Air Group Inc., the regional airline operator that lost
a $80 million judgment in October to Hawaiian Airlines Inc., must
pay an addition $3.9 million to cover Hawaiian;s attorneys; fees
and costs, the bankruptcy judge in Honolulu ruled last week. To
read Bloomberg coverage, click here. Mesa posted a $90 million
bond so it could appeal the judgment for misusing confidential
information gained while performing due diligence during the
Chapter 11 reorganization of the airline subsidiary of Hawaiian
Holdings Inc. Hawaiian completed a Chapter 11 plan in June 2005
paying creditors in full after filing for reorganization in March
2003. The Chapter 11 case is In re Hawaiian Airlines Inc.,
03-00817, U.S. Bankruptcy Court, District of Hawaii (Honolulu).
The lawsuit is Hawaiian Airlines Inc. v. Mesa Air Group Inc.,
06-90026, U.S. Bankruptcy Court, District of Hawaii (Honolulu).
All American Bottled Water Corp., the owner of a plant that
was once a brewery for Miller Brewing Co., will be foreclosed on
March 21. Secured creditors were allowed to foreclose when the
Chapter 7 trustee couldn;t sell the 120-acre property in Tacoma,
Washington. The bankruptcy court is allowing the trustee to sell
the plant if he can land a buyer before the foreclosure is
completed. The trustee received offers, though they weren;t
enough to repay more than $36.5 million owing to the lender. The
case is In re All American Bottled Water Corp., 06-43133, U.S.
Bankruptcy Court, Western District Washington (Tacoma).
Creditors of Teligent Inc. won a $12 million fraudulent
transfer judgment last week against Alex Mandl, the company;s
former chief executive. A bankruptcy judge in New York ruled that
his resignation wasn;t enough to give in exchange for the
company;s waiver of a $12 million loan when the business was
insolvent. To read Bloomberg coverage, click here. Teligent, a
local, long-distance, high-speed data and Internet-service
provider, filed under Chapter 11 in May 2001. Two agreements to
sell the company fell apart, so Teligent carried out a plan in
September 2002 where the banks took stock they later sold. The
Chapter 11 case is In re Teligent Inc., 01-12974 and the lawsuit
is Savage %26amp; Associates PC v. Mandl, both in U.S. Bankruptcy
Court, Southern District of New York (Manhattan).
Universal Food %26amp; Beverage Co. was authorized to pay about
$6 million to the secured lenders in cancellation of debt
exceeding $6.5 million. The lenders also receive a release from
lawsuits the creditors; committee said it intended to file. The
producer of private-label and branded food and drink was
previously authorized to sell most of its assets. Universal and
two affiliates filed under Chapter 11 at the end of August in
Chicago. The case is In re Universal Food %26amp; Beverage Co.,
07-15955, U.S. Bankruptcy Court, Northern District of Illinois
(Chicago).
Downgrades
Prison Phone Provider Securus Downgraded to B- by S%26amp;P
Finding that liquidity is “extremely limited,;; Standard %26amp;
Poor;s downgraded Securus Technologies Inc. for a second time in
two months.
One of the two largest providers of telephone systems for
use by prisoners now has a B- rating from S%26amp;P that is one click
higher than the downgrade issued in October by Moody;s Investors
Service.
S%26amp;P is concerned that Securus later this year might again
violate bank loan covenants.
Washington Homebuilder Stanley-Martin Downgraded to B
Stanley-Martin Communities LLC, a privately owned
homebuilder specializing in the Washington market, received a
one-notch downgrade from Standard %26amp; Poor;s lowering the corporate
and senior unsecured ratings to B and CCC+.
Asset-impairment charges reduced stockholders; equity to
what S%26amp;P called a “slim $57 million.;;
The new S%26amp;P rating is two clicks higher than the ding
Moody;s Investors Service issued in December.
Revenue last year for the Reston, Virginia-based company was
$160 million.
S%26amp;P Lowers Freedom;s Rating Below Moody;s December Downgrade
Freedom Communications Inc., an Irvine, California-based
newspaper and television station owner, lost two clicks on its
rating when Standard %26amp; Poor;s lowered the corporate peg to B.
S%26amp;P attributed the action to “significant declines in
revenue;; and the “expectation;; Freedom would use debt to buy
back the 45 percent of the equity owned by Blackstone Group and
Providence Equity Partners.
Freedom has more than $860 million in annual revenue. Its
flagship publication is the Orange County Register.
The new S%26amp;P rating is one level lower than the Ba3 grade
issued in December by Moody;s Investors Service.
S%26amp;P Downgrades MediaNews One Below Moody;s December Action
MediaNews Group Inc., the Denver-based newspaper publisher
with $1.65 billion in annual revenue, was downgraded last week by
Standard %26amp; Poor;s, as it was in December by Moody;s Investors
Service.
S%26amp;P, however, issued a two-notch ding, compared with one by
Moody;s, with the result that S%26amp;P;s new B rating is one level
lower than Moody;s.
Canada News
Embedded System Developer Mindready Files for Protection
Mindready Solutions Inc., a developer of tests and embedded
systems for aerospace contractors and the auto industry, sought
protection from creditors by filing a notice of intention to make
a proposal to its creditors under Bankruptcy and Insolvency Act.
The company has headquarters in Quebec and offices in
Colorado and Alabama.
Advance Sheets
State Law Wins in Conflict with Indian Tribal Law
The Court of Appeals for the Tenth Circuit issued a Jan.
24 opinion important for banks and financial institutions making
secured loans to members of Indian tribes not living on tribal
land.
The Court of Appeals voided a security interest in an auto
because tribal law didn;t contain all the detail required by the
Uniform Commercial Code.
The bankrupt couple were members of a tribe but didn;t live
on tribal land. They purchased an auto, with the bank;s security
interest noted on the title document issued by the tribe.
The intermediate appellate court upheld the decision of the
bankruptcy court voiding the security interest. Although the
security interest would have been valid had the couple lived on
Indian land, the Court of Appeals agreed that the security
interest was invalid because tribal law didn;t have provisions
regarding the “creation and perfection of security interests in
vehicles;; containing detail required by the Uniform Commercial
Code. Oklahoma;s version of the UCC was applicable in part
because the couple didn;t live on Indian land.
The Tenth Circuit decision is important because it stands
for the proposition that the sufficiency of Indian tribal law
will be measured against state law when borrowers don;t live on
Indian land.
Unless the Tenth Circuit decision is reversed by the U.S.
Supreme Court, lenders to insure the validity of liens may decide
to perfect security interest under state law for tribe members
not living on Indian land. The decision also raises questions
about the extent Indian sovereignty can reach beyond the borders
of tribal land.
The case is Malloy v. Wilserve Credit Union (In re Harper),
07-5016, U.S. Court of Appeals for the Tenth Circuit.
Negligent Homicide Limits Homestead Exemption to $125,000
The Court of Appeals for the First Circuit is the first to
rule that being guilty of negligent vehicular homicide limits a
bankrupt;s homestead exemption to $125,000.
Federal bankruptcy law puts a $125,000 cap on the right to
exempt a home from creditors; claims if the debt arose from a
criminal act causing serious physical injury or death.
The First Circuit, in reaching its Jan. 23 decision, looked
at the grammar in the statute and disregarded a House of
Representatives conference committee report leading to the
opposite result.
The bankrupt in the First Circuit case argued unsuccessfully
that merely being negligent was not enough to invoke the
homestead cap arising from criminal acts.
The case is Larson v. Howell (In re Larson), No. 07-1925,
U.S. Court of Appeals for the First Circuit.
Debt From Intentional Contract Breach May Not Be Dischargeable
A U.S. District Judge in Chicago took sides in the
continuing debate over whether a debt is dischargeable in
bankruptcy if it arose from an intentional breach of contract.
Agreeing with the Courts of Appeal for the Fifth and Tenth
Circuits, District Judge James Zagel ruled on Jan. 18 that a debt
is wiped out in bankruptcy so long as the bankrupt didn;t intend
to cause injury. He said it wasn;t enough to show the bankrupt
intended to breach a contract.
The Court of Appeals for the Seventh Circuit held otherwise,
saying a debt wasn;t discharged in bankruptcy if it was based on
an intent to breach a contract.
The debate between the circuits follows a U.S. Supreme Court
decision called Kawaauhau v. Geiger making a distinction between
acts done with intent to cause injury as opposed to intentional
acts that cause injury.
The Seventh Circuit, covering Chicago, hadn;t addressed the
issue directly, Zagel said in concluding the Seventh Circuit
would follow the Fifth and Tenth Circuits.
The case is Wish Acquisition LLC v. Salvino, No. 07-4756,
U.S. District Court, Northern District Illinois (Chicago).
To contact the reporter on this story:
Bill Rochelle in New York at
