PRC Filing Solutia Dura New Century Bankruptcy (Update2)
PRC Filing, Solutia, Dura, New Century: Bankruptcy (Update2)
By Bill Rochelle
Jan. 24 (Bloomberg) — PRC LLC, an outsourcing customer-care
and marketing provider, filed a Chapter 11 petition yesterday in
New York describing a plan where first and second-lien secured
creditors will take over ownership.
PRC;s filing said the bankruptcy resulted in part from a
contract with an unnamed key customer that was “substantially
unprofitable.;; This year the contract would have produced
$15 million in negative earnings before interest, depreciation,
and amortization, according to Chief Financial Officer H. Philip
Goodeve.
First-lien creditors, owed $120 million, are to receive
80 percent of the stock plus a $40 million second lien and
$40 million in unsecured notes.
Second-lien creditors, currently owed $67 million, are to
have 20 percent of the new stock plus warrants for another
6 percent. The exercise price for the warrants will be based on
enterprise values of $170 million and $200 million.
Goodeve said unsecured creditors are to receive cash “in an
amount to be determined.;; Goodeve said trade suppliers are owed
$30 million.
A group of existing lenders will supply $30 million in
financing for the reorganization and a $45 million secured credit
on emerging from Chapter 11.
A detailed term sheet for the plan is among the court
filings.
A court filing says PRC had assets of $354 million and debt
totaling $261 million on Dec. 31. Last year, revenue was
$473 million, up 13.2 percent from 2006. The business operates 21
call centers with 10,100 employees.
Diamond Castle Holdings LLC and company officers acquired
Plantation, Florida-based PRC in November 2006.
The case is In re PRC LLC, 08-10238, U.S. Bankruptcy Court,
Southern District of New York (Manhattan).
Updates
Solutia;s $2 Billion Exit Financing Isn;t Working Out
Solutia Inc., the specialty chemical maker whose
reorganization plan was approved Nov. 29, may end up in a legal
fight with lenders over whether there;s been a material adverse
change in the credit market allowing the banks to walk away from
their commitment to provide $2 billion in exit financing.
Solutia said in a statement yesterday it won;t be emerging
from Chapter 11 on Jan. 25 as planned because Citigroup Global
Markets Inc., Goldman Sachs Credit Partners LP, Deutsche Bank
Trust Company Americas and Deutsche Bank Securities Inc. have so
far been unable to syndicate the new financing.
The banks contend they aren;t obligated under their
commitment from Oct. 25 because a material adverse change
occurred since then in the loan syndication or capital markets.
Solutia disagrees, saying the “ongoing conditions in the
credit markets began long before Oct. 25.;;
The new financing is to include a $1.2 billion senior
secured term loan, a $400 million senior secured revolving credit
and $400 million in senior unsecured notes. The banks are to
provide a $400 million bridge loan if the notes can;t be sold.
The banks; commitment expires Feb. 29.
If Solutia is able to carry out the plan, unsecured
creditors will receive 46.6 percent of the new stock, intended to
produce a 69.8 percent recovery. Those who participate in a
rights offering should recover a predicted 83.1 percent.
Noteholders are to have 48.6 percent of the stock, for an
assumed 75 percent dividend. By purchasing in a rights offering,
noteholders could recover 84.4 percent, in Solutia;s judgment.
Existing stockholders will receive five-year warrants to buy
7.5 percent of the new stock plus the right to participate in a
rights offering.
Solutia, based in St. Louis, filed its Chapter 11
reorganization petition in December 2003, listing assets of
$2.85 billion against debt totaling $3.22 billion.
The case is In re Solutia Inc., 03-17949, U.S. Bankruptcy
Court, Southern District New York (Manhattan).
Dura Restructures Agreements With GM and Adjourns Bonus Request
Dura Automotive Systems Inc., the auto-parts maker that
announced earlier this month it would “re-negotiate;; the
reorganization plan and its “economic terms,;; has agreed with
General Motors Corp. to restructure their commercial relationship
and purchase orders.
The U.S. Bankruptcy Court in Delaware will decide at a Jan.
29 hearing whether to honor the request by Dana and GM to keep
the details secret. The U.S. Trustee contends that “not all of
the information;; should remain secret.
Given the inability to emerge from bankruptcy last year as
expected, Dura asked the bankruptcy court to approve an $8.5
million bonus program to remove “uncertainty;; among company
executives. The request for bonuses has been pushed back to Feb.
12 from the originally scheduled Jan. 29 hearing date.
Dura put back the hearing at the request of the creditors;
committee. Dura says the company and the committee are “making a
concerted effort;; at resolving their disagreements over the
bonus program.
Although creditors voted to accept the auto parts maker;s
Chapter 11 plan, 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).
Reliant Aims to Sell Channelview Power Project in February
The Reliant Energy Inc. affiliates that own the 830-megawatt
Channelview power plant near Houston won an extension of the
exclusive right to file a Chapter 11 plan until Feb. 19.
After the project;s August Chapter 11 filing, Reliant says
its investment banker contacted 115 potential buyers, signed
confidentiality agreements with 38, and watched 24 conduct due
diligence.
Reliant said in December it hoped to have a signed agreement
to sell the project by the middle of February. The project has
$340 million in secured debt.
Houston-based Reliant Energy, not itself in bankruptcy, owns
the four companies making up the project that filed to
reorganize.
Reliant Energy said in a U.S. Securities and Exchange
Commission filing that it;s not liable for the project;s debt and
that the bankruptcy filing didn;t cause a default under any of
its other debt.
The plant has what Reliant called an unfavorable contract to
supply power and steam to Equistar Chemicals LP.
The case is Reliant Energy Channel View LLC, 07-11160, U.S.
Bankruptcy Court for the District of Delaware (Wilmington).
Briefly Noted
Calpine Corp., the power producer whose Chapter 11 plan was
approved in a Dec. 19 confirmation order, is in bankruptcy court
today opposing a request by some shareholders to delay the
reorganization while they appeal. Calpine says losing the ability
to appeal doesn;t make the required showing of “irreparable
harm.;; After confirmation of the Chapter 11 plan of Adelphia
Communications Corp. last year, dissident creditors were told by
a federal district judge to post a $1.3 billion bond to stop
consummation of the plan. The bond wasn;t posted, and the judge
later dismissed the appeal. In Calpine;s case, the bankruptcy
judge on Jan. 15 turned down shareholders; requests to reconsider
approving the plan. Calpine;s Chapter 11 filing was the largest
in 2005 measured by assets. Calpine;s plan pays creditors with
the reorganized company;s stock and gives warrants expiring in
August to existing stockholders. To read Bloomberg coverage,
click here. The case is In re Calpine Corp., 05-60200, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).
Buffets Holdings Inc., the second-largest family restaurant
operator in the U.S., won interim approval for $30 million in
financing to support the Chapter 11 reorganization filed Jan. 22
in Delaware. Eventually, Buffets is looking for approval of a
$385 million secured credit, including $85 million in new
availability. To read Bloomberg coverage, click here. Eagan,
Minnesota-based Buffets operates under the names Old Country
Buffet, HomeTown Buffet, Ryan;s and Fire Mountain. Twelve-month
revenue was $1.55 billion. The filing listed $964 million in
assets against debt of $1.16 billion. The case is In re Buffets
Holdings Inc., 08-10141, U.S. Bankruptcy Court, District of
Delaware (Wilmington).
New Century Financial Corp. examiner Michael Missal was
given a new deadline of Feb. 29 for filing his final report.
Missal was seeking to file the report by March 17. To read
Bloomberg coverage, click here. Missal couldn;t meet the Jan. 17
deadline. He was assigned to investigate “irregularities,
errors, and misstatements;; in the 2005 and 2006 financial
statements. New Century is the target of a formal investigation
by the SEC and a criminal grand jury investigation by the U.S.
Attorney in Los Angeles. Before filing in 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).
Quebecor World Inc., the Montreal-based commercial printer
that;s one of the world;s largest, received interim approval
yesterday for $750 million from a promised $1 billion in
financing to support the reorganization. Without the loan, the
company wouldn;t have been able to make payroll today. The
company filed for reorganization Jan. 21 in both the U.S.
Bankruptcy Court in Manhattan and the Quebec Superior Court. To
read Bloomberg cover of the so-called first day hearing, click
here. Quebecor World;s parent is Quebecor Inc. The case in New
York is In re Quebecor World (USA) Inc., 08-10152, U.S.
Bankruptcy Court, Southern District New York (Manhattan).
Ownit Mortgage Solutions Inc., the subprime mortgage lender
whose disclosure statement was approved in September, obtained
the signature of the bankruptcy judge on a confirmation order
last week approving the liquidating plan first filed in July.
Ownit projected a recovery between 9.6 percent and 10.9 percent
for unsecured creditors on their claims totaling $181 million.
Once the country;s 11th-largest subprime lender, Agoura Hills,
California-based Ownit filed under Chapter 11 in December 2006.
Ownit halted operations earlier that month after the warehouse
lenders shut down financing and froze Ownit;s funds. The case is
In re Ownit Mortgage Solutions Inc., 06-12579, U.S. Bankruptcy
Court, Central District California (San Fernando Valley).
The bankruptcy judge in Chattanooga, Tennessee gave Propex
Inc. permission yesterday to borrow $20 million from a promised
$60 million secured financing for the Chapter 11 reorganization
begun last week. The final hearing on financing is set for Feb.
13. Propex is a manufacturer of polypropylene fabrics and fibers
for carpet backing, industrial applications, and concrete fiber
reinforcement. Based in Chattanooga, the company listed assets of
$586 million against debt totaling $527 million. The case is In
re Propex Inc., 08-10249, U.S. Bankruptcy Court, Eastern District
Tennessee (Chattanooga).
Marcal Paper Mills Inc. reported a $2 million operating loss
in November on $32.5 million in sales. The net loss for the month
was $5.4 million. Since the inception of the reorganization, the
cumulative net loss was $38.7 million. Last week, the bankruptcy
judge in Newark, New Jersey, said he would approve the sale of
the assets to NexBank SSB, as agent for the second-lien secured
creditor. The price is $160 million, including assumed debt and
credit given for the buyer;s secured claim. Marcal gave up hope
of reorganizing in October when it was unable to work out
financing for a plan that was intended to pay unsecured creditors
up to 52 percent. The manufacturer of toilet paper, kitchen
towels, napkins and facial tissue filed under Chapter 11 in
November 2006, listing assets of $178.6 million against
$178.9 million in debt. The case is In re Marcal Paper Mills
Inc., 06-21886, U.S. Bankruptcy Court, District of New Jersey
(Newark).
The landlords for 90 stores operated by Movie Gallery Inc.
objected to the disclosure statement because they won;t know
until after voting on the plan whether the company will continue
operating their stores, shut them down, or sell them off. To read
Bloomberg coverage, click here. A disclosure statement explains a
Chapter 11 plan and theoretically gives creditors enough
information to decide whether to vote for against the proposed
reorganization. Movie Gallery, the second largest in the movie
rental business behind Blockbuster Inc., filed a reorganization
plan in December to carry out the restructuring agreed upon
before the bankruptcy filing. The plan is to reduce liabilities
by $400 million through a swap of debt for stock. The company is
intending for the plan to be approved early in the second
quarter. Using the names Movie Gallery, Hollywood Video, and Game
Crazy, Dothan, Alabama-based Movie Gallery currently has 3,640
stores in all 50 states. The petition listed assets of
$892 million against debt totaling $1.4 billion. The case is In
re Movie Gallery Inc., 07-33849, U.S. Bankruptcy Court, Eastern
District Virginia (Richmond).
The Chapter 11 cases of 75 U.K. subsidiaries of Federal-
Mogul Corp. were dismissed as part of the housekeeping details
surrounding the formal emergence from a six-year Chapter 11
reorganization on Dec. 27. The units were also in administration
proceedings in the High Court of Justice in London, the
equivalent of a reorganization in the U.S. Fourteen of the U.K.
subsidiaries completed their reorganizations in the London court
at the end of 2006. The other 61 were inactive or had no assets
or creditors. The reorganization plan created a trust to pay
asbestos claims while giving control to Carl Icahn. The 157
Federal-Mogul companies began their bankruptcy court
reorganization in October 2001 to deal with more than 500,000
asbestos claims. The Southfield, Michigan-based manufacturer and
distributor of engine, transmission, steering and suspension
parts had $7.2 billion in assets in 2006. The case is In re
Federal-Mogul Global Inc., 01-10578, U.S. Bankruptcy Court,
District of Delaware (Wilmington).
NetBank Inc., the parent of the first exclusively Internet
bank in the U.S., is asking for a 30-day extension of the
exclusive right to file a plan. The new deadline would be Feb.
25. NetBank says the Federal Deposit Insurance Corp. has taken
control of most of the books and records while the U.S.
Securities and Exchange Commission and the Labor Department are
conducting investigations. NetBank;s schedules filed in October
listed assets of $5.7 million and $35.2 million in liabilities.
The company filed under Chapter 11 in September after the
subsidiary NetBank became the first savings-and-loan failure in
three years when it was taken over and put into receivership by
the FDIC. The savings-and-loan subsidiary had $2.5 billion in
assets and $2.3 billion in total deposits as of June 30,
according to the FDIC. The case is In re NetBank Inc., 07-04295,
U.S. Bankruptcy Court, Middle District Florida (Jacksonville).
The reorganization plan of Enesco Group Inc., a designer,
manufacturer and marketer of home and garden decor products and
giftware, is now on the bankruptcy court;s Jan. 30 calendar for a
confirmation hearing. The first attempt to gain plan approval was
Nov. 28. Using proceeds from a settlement with lenders, the plan
is intended initially to pay 27 percent of unsecured creditors;
claims, with the possibility of more after resolution of a Hong
Kong tax-refund claim. Enesco sold its assets last February to
Tinicum Capital Partners II LP after a January 2007 Chapter 11
filing. Operating in the U.S., Europe, and Canada, Enesco filed
after the bank cut off credit and dishonored checks. The petition
listed assets of $155 million against debt totaling $108 million.
The case is In re Enesco Group Inc., 07-00565, U.S. Bankruptcy
Court, Northern District Illinois (Chicago).
Contrary to the impression arising from the refusal by
bankruptcy judges in New York who so far haven;t recognized the
primacy of insolvency proceedings in the Cayman Islands for two
Bear Stearns Cos. hedge funds and a third hedge fund named Basis
Yield Alpha Fund (Master), the Manhattan courts usually do
recognize bankruptcies abroad. An example is Highlands Insurance
Company Ltd. U.K., whose administration proceeding in the U.K.
was recognized yesterday as a “foreign main proceeding.;;
Highlands was an insurer that wrote its last policy in 1994. It
was a subsidiary of Highlands Group Inc., a company in Chapter 11
in the U.S. Recognition as “foreign main;; allows the U.K. court
to lead the liquidation and distribution of assets. The case is
In re Highlands Insurance Co. 07-13970, U.S. Bankruptcy Court,
Southern District of New York (Manhattan).
Downgrade
CSK, Auto-Parts Retailer, Downgraded Second Times in Three Months
CSK Auto Inc., the country;s second-largest auto parts
retailer, received a second downgrade in less than three months
from Standard %26amp; Poor;s. The new corporate and senior unsecured
ratings are both one notch lower at B- and CCC.
S%26amp;P cited “third-quarter results that were meaningfully
weaker than expected due to continued declines in same-store
sales;; and said a loan agreement will “likely;; need covenant
amendments in the second half.
On the plus side, S%26amp;P predicts “positive free operating
cash flow in 2008.;;
CSK hired an investment banker to explore selling assets,
raising new capital, or structuring a “business combination.;;
The Phoenix-based company has more than half its stores in
California and Arizona. They operate under the names Checker Auto
Parts, Schuck;s Auto Supply and Kragen Auto Parts. CSK competes
with AutoZone Inc.
New Filing
Homebuilder Maryland Developments Files in Greenbelt
A Maryland and Virginia homebuilder named Maryland
Development Co. filed under Chapter 11 on Jan. 22 in Greenbelt,
Maryland, saying assets and debt are both less than $50 million.
To read Bloomberg coverage, click here.
The case is In re Maryland Development Co. LLC, 08-10938,
U.S. Bankruptcy Court, District of Maryland (Greenbelt).
Advance Sheets
Sale Proceeds Exempt When Home Sold After Bankruptcy
If a home is exempt from creditors; claims under state law,
the proceeds from sale of the home after bankruptcy remain
exempt, the 1st U.S. Circuit Court of Appeals ruled Jan. 22.
The debtor filed in Chapter 7 for protection from a $190,000
judgment. The bankruptcy judge ruled that the debt was procured
by fraud and wasn;t voided by the bankruptcy.
Although the debt wasn;t voided, the bankruptcy judge
removed a lien on the bankrupt;s home because the value of the
home was within the exemption under Massachusetts law.
After bankruptcy the debtor sold the home and moved to
Florida. The bankruptcy judge and the district judge both said
the sale proceeds remained free from the claim of the judgment
creditor even though the judgment survived the bankruptcy. The
appeals court agreed, saying the proceeds retain “the exempt
status of the home itself;; under the “plain language;; of the
bankruptcy statute.
The appeals court said the result was no different even
though the bankrupt was “a dishonest debtor.;;
The appeal is Pasquina v. Cunningham (In re Cunningham), 06-
2786, U.S. Court of Appeals for the 1st Circuit.
To contact the reporter on this story:
Bill Rochelle in New York at
