Tousa Friedman#39;s Interstate Bakeries Bankruptcy (Update2)
Tousa, Friedman;s, Interstate Bakeries: Bankruptcy (Update2)
By Bill Rochelle
Jan. 29 (Bloomberg) — Tousa Inc., a homebuilder based in
Hollywood, Florida, filed a Chapter 11 petition in Fort
Lauderdale this morning, along with three affiliates and a plan
for exchanging bonds and unsecured debt for all the new stock.
Tousa said in a statement that it has support from more than
a majority of senior noteholders on a restructuring agreement
calling for an exchange of all unsecured senior notes and other
unsecured claims for “substantially all;; of the new stock.
Noteholders and unsecured creditors also would receive anything
collected by a litigation trust.
The petition listed assets of $2.28 billion against debt
totaling $1.77 billion.
The reorganization will be financed with $150 million from
Citigroup Global Markets Inc. The company says it intends to
continue building and delivering homes without interruption.
This morning;s statement said subordinated noteholders “may
receive;; a portion of the litigation trust and warrants
“subject to further negotiation.;;
This month, Tousa missed interest payments on the
$200 million in 7.5 percent senior subordinated notes of 2015,
the $300 million in 9 percent senior notes of 2010 and the
$185 million in 10.375 subordinated notes due 2012. Tousa was
delisted from the New York Stock Exchange in November.
The company said in November it was negotiating with a
bondholder group over a restructuring, with survival dependent on
“exchanging a large portion of the company;s outstanding
indebtedness for equity.;;
Tousa is 70 percent owned by Technical Olympic SA. Tousa;s
subsidiaries include Newmark Homes LP. Tousa;s revenue for the
first nine months of 2007 was $1.619 billion.
Tousa was unchanged yesterday at 14 cents a share in over-
the-counter trading.
The case is In re Tousa Inc., 08-10928, U.S. Bankruptcy
Court, Southern District Florida (Fort Lauderdale).
Other New Filings
Jewelers Friedman;s and Crescent Return to Chapter 11
Friedman;s Inc. and affiliate Crescent Jewelers, two
recently reorganized retailers, are back in Chapter 11 with their
473 jewelry stores. The Crescent petition says the two companies
together have assets of $245 million and debt totaling
$172 million.
Creditors filed an involuntary Chapter 7 petition against
Friedman;s on Jan. 22. Three days later Friedman;s consented to
having a reorganization in Chapter 11 and at the same time put
its affiliate Crescent into Chapter 11, also in Delaware.
The reorganization will be supported by a $75 million
revolving credit supplied by the pre-bankruptcy first-lien lender
CIT Group/Business Credit Inc. and a $17.2 million term loan from
the second-lien pre-bankruptcy lender Harbinger Capital Partners
Master Fund I Ltd.
A court filing says that debt on the filing date included
$57.9 million on the first-lien loan, $10.3 million on the second
lien, and $27 million on an unsecured subordinated loan made by
shareholders to enable the Crescent acquisition.
Addison, Texas-based Friedman;s completed a reorganization
in November 2005 by confirming a Chapter 11 plan giving Harbert
Distressed Investment Master Fund Ltd. all the stock in return
for a $25 million cash infusion.
In July 2006, Crescent, the largest jewelry retailer in
California, completed its own Chapter 11 reorganization plan
under which Friedman;s and Harbinger Capital Partners Master Fund
I Ltd. took all the new stock in exchange for their claims and
capital investment.
Friedman;s and Crescent together have 3,500 employees.
Bradley Stinn, the former chief executive of Friedman;s, was
indicted in March for conspiracy to commit securities fraud, wire
fraud and mail fraud. Federal prosecutors in Brooklyn, New York,
said Stinn misled investors about Friedman;s ability to collect
payments from customers purchasing jewelry on credit.
The cases are In re Friedman;s Inc., 08-10161, and In re
Crescent Jewelers, No. 08-10179, both in the U.S. Bankruptcy
Court, District of Delaware (Wilmington).
Fire Truck Maker American LaFrance Files in Delaware
American LaFrance LLC, a manufacturer of fire trucks and
other emergency vehicles, filed for bankruptcy reorganization
yesterday in Delaware.
A court filing says secured debt is $150 million while
unsecured claims are $50 million. Last year the company lost
$56 million on $195 million in sales.
A court filing discloses that the company has a $50 million
revolving credit from its existing lenders to support operations
while it continues efforts “to market the company and its assets
for sale and investment.;; The filing says current revenue
generates “insufficient cash to support ongoing operations.;;
The Summerville, South Carolina-based company was spun off
in December 2005 from Freightliner LLC, a unit of Daimler AG. The
company blames its problems in part on difficulties in
transitioning to a stand-alone business and moving headquarters
to a new location.
Production didn;t resume as scheduled earlier this month
after a holiday shutdown. A court filing says production has been
suspended until the end of February “to complete the physical
inventory and to complete a business plan based upon the
inventory count.;; The company says it may have claims against
Freightliner.
The company has eight plants and two dealerships employing
nearly 1,000 workers.
The case is In re American LaFrance LLC, 08-10178, U.S.
Bankruptcy Court, District of Delaware (Wilmington).
Florida Developer Pilar Home Files in Chapter 11
Pilar Home Developers Inc., the developer of a housing
project in Hendry County, Florida, near Lake Okeechobee, filed a
Chapter 11 petition yesterday in Fort Myers.
The petition listed assets of $9 million and debt almost
reaching $17 million.
The case is In re Pilar Home Developers Inc., 08-01012, U.S.
Bankruptcy Court, Middle District Florida (Fort Myers).
Updates
Interstate Bakeries Doesn;t Predict Profit Until 2011
In advance of this afternoon;s hearing for approval of its
disclosure statement, Interstate Bakeries Corp. filed an amended
reorganization plan.
Explaining the plan, the revised disclosure statement says
that obtaining contract concessions from the Teamsters union is
an “essential contingency;; that hasn;t been satisfied because
the union says it would prefer a liquidation to accepting the
company;s offer.
The disclosure statement also says there are “questions;;
about whether the market value of the securities being given to
pre-bankruptcy bank lenders will pay them in full.
The new disclosure statement contains predictions for
operations in future years. For the fiscal year ending in May
2008, the loss is predicted to be $148 million. The projections
don;t show break-even operations until the fiscal year ended May
2010. The first substantial profit is expected to come in the
fiscal year ended May 2011 with net income of $48.7 million.
Interstate;s plan is financed with $400 million from the
lending group led by Silver Point Capital LLC. Bank debt totaling
$450 million is to swap for $250 million in second-lien debt,
$165 million in convertible secured notes, and $35 million in
Class A common stock representing 13 percent of the equity after
dilution.
Unsecured creditors with $194 million in claims are to
realize a predicted 26.1 percent recovery from receiving some of
the Class B common stock and the right to participate in an
equity-rights offering to purchase another $50 million in Class B
stock.
The Teamsters filed papers opposing approval of the
disclosure statement. They say there is no reason to send the
plan out for a vote by creditors because it can;t be confirmed,
given the union;s opposition.
Ron Burkle;s Yucaipa Cos. LLC and the Teamsters union last
year said they intend to offer their own reorganization proposal.
Their statement was made before Mexico City-based bakery operator
Grupo Bimbo SAB de CV told the Mexico stock exchange last month
it was “not in a position;; to join the bid for Interstate.
Yucaipa and the union didn;t file a competing proposal,
leaving Interstate;s disclosure statement and plan as the only
reorganization coming to the bankruptcy court today for
preliminary approval.
Then the largest wholesale baker in the U.S., Interstate
filed under Chapter 11 in September 2004. Brand names include
Wonder, Hostess, Merita, Dolly Madison, Drake;s and Butternut.
The company currently has 41 bakeries, 633 distribution centers,
and 730 thrift stores.
The case is In re Interstate Bakeries Corp., 04-45814, U.S.
Bankruptcy Court, Western District of Missouri (Kansas City).
Hotel Zoso to Complete Plan Paying Secured Creditor in Full
The former owner of the 163-room Hotel Zoso in Palm Springs,
California, returns to bankruptcy court in Las Vegas on Feb. 4
for a confirmation hearing to approve a Chapter 11 plan paying
secured creditors in full.
The hotel was sold in November for $25.1 million to American
Property Hospitality Management LLC. The secured creditor claims
it;s owed $24.4 million while the company says the claim is only
$19.1 million.
If the secured claim comes in at the lower amount, unsecured
creditors with $27 million in claims could receive as much as
30 percent if other contingencies work out in their favor. If the
secured claim is at the higher amount, unsecured creditors will
see hardly anything at all, according to the disclosure statement
explaining the plan.
The hotel was owned by USA Investors VI LLC and operated by
the Chapter 11 trustee for affiliate USA Investment Partners LLC.
The bankruptcy judge appointed the trustee two days after
creditors filed an April 4 involuntary petition for the
affiliate. The interim trustee put USA Investors VI LLC into its
own Chapter 11 in late April. The trustee filed the liquidating
plan in October.
The creditors claimed that the owners, Joseph D. Milanowski
and Thomas A. Hantges, had taken money out of USA Investment
Partners in the form of inappropriate loans.
The cases are In re USA Investment Partners LLC, 07-11821,
and In re USA Investors VI LLC, 07-12377, both in U.S. Bankruptcy
Court, District of Nevada (Las Vegas).
Okun Wants Turnover Agreement Voided So He Can Retain Cars
Edward Okun, the former chief executive of 1031 Tax Group
LLC, wants the bankruptcy court to let him out of an agreement he
made in October to turn most of his property over to creditors.
The trustee for the company sued Okun earlier this month,
saying he refused to turn over a Bentley automobile, a Rolls-
Royce, a Porche 911, a Lamborghini and other property together
worth more than $600,000.
Okun responded last week by asking the bankruptcy judge in
Manhattan to let him out of the agreement. He says the trustee
failed to carry out the October agreement by not giving him
protection from a lawsuit by a creditor attempting to seize
properties Okun was allowed to keep.
Okun was permitted to keep a home in Florida, another in New
Hampshire, and two cars.
Separately, the trustee for 1031 found a buyer willing to
pay $400,000 for Okun;s 1978 Lear 25D private jet aircraft. The
hearing for approval of the sale of the aircraft is set for Feb.
19 if there;s an objection.
The company was a “qualified intermediary;; helping
individuals avoid capital gains taxes by holding proceeds from
the sale of property until a replacement property was purchased.
Customers contend Okun caused 1031 improperly to loan
$130 million to other companies he controlled.
The Chapter 11 filing in May by Richmond, Virginia-based
1031 listed assets of $154.6 million.
The case is In re The 1031 Tax Group LLC, 07-11448, U.S.
Bankruptcy Court, Southern District New York (Manhattan).
Tersigni Wants Outside Lawyer;s Report Kept Secret
Before L. Tersigni Consulting CPA PC filed in Chapter 11,
the former asbestos claims consultant hired an outside law firm
to investigate whether the firm;s deceased principal inflated his
billings in major Chapter 11 reorganizations where he had been
retained.
The bankruptcy judge in Bridgeport, Connecticut, this month
called for the appointment of an examiner to investigate the
billing practices and whether there was any “fraud, dishonest,
incompetence, or gross mismanagement.;; Although the firm has no
objection to giving the outside lawyer;s written report to the
examiner, the firm wants it never disclosed to the public.
The U.S. Trustee opposes keeping the lawyer;s report
confidential. The U.S. Trustee, an arm of the federal Justice
Department, says it should be briefly kept private while the
parties negotiate what to keep confidential under the attorney-
client privilege.
The examiner has a $100,000 budget.
The firm;s principal, Loreto Tersigni, died last May.
Information from a company employee led to an investigation into
whether Tersigni was inflating his bills in major Chapter 11
reorganizations.
The firm shut down soon after his death. The remains of the
company are being managed by Tersigni;s widow and daughter.
The case is In re L. Tersigni Consulting CPA PC, 07-50702,
U.S. Bankruptcy Court, District of Connecticut (Bridgeport).
Carburetor Maker Champion Auto Liquidates in Chapter 7
After 60 years in the business of remanufacturing
carburetors, Champion Auto Parts Inc. will be liquidated by a
trustee in Chapter 7.
After filing to reorganize in October in U.S. Bankruptcy
Court in Texarkana, Arkansas, Champion was facing a request by
the secured lender for permission to foreclose. The company threw
in the towel and agreed before yesterday;s hearing to switch the
case from Chapter 11 to a liquidation in Chapter 7.
Champion previously said the secured lender, PNC Bank NA,
was unwilling to finance the Chapter 11 effort and precipitated
the filing by cutting off cash when the company went “out of
formula.;;
The petition listed assets of $26.4 million against debt
totaling $25.3 million.
Champion Auto Parts isn;t connected with Champion Spark
Plugs Co., a unit of recently reorganized Federal-Mogul Corp.
The case is In re Champion Auto Parts Inc., 07-73253, U.S.
Bankruptcy Court, Western District Arkansas (Texarkana).
Filing Possible
Tekni-Plex Doesn;t Cure Within 30-Day Grace Period
Tekni-Plex Inc., a manufacturer of packing materials for
consumer products, health care and food, didn;t make a Dec. 17
$20.5 million interest payment on 12.75 percent senior
subordinated notes due 2010 within the 30-day grace period.
The company said in a statement it has a forbearance
agreement good through Feb. 14 with 91 percent of the
subordinated noteholders and with 67 percent of the holders of
the 8.75 percent senior secured notes of 2013. Tekni-Plex
previously worked out a waiver from lenders on the $75 million
revolving credit.
The Coppell, Texas-based company hired a restructuring
officer.
Before the payment default Moody;s Investors Service said
the company was hurt by rising raw material costs and loss of
market share for garden hoses.
Briefly Noted
Calpine Corp., the power producer whose Chapter 11 plan was
approved in a Dec. 19 confirmation order, reported a $35 million
gross profit in November. After $118 million in interest expense
and $144 million in “reorganization items,;; the net loss for
the month was $220 million. The bankruptcy judge turned down
attempts by disgruntled stockholders to reconsider approving the
plan or prevent Calpine from carrying out the plan pending an
appeal. Calpine;s plan pays creditors with the reorganized
company;s stock and gives warrants expiring in August to existing
stockholders. The stock closed yesterday at $16.30, up 40 cents
in when-issued trading on the New York Stock Exchange. The high
and low closing prices since the stock began trading on a when-
issued basis are $18.50 and $15. Calpine;s Chapter 11 filing was
the largest in 2005 measured by assets. The case is In re Calpine
Corp., 05-60200, U.S. Bankruptcy Court, Southern District of New
York (Manhattan).
MBS Management Services Inc., the multifamily real estate
owner and manager that filed under Chapter 11 in November, will
sell the Northcastle Apartment project in Austin, Texas, for
$9.6 million unless someone makes a higher bid at auction. If the
sale doesn;t close, the secured creditor has been authorized by
the U.S. Bankruptcy Court in New Orleans to foreclose the project
on March 4. The case is In re MBS Management Services Inc.,
07-12151, U.S. Bankruptcy Court, Eastern District of Louisiana
(New Orleans).
Fieldstone Mortgage Co. is encountering opposition from six
states and a trustee under a servicing agreement who don;t want
loan documents destroyed. The state of New Hampshire says that
destroying loan documents would violate state laws requiring the
documents be maintained. Fieldstone;s parent is Credit-Based
Asset Servicing and Securitization LLC. Fieldstone filed under
Chapter 11 in November. It stopped making loans in August after
financing dried up. Columbia, Maryland-based Fieldstone was the
originator of $5.5 billion in residential mortgages in 2006. The
case is in re Fieldstone Mortgage Co., 07-21814, U.S. Bankruptcy
Court, District of Maryland (Baltimore).
Downgrades
Georgia Gulf Downgraded Four Times in Less than 17 Months
For a fourth time in less than 17 months, Standard %26amp; Poor;s
lowered the rating of Georgia Gulf Corp., a manufacturer of
chlorovinyl products, aromatic chemicals, and PVC products. The
corporate rating is one peg lower at B-.
S%26amp;P attributed the action to “ongoing weakness in the
domestic economy and in the development of new residential
construction.;;
Georgia Gulf acquired Royal Group Technologies Ltd. in a
$1.6 billion debt-financed transaction in 2006.
S%26amp;P calculates that Georgia Gulf has $1.7 billion in debt
after adjustment for capitalized leases and accounts receivable
securitizations.
Atlanta-based Georgia Gulf generates more than $3 billion in
annual revenue, S%26amp;P says.
Wireless Provider Cleveland Unlimited Late on Financials
Cleveland Unlimited Inc., a wireless telecommunications
provider in Ohio, didn;t ask bondholders for a waiver from the
failure to file financial statements for the quarter ended Sept.
30, says Moodys; Investors Service.
Moody;s lowered the corporate and secured bond ratings by
two notches to Caa2.
Revenue for the 12 months ended June 30 was $130 million.
Statistics
New Home Sales Continue to Plunge at a Record-Setting Pace
New homes sales fell 26 percent in 2007, the largest drop
since records were first kept in 1963, the U.S. Commerce
Department reported yesterday.
Sales of new homes in December dropped 4.7 percent, marking
a new 12-year low. Economists surveyed by Bloomberg were
expecting December sales to be flat.
Homes were selling in December at an annual pace of 604,000.
At the current selling rate, the inventory of unsold homes
would take 9.6 months to work off, the most in more than 20
years.
To read Bloomberg coverage, click here.
To contact the reporter on this story:
Bill Rochelle in New York at
