March 24, 2010

Extended Stay to Seek Approval for New Plan Backed by Starwood 

Extended Stay Inc. will head to court on April 8 to request court approval to enter into an investment agreement with Starwood Capital Group that is the centerpiece of its latest reorganization plan, the Deal Pipeline reported yesterday. The bankrupt hotel operator was originally scheduled in court on April 8 to request court approval of the disclosure statement outlining a plan backed by Centerbridge Partners LP and Paulson & Co. However, Extended Stay terminated the agreement with Centerbridge and Paulson on March 15, deciding instead to move forward with a proposal from Starwood, TPG Capital and Five Mile Capital Partners centered upon a $905 million equity investment. Under the Starwood-led deal, the group would invest $450 million for 42.85 percent of the debtor's new common stock. The investor would also backstop a $200 million rights offering open to certain holders of mortgage debt and commit to purchase up to $255.4 million in mortgage debt from holders that did not wish to receive the remainder of new shares. Read more. (Subscription required.)

Lehman Examiner Urges Court to Overrule CME Objection

The court-appointed examiner of the Lehman Brothers Holdings Inc. collapse fired back yesterday at CME Group Inc., arguing the identity of firms that bid on portions of the failed bank's futures portfolio must be disclosed, Dow Jones Daily Bankruptcy Review reported yesterday. The legal team for Anton Valukas told court officials the public has a right to know which firms participated in what they viewed as a privately arranged fire sale of Lehman positions held at CME, resulting in an estimated $1.2 billion loss to the doomed investment bank. At issue are three documents that remain the last obstacle to the full publication of the Lehman examiner's report, the bulk of which was released earlier this month in a 2,200-page nine-volume document. CME, the world's largest futures exchange, is fighting to keep confidential the identity of six firms that bid to buy chunks of Lehman's futures book held at CME in the days following its historic 2008 bankruptcy filing. More than $2 billion in Lehman positions were sold on Sept. 18, 2008 to three firms, spanning energy, fixed income and equity-linked futures holdings, as CME worked to wind down Lehman's portfolio.

Feinberg Caps Pay at AIG, Other Companies

U.S. pay czar Kenneth Feinberg said yesterday that his $500,000 restriction on cash salaries will cover 82 percent of the 119 top executives at the five companies he oversees, the Wall Street Journal reported today. He made the announcement as part of his review of 2010 pay packages for the 'top 25' executives at the companies, including senior executives and the next 20 most highly compensated employees. Some of those employees have since left the firms, which in addition to AIG include General Motors Co., Chrysler Financial, Chrysler Group LLC and GMAC Inc. Feinberg didn't give AIG everything it sought. AIG asked that 10 of its top 25 get more than $500,000 cash salary, an exception permitted under Feinberg's rules for 'good cause,' but Feinberg agreed to five. Next month, Feinberg plans to release compensation restrictions for the 26th to 100th highest-paid employees at the five firms. Read more. (Subscription required.)

South Bay Expressway Operators Seek Chapter 11 Protection

The developers and operators of the South Bay Expressway, which connects southern California and Mexico, have filed for chapter 11 protection after the subprime mortgage crisis halted development along the nine-mile express toll road, leading to declines in traffic, Dow Jones Daily Bankruptcy Review reported today. South Bay Expressway LP and California Transportation Ventures Inc. on Monday filed for chapter 11 aiming to reduce their $570 million debt load as well as to address the substantial litigation on which they've had to spend millions of dollars over the past few years, but no longer have the resources to continue funding. South Bay and CTV said they're hoping to work with their key stakeholders, including public and private lenders owed $510 million, to draft a 'fully consensual' restructuring plan. The companies added that they expect their bankruptcy to have 'little to no effect' on their trade creditors.

Cooper-Standard, Bondholders Reach Equity Deal

The parent company of Cooper-Standard Automotive Inc. has reached a deal with seven large funds that hold much of its bond debt to take new equity in the company instead of cash repayments, the Associated Press reported yesterday. The deal clears the way for the company to offer $355 million in new common shares for the bondholders and to and repay other debts with cash as part of a new reorganization plan. The parent company, Cooper-Standard Holdings Inc., filed for chapter 11 protection in August in an effort to reduce its debt amid a historic slowdown in car and truck sales. The company, now privately held, makes fluid handling, body sealing and other systems for automakers. It is based in Novi, Mich., near Detroit. Under the deal, the seven funds that hold a majority of Cooper Standard's 7 percent senior notes due in 2012 and a substantial majority of the 8 3/8 percent senior subordinated notes due in 2014 will get stock instead of cash. Read more.

Visteon Moves to Sell Plants to Johnson Controls for $17 Million

Visteon Corp. sought court approval yesterday to sell a pair of plants to Johnson Controls for $17 million, Dow Jones Daily Bankruptcy Review reported yesterday. The parts maker said the sale was part of an arrangement allowing it to exit unprofitable lines of production for Chrysler Group LLC. It is seeking bankruptcy court approval to go through with the sale. If the money coming from the deal doesn't cover Visteon's costs of exiting the plants, Chrysler will cover the rest of the wind-down, court papers say.

Judge Allows Tribune to Drop Bonus Motions

Bankruptcy Judge Kevin Carey ruled yesterday that the Tribune Co. will be allowed to withdraw a motion seeking court approval of two management bonus plans worth more than $20 million and instead include them in its reorganization plan, the Associated Press reported yesterday. The U.S. Trustee and a union for employees of The Baltimore Sun have fought against the bonus plans, which were the subject of extensive court filings and oral arguments. In January, Judge Carey approved a separate bonus plan allowing bonuses of up to $45 million for hundreds of Tribune Co. managers, including its top 10 executives. However, Judge Carey had yet to rule on two other bonus plans, one authorizing up to $10.6 million to 21 managers, including the top 10 executives, and the other allowing bonuses of up to $9.3 million for 23 people, including six of the top 10 executives. Read more.

Auction Called off for Magna's Maryland Race Tracks

A bankruptcy auction of the Laurel Park and Pimlico horse tracks has been called off following a deal in which Magna Entertainment Corp.'s parent company will acquire its Maryland assets, the Associated Press reported yesterday. The assets of the Maryland Jockey Club, which include the Preakness, the second race in horse racing's Triple Crown, had been scheduled to be sold at an auction on Thursday. However, attorneys for Magna and its unsecured creditors' committee told Bankruptcy Judge Mary Walrath that, despite their best efforts, they were unable to obtain a stalking-horse bid sufficient to ensure a successful auction. Read more.

Foreclosure Auction for W Hotel in NYC Canceled

A foreclosure auction for the 270-room W New York-Union Square was canceled on Tuesday after the owner of the luxury hotel filed for chapter 11 bankruptcy protection, Reuters reported yesterday. DekaBank Deutsche Girozentrale, a senior lender holding a $60 million loan on the property, had planned to foreclose on today at the offices of the law firm Sonnenschein Nath & Rosenthal LLP. Plans for the auction were derailed after Hotels Union Square Mezz 1 LLC, the hotel's owner, filed for chapter 11 protection from creditors yesterday. LEM Mezzanine, a sister company to Lubert-Adler Real Estate Funds, created the Hotels Union Square Mezz entity. LEM, which is also a junior lender in the hotel, wrested control of the property for just $2 million during a foreclosure auction in December. In November, a notice of default was sent to mezzanine lenders as the property grappled with lower room rates and higher property taxes, according to Realpoint LLC. The case is In re Hotels Union Square Mezz 1 LLC, U.S. Bankruptcy Court, District of Delaware, No. 10-10971. Read more.

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