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March 10, 2008
Champ Car Owners File for Bankruptcy
The owners of the Champ Car World Series have filed for chapter 11 bankruptcy just two weeks after agreeing to an open-wheel unification plan with the Indy Racing League, the Associated Press reported Friday. The filing in U.S. District Court in Indianapolis, Ind., states that Champ Car has spent tens of millions of dollars in the past four years to maintain the series and that its takeover by the IRL is in the best interest of the sport. The bankruptcy filing will not affect the IRL deal, said Jeff Hokanson, a lawyer representing Champ Car. The owners say they intend to stay in business long enough to run their Toyota Grand Prix of Long Beach on April 20. Then they plan to liquidate or sell their assets to pay debts estimated at up to $10 million. Champ Car's largest creditor is the engine-maker Cosworth Inc., which is owed $1.8 million. A creditors' meeting is scheduled for April 21.
name='2'>Judge Blocks Delphi from Taking GM Loans
Auto parts supplier Delphi Corp. cannot accept more than $2 billion in loans directly from General Motors Corp., Bankruptcy Judge Robert Drain ruled Friday, but said the company could still get help from its former parent if the money came through an intermediary, the Associated Press reported Friday. Judge Drain denied Delphi's official request for GM's participation, but the ruling allows the company to relaunch its $6.1 billion exit financing package next week. Delphi is facing an April 4 deadline to get financing and close a multimillion-dollar investment deal with a group of hedge funds and investment banks led by Appaloosa Management LP that would take stock in the reorganized company. Drain noted that nothing in that contract stopped GM from offering the loans through a subsidiary as the deal between Delphi and the investors merely said the GM corporation could not offer more than $750 million in financing. GM had offered to give Delphi a $2 billion loan and take any ubsubscribed portion of another $825 million loan. Delphi lawyer Jack Butler said the loans were the lynchpin to get the total exit financing that the company needs to leave court protection. Five proposed investors led by Appaloosa objected to the loans, saying they were concerned about GM expanding its influence over Delphi, its parts subsidiary until 1999 and still its biggest supplier. Read more.
name='3'>Bankruptcy Exit Hearing Delay Granted for Interstate Bakeries
Interstate Bakeries Corp., which is in bankruptcy, has received permission to push back a hearing over the confirmation on its plan to exit bankruptcy to April 23 from March 12, the Kansas City Star reported Friday. As a result of the delay in the court hearing, the company's agreement with Silver Point Finance LLC for $400 million in exit financing will expire on March 14, an agreement that was contingent on the company having its plan confirmed by creditors by that date. The company is talking with Silver Point and others about a new financing agreement, stating that if its plan cannot be confirmed, the best alternative for creditors is for the company to be sold in whole or parts and that it would hold discussions with potential buyers concurrent with seeking approval for creditors for its reorganization plan.
name='4'>Northwest Air Settles with Machinists over Bankruptcy Claim
Northwest Airlines Corp. has reached a settlement with the union that represents its baggage handlers over a $10 million claim related to worker grievances filed in the company's bankruptcy case, Bloomberg News reported today. Under the agreement, the International Association of Machinists and Aerospace Workers will get a $3 million unsecured claim against Eagan, Minn.-based Northwest and a $1 million administrative claim under its reorganization plan. 'It will allow Northwest to resolve with finality the grievances in a manner acceptable to the IAM and beneficial to Northwest's estate,' the airline said in papers filed this past week in U.S. Bankruptcy Court in New York. The deal resolves all the grievances filed by the union's workersÑapproximately 11,000 employeesÑbefore the airline filed for bankruptcy. The company has asked for a hearing on March 20 before U.S. Bankruptcy Judge Allan Gropper in New York to seek approval of the settlement. Read more.
name='5'>Quebecor Fails to Reach Accord on $1 Billion Bankruptcy Loan
Quebecor World (USA) Inc., the bankrupt printer of Time and Cosmopolitan magazines, failed to negotiate new terms for a $1 billion loan needed to finance operations in bankruptcy, Boomberg News reported on Friday. U.S. Bankruptcy Judge James Peck in Manhattan said today he would give Quebecor another 30 days before hearing its request for the debtor-in-possession loan. Quebecor, which filed for bankruptcy in both Canada and the United States on Jan. 21, won interim approval Jan. 23 to borrow $750 million under the loan, made by a group of investors through lead arrangers Credit Suisse Group and Morgan Stanley. Quebecor's noteholders and unsecured creditors said they wanted the loan revised because its original draft gives the lenders too much power as well as undetermined fees. The lenders said the agreement was the best possible arrangement amid tightening credit markets. The case is In re Quebecor World (USA) Inc., 08-10152, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
A&B Bankruptcy Trustee Blocks Carrollton's Move to Recoup Cash
The trustee in the A&B Check Cashing bankruptcy case has objected to a $5 million claim against the defunct check casher by Carrollton Bank, the Baltimore Business Journal reported Friday. A&B filed for chapter 11 bankruptcy and co-owner Alec Satisky committed suicide in June 2006, as the company faced allegations of check-kiting from local banks. Carrollton Bank claimed it lost $5 million from A&B's alleged fraud. But Zvi Guttman, a court-appointed trustee overseeing the liquidation of A&B, said Baltimore-based Carrollton is not entitled to the $5 million and that he plans to file a lawsuit in bankruptcy court to recover the money. Read more (subscription required).
name='7'>Boy Band Mogul Pearlman Pleads Guilty in Bankruptcy Proceeding
Lou Pearlman, one-time architect of acts the Backstreet Boys and 'N Sync, pleaded guilty Thursday to federal charges of conspiracy, money laundering and making false statements during a bankruptcy proceeding, the Associated Press reported Friday. The plea was the result of a lengthy federal probe alleging he bilked investors and banks out of more than $300 million. Pearlman's Transcontinental Airlines Inc. didn't have 41 airplanes, as he represented to investors, but two. He also admitted that he did not have a German investment partner with a $50 million line of bailout capital. 'I'm accepting full responsibility,' Pearlman said in a change-of-plea hearing. He will be sentenced May 21, and faces up to 25 years in prison and a $1 million fine. Pearlman acknowledged setting up a fake accounting firm to create business documents and tax returns for himself and his companies. He also admitted using the signature of a deceased former associate, Harry Milner, to push off anyone seeking repayment. Read more.
name='8'>Homebuilder Tousa Wins Bankruptcy Court OK to Sell Interest in Florida Property
Florida homebuilder Tousa Inc. won bankruptcy court approval to sell a note it holds on a piece of property in one of Orlando's most popular tourist areas for $13.5 million, the Associated Press reported Friday. The U.S. Bankruptcy Court in Fort Lauderdale, Fla., on Thursday said that Tousa can sell the note to Florida company PRN Real Estate & Investments Ltd. In court papers filed last month, Tousa said that by selling the note it would avoid having to initiate a lengthy foreclosure action against the note's issuer. The company said PRN's $13.5 million bid was its best option in spite of a $2.8 million shortfall between the offer and the note's face value of $16.3 million. In early 2005, a Tousa unit purchased about 59 acres on a 14.5-mile stretch of International Drive, Orlando's main tourist strip, for $28 million. Tousa, which builds single-family homes and developments, said it immediately sought to sell its interest in the commercial land. Tousa sold off 18 acres for about $7 million. The company sought chapter 11 protection on Jan. 29. Read more.
name='9'>Ohio Nursing Home Files for Bankruptcy
Darlington Nursing & Rehabilitation Center Ltd., an established nursing home in West Toledo, Ohio, has filed for bankruptcy protection from creditors, the Toledo Blade reported Saturday. The facility listed between $1 million and $10 million in debts in its chapter 11 petition filed this week in the U.S. Bankruptcy Court in Toledo. The largest debt is $425,021 owed to Medicaid. The home was owned for many years by Jewish Senior Services of Toledo, but recently has been operated by Royal Manor Management Inc. of suburban Cleveland.
name='10'>New York Hospital Emerges from Bankruptcy
After nearly three years, New Parkway Hospital in Queens, N.Y., announced last week it had officially emerged from bankruptcy, according to the Queens (N.Y.) Chronicle yesterday. Dr. Robert Aquino, chief executive and president of the hospital, had purchased the ailing hospital in June 2005 in hopes of saving it, but was forced to file for bankruptcy on the hospital's behalf after a month, unable to repay the millions of dollars of debt owed to emergency medical workers and the IRS. Fred Stewart, vice president of new business development for the hospital, cited reduced Òlength-of-stayÓ and improved Òpatient outcomesÓ as some of the reasons for the turnaround. Read more.
International
name='11'>Britain's Treasury Aims to Reduce Bankruptcy Stigma for Entrpreneurs
Measures to remove the stigma of bankruptcy will be announced in next week's Budget in an attempt to encourage more entrepreneurs to start businesses, U.K.'s The Daily Telegraph reported on Saturday. It will no longer be necessary to advertise in local newspapers that you have gone bankrupt, ministers say. At a time when the Treasury has been warning of profligate lending and 'easy money,' the move may be seen by some as encouraging recklessness. The fear of failure has caused Britain to lag behind the United States in terms of encouraging entrepreneurs, officials say. The Enterprise White Paper will be announced alongside the Budget on Wednesday and will look at how business can get better 'access to finance' at a time of tightening credit. Currently, the courts have to inform a number local organisations of a bankruptcy, and it is advertised in the London Gazette and local newspapers; this practice will be discontinued under the proposals. Read more.
name='12'>Alitalia Deal Jeopardized by Politics, Dwindling Cash
Just as the perennial money-losing carrier Alitalia SpA is poised to seal a merger deal with Air France-KLM SA, political turbulence threatens to scuttle it all, the Wall Street Journal reported Friday. The fate of Alitalia has emerged as one of the major issues in Italy's national elections, which are set for April 13 and 14. The center-right, headed by former Prime Minister Silvio Berlusconi, appears set on keeping the carrier in Italian hands, while the center-left, led by former Rome Mayor Walter Veltroni, looks more inclined to close the deal with Air France-KLM. The problem for Alitalia is that it doesn't have much time. The carrier disclosed Feb. 29 that its cash reserves were down to Û282 million, or about $430 million, at the end of January, a 23 percent drop from a month earlier, sending its shares to a record low when markets reopened this week. The Italian state owns 49.9 percent of Alitalia, but political uncertainty makes it difficult to finalize a deal to sell the carrier before the electionsÑand by that time, Alitalia could already be out of cash. Air France-KLM is expected to make a final binding offer on March 14. Read more.