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September 20, 2002
House Conservatives Developing Alternative Bankruptcy
Measure
A group of social conservatives in the House has been working on an
alternative bankruptcy reform bill as a means of dealing with the
impasse surrounding a pending conference report, CongressDaily
reported. The bill, as described Thursday by Rep. Joseph Pitts (R-Pa.),
would mirror the conference report -- but would alter controversial
language he and other anti-abortion Republicans believe would single out
abortion clinic protesters for unfair treatment in bankruptcy.
House Republican leaders have signaled they will not seek to bring
the conference report to the floor over the objections of anti-abortion
Republicans -- but also have acknowledged that bringing up a new bill is
not a viable option, given the limited time left in the session.
Reintroducing the measure would remove its privileged status as a
conference report, making it a fully amendable vehicle in the Senate.
That means 'anybody over here could kill it,' Senate Judiciary ranking
member Orrin Hatch
(R-Utah) said in an interview last week.
Lobbyists: Securitization Items Cut From Bankruptcy Bill
Financial services lobbyists said Thursday they had convinced Sen.
Richard Durbin (D-Ill.) to remove sections from his proposed bankruptcy
bill that would threaten securitized loans, Dow Jones reported. Michael
Williams, vice president for legislative affairs at the Bond Market
Association, said the Illinois Democrat agreed to propose a substitute
bill that removes the securitization items.
'There is a lot of relief,' Williams said. The Senate Judiciary
Committee is scheduled to vote Thursday on the revised bill, aimed at
preserving corporate assets in a bankruptcy to benefit workers and
retirees. The new version strikes five sections, including one to give
bankruptcy courts the ability to seize assets placed in securitized
trusts, another financial service lobbyist said. The original version
would have given bankruptcy trustees the ability to 'recharacterize' or
seize these vehicles to distribute the funds to workers and retirees in
a bankruptcy reorganization.
The Bond Market Association, Fannie Mae, Freddie Mac and a variety of
financial services trade groups strongly objected, saying the bill would
threaten the legal underpinnings of securitized loans and repurchase
agreements.
Ala. Pension Fund Opposes Texas Pacific's US Air Bid
The Retirement Systems of Alabama, which on Wednesday submitted a
competing investment proposal to help US Airways Group Inc. exit chapter
11, says the airline shouldn't be authorized to assume its deal with
private-equity firm Texas Pacific Group or to pay the firm any more
fees, Dow Jones reported. US Airways should be authorized to select the
pension fund, not Texas Pacific, as the lead bidder to be its plan
sponsor, the pension fund said in a filing Thursday with the U.S.
Bankruptcy Court in Alexandria, Va., the newswire reported. The pension
fund also objected to competitive bid procedures that it said chills,
rather than enhances, competitive bidding. U.S. Bankruptcy Judge
Stephen S. Mitchell is scheduled to consider the procedures, as well
as the company's proposed debtor-in-possession financing arrangement, at
a hearing Sept. 26.
The pension fund, which has $25 billion in assets and owns $340
million in US Airways debt, said in court papers that the proposed bid
procedures require competing bidders to match the structure of the Texas
Pacific deal, which hasn't even been finalized yet, Dow Jones reported.
The procedures also give Texas Pacific unfair advantages, like the
opportunity to match the last bid of a competing bidder and prohibiting
US Airways from actively shopping for other bidders, the newswire
reported. In addition, the company's $500 million DIP loan arrangement
is linked to the Texas Pacific investment scheme. As reported, a
memorandum of understanding provides for Texas Pacific Group, under
certain conditions, to make a $200 million investment in the airline
upon its emergence from chapter 11, leaving it with a 38 percent stake
in the company and seats on a reconstituted US Airways board.
Rigases Don't Want Bankruptcy Court to Handle Adelphia
Suit
The Rigases want the bankruptcy court handling Adelphia Communications
Corp.'s lawsuit against them to hand the case over to a federal district
court, Dow Jones reported. In a filing on Wednesday with Manhattan's
U.S. Bankruptcy Court, which is handling both the lawsuit and Adelphia's
chapter 11 case, the Rigases said the suit alleges violations of the
Racketeer Influenced and Corrupt Organizations Act (RICO) and federal
securities laws, which aren't within the bankruptcy court's
expertise.
According to the Rigases, the district court, not the bankruptcy court,
should handle the lawsuit because the allegations will require more than
a routine application of RICO and securities fraud claims. They also say
the bankruptcy court wouldn't be able to preside over a jury trial,
which they tend to seek.
Guilford Mills Set to Emerge From Bankruptcy Protection
Guilford Mills Inc. received court approval for its reorganization plan,
clearing the way for the company to emerge from bankruptcy, Dow Jones
reported. In a press release Thursday, the company said it expects to
complete the process by Sept. 30. Guilford Mills' creditors and
shareholders have accepted the plan. The company filed a motion last
week for court approval of its $25 million exit financing agreement in
connection with its reorganization.
Under the reorganization plan, Guilford Mills' senior lenders will
own 90 percent of the company, while its existing shareholders will own
the remaining 10 percent, Dow Jones reported. Senior debt will total
about $145 million-down from $270 million before entering bankruptcy
court, the company said. The debt will consist primarily of a three-year
revolving credit facility and a three-year term loan. Guilford and 13
affiliates filed chapter 11 petitions on March 13, with the parent
company listing assets of $551 million and debts of $409 million as of
Sept. 30, 2001.
Vanguard Airlines Gets Final OK of Funding; Bid in Works
A bankruptcy court granted Vanguard Airlines Inc. final approval to
obtain limited post-petition financing from the chairman of the Hooters
restaurant chain to meet payroll and other expenses while the chairman
plans to buy the carrier's assets, Dow Jones reported. Judge Jerry W.
Venters of the U.S. Bankruptcy Court in Kansas City signed an order
Tuesday that adopted the content of an existing interim order on a final
basis. A final hearing on the matter had been slated for Thursday, but
since no entity filed an objection by Monday's deadline, Judge Venters
signed the final order.
Without the stop-gap financing and the funds that are to be made
available by Brooks, the airline said in its second interim motion that
'Vanguard would be unable to continue efforts to restart operations,
reorganize, or sell its assets.' On Aug. 14, Judge Venters initially
granted Vanguard Airlines interim authorization to borrow $50,000 a week
to cover expenses. The bankruptcy court also approved the use of cash
collateral from the carrier's pre-petition lenders. The Kansas
City-based airline shut down and filed for chapter 11 protection July
30, listing assets of $39.7 million and debts of $95.9 million as of
June 30 in its bankruptcy petition.
Graham-Field Health Gets More Time from Court to File Plan
Graham-Field Health Products Inc. has been given more time by a
bankruptcy court to develop a turnaround plan to take the company out of
chapter 11 protection, Dow Jones reported. In a Sept. 12 ruling by the
U.S. Bankruptcy Court in Wilmington, Del., the company was given until
Sept. 27 to file a plan of reorganization and up to Nov. 25 to lobby for
creditor support. The court's ruling marks the company's ninth
exclusivity extension.
Court papers said Graham-Field Health has been working with the official
committee of unsecured creditors and the company's financial adviser,
Houlihan Lokey Howard & Zukin, to prepare a comprehensive business
plan to emerge from bankruptcy. The company said it continues to
institute a turnaround program, which involves reducing costs,
redirecting the sales force and improving cash flow.
ANC Rental Wins Three-Month Extension of Cash Collateral Use
ANC Rental Corp. Thursday won an extension of its authority to use the
cash collateral of its secured lenders to fund business operations, Dow
Jones reported. The car rental company can use the cash collateral of
Lehman Brothers Inc. and Congress Financial Corp. through Dec. 15. ANC
Rental said the order signed by Judge Mary F. Walrath of the U.S.
Bankruptcy Court in Wilmington is vital to its reorganization efforts.
'Failure to obtain authorization for the continued use of cash
collateral would seriously undermine the debtors' reorganization efforts
and would be disastrous to their creditors, equity holders and
employees,' ANC Rental had said in its motion.
ANC said the most significant use of cash collateral is to finance and
purchase automobiles rented by the company. ANC said it also uses the
funds from cash collateral to pay for administrative expenses in
connection with its chapter 11 proceedings. ANC Rental owns and operates
car rental businesses under the brand names Alamo and National. The
company filed for chapter 11 bankruptcy protection on Nov. 13, 2001,
listing assets of just under $6.5 billion and debts of $5.9 billion as
of Oct. 31, 2001.
Global Crossing Seeks OK to Settle $497 Million Vendor Claims
Global Crossing Ltd. will seek court approval Monday to settle the $497
million in claims asserted by seven of its major equipment and
construction vendors, Dow Jones reported. The settlement agreements will
also save the company about $24.5 million on post-petition services that
would have otherwise been payable to the vendors in 2002, according to
recently obtained court papers.
A hearing on the settlement agreements was set for Thursday before
Judge Robert E. Gerber of the U.S. Bankruptcy Court in Manhattan,
but was pushed back to Monday at Global Crossing's request. The
Bermuda-based company filed for chapter 11 bankruptcy protection Jan.
28, listing assets of $22.4 billion and debts of $12.4 billion.
ENRON
Enron Trading Unit Wins 3 More Months to File Plan
Judge Arthur Gonzalez approved Enron North America unit's request for 90
more days-till Nov. 30-to file a reorganization plan for this largest
subsidiary of Enron, which has been gradually winding down its
once-formidable trading business, Dow Jones reported. The decision
represents a setback to a group of energy trading companies that have
claims against the unit-instead of the parent Enron-and have been hoping
for a quick recovery.
The extension of the exclusivity period--in which Enron North America
is the only party to submit a chapter 11 plan with the court--was asked
for by Enron as well as the examiner responsible for reviewing the
unit's finances, reported the newswire. Both cited a number of
still-unresolved matters, including intercompany claims, overhead
allocation issues, and the question of how the unit might or might not
separate itself from the parent. Enron North America, compared with the
Enron parent, appears to have a relatively healthy balance sheet, the
newswire reported. The unit's own bankruptcy filing, lodged in December,
listed $13.7 billion in assets, which exceeded its listed debt of $8.8
billion.
Enron Creditors Get Bankruptcy Court OK to Sue
Andersen
Judge Arthur Gonzalez on Thursday granted creditors of Enron Corp. the
right to try to recover $10 million paid to former auditor Arthur
Andersen LLP days before the energy company's collapse, Dow Jones
reported. The 13-member official committee of unsecured creditors sought
the authority to sue Andersen on the company's behalf. Enron has
indicated its willingness to let the creditors lead the charge to
maximize their potential recovery.
The creditors panel said in its court papers that all the available
evidence indicates Andersen received 'more than it would likely receive'
if Enron had gone to liquidation under chapter 7. In that case, the
absolute priority rule applies, meaning that creditors with secured
claims get the first call on the company's assets, followed by unsecured
claimants.
Andersen is also a target in a class-action lawsuit filed in a Houston
federal court by Enron investors and former workers. Those plaintiffs,
who said they suffered $29 billion in losses in Enron's fall, accuse
Andersen of contributing to fraud at Enron that included hiding $1
billion in losses in off-the-books partnerships. Meanwhile, Enron's
creditors' committee has also been conducting its own investigation of
Andersen's role in Enron's demise, which could lead to additional claims
against the former auditor.
Judge to Rule on Monday on Creating Exide Equity Holders
Panel
A bankruptcy judge will rule Monday on whether to appoint an official
committee of equity security holders in the Exide Technologies chapter
11 bankruptcy case, Dow Jones reported.The State of Wisconsin Investment
Board wants the court to appoint an official committee to ensure someone
is looking out for the rights of equity holders. Exide, its committee of
unsecured creditors, its lenders, and the U.S. Trustee's Office oppose
such an appointment, arguing an official equity committee would
unnecessarily drain the estate's funds because Exide is 'hopelessly
insolvent.' After two days of hearings, Judge John C. Akard said
Thursday that he will rule on the matter at 9 a.m. EDT on Monday.
In arguing the first point, the State of Wisconsin Investment Board said
Exide's financial projections, which place the company with a negative
equity value in excess of $600 million, aren't accurate. The investment
board argued that Exide failed to include the value of its nondomestic
operations in its projections, which could substantially alter the
findings. Exide filed for chapter 11 bankruptcy protection on April 14.
The Princeton, N.J.-based automotive battery maker said it has $300
million of outstanding 10 percent senior notes due in 2005 and $315.7
million of outstanding 2.9 percent convertible senior subordinated notes
due in 2005.
PG&E Objection Filed
PG&E Corporation and Pacific Gas and Electric Company filed their
opposition to a request by the California Public Utilities Commission
and the Official Creditors' Committee to reopen the voting period and
allow creditors and equity holders to revote on competing plans of
reorganization in PG&E's bankruptcy proceeding, BankruptcyData.com
reported. The objection notes that neither the CPUC nor the Creditors'
Committee have provided new financial projections or new evidence from
their financial advisors in support of the modifications they propose to
the CPUC's Plan. The objection also maintains that there is no reason to
have creditors and equity holders revote since modifications made by the
CPUC and the creditors' committee do not meet the Bankruptcy Code
requirements for a resolicitation.
EPIQ Systems Completes Buy Of CPT Group's Chapter 7
Operations
EPIQ Systems Inc. completed the integration of CPT Group Inc.'s chapter
7 business, which was acquired in July, Dow Jones reported. In a press
release Thursday, EPIQ, a provider of software for bankruptcy
management, said it retained 100 percent of the acquired client list.
Boutique service provider CPT Group was located in the Central District
of California, a large geographic bankruptcy market, EPIQ said. 'With
corporate and consumer debt at record high levels, we believe there will
be a continued acceleration of bankruptcy filings,' Chairman and Chief
Executive Tom W. Olofson said in the release.
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