March 9, 2010
U.S. Dry Cleaning Files for Chapter 11
U.S. Dry Cleaning Services Corp. has sought chapter 11 protection and is asking for bankruptcy court approval for interim use of cash collateral, the Deal Pipeline reported yesterday. The company, which filed for chapter 11 with affiliates Enivel Inc., Cleaners Club Acquisition Sub Inc., Steam Press Holdings Inc., USDC Fresno Inc., USDC Fresno 2 Inc., USDC Portsmouth Inc. and USDC Tuchman Indiana Inc., won an order jointly administering the cases on March 5. The company now intends to file its pleadings as part of the Enivel docket. At the time of its filing, the company attributed its financial difficulties to the frozen capital markets, which it said forced it to internally finance its operations during its period of heavy expansion. Read more. (Subscription required.)
Extended Stay Seeks to Exit Bankruptcy
Extended Stay Inc.'s senior lenders, who are owed more than $4 billion, will join Paulson & Co. and Centerbridge Partners to pump $450 million into the hotel chain and take it out of bankruptcy, the Wall Street Journal reported today. Extended Stay's proposed reorganization plan calls for Paulson and Centerbridge to invest $225 million into the struggling hotel operator for a 22.5 percent stake. Holders of Extended Stay's $4.1 billion in mortgage debt will receive new mortgage notes totaling $2.5 billion plus stock valued at a 55 percent stake in the company. Extended Stay also plans to raise an additional $225 million through a rights offering. The mortgage lenders will receive the right to buy all the shares for an additional 22.5 percent stake plus warrants. Read more.
Colonial BancGroup Sues FDIC Over Ownership of Assets
The former holding company for Colonial Bank, which was seized by federal regulators last year, filed a lawsuit on Thursday against the Federal Deposit Insurance Corp. over the rights to millions of dollars in disputed assets, Dow Jones Daily Bankruptcy Review reported today. The FDIC, which sold Colonial's assets to BB&T Corp., claims it has dibs on the assets. However, the restructuring professionals overseeing Colonial BancGroup's chapter 11 case are asking Bankruptcy Judge Dwight H. Williams Jr. to decide whether the assets are property of the bankruptcy estate. The FDIC was named receiver of Colonial Bank after regulators seized the Montgomery bank in the summer of 2009. Colonial, which had $25 billion in assets and $20 billion in deposits, was the biggest bank failure of last year. Colonial BancGroup is also asking Williams to deny the FDIC's claims, including fraudulent transfers, filed against the holding company.
Lyondell's Restructuring Plan Includes Private Equity Role
LyondellBasell filed a restructuring plan yesterday, rejecting a takeover bid from India's Reliance Industries Ltd., in favor of commitments from private equity firms to help the chemicals maker exit bankruptcy, Reuters reported yesterday. The company has rejected several offers from Reliance Industries, the most recent of which valued the petrochemicals firm at $14.5 billion, in favor of a plan supported by key creditor groups. Private equity firms Apollo Management LP, Ares Management and Access Industries have agreed to back a $2.8 billion rights offering in which Lyondell would sell 263.9 million Class B shares, according to the company's disclosure statement filed yesterday. Apollo could invest up to $1.52 billion, while Ares could invest up to $475.7 million and Access can invest up to $805.9 million, the court documents showed. Read more.
Public Pension Funds Are Adding Risk to Raise Returns
States and other bodies of government are seeking higher returns for their pension funds, to make up for ground lost in the last couple of years and to pay all the benefits promised to present and future retirees, the New York Times reported today. Though they generally say that their strategies are aimed at diversification and are not riskier, public pension funds are trying a wide range of investments: commodity futures, junk bonds, foreign stocks, deeply discounted mortgage-backed securities and margin investing. Additionally, some states that previously shunned hedge funds are trying them now. Read more.
Blue Dog Democrats Pitch TARP Repayment Bill
Six congressional leaders of the Blue Dog Coalition are pressing for legislation to recoup the cost of the $700 billion Troubled Asset Relief Program and pay down the growing deficit, CongressDaily reported yesterday. The debate has picked up steam ever since estimates suggested TARP will cost far less than initially projected. CBO recently put the price tag at just under $100 billion. President Obama proposed in January imposing a 0.15 percent tax on the liabilities of banks, thrifts, securities dealers and other entities with more than $50 billion in assets, which the White House estimates would raise $90 billion over ten years to help pay down the deficit. Meanwhile, House Democrats are exploring using a variant on the bank fee proposal to help offset job-creation initiatives. Several lawmakers of both parties have said they want to exempt firms that did not take any TARP assistance from the fee.
Tropicana Entertainment Emerges from Bankruptcy
Billionaire investor Carl Icahn said yesterday that Tropicana Entertainment Inc. has emerged from chapter 11 protection, MarketWatch.com reported yesterday. Icahn and his affiliates own about 47 percent of the casino operator. Under Tropicana's bankruptcy reorganization, the company shed about $2.5 billion in debt, and secured $150 million in financing to repay its debtor-in-possession facility. Tropicana entered bankruptcy protection in May 2008. Read more.
Shelley Chapman Tapped as Newest Bankruptcy Judge for the Southern District of New York
Shelley Chapman has been tapped as the newest bankruptcy judge for the U.S. Bankruptcy Court for the Southern District of New York, Reuters reported yesterday. The appointment of Chapman, previously a partner at Willkie Farr & Gallagher LLP's business reorganization and restructuring group, became effective March 5, the firm said. Chapman joined Willkie in 2001 as a partner, building a practice around major business reorganizations and restructurings, the firm said. She has represented companies including cable company Adelphia Communications Corp, fiber optic network company 360networks and National Energy & Gas Transmission. She replaces Judge Prudence Carter Beatty, who retired on Jan. 4. Read more.
Casino Owner Centaur Files for Bankruptcy
Centaur LLC, which owns Indiana's Hoosier Park casino and horse track and a Colorado casino, filed for chapter 11 protection, Reuters reported yesterday. Centaur says that normal operations will continue at Hoosier Park in Anderson and Fortune Valley Hotel & Casino in Central City, Colo., despite the chapter 11 filing. The Indianapolis-based company says it also will continue work on its Valley View Downs & Casino projects near New Castle, Pa. In October, Centaur missed a $13.4 million payment due on more than $400 million in debt. The company borrowed heavily to pay for a $250 million state license fee and $150 million in upgrades to open the Hoosier Park casino in 2008. Read more.
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