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September 27, 2002
DeLay Signals Hope for Bankruptcy Legislation, Finance Groups
Say
Credit union lobbyists emerged hopeful from a one-on-one meeting
yesterday with House Majority Whip Tom DeLay (R-Texas) on the fate of
the pending bankruptcy reform legislation, reported
CongressDaily. According to officials with the Credit Union
National Association (CUNA), DeLay told representatives of CUNA and
other trade groups, including the Financial Services Roundtable, that
the House leadership is waiting for an opportunity to vote on the bill,
the newswire reported. 'The leadership is for bankruptcy reform,' CUNA
officials quoted DeLay as saying, reported CongressDaily. 'I want
to have the opportunity to vote on this bill. I want to see it
pass.'
DeLay and other House GOP leaders previously indicated they hesitated
to force their members to vote on the bankruptcy bill because of
concerns raised by anti-abortion activists about an aspect of the
legislation. But according to CUNA, DeLay said he was considering
'whipping' the legislation in the near future. While DeLay indicated it
is a good bill, he made the groups no promises. 'Nevertheless, we
consider this a very positive sign,' said CUNA's chief lobbyist, John
McKechnie, the newswire reported.
Court Backs U.S. Airways Financing Plan
A federal judge on Thursday approved a $740 million deal between US
Airways Group Inc. and an Alabama pension fund for new emergency
financing and a stake in the airline once it emerges from bankruptcy,
Reuters reported. Judge Stephen Mitchell of the U.S. Bankruptcy
Court for the Eastern District of Virginia approved an arrangement with
Retirement Systems of Alabama for an eventual 37.5 percent equity
investment in the carrier worth $240 million. Judge Mitchell also
approved an agreement for $500 million in debtor-in-possession financing
underwritten by the Alabama group. He released $300 million from the
deal to the airline immediately and plans to rule on the balance next
month.
U.S. Creditors Accept 360networks' Reorganization
Fiber optic network builder 360networks Inc. has the endorsement of both
U.S. and Canadian creditors to emerge from bankruptcy protection,
Reuters reported. The company's U.S. creditors have voted 98 percent in
favor of accepting the 360networks' plan to restructure itself into a
North American-based operation, Director of Investment Relations Chris
Mueller said. The U.S. Bankruptcy Court confirmation hearing on the vote
is scheduled for Tuesday. The company's plan won Canadian court and
creditor approval in early September. Under the reorganization plan,
360networks' Canadian and U.S. subsidiaries would be used to create a
new company with $215 million in debt and $50 million in cash.
Interliant Obtains Bankruptcy Financing
Internet-based software provider Interliant Inc., which filed for
bankruptcy reorganization on Aug. 5, said on Thursday it obtained $5
million of debtor-in-possession financing from Access Capital Inc.,
Reuters reported. Interliant said the $5 million credit facility is
secured by the company's accounts receivable, with additional security
in the company's assets. Interliant went public in July 1999, but never
turned a profit. It defaulted on $165 million of convertible notes last
year. It became one of many Internet-based companies to fail because of
the shaky U.S. economy and deep cutbacks in corporate capital spending.
Interliant filed for bankruptcy protection with the U.S. Bankruptcy
Court for the Southern District of New York.
Williams Communications Working on Plan Objections
A hearing on confirmation of Williams Communications Group Inc.'s
chapter 11 reorganization plan has been put off until Monday, from
Wednesday, while the company attempts to resolve three outstanding
objections, Dow Jones reported. Company sources indicated that the
company was close to resolving objections by the U.S. Trustee overseeing
the chapter 11 case and the U.S. government. The company is also working
towards resolving an objection filed by the lead plaintiff in a
securities class-action suit. Like many telecommunications companies,
Williams Communications has suffered from the glut in telecom capacity.
It filed for protection from creditors in April after it was unable to
renegotiate its debt.
ENRON
Enron Seeks Four More Months to File Reorganization
Plan
Enron Corp. is seeking the bankruptcy court's approval for four more
months to file a reorganization plan, citing a myriad of unresolved
issues, Dow Jones reported. The request follows a court order last
Thursday that extended the exclusivity period for 90 days for Enron
North America. The unit, which once housed the energy company's crown
jewel trading business, is entitled to be the only party to file a
chapter 11 plan with the court until Nov. 30.
Also at issue is how to divide the expenses during the restructuring
process. Enron's chapter 11 case, now 10 months old, is estimated to
have run up about $120 million in lawyer and other professional fees.
The company is expected to propose an expense allocation plan on Monday.
Meantime, Enron is yet to complete its financial analysis of a
consolidation issue that could greatly affect the payment of claims in
bankruptcy.
Enron Partnership LJM2 Files for Chapter 11
The infamous LJM2 partnership engineered by Enron Corp.'s former chief
financial officer filed for chapter 11 bankruptcy after facing a horde
of lawsuits, reported The New York Times. LJM2 Co-Investment LP
filed for bankruptcy after being hit with a number of lawsuits, said
Bettina Whyte, the chief representative of the restructuring firm
now running LJM2, the online newspaper reported. 'The most pressing
reason was the fact that the lenders had filed a lawsuit against the
partnership for repayment of the loan in the Supreme Court of New York,
and we did not have the ability to repay that loan,' Whyte told
Reuters.
The lenders' suit, involving a $70 million loan, could have led to a
judgment against the assets, and LJM2 needed 'to protect all of the
assets for all of the creditors, not just the lenders,' Whyte said. The
partnership filed for chapter 11 bankruptcy in the U.S. Bankruptcy Court
for the Northern District of Texas, in Dallas. Court records show that
LJM2 has assets of $68 million and liabilities totaling $125 million.
LJM2 figured greatly in Houston energy giant Enron's failure and was
created by former CFO Andrew Fastow to hide billions in debts off of
Enron's balance sheet. LJM2—its initials drawn from the first
names of Fastow's wife and children—entered 26 deals with Enron,
the newspaper reported.
StarBand Wins Approval of Plan to Retain Key Employees
StarBand Communications Inc. last week won court approval to implement a
retention plan aimed at ensuring that key employees remain with the
debtor during its time in chapter 11 bankruptcy, Dow Jones reported. The
order signed by Chief Judge Peter J. Walsh of the U.S. Bankruptcy
Court in Wilmington, Del., authorizes StarBand to make up to $683,000 in
retention payments. StarBand said its ability to maintain its business
operations and preserve value for the company's estate depends on key
employees staying with the company. The company said the uncertainty
surrounding its chapter 11 proceedings will likely lead to resignations
and reduced morale.
Also last week, Judge Walsh authorized StarBand to enter into an
insurance premium financing agreement to protect the assets of its
estate. Cananwill Inc. will provide insurance policies for commercial
liability, automobile and umbrella insurance coverage totaling $219,620.
McLean, Va.-based StarBand filed for chapter 11 protection on May 31,
listing liabilities of more than $229 million and assets of $58
million.
Kellstrom Industries Asks Court to OK $250,000 Fee to
Adviser
Kellstrom Industries Inc. is asking a bankruptcy court to approve a
$250,000 success fee payment to its financial adviser, Dow Jones
reported. Court papers said an agreement between Kellstrom and Phoenix
Management Industries provided for the payout of a success fee if a plan
of reorganization were confirmed or the court approved the sale of the
company's assets. A hearing on the matter will be held on Oct. 24 at the
U.S. Bankruptcy Court in Wilmington, Del. Objections are due by Oct.
17.
Sunrise, Fla.-based Kellstrom has been under chapter 11 protection
since Feb. 20. The company listed assets of $371.2 million and
liabilities of $402.4 million. The company buys, markets, resells and
leases aviation equipment, mainly engines and parts for commercial
jets.
Court Lets Adelphia Communications Wind Down 14 CLECs, Sell
Assets
The bankruptcy court handling Adelphia Communications Corp.'s chapter 11
case has authorized the cable company to wind down 14 of its 17
competitive local exchange carrier (CLEC) markets and sell nearly all
the related assets, Dow Jones reported. In an order made available to
the public Thursday, Judge Robert E. Gerber of the U.S.
Bankruptcy Court in Manhattan found the winding down of the unprofitable
CLEC's to be a 'sound exercise of business judgment.' Judge Gerber also
authorized Adelphia to adopt a severance plan for 125 employees. He
found that the severance plan is needed to allow the company to prepare
for, structure and complete the CLEC wind-downs.
Sleepmaster Panel Files Complaint Against Citicorp Venture
Capital
Sleepmaster LLC's unsecured creditors' committee on Wednesday filed a
complaint against Citicorp Venture Capital Ltd., arguing that the
entity's claim in Sleepmaster's bankruptcy case shouldn't be granted
higher priority than the claims of general unsecured creditors, Dow
Jones reported. The filing said Citicorp Venture Capital made payments
of roughly $16.1 million to the company 'in the shadow of Sleepmaster's
bankruptcy filing,' when the company was insolvent and when no other
outside lender would have made such loans, which the committee labeled
'equity infusions subject to equitable subordination' under the U.S.
Bankruptcy Code.
Sleepmaster filed for chapter 11 protection on Nov. 16, 2001, with
the U.S. Bankruptcy Court in Wilmington, Del. Affiliate Sleep Investor
filed for bankruptcy on March 6 of this year. The bankruptcy court will
consider the disclosure statements to both the company's and committee's
proposed reorganization plans at a hearing scheduled for Oct. 11.
Glenoit Wins Confirmation for Reorganization Plan
Glenoit Corp. Thursday won confirmation of a reorganization plan that
calls for the company to emerge from chapter 11 bankruptcy as a going
concern, Dow Jones reported. Glenoit's lenders unanimously supported
confirmation of the plan. Ninety percent of the company's unsecured
creditors, holding 99.89 percent of the unsecured debt in the case,
supported confirmation, the newswire reported. In addition, 93 percent
of the debtor's bondholders, holding 99.88 percent of the bond debt,
voted in favor of confirmation, according to Dow Jones.
The order signed by Judge Ronald S. Barliant of the U.S.
Bankruptcy Court in Wilmington, Del., paves the way for Glenoit to
emerge from bankruptcy after more than two years in chapter 11
protection. The fabric, textile and rug manufacturer filed for chapter
11 bankruptcy protection on Aug. 8, 2000, listing assets of $202.5 and
liabilities of $265.1 as of April 30, 2000.
Insurers Rescind Policies with Ex-Adelphia Communications
Executives
Two insurance companies have rescinded liability policies of some
current and former officers and directors of Adelphia Communications
Corp. and former telecommunications unit Adelphia Business Solutions
Inc., reported Dow Jones. In papers filed late Thursday with the court
handling the companies' separate chapter 11 cases, the insurers also
seek to take steps to rescind the policies with the two Adelphia
companies as well, the newswire reported. The insurers said the policies
are subject to rescission because they were issued in reliance on
insurance applications, financial documents and filings with the
Securities and Exchange Commission that are apparently false and
misleading.
Associated Electric & Gas Insurance Services Ltd. said in court
papers that it rescinded its $25 million policy with respect to seven
current or former officers and directors, among them founder John Rigas
and members of his family. Federal Insurance Co. said it rescinded its
$15 million excess coverage Director and Officer policy with 13 current
and former directors. A third insurer, Greenwich Insurance Co., which
joined in the court filing, said it has notified these 13 individuals of
its intent to seek recission of its $10 million excess coverage D&O
policy. In the court filings, the three insurers asked the U.S.
Bankruptcy Court to lift the Bankruptcy Code's automatic stay provision,
to the extent it applies, to allow them to give rescission notices to
the Adelphia companies.
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