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March 16, 2007
Bally Total Fitness Considering Bankruptcy
Bally Total Fitness Holding Corp., the nation's largest gym operator by revenue, said yesterday that it might file for bankruptcy protection if the company is unable to restructure its debt, Bloomberg News reported today. The Chicago-based company said in a regulatory filing that it had about $827 million in debt as of March 14 and has interest payments due in April, July and October. Bally's debt has more than doubled in recent years, interim chairman Don Kornstein said on a conference call. Bally hasn't had a profitable year since 2001 and said in a separate statement that it expects to report a loss from continuing operations for 2006. Read more.
name='2'>Leslie Dick Worldwide Ltd. Requests Investigation in Conseco Case
Leslie Dick, president of Leslie Dick Worldwide Ltd. in New York, called for an investigation by a U.S. Bankruptcy Trustee for criminal violations of the Code, according to a press release yesterday. Dick requested that certain irregularities, both in the filing and the sale of its two major assets, the General Motors Building and Conseco Finance, be fully investigated and examined. In December 2002, Conseco Inc. filed for chapter 11 bankruptcy protection in the Northern District of Illinois. The filing by Conseco was the third largest in U.S. history, trailing only those of Enron and Worldcom. Read more.
name='3'>Judge Denies Class in Musicland Overtime Suit
A judge overseeing Musicland Holding Corp.'s bankruptcy case has shot down a proposed overtime pay class action brought by former store managers, saying the class claim would doom the music retailer's liquidation plan, BankruptcyData reported yesterday. Judge Stuart M. Bernstein of the U.S. Bankruptcy Court for the Southern District of New York determined Tuesday that if allowed, the $1.26 million priority wage claim would seriously jeopardize the administration of the case. Read more (subscription required).
name='4'>Eddie Bauer Sees First Profit Since Bankruptcy
Eddie Bauer, the Redmond, Wash.-based outdoor clothes maker, reported on Wednesday its first profit since emerging from bankruptcy in 2005, thanks to sales of down clothing, coats and catchy Christmas gifts, the Seattle Post-Intelligencer reported yesterday. The company also had fewer markdowns. The company had profits of $63.2 million, or $2.11 a share, for the fourth quarter that ended Dec. 30, compared with a net loss of $12.8 million, or 43 cents a share, a year earlier. Sales increased 1.5 percent to $381.9 million from $376.4 million. Read more.
name='5'>Debt Collector Settles with FTC for Abusive Practices
The final defendant in a case that brought a $1 million settlement with the Federal Trade Commission (FTC) in December for illegal debt collection practices has agreed to settle FTC charges that he threatened and harassed consumers to get them to pay old, unenforceable debts or debts they did not owe, the FTC reported Monday, according to CreditandCollectionsWorld.com yesterday. Under the settlement, Joshua Rausch is prohibited from engaging in debt collection activities or assisting others engaged in debt collection activities. Rausch was among several individual and corporate defendants, including Capital Acquisitions and Management Corp. (CAMCO), charged with violations of the Federal Trade Commission Act and the Fair Debt Collection Practices Act. CAMCO, which was permanently closed by the court-appointed receiver in December 2004, was a debt buyer. Most of the debts CAMCO attempted to collect were out of statute and unenforceable in court, and many of the debts also were more than seven years old and beyond the credit reporting period allowed under the Fair Credit Reporting Act, according to the FTC. In December 2006, under a settlement involving the FTC, CAMCO and CAMCO's largest creditors, CAMCO agreed to pay $1 million in ill-gotten gains to the FTC. Read more.
Red Star Developer Files for Bankruptcy
1396 5th St. LLC, a company organized to develop the site of the former Red Star Yeast factory in West Oakland, Calif., has filed for bankruptcy protection, the San Francisco Business Times reported yesterday. The LLC, a partnership of San Francisco developers Allen Curtis Eisenberger and Jabari Herbert, who until last year was the executive director of the Alliance for West Oakland Development, filed for chapter 11 protection from creditors in the U.S. Bankruptcy Court of San Francisco. The Oakland company listed assets of $4.8 million, including real property of $3.9 million, and nearly $3 million of debt, court papers show. The company named Community Bank of the Bay as its largest secured creditor, with a claim of more than $1.6 million. The claim stems from a May 2005 loan Community Bank of the Bay made to the LLC. In fact, Community Bank of the Bay on March 9 sold off the loan, which was in foreclosure, to Red Star Properties LLC, an Oakland company formed last week. Read more. (Registration required.)
Airlines
name='7'>Delta Puts $50M into Nonpilot Pensions
Delta Air Lines Inc. has made a $50 million contribution to the pension plan for its ground employees and flight attendants and filed for pension funding relief provided by the Pension Protection Act, the Birmingham (Ala.) Business Journal reported yesterday. 'Delta employees and retirees were instrumental in championing and fighting for pension legislation reform on Capitol Hill, making it possible for us to preserve benefits earned by our ground employees and flight attendants,' said Edward Bastian, Delta CFO. 'Our ability to make this election and save this plan is a tribute to their hard work and dedication.' Both the $50 million voluntary contribution and the ongoing required contributions are included in Delta's business plan. Bastian said Delta will emerge from bankruptcy in less than 60 days.
name='8'>Hedge Funds Must Publicly Disclose Data in Northwest Airlines Case
A federal bankruptcy judge in New York ordered a group of hedge funds to publicly disclose data about trades in Northwest Airlines shares, but gave the funds a 10-day reprieve as they appealed the matter to another federal court, the Associated Press reported today. Judge Allan Gropper also delayed a decision on whether to appoint an investigator to look into any merger talks the airline may have conducted. He said he would decide that once the record was clear on the other issue. There were four motions on which the investor group, which owns about 27 percent of Northwest's shares, opposed the airline as it tries to maximize the value of its stock. The funds argue that the airline is worth more than the company's estimate of about $7 billion and that an investigator was needed to look more closely. Read more.
name='9'>Le-Natures Creditors Enjoined from Suing Wachovia
A court has slapped a restraining order on creditors that want to sue Wachovia Bank for losses sustained in the collapse of drink maker Le-Nature's Inc, BankruptcyData reported yesterday. The North Carolina Superior Court issued the order Wednesday, temporarily banning the six investment firms from making any claims against the bank until the next hearing on March 22, when a permanent injunction might be issued. The judge said that Wachovia, which made loans of over $265 million to the Pennsylvania-based Le-Nature's two months before the company was forced into bankruptcy last November, would suffer irreparable injury should the firms be allowed to file a lawsuit. The judge said the creditors' purchase of Le-Nature's debt, and subsequent threats to launch legal action against the bank for the losses, amounted to the 'buying and selling' of litigation claims, which the court prohibited. Read more (subscription required).
name='10'>Lay, Skilling Desks for Sale on eBay
A nonprofit in Houston wants to cash in on Enron's infamy by auctioning the desks once used by former Enron executives Kenneth Lay and Jeffrey Skilling to raise funds for spaying and neutering cats and dogs, the Associated Press reported today. Bidding on eBay starts at $25,000 each for the 20-year-old desks, which were donated to Saving Animals Across Borders by a group that bought Enron's Houston building after the company collapsed in 2001. The items were posted on eBay on Friday, and bidding continues through March 26. Hawkins said the group accepted the desks because Enron had a history of supporting animal-welfare groups. The company and the Lay family made donations and provided office space for the Spay-Neuter Assistance Program, he said. A news release on eBay said the desks were designed by Gensler Architects and made by Brochstein's, a manufacturer of custom architectural furniture. Read more.
name='11'>Arizona Bankruptcy Filings Up
Bankruptcy filings across Arizona jumped in January and February, but remained far below normal, the U.S. Bankruptcy Court of Arizona reported, according to the East Valley Tribune today. Statewide, 1,252 bankruptcy cases were filed, compared to 660 for the first two months of 2006, representing a nearly 90 percent increase. Read more.
International
name='12'>Czech Lawyer Suspects CSSD of Concealing Assets Ahead of Bankruptcy
Lawyer Zdenek Altner, who claims billions of crowns from the senior opposition Czech Social Democrats (CSSD), today said that the CSSD wants to conceal its property ahead of its pending bankruptcy, therefore he has lodged a criminal complaint against CSSD leader Jiri Paroubek, the Prague Daily Monitor reported today. Altner, who filed a bankruptcy petition against the CSSD in January, said he bases his suspicion on the CSSD's property statement the party has submitted to court and that puts the CSSD's financial assets at 586,000 crowns in the party coffers and 34.019 million on a current bank account as of the end of last year. According to Altner, this is at variance with Paroubek's words that the CSSD will deposit 93 million crowns with a notary or would provide a bank guarantee for the sum in an effort to meet Altner's claim. Read more.
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BabyUniverse Inc., a Jupiter, Fl. online retailer of baby and pregnancy products, is merging with eToys Direct, a privately-held Denver, Co. online seller of toys. According to terms of the merger, whose price hasn't been revealed, BabyUniverse must have no outstanding debt when the transaction closes. As of last September, the company faced $4.7 million in debt, although it also had $2 million in cash on hand. EToys, in its most recent fiscal year, reported unaudited net sales of $117 million. BabyUniverse, in its quarter ended last September, reported $23.7 million in sales and a profit of just over $100,000.
Double Eagle Petroleum Co., a Casper, Wy. oil and gas exploration company, reported its fiscal net income sank 47%Ðto $2.1 million. Revenue declined 7%-to $19 million.
Empire Resorts Inc., a Monticello, N.Y. operator of horse racing facilities, reported a fourth quarter net loss of $5.1 million. Revenue declined 7%Ðto $20.8 million. For the year, it lost $7.1 million on a 13% revenue increaseÐto $98.1 million.
Fiberstars Inc., a Solon, Oh. manufacturer of fiberoptic lighting systems, reported a fourth quarter net loss of $2.8 million. Revenue increased 15%Ðto $7.2 million. For the year, the company lost more than $9.6 million, including a restructuring expense of $734,000. Revenue declined 5%Ðto $27 million.
Frequency Electronics Inc., a Mitchel Field, N.Y. maker of control products, reported a third quarter net loss of $750,000. Revenue declined 20%Ðto $12.1 million.
Peerless Systems Corp., an El Segundo, Ca. maker of software-based imaging systems, reported its fourth quarter net income declined 9.5%Ðto $1.6 million. Revenue declined 10%Ðto $8.7 million. For the year, its net income declined 24%Ðto $3.3 million, on a nearly 8% decline in revenueÐto $33.4 million.
ShopKo Stores Operating Co. LLC, the Green Bay, Wi. operator of the ShopKo discount department stores, reached a sale-leaseback deal for seven of its stores in the West. ShopKo sold its stake in those properties to Sovereign Investment Co. of Princeton, N.J. for $75.5 million and will lease back the locations for twenty years. The arrangement frees up some cash for the retailer's plans to remodel existing stores and develop new locations. Last year, ShopKo sold off more 100 of its ShopKo stores, sixty-six of its Pamida stores and certain other assets for more than $800 million.