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February 4, 2010
More Firms Opt for Chapter 11 as Total
Business Filings Drop
The number of businesses seeking chapter 11 protection in January
increased nearly 22 percent from December 2009, but the same period
showed a drop in overall commercial filings, Dow Jones Daily
Bankruptcy Review reported today. Last month, 1,305 businesses and
individuals sought chapter 11 protection, as opposed to 1,071 in
December, according to new data from Automated Access to Court
Electronic Records, or AACER. By comparison, 6,502 businesses filed for
all types of protection under the Bankruptcy Code, down from 7,285 in
December - a month-to-month drop of 10.7 percent. Chapter 7 filings sank
even lower, decreasing by 17.5 percent from December. Still, experts
cautioned against an overly optimistic outlook and emphasized that the
figures don't indicate significant movement toward a healthy economy. 'I
don't think we've turned a corner at this point,' said ABI Executive
Director Samuel J. Gerdano.
St. Mary's Hospital's Reorganization Plan
Receives Court Confirmation
St. Mary's Hospital of Passaic, N.J., will emerge from bankruptcy
with $20 million in exit financing after winning confirmation of its
reorganization plan from Bankruptcy Judge Morris Stern, the
Deal Pipeline reported today. Administrative claims, priority tax
claims, U.S. Trustee fees, priority claims and all secured claims,
including $20 million in debtor-in-possession financing from lenders
lead by Healthcare Finance Group Inc., will be paid in full under the
plan. The New Jersey Health Care Facilities Financing Authority will see
a 60 percent recovery on a $43 million secured claim. Meanwhile, roughly
$27 million in general unsecured claims will receive 4.7 percent
recoveries via a $1 million promissory note priced at 5 percent annually
and payable in 12 monthly installments, plus the proceeds from any
avoidance actions.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005385630'>Read
more. (Subscription required.)
Judge Dismisses Lehman Retirement Plan Suit
Against Directors
U.S. District Judge Lewis A. Kaplan on Tuesday threw out a lawsuit
by participants in Lehman Brothers Holdings Inc.'s retirement plan over
allegations that the company's directors knew of Lehman's deteriorating
financial condition but failed to protect the plan, Dow Jones Daily
Bankruptcy Review reported yesterday. The plan suffered a large loss
when the firm failed in the fall of 2008, sparking a global financial
crisis. The lawsuit 'does not sufficiently allege that any of the
director defendants are fiduciaries in any respect material to this
case,' Judge Kaplan wrote. The complaint had alleged that the
directors failed to meet their fiduciary duties to the plan under the
federal Employee Retirement Income Security Act. The company's directors
and a member of its Employee Benefit Plans Committee were defendants in
the case.
U.S. to Help Banks in Distressed
Areas
The Treasury Department will invest up to $1 billion from the federal
bank bailout fund in small banks and credit unions that make loans to
small businesses in some of the communities most ravaged by the economic
downturn, the New York Times reported today. About 210
institutions will be eligible for low-cost capital under the Troubled
Asset Relief Program, created in 2008 to buy assets from troubled banks,
Treasury officials said. The eligible institutions are 60 banks and
thrifts with a total of $21 billion in assets and 150 credit unions with
a combined $5 billion in assets. They are among 834 certified by the
Treasury as community development financial institutions, meaning that
they make at least 60 percent of their small-business lending in low-
and moderate-income areas.
href='http://www.nytimes.com/2010/02/04/business/smallbusiness/04small.html?ref=business&pagewanted=print'>Read
more.
Movie Gallery Files for Chapter 11, to
Shutter 805 Stores
Movie Gallery Inc., operator of the Hollywood Video rental chain,
filed for bankruptcy for the second time in three years after sales fell
and losses mounted, and said that it would close 805 U.S. stores,
Reuters reported today. The closings affect one-third of the company's
2,415 U.S. stores, court filings show. Several thousand of its roughly
19,100 employees will probably lose their jobs. Movie Gallery and four
affiliates filed for protection on Tuesday with the U.S. bankruptcy
court in the Eastern District of Virginia. The company previously filed
for bankruptcy in October 2007. The case is In re Movie Gallery
Inc., U.S. Bankruptcy Court, Eastern District of Virginia, No.
10-30696.
href='http://www.reuters.com/article/idUSN0311426020100203'>Read
more.
Spheris Files for
Bankruptcy, Plans U.S. Asset Sale
Spheris Inc., a provider of document services for
hospitals, filed for bankruptcy yesterday and said that it plans to sell
its U.S. business to MedQuist Inc., its largest competitor, Reuters
reported yesterday. As part of the sale, CBay Inc. would acquire the
stock of Spheris India Private Ltd., a unit of Spheris that is not part
of the bankruptcy. To support Spheris' business during the bankruptcy,
its lenders will extend a $15 million debtor-in-possession loan. As a
condition of the loan, the company agreed to auction its U.S. business,
with MedQuist acting as the stalking-horse bidder and setting the
initial auction price, although the initial court filings did not
contain a bid price. The case is In re Spheris Inc. et al., U.S.
Bankruptcy Court, District of Delaware, No. 10-10352.
href='http://www.reuters.com/article/idUSN0317482820100203'>Read
more.
Bankrupt, to Dissolve
Air America, the talk radio network whose on-air
talent once included now U.S. Senator Al Franken (D-Minn.) and MSNBC
host Rachel Maddow, filed for bankruptcy protection yesterday and plans
to liquidate, Reuters reported yesterday. The chapter 7 filing came
after Air America on Jan. 21 announced plans to wind down operations
following a decline in advertising and an inability to attract new
investors. It subsequently went off the air. The firm had struggled
under a series of management changes since its inception in 2004. It
previously filed for bankruptcy in 2006 after debt talks with one of its
earliest creditors broke down, but it remained on the air The case is
In re: Air America Media LLC, U.S. Bankruptcy Court, Southern
District of New York, No. 10-10615.
href='http://www.reuters.com/article/idUSN0317292120100203'>Read
more.
Cantwell Pushing for
Derivatives Reform Beyond House Bill
Sen. Maria Cantwell (D-Wash.) said yesterday that she
intends to keep pressure on the Senate Agriculture Committee to produce
a strong measure to rein in the multitrillion-dollar derivatives
industry, noting that a House-passed bill contained too many loopholes
to benefit the big banks that dominate the market, CongressDaily
reported today. Cantwell said she will focus much of her efforts on the
Agriculture Committee, which has supervision over the Commodity Futures
Trading Commission, rather than the Banking Committee, which has
jurisdiction over the SEC. Senate Banking Committee Chairman Christopher
Dodd (D-Conn.) is working with ranking member Richard Shelby (R-Ala.) to
craft a bipartisan measure to revamp the nation's financial regulatory
system, with a section to regulate the derivatives market. Agriculture
Chairwoman Blanche Lincoln (D-Ark.) has been on a slower path with
ranking member Saxby Chambliss to craft a derivatives bill. She pointed
out that CFTC will be the main agency to focus on derivatives,
especially in the unregulated over-the-counter market, where trades are
conducted between parties and do not go through a traditional
exchange.
Foundry Company Files for
Chapter 11 amid Drop in Sales
Iron foundry and heavy casting company Neenah
Enterprises Inc. and at least 15 of its subsidiaries have filed for
chapter 11 reorganization, citing a 35 percent drop in sales volume in
2009 because of dramatic declines in construction and other markets,
Bankruptcy Law360 reported yesterday. NEI said it had reached an
agreement with key creditors on terms for a reorganization plan that
would cut its debt by about $220 million. The agreement with key
creditors would provide full recoveries for NEI's suppliers and vendors,
the company said. The chapter 11 petition listed the company's assets at
about $287 million, with debts of $449 million. The case is In re
Neenah Enterprises Inc., case number 10-10360, in the U.S.
Bankruptcy Court for the District of Delaware.
href='http://bankruptcy.law360.com/articles/147495'>Read
more. (Subscription required.)
Zayat Stables Files for
Bankruptcy
Prominent racehorse owner Ahmed Zayat yesterday filed
for chapter 11 protection amid a legal battle between Zayat
Stables and Fifth Third Bank, which claims in a lawsuit that Zayat owes
more than $34 million from loans, the Associated Press reported
yesterday. A hearing had been set for next week in
Lexington, Ky., to determine whether a receiver should be
appointed to oversee the stable. It wasn't immediately clear whether it
would be canceled due to the bankruptcy filing. Zayat was the leading
thoroughbred owner by earnings in 2008, winning almost $6.9
million.
href='http://www.usatoday.com/sports/horses/2010-02-03-zayat-bankruptcy_N.htm'>Read
more.
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