Fresh & Easy Neighborhood Market Inc., the former Tesco Plc-owned grocery chain that billionaire Ron Burkle bought in 2013, is preparing its second bankruptcy filing in two years, Bloomberg News reported yesterday. The supermarket company could still find a buyer for all or part of the chain, a move that may forestall a filing. An affiliate of Burkle’s investment firm, Yucaipa Cos., bought most of Fresh & Easy’s assets after it sought protection from creditors in 2013. The chain filed for bankruptcy after suffering from poorly located stores and intense competition in its Southern California home market. The company also cited the effects of the U.S. recession.
It is reasonable to ask, 10 years since the implementation of the Bankruptcy Abuse Reform and Consumer Protection Act, whether the reform law achieved its goals, according to an American Banker commentary today by John McMickle, a former counsel to the Senate Judiciary Committee who helped to draft the legislation. McMickle believes that the law has worked well, though not perfectly. As intended, the number of bankruptcy filings has declined dramatically since 2005, from almost 1.7 million to 920,000 in 2104, according to McMickle. He thinks that the "means test" — which measures a prospective bankruptcy filer's ability to pay and channels those with higher incomes into repayment plans — has worked well. “Despite criticism, the ‘means test’ assures repayment but permits the truly distressed to avoid hardship,” McMickle writes. Read the commentary.
For additional expert perspectives of business and consumer bankruptcy trends on the 10th anniversary of BAPCPA, be sure to watch ABI’s media webinars, “BAPCPA at 10.”
The trustee in the bankruptcy of Hutcheson Medical Center is asking a judge to authorize the sale of financially ailing Fort Oglethorpe Hospital at auction, the Chattanoogan reported today. Trustee Ronald Glass said there would be more value if the hospital is sold as a going concern (still operating) rather than it having closed due to mounting debt. He is proposing that bidders for the hospital and its assets, including a nursing home and a surgery center, be pre-qualified to determine that they have the financial ability to make the acquisition and the ability to operate the facility. There would be an auction date set that would be attended by only qualified bidders, the trustee, Regions Bank, the creditors’ committee and attorneys. The motion says that it is anticipated that a winning bidder would want to retain current Hutcheson employees, but that is not a requirement. Read more.
Oaktree Capital Management LP may consider combining bankrupt surfwear retailer Quiksilver Inc. with Billabong International Ltd., a brand the investment firm already owns a stake in, a judge in Delaware was told, Bloomberg News reported yesterday. Durc Savini, an investment banker at Peter J. Solomon Co. who is working with Quiksilver, testified that “at some point” Oaktree may put the clothing companies together if it’s able to bring Huntington Beach, Calif.-based Quiksilver out of bankruptcy under its control. Savini added that he never directly approached Oaktree about a transaction with Billabong and that he doesn’t believe Billabong “has the balance sheet to support” such a deal. Oaktree owns about 20 percent of Australia-based Billabong. Quiksilver is in court defending its proposal to borrow as much as $175 million from Oaktree and Bank of America Corp., part of a broader plan to have Oaktree convert its debt into equity and assume control of the company.
Recent retail bankruptcy cases speak to the debate underway about proposed changes to bankruptcy laws that would make the process cheaper for and potentially more favorable to businesses trying to reorganize, according to a commentary yesterday by Prof. Stephen J. Lubben in the New York Times DealBook blog. In response to the recommendations of ABI's Chapter 11 Reform Commission, the Loan Syndications and Trading Association recently released a report in response focused on the importance of preserving chapter 11 in its current form. ABI's Chapter 11 Reform Commission instead portrays its proposed changes as restoring the balance of power in chapter 11. Read more.
To read more or to watch presentations on the Commission's the recommendations to modernize chapter 11, be sure to visit http://commission.abi.org/.
When the Federal Trade Commission in January cleared grocery chain Albertsons Cos. to buy rival Safeway Inc., it insisted that the two companies sell 168 of their stores to rivals to preserve competition and protect consumers from higher prices, the Wall Street Journal reported on Saturday. The FTC allowed the small Pacific Northwest supermarket operator Haggen Holdings LLC to buy most of the stores, and Haggen quickly ballooned to 164 locations throughout the West from 18 in Washington and Oregon. Just months later, however, the rapid expansion appears to have been more than the company could handle, and the FTC-approved plan might have been a major mistake. Instead of becoming a regional powerhouse, Haggen is struggling to stay afloat. The company filed for bankruptcy protection last month and began closing 26 of its recently purchased stores. It then announced plans to close 100 more locations and realign its business around 37 “core stores.”
Gunmaker Colt Defense LLC filed a plan of reorganization with a promise of $50 million in new financing, signaling it could be nearing an exit from bankruptcy protection, Bloomberg News reported on Saturday. Colt will receive the additional money from its private-equity owner Sciens Capital Management LLC, as well as Fidelity National Financial Inc., Newport Global Advisors LP and certain lenders to help execute its business plan. It expects to emerge from chapter 11 before year-end, according to documents filed in the U.S. Bankruptcy Court in Wilmington, Del. The plan is supported by Sciens and the owners of more than 60 percent of Colt’s senior outstanding notes due in 2017, marking the end of a months-long battle between the two parties over how best to reorganize the West Hartford, Conn.-based company.
Patriot Coal Corp. won confirmation of its chapter 11 debt repayment plan, clearing the way for the company to hand over its mines to new owners in an effort to preserve the business amid widespread distress in the coal industry, The Wall Street Journal reported yesterday. Bankruptcy Judge Keith Phillips said that he would approve Patriot’s chapter 11 plan as a “largely consensual plan and the result of extensive, comprehensive negotiations.” The plan proposes to sell Patriot’s mines to Blackhawk Mining LLC and a unit of nonprofit Virginia Conservation Legacy Fund, which are not offering cash for the assets but instead would issue new debt or take responsibility for existing Patriot debts. The company has eight mining complexes, all in West Virginia. An attorney for Patriot said that the plan is the “embodiment of thousands of hours of work” to achieve the best possible outcome for creditors as well as Patriot’s miners and other employees. The company faced a raft of creditor objections to the plan, but was able to resolve many of them before it presented the plan for court approval at a hearing that began Wednesday and continued into Thursday.
A Canadian railroad's withdrawal of opposition to a $338 million fund for victims of an oil train derailment that killed 47 people in Quebec has set the stage for final approval and compensation for victims, The Associated Press reported today. A U.S. bankruptcy trustee and Canadian Pacific agreed to modify the settlement fund to give the railroad some legal protection, prompting the railroad's decision to end its objections. A Canadian judge gave conditional approval on Thursday, and a U.S. bankruptcy judge is to consider the plan Friday. Victims and the province of Quebec have until Tuesday to confirm their support of the changes in Canada. Barring any surprises, the timeline would allow payments to be made to victims of the disaster by year's end, said former ABI President Robert Keach, who is serving as bankruptcy trustee. About $83 million is being set aside to settle wrongful death claims. "We're very happy for the victims that we were able to get to this point. They're the primary focus here," Keach said. A runaway train with 72 oil tankers derailed on July 6, 2013, in Lac Megantic, Quebec, setting off powerful explosions and causing fires that wiped out much of the downtown. The disaster led to greater regulatory scrutiny of the use of trains to transport crude oil amid a production surge thanks to new technologies including hydraulic fracturing. After the disaster, the train's operator, the Maine-based Montreal, Maine & Atlantic, filed for bankruptcy and the settlement fund is tied to proceedings in both the U.S. and Canada. The fund, worth $446 million in Canadian dollars, was the product of negotiations with about two dozen companies with potential liability.
