Hedge fund Standard General LP is in talks to serve as the lead bidder at a bankruptcy auction for struggling consumer-electronics retailer RadioShack Corp., the Wall Street Journal reported today. RadioShack, which is running out of cash after reporting losses in each of the last 11 quarters, was aiming to file for chapter 11 protection as early as today. But as of yesterday, the company and its advisers were still working out the details of an agreement with Standard General to serve as the stalking-horse bid at a court-supervised auction for RadioShack’s assets. Standard General last year became the company’s largest shareholder and led a financing that helped RadioShack get through the holidays.
A judge approved a settlement between the trustee in charge of Jeffrey Soffer's failed Fontainebleau Las Vegas casino project and the company's former directors and officers that will put millions in creditors' pockets, Dow Jones Daily Bankruptcy Review reported today. In an order signed last week, Bankruptcy Judge A. Jay Cristol approved the deal, which calls for $27.5 million to go into the coffers of chapter 7 trustee Soneet R. Kapila, the man in charge of Fontainebleau's estate. The judge had rejected a prior settlement, which was opposed by a group of term lenders who were suing Fontainebleau's officers and directors for fraud, charges those parties denied. Those lenders support the new settlement, which calls for a payment of $25 million of directors' and officers' insurance money to creditors.
A bankruptcy judge on Monday denied a request by GT Advanced Technologies Inc. shareholders to have a voice in the former Apple Inc. supplier’s bankruptcy, though he left open the possibility for the group to come back with a new proposal, the Wall Street Journal reported today. Bankruptcy Judge Henry Boroff issued the one-paragraph denial after a Monday hearing in U.S. Bankruptcy Court in Springfield, Mass. The shareholders had argued they should be given an official role in the case — with expenses paid for out of the debtor’s coffers — because GT Advanced’s business is still worth enough to leave a payout for them.
A bankruptcy judge last week signed off on the $27.5 million settlement agreement with Fontainebleau Las Vegas resort’s officers, directors and managers of the debtors involved in the $2.9 billion development, the Miami Herald reported today. Bankruptcy trustee Soneet Kapila reached the agreement after more than two years of negotiations and three years of litigation. Insurers of the directors and officers will pay $25 million and developer Jeffrey Soffer, an owner of Turnberry Associates, will be responsible for paying $2.5 million. Separate litigation filed by the term lenders in Nevada was also settled, resulting in a payout of $98 million. Of that, $93 million will be paid by the directors and officers insurers and $5 million will come from Soffer. A $178 million settlement agreement with creditors for the development was approved in December of 2013. The Las Vegas project was never completed; it filed for bankruptcy protection in 2009. During the bankruptcy process, investor Carl Icahn bought the building.
The casino operating unit of Caesars Entertainment Corp. should be allowed to choose where to file for bankruptcy even if it misbehaved, the company's lawyers argued yesterday as its chapter 11 case unfolded in two courts, Reuters reported yesterday. Creditors of Caesars' operating unit want a U.S. Bankruptcy judge to move its chapter 11 case from Chicago to Delaware, where the creditors have tried to push the company into bankruptcy. The creditors hope a Delaware court will be less favorable to the company's strategy for getting its debt-cutting plan approved. Yesterday’s hearing was adjourned in the afternoon as a major winter storm loomed. Closing arguments will be held today at 10 a.m. by telephone. The hearing will decide where the bankruptcy will proceed, and by extension which legal standard to apply to Caesars' $10 billion debt-cutting plan — the one in Chicago or the one in Delaware.
A company should be able to reorganize through a value-maximizing sale in chapter 11, but those sales should not include quick fire sales that offer little opportunity for a robust auction or the need to use chapter 11 tools to enhance value in that auction, according to Prof. Michelle Harner’s post today on the Credit Slips blog. Chapter 7 is already well suited for such fire sales, according to Harner. Under current practice, it is possible in some jurisdictions to file a chapter 11 case and close a sale of substantially all of the debtor’s assets in 30 to 60 days. That sale often cleanses the assets of all interests, liens, and claims; implements broad releases for not only the purchaser but also other parties in the case; and dictates the distribution of at least a significant part — if not all — of the sale proceeds. In essence, it is the entire chapter 11 case. Creditors are left with no opportunity to explore alternatives for maximizing the value of the debtor or to participate in value accretion that may have occurred during the case. The ABI Chapter 11 Reform Commission’s Final Report recommended a statutory moratorium on going concern sales and financing provisions that would require expedited sales. Although the 60-day moratorium may not be long enough, it would at least allow the U.S. trustee to form a committee and provide parties some opportunity to test the terms and timing of the proposed sale.
The operating unit of Caesars Entertainment Corp begins an unusual two-day trial today to decide which of two bankruptcy courts will review its $10 billion debt-cutting plan, Reuters reported today. Caesars Entertainment Operating Co. Inc., which runs 38 casinos, finds itself in the rare situation of being in two bankruptcies in two different courts at the same time. A group of hedge fund creditors tried to force the company into bankruptcy in Wilmington, Del., earlier this month. The company responded by filing for bankruptcy in Chicago, and Monday's trial in Wilmington in front of Judge Kevin Gross will sort out where the case ends up.
In related news, Caesars Entertainment Corp., which has been gathering support for a plan backed by Leon Black’s Apollo Global Management LLC, was accused by bank lenders of trying to buy their votes and subverting bankruptcy law, Bloomberg News reported on Saturday. The lenders, including GSO Capital Partners LP, Silver Point Capital LP and BlackRock Financial Management Inc., asked a judge to bar the casino company from handing out fees to obtain votes, according to a court filing in Wilmington, Del. Friday. They own about $2.9 billion of Caesars’ most senior debt, they said. Detailing the “improper” offer, the lenders said that they were offered a $150 million fee to consent to the company’s proposed refinancing, along with opportunities to buy new convertible notes issued by the healthier parent company and take cash from the bankrupt company. In return, they said that they were asked to back a pact hammered out with supporting creditors outside of court and not yet filed as part of a chapter 11 case.
