Chances are growing slim for Texas utility Energy Future Holdings to negotiate a prepackaged bankruptcy with its creditors that would avoid a lengthy spell in chapter 11, Reuters reported yesterday. The embattled company has been in talks for months with secured lenders, which hold about $20 billion in debt. But with interest payments of about $250 million due on Nov. 1 and with several key creditors yet to sign nondisclosure agreements, time is running out to reach a prepackaged restructuring. The company still hopes to establish at least the framework of an agreement before any chapter 11 filing. The company, which has about $1.6 billion on hand, could also choose to make its Nov. 1 payment and extend the discussions, although the sides reportedly would like to agree on a deal before then.
Moody’s Investors Service said that investors in Energy Future Holdings Corp.’s debt may get less of their money back than comparable restructurings when the power company that was the target of the biggest leveraged buyout in history files for bankruptcy this year, Bloomberg News reported yesterday. There’s a high probability that the electricity provider taken over in a $48 billion deal in 2007 led by KKR & Co., TPG Capital and Goldman Sachs Capital Partners “will announce a material restructuring in the fourth quarter,” probably giving investors across the company a recovery of about 50 percent, Moody’s analysts said. Holders of the senior secured first-lien notes from Energy Future Intermediate Holding and Texas Competitive Electric Holdings Co., the parent’s deregulated unit, may recover 68 percent and 63 percent, respectively, while senior unsecured lenders at Texas Competitive and the parent “would be pretty much wiped out,” recovering as little as 4 percent, according to Moody's analysts.
As we observe the five-year anniversary of the financial crisis — Lehman Brothers filed for bankruptcy five years ago this coming weekend — the most intriguing hypothetical question about those fateful days is what would have happened had the government bailed out Lehman, according to a commentary in the New York Times DealBook blog yesterday. The collapse of Lehman has long been considered the domino that led to the tumbling of so many others: Merrill Lynch’s hasty sale to Bank of America; the bailout of American International Group; the breaking of the buck in the money market; the near-collapse of Goldman Sachs and Morgan Stanley that led them to become bank holding companies; and the decision by the government to pursue the $700 billion Troubled Asset Relief Program to bail out the entire banking industry. No one at the time had suggested that Lehman deserved to be saved, according to the commentary, but the argument has been made that the crisis might have been less severe if it had been saved, because Lehman’s failure created remarkable uncertainty in the market as investors became confused about the role of the government and whether it was picking winners and losers. The government had bailed out Bear Stearns and then nationalized Fannie Mae and Freddie Mac, but it left Lehman for dead, only to turn around and save AIG. Read more.
Since filing for bankruptcy nearly five years ago, the Lehman estate has paid more than $2 billion in fees and expenses to professionals, dwarfing the previous record of $757 million in Enron Corp.’s bankruptcy, Bloomberg News reported today. In exchange for that pay, approved by the bankruptcy court, Lehman creditors are poised to get 18 cents on the dollar by 2016 from an estate valued at $65 billion, according to a liquidation plan approved in December 2011. Harvey Miller, Lehman's lead attorney, estimated that the recovery may rise to as much as 22 cents on the dollar as the value of Lehman’s assets increases over the next three years to about $80 billion. Lehman, which listed $613 billion in debt when it filed, is scheduled to pay out $14 billion to creditors on Oct. 3, bringing total distributions to $43 billion since its chapter 11 plan was approved, according to court records. http://www.bloomberg.com/news/print/2013-09-11/lehman-recovery-seen-as-…
ABI will be holding a media teleconference at 2 p.m. ET tomorrow with primary figures involved in the Lehman chapter 11 filing to examine the Lehman case and the lessons learned from it, so that large financial institutions can be better equipped to emerge from financial distress in the future. Experts on the teleconference include Bankruptcy Judge James Peck, Harvey Miller of Weil, Gotshal & Manges LLP (New York), Dennis Dunne of Milbank, Tweed, Hadley & McCloy (New York), Bryan Marsal of Alvarez and Marsal (New York) and Chris Kiplock of Hughes Hubbard & Reed LLP (New York). There is limited space available for ABI members that would like to join the teleconference. To join, please contact ABI Public Affairs Manager John Hartgen at jhartgen@abiworld.org.
Dish Network Corp. Chairman Charles Ergen asked a court to dismiss a lawsuit brought by Philip A. Falcone’s Harbinger Capital Partners LLC against him and an entity that are offering $2.22 billion in cash to buy LightSquared Inc. out of bankruptcy, saying that the suit is an attempt to derail his offer, Bloomberg News reported yesterday. Harbinger sued Ergen and Dish in August, claiming that he’s fraudulently trying to take control of LightSquared, a broadband network services provider, by having an entity that he controls, SP Special Opportunities LLC, buy large amounts of its debt. Ergen and SP said in a motion to dismiss, filed yesterday in bankruptcy court, that they made no “false representations” about the purchases, so there was no fraud.
American Airlines parent AMR Corp. and US Airways Group Inc ., whose expected merger has been held up by a Justice Department antitrust complaint that is slated to go to trial Nov. 25, yesterday reiterated their support for the merger and told AMR creditors that the two carriers plan to ask their respective boards to extend the merger termination date beyond its current Dec. 17 deadline, the Wall Street Journal reported today. If the stock-swap combination hasn't received regulatory approval by that date, then if a government order prohibits the deal or if either party wants to abandon it, the plan would die. However, the two airlines could extend the expiration date if both sides agree. Tom Horton, AMR's CEO, and Doug Parker, his counterpart at US Airways, said yesterday in response to questions from members of the creditors’ committee in AMR's bankruptcy case that they intend to do just that. The new potential termination date was not specified.
A bankruptcy judge yesterday cleared Mexican phone company Maxcom Telecomunicaciones S.A.B. to exit chapter 11 protection under the control of a group of investors led by private-equity firm Ventura Capital Privado S.A., Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Peter Walsh signed off on the company's prepackaged chapter 11 restructuring plan, which Maxcom filed when it sought bankruptcy protection in late July. Under the restructuring plan, the Ventura-led investors will pump $45 million into the company through an equity tender offer for up to 100 percent of the reorganized company's shares.
For much of the last decade, Metro-Goldwyn-Mayer has been troubled by financial turmoil and infuriating production stops and starts, it appears that the studio finally has its act together, according to a New York Times analysis today. Shares of MGM Holdings’ thinly traded over-the-counter stock have risen 50 percent since April, to about $58.50. Revenue almost tripled in the last quarter, to $339 million, according to the company. Helped by repeated Standard & Poor’s upgrades over the last three years, MGM now has access to revolving lines of credit totaling $750 million. “The company was on death’s doorstep and now has effectively no debt and is generating a ton of cash,” said Kevin Ulrich, co-founder of Anchorage Capital Group, a New York investment firm that is MGM’s largest single owner, with a 30 percent stake. Many initially bought MGM debt, which was converted to equity in 2010 as part of a pre-packaged bankruptcy. If hedge funds are willing to stick with MGM, it would underscore an important shift on Wall Street regarding Hollywood. A few years ago, when the DVD business collapsed and DVRs changed the habits of television viewers, many analysts and investors soured on filmed entertainment. But lately that opinion has shifted. Movies and TV shows are becoming more valuable again because of box office growth overseas and the eagerness of streaming services like Netflix and Amazon to acquire content.
Furniture Brands International Inc. filed for chapter 11 protection yesterday and said that it plans to sell most of its business, which includes names such as Thomasville, Drexel Heritage and La Barge, Reuters reported yesterday. The St. Louis-based company said that it agreed to sell all of its brands except Lane Furniture to Oaktree Capital Management, an investment firm that specializes in buying assets from bankrupt companies. The sale agreement will be subject to higher bids and a court-supervised auction. The money from the auction will be used to repay Furniture Brands creditors. Oaktree also committed to providing a $140 million debtor-in-possession or DIP loan to finance the bankruptcy case.
Sen. Chuck Grassley (R-Iowa) is requesting a probe into the Department of Justice’s initiative to overhaul how attorneys are paid in large chapter 11 cases, the Wall Street Journal reported yesterday. Starting Nov. 1, attorneys representing large corporate debtors in chapter 11 will be subject to additional disclosures and rules when it comes time to submit their legal fees for bankruptcy court approval. U.S. Trustee Program officials hope that the guidelines will help combat the perception that lawyers take advantage of a company’s crisis to charge expensive fees. Grassley in a letter yesterday asked Congress’s investigative arm, the U.S. Government Accountability Office, to review whether the new fee guidelines will “prevent excessive fees in the future and, if not, whether legislation is needed to address this problem.” http://blogs.wsj.com/bankruptcy/2013/09/09/senator-requests-probe-of-ne…
