The parent of American Airlines won approval to renew its leases at airports in San Francisco and Nashville under agreements that will save it millions of dollars over the next several years, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Sean H. Lane on Thursday signed off on AMR Corp.'s deals with the airports.
China-based solar panel maker Suntech Power Holdings Co Ltd., whose main unit is in insolvency proceedings, said it had struck a deal with a majority of its bondholders to defer payment on a $541 million loan until Aug. 30, the third time the company has reached such an agreement, Reuters reported on Friday. Suntech defaulted on a principal payment on the 3 percent convertible notes on March 15, prompting the company's Chinese lenders to drag its main manufacturing unit into insolvency proceedings. Lenders holding the senior notes will nominate two additional members to Suntech's board and will help to identify strategic and financial investors to bring in new capital, the company said in a statement on Friday. Suntech said it was also looking at converting all major debt claims held by the bondholders into equity.
The publisher of the Reader's Digest magazine said that it expects to emerge from bankruptcy by the end of July after a bankruptcy court approved its reorganization plan, Reuters reported on Friday. The Reader's Digest Association Inc. and its affiliates filed for chapter 11 protection for the second time in less than four years in February, citing a greater-than-expected decline in the media industry. The publisher, which had earlier filed for bankruptcy in 2009, will see its debt reduced by more than 80 percent to about $100 million under the restructuring plan, the company said. It will also convert about $465 million of secured notes to equity.
Orchard Supply Hardware Stores Corp., the operator of 91 hardware stores with a $205 million offer from Lowe’s Cos. for at least 60 of them, won court approval to hold going-out-of-business sales at eight underperforming stores and potentially another 22, Bloomberg News reported on Friday. Bankruptcy Judge Christopher Sontchi at a hearing on Friday approved the company’s agreement with liquidator Great American Group, which yesterday won an auction for the right to run the store closing sales. A joint venture of liquidators Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC made an initial offer for a 74 percent recovery on assets to be sold, according to court papers.
Cengage Learning Inc., the struggling textbook publisher owned by private-equity firm Apax Partners, is preparing to file for bankruptcy protection in the coming days, the Wall Street Journal reported today. Cengage, which employs about 5,400 people, is currently negotiating a pre-packaged bankruptcy restructuring with senior creditors to rework more than $4 billion in debt, and plans to seek chapter 11 court protection by July 5. Cengage plans to skip a $225 million debt payment due that day. Apax also holds roughly $800 million in Cengage debt alongside a host of other investment firms, and will likely share ownership of the company after it emerges from bankruptcy proceedings.
U.S. companies would have to regularly assess their ability to continue as a going concern under a proposal issued yesterday by accounting rule-makers, an attempt to ensure investors get timelier warnings when companies get in trouble, Reuters reported yesterday. The proposal from the U.S. Financial Accounting Standards Board calls for companies to evaluate each quarter their ability to survive as a going concern, or stay afloat and pay its obligations. Currently, the company's auditors are primarily responsible for making this evaluation. Under the proposal, the company would have to issue its own warnings to investors when it is more likely than not that it would fail to meet its obligations over the next 12 months. Auditors would still be responsible for evaluating the company's going concern assessments. FASB is seeking comment on the proposal through September 24. It did not give an estimate for an effective date.
Bankruptcy Judge Martin Glenn yesterday approved a settlement in which the U.S. government-owned Ally Financial Inc., formerly the finance arm of General Motors Co., will pay $2.1 billion to its bankrupt unit Residential Capital LLC, Reuters reported. Judge Glenn also said that he will unseal a report by a bankruptcy examiner probing Ally's role in ResCap's collapse. The report had been sealed as the parties hashed out a settlement. The deal is a key step in ResCap's eventual exit from chapter 11 protection. The settlement also will help Ally focus on its core business of auto lending and on repaying the U.S. government roughly $10 billion outstanding on a $17 billion loan for a bailout during the financial crisis.
Pfizer Inc.’s non-operating Quigley Co. can end almost nine years in bankruptcy under a plan that will resolve most asbestos claims against the world’s largest drugmaker and its former maker of insulation products, Bloomberg News reported yesterday. Bankruptcy Judge Stuart Bernstein yesterday approved a chapter 11 plan under which Pfizer will contribute assets worth $964 million. He rejected a prior plan almost three years ago, saying that Pfizer was improperly using Quigley’s bankruptcy to shield itself from asbestos claims.
Residential Capital LLC, the bankrupt former mortgage company, will ask a judge today to approve a $2.1 billion deal with its parent Ally Financial Inc. before unveiling a report into the disputes they settled, Bloomberg News reported today. The companies and their allies among ResCap’s creditors will be in federal court in Manhattan, seeking approval of a plan support agreement that requires them to back the proposed deal. If Bankruptcy Judge Martin Glenn makes public an $80 million investigative report about ResCap’s pre-bankruptcy relationship with Ally too early, the deal could fall apart, the companies say. The settlement, reached last month, helps Ally move closer to repaying a U.S. bailout by dodging lawsuits and other claims that ResCap creditors said could be as much as $25 billion.
Federal Reserve Bank of Dallas President Richard Fisher said an implicit government guarantee for the biggest U.S. banks is an “injustice” that prompts them to take excessive risks and that they should be allowed to fail, Bloomberg News reported yesterday. The largest financial firms should be restructured so each of their units “is subject to a speedy bankruptcy process,” and creditors should be notified their investments won’t be guaranteed by the government, Fisher said in testimony prepared for a House Financial Services Committee hearing today on the risk of taxpayer-funded bailouts for banks. Fisher reiterated his view that the government should break up the biggest institutions to safeguard the financial system. He is one of the central bank’s most vocal critics of the “too-big-to-fail” advantage he says large firms have over smaller rivals. In Fisher’s view, the 2010 Dodd-Frank Act hasn’t fixed a system in which the biggest banks are “seen as critical to the proper functioning of our economy” and deserve rescues.