Shutterfly Inc., the online photo-sharing service, sued bankrupt Eastman Kodak Co., accusing it of violating a noncompetition agreement included in the sale of its Kodak Gallery business, Bloomberg News reported on Friday. A Kodak service called My Kodak Moments, which allows users to create photo books and order prints from their smartphones, is "explicitly prohibited" under the agreement, Shutterfly said in a complaint filed in bankruptcy court on Friday. Shutterfly, based in Redwood City, Calif., last year agreed to buy Kodak Gallery, another online photo-sharing business, for $23.8 million. Kodak Gallery competed with Shutterfly, and a "significant driver" of the purchase price was the noncompete agreement, Shutterfly said in its court filing.
Otelco Inc., a local exchange carrier based in Oneonta, Ala., filed for chapter 11 protection after losing a contract with Time Warner Cable Inc., which resulted in lower revenue, Bloomberg News reported yesterday. Otelco listed assets of $168 million and debt of $310 million in the chapter 11 documents filed on Saturday. Otelco won support of creditors for a debt restructuring plan prior to the filing, the company said. Under the proposal, which must be approved by the bankruptcy court, Otelco will cut its long-term debt by half to $135 million from $271 million with secured creditors swapping current debt for new debt and shares in the company. Subordinated note holders will receive 92.5 percent of Class A shares in the company, Otelco said.
Ormet Corp., the operator of an Ohio aluminum smelter, won court approval to hold an auction to sell virtually all its assets, with an affiliate of lender Wayzata Investment Partners LLC making the lead bid, Bloomberg News reported yesterday. Bankruptcy Judge Mary Walrath approved the procedures that will govern the auction process and also granted the company final approval of a $90 million loan from Wayzata and Wells Fargo Capital Finance LLC, according to court documents. Wayzata is providing $30 million and Wells Fargo the remaining $60 million. Ormet will hold an auction on May 13 to see if there are any potential buyers willing to top Wayzata’s stalking-horse offer of about $221 million in debt forgiveness, court filings show. The case is In re Ormet Corp., 13-bk-10334, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Edison Mission Energy won bankruptcy court approval to pay a group of top executives up to $41 million in incentive bonuses, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Jacqueline P. Cox of the U.S. Bankruptcy Court on Wednesday signed off on the energy company's bonus plans for 47 senior executives. The judge last month had approved several bonus plans worth about $20 million for more than 1,000 of the company's rank-and-file and unionized employees.
RDA Holding Co., the publisher of Reader’s Digest magazine, won final court approval to borrow $105 million from a group of lenders while it reorganizes in bankruptcy protection, Bloomberg News reported yesterday. The debtor-in-possession loan arranged by a Wells Fargo & Co. unit was approved yesterday by Bankruptcy Judge Robert Drain. The 91-year-old publisher filed for chapter 11 protection on Feb. 17, the second such filing in four years, in a bid to shed debt as consumers shift to electronic media. The company had reached a restructuring deal with its secured lender and more than 70 percent of its secured noteholders to convert $465 million of senior notes into equity in the company.
Journal Register Co., a newspaper publisher in bankruptcy for a second time, won court approval to sell its assets to an affiliate of its current owner in exchange for $114 million in secured debt and about $6 million in cash, Bloomberg News reported yesterday. Bankruptcy Judge Stuart Bernstein yesterday overruled a union, part of the Communications Workers of America, that had objected to the deal with the buyer, 21st CMH Acquisition Corp. "In light of [the] fact that the transaction will not close until after the termination of the collective bargaining agreements, the court overrules the unions’ objection," Judge Bernstein said in his written ruling. The union contract expires on March 31.
Auto lender Ally Financial Inc.'s banking unit said it would sell its remaining mortgage servicing rights portfolio to online lender Quicken Loans Inc. for about $280 million, Reuters reported yesterday. Ally, which is 74 percent-owned by the U.S. government after a series of bailouts, has been exiting the mortgage business as part of a plan to focus on auto lending and Internet banking. Detroit-based Quicken is buying collection rights on $34 billion of non-delinquent Freddie Mac and Fannie Mae mortgages. Quicken, which has a $90 billion mortgage servicing portfolio, said that it would become a top-10 servicer after the purchase.
Bankruptcy Judge Martin Glenn said yesterday that Residential Capital LLC should try to negotiate a new foreclosure-review process with federal regulators before seeking a bankruptcy court order to halt the $300 million program, Bloomberg News reported yesterday. Judge Glenn said that he would not rule immediately on the company's request to suspend its obligation to find any damages suffered by borrowers who went through foreclosure. ResCap, through its GMAC Mortgage unit, agreed to the review under a settlement with U.S. regulators before filing for bankruptcy last year. The review, which may cost about $300 million, is a waste of money because a new federal policy allows a lump-sum payment to be split among borrowers, a lawyer for ResCap said today. That would be cheaper than paying PricewaterhouseCoopers LLP to conduct the review, the company said.
Documents in 12 major asbestos-related bankruptcies could be unsealed for the first time next month in a novel bid by a manufacturer to bolster its defense against a barrage of claims that its products caused deadly cancer and mesothelioma, Reuters reported yesterday. Garlock Sealing Technologies LLC won access to lists of clients of plaintiffs' attorneys after a federal judge in Delaware on March 1 reversed a bankruptcy court judge who kept the documents from the public. The bankruptcies include Pittsburgh Corning Corp., W.R. Grace & Co., Kaiser Aluminum Corp. and nine others. Law firms that opposed opening the records called the volume of material "staggering" and "of almost unprecedented scope." The order by Delaware District Court Judge Leonard Stark comes amid a push in Congress and state legislatures for greater transparency in the multibillion-dollar world of asbestos litigation, which critics say carries great potential for fraud. Garlock filed for bankruptcy in 2010 under a mounting number of lawsuits claiming the asbestos in its sealants caused deadly cancer and other diseases. It is currently trying to estimate the size of its asbestos liability, which will likely lead to the creation of a trust to pay claimants over the coming years. Garlock hopes the documents from the bankruptcy cases will help to limit the amount of money needed to provide compensation.
To read the bill text of H.R. 982, the "Furthering Asbestos Claim Transparency (FACT) Act of 2013,” please click here. To read the prepared testimony from the House Judiciary Committee's March 13 hearing on the bill, please click here.
Energy Future Holdings Corp., the power company that went private in a record $45 billion buyout only to say last month that it could go bankrupt, is facing a new headache as a unit's creditors have filed a $725 million lawsuit to recover unpaid interest, Reuters reported yesterday. Affiliates of the hedge fund Aurelius Capital Management LP sued seven current and former Energy Future Competitive Holdings Ltd directors, saying that they improperly let the parent once known as TXU Corp. be repaid billions of dollars of fraudulent intra-company loans without ensuring full payment to creditors. Aurelius accused Energy Future Chief Executive John Young and the other directors of showing a "demonstrated indifference" to creditors stemming in part from conflicts of interest, and said that these directors should pay the interest owed.
