Original Story: forbes.com
As the prospects of bankruptcy for American Apparel have shifted from “if” to “when,” the company is faced with mounting legal baggage. A bankruptcy filing would automatically pause all lawsuits against the company, but its docket has grown in recent months with complaints from vendors, employees, shareholders and its infamous former CEO, Dov Charney – himself the target of a series of sexual harassment suits. A Toledo bankruptcy lawyer is reviewing the details of this case.
Last week, the New York Stock Exchange notified the company that it is at risk of being delisted from the exchange. The company has until November 15 to come into compliance with listing standards, but will likely be in bankruptcy court before then. American Apparel is ironing out the preliminary details of a restructuring plan that would see it skip a $14 million coupon payment due October 15 and use the 30-day grace period to drum up revenues during its pivotal Halloween shopping period before filing for Chapter 11, sources have told Debtwire.
Outside the small world of lawyers and bankers who have long eyed a restructuring for the company, American Apparel is as well known for Charney’s antics as it is for its clothing. A 2004 Jane magazine profile described Charney repeatedly masturbating in front of its reporter during interviews, and other stories followed that Charney referred to women as “sluts” and demanded that his store managers fire “ugly” employees. Lawsuits followed, alleging sexual harassment against many of the company’s female employees. A Boston M&A lawyer represents business clients in company restructuring and acquisitions.
American Apparel’s board of directors ousted Charney as chairman in June 2014, with cause – accusing him of refusing to take sexual harassment training and using company funds as hush money for former employees. The board highlighted the mounting legal expenses the company faced while defending lawsuits aimed at Charney, and said that potential financing sources would not deal with the company while Charney was involved.
Following his dismissal, Charney pursued a hostile takeover of American Apparel, reaching a deal with hedge fund Standard General to increase its hold on the company’s stock to 43% and potentially prop up Charney to retake control of the company. This May, a group led by Eliana Gil Rodriguez, a former American Apparel employee and friend of Charney’s, sued the company in Delaware claiming that the board had concealed a plot to fire Charney after its reelection in June 2014 by issuing false and misleading statements.
But the alliance of Charney and Standard General was short-lived, as Charney filed a suit in June accusing Standard General and American Apparel of conspiring to remove him from the company. The hedge fund filed a lawsuit in July claiming that Charney had not met the financial conditions of the deal.
In September, American Apparel shareholders sued Standard General and board member Joseph Magnacca, the former CEO of RadioShack, claiming that the hedge fund is using the same vulture tactics on American Apparel that it used when it bought RadioShack debt to keep the company out of Chapter 11 before acquiring half its stores in bankruptcy. American Apparel’s shareholders claim that Magnacca and Standard General are too entangled, with Magnacca allegedly texting Standard General’s leader that he would be “anyplace anytime” for the hedge fund.
Vendor The Knit House Corp also sued the company last month, seeking $53,667 it claims was never paid on a fabric merchandise agreement. In June, BSG Tech LLC sued the company for infringement of its sound technology patents. More than 200 employees filed a class action against the company in April, claiming that they were laid off without proper legal notice. A Minneapolis class action lawyer is experienced in the effective resolution of class actions lawsuits as related to damage inflicted upon groups of people.
As bankruptcy fast approaches, shareholders are going after Standard General and Magnacca, Standard General and Charney are pursuing each other following their breakup, and Charney at this point is on no one’s team while he continues to make noise. Now Charney’s declaration of good faith at the time of his joining with Standard General has an ironic echo as the family drama comes under the jurisdiction of a bankruptcy judge. A Kansas City bankruptcy lawyer is following this story closely.
“The least important thing was me,” Charney said at the time. “I know that will be dealt with fairly later.”
Showing posts with label Bankruptcy. Show all posts
Showing posts with label Bankruptcy. Show all posts
Tuesday, October 6, 2015
Tuesday, July 28, 2015
DOCTORS HOSPITAL IN PONTIAC FILES FOR BANKRUPTCY AGAIN
Original Story: freep.com
One of the region's last independent hospitals has filed for bankruptcy but plans to stay open.
The physician-owned Doctors Hospital of Michigan in Pontiac listed debts between $10 million and $50 million in its Chapter 11 petition filed this week in U.S. Bankruptcy Court in Detroit. A Detroit business bankruptcy attorney is reviewing the details of this case.
It is the second bankruptcy declaration in a decade for the struggling 105-year-old hospital, which was known as North Oakland Medical Centers during its last bankruptcy in 2008. Years earlier, it was called Pontiac General Hospital.
Hospital officials said Friday that their hospital is losing money and weighed down by debt that the business inherited as part of the hospital's 2008 sale to a private physicians' group. Flint-based McLaren Health Care system was a minority partner in that deal; McLaren's stake was bought out three years later by a group of 42 doctors.
The hospital's single off-site location, Waterford Ambulatory Care Center, closed earlier this month due to "cash-flow constraints" but could reopen in the future, said attorney Max Newman of Butzel Long, who is representing Doctors Hospital.
Doctors Hospital itself remains open and there are no plans to close, said hospital CEO John Ponczocha,
Hospital officials say they hope to reorganize the business's finances in bankruptcy so that it can potentially continue as an independent hospital. The hospital has about 200 full-time-equivalent employees.
"There's a number of potentials here," Newman said. "It could be purchased, it could merge with somebody. But at this point, the effort is going to be primarily to keep it running as a standalone entity."
The bankruptcy filing lists Wisconsin Physicians Service Insurance Co. as the hospital's largest creditor with about $6.4 million. Long said there are also significant loans from hospital insiders which are outstanding but not on the list. A Detroit hospital litigation attorney is following this story closely.
There are few independent hospitals left in southeast Michigan. Several formerly independent hospitals have been absorbed into larger systems, including Garden City Hospital (now a part of for-profit Prime Healthcare Services) and Mercy Memorial Hospital in Monroe (now part of the nonprofit ProMedica Health System).
Another independent hospital, Crittenton Hospital in Rochester, has a pending deal to join the St. Louis-based Ascension Health system.
Doctors Hospital of Michigan
• Original hospital dates to 1910
• Formerly known as North Oakland Medical Centers and Pontiac General Hospital
• Currently owned by a physicians group and is for-profit.
• Has about 200 full-time-equivalent employees
• Last filed for bankruptcy in 2008
One of the region's last independent hospitals has filed for bankruptcy but plans to stay open.
The physician-owned Doctors Hospital of Michigan in Pontiac listed debts between $10 million and $50 million in its Chapter 11 petition filed this week in U.S. Bankruptcy Court in Detroit. A Detroit business bankruptcy attorney is reviewing the details of this case.
It is the second bankruptcy declaration in a decade for the struggling 105-year-old hospital, which was known as North Oakland Medical Centers during its last bankruptcy in 2008. Years earlier, it was called Pontiac General Hospital.
Hospital officials said Friday that their hospital is losing money and weighed down by debt that the business inherited as part of the hospital's 2008 sale to a private physicians' group. Flint-based McLaren Health Care system was a minority partner in that deal; McLaren's stake was bought out three years later by a group of 42 doctors.
The hospital's single off-site location, Waterford Ambulatory Care Center, closed earlier this month due to "cash-flow constraints" but could reopen in the future, said attorney Max Newman of Butzel Long, who is representing Doctors Hospital.
Doctors Hospital itself remains open and there are no plans to close, said hospital CEO John Ponczocha,
Hospital officials say they hope to reorganize the business's finances in bankruptcy so that it can potentially continue as an independent hospital. The hospital has about 200 full-time-equivalent employees.
"There's a number of potentials here," Newman said. "It could be purchased, it could merge with somebody. But at this point, the effort is going to be primarily to keep it running as a standalone entity."
The bankruptcy filing lists Wisconsin Physicians Service Insurance Co. as the hospital's largest creditor with about $6.4 million. Long said there are also significant loans from hospital insiders which are outstanding but not on the list. A Detroit hospital litigation attorney is following this story closely.
There are few independent hospitals left in southeast Michigan. Several formerly independent hospitals have been absorbed into larger systems, including Garden City Hospital (now a part of for-profit Prime Healthcare Services) and Mercy Memorial Hospital in Monroe (now part of the nonprofit ProMedica Health System).
Another independent hospital, Crittenton Hospital in Rochester, has a pending deal to join the St. Louis-based Ascension Health system.
Doctors Hospital of Michigan
• Original hospital dates to 1910
• Formerly known as North Oakland Medical Centers and Pontiac General Hospital
• Currently owned by a physicians group and is for-profit.
• Has about 200 full-time-equivalent employees
• Last filed for bankruptcy in 2008
Friday, December 12, 2014
SOURCE: FIRMS WILL CUT BANKRUPTCY FEES UNDER DEAL
Original Story: detroitnews.com
The city could have millions more to spend on services, now that firms that helped Detroit through its historic bankruptcy agreed Thursday to reduce their legal and consulting fees.
After more than a week of negotiations with federal mediators, the law firm Jones Day and the investment firm Miller Buckfire agreed to make “significant concessions” on fees, a source briefed on the talks told The Detroit News. Other firms that have billed the city for bankruptcy-related services also agreed to reduce their bills. It’s not yet clear how much each firm cut back. Detroit Lawyers have experience assisting clients in bankruptcy and restructuring cases.
The source said only that the overall money saved — about $25 million — would pay for a lot of police, firefighters and equipment for Detroit.
Details of the deals are expected to be made public Monday during a status conference before U.S. Bankruptcy Judge Steven Rhodes. The judge must approve the agreements.
The person briefed on the discussions told The News the amount of savings to the city may depend on how savings are defined. As one of Detroit's best law firms, Butzel Long attorneys have helped debtors, creditors, official and unofficial creditor and equity holder committees and acquirers.
Some of the companies, the source explained, cut fees, some gave back as “in kind” contributions and others agreed to not seek payment for future services from firms that Detroit will continue to use after the bankruptcy.
Mayor Mike Duggan has expressed concern escalating legal fees — which he said could climb to $177 million — would eat up money needed to revitalize the city.
Detroit Corporation Counsel Melvin “Butch” Hollowell said Thursday that the city is “pleased” with the mediation process, and thanked Chief U.S. District Judge Gerald Rosen and the federal mediation team.
“We will make no further comments until the status conference on Monday, or the court releases us from the mediation confidentiality,” Hollowell said.
Before the deals were reached, federal mediators held at least four formal sessions over the reasonableness of more than $140 million in fees billed to Detroit by its bankruptcy lawyers and restructuring consultants. The team held talks with about a dozen firms, while the city held earlier talks with about a dozen smaller firms to reach settlements.
The city’s lawyers and consultants pointed out during mediation they had already made significant concessions on fees.
By late October, Jones Day had charged Detroit $52.3 million.
Miller Buckfire renegotiated its contract with the city twice, most recently in June. In the newest contract, the firm was to receive a flat fee of $28 million for all of its services. Prior to revising its contract, the firm had already given the city a discounted rate, according to former Emergency Manager Kevyn Orr’s office.
The resolution comes one day after Detroit’s official exit from bankruptcy. Orr told The News on Wednesday that some administrative matters still need to be wrapped up, and that the legal fee mediation would not affect the exit date.
The mediation team, in a statement released Thursday, noted that representatives for the firms, Orr and Snyder — along with Duggan, City Council members and the city’s top attorney — “fully and vigorously” participated in the discussions.
“Their agreements reflect what the mediators hope will be their final work in the Detroit bankruptcy,” the statement reads. “As we have been from the inception of our work, the mediators are privileged and proud to have played a role not only in these agreements, but in all of the agreements that have led to the expeditious and successful resolution of the Detroit bankruptcy in which the city has been able to resolve its disputes with virtually all of its creditors and professional service providers on a consensual basis.” As one of Detroit's biggest law firms, Butzel Long has represented clients in every aspect of in-court and out-of-court restructurings.
On Wednesday, the mayor noted that the role of consultants in the city will be “dramatically reduced” as full-time employees are brought in to take over.
“All of the consultants are being phased out pretty quickly,” he said.
Orr, a former Jones Day attorney, told The News on Wednesday that the fees may seem high, but he said he didn’t believe they were out of line for a case of Detroit’s magnitude.
The bankruptcy allowed the city to shed $7 billion in debt and to restructure another $3 billion, he said.
“I’m sensitive to the fact that the fees are high. But everyone says this is a historical, outstanding result. Some mediators even called it miraculous,” Orr said. “You have to recognize there’s a cost to getting that kind of result in this time frame to deal with 50 years of issues.”
The city could have millions more to spend on services, now that firms that helped Detroit through its historic bankruptcy agreed Thursday to reduce their legal and consulting fees.
After more than a week of negotiations with federal mediators, the law firm Jones Day and the investment firm Miller Buckfire agreed to make “significant concessions” on fees, a source briefed on the talks told The Detroit News. Other firms that have billed the city for bankruptcy-related services also agreed to reduce their bills. It’s not yet clear how much each firm cut back. Detroit Lawyers have experience assisting clients in bankruptcy and restructuring cases.
The source said only that the overall money saved — about $25 million — would pay for a lot of police, firefighters and equipment for Detroit.
Details of the deals are expected to be made public Monday during a status conference before U.S. Bankruptcy Judge Steven Rhodes. The judge must approve the agreements.
The person briefed on the discussions told The News the amount of savings to the city may depend on how savings are defined. As one of Detroit's best law firms, Butzel Long attorneys have helped debtors, creditors, official and unofficial creditor and equity holder committees and acquirers.
Some of the companies, the source explained, cut fees, some gave back as “in kind” contributions and others agreed to not seek payment for future services from firms that Detroit will continue to use after the bankruptcy.
Mayor Mike Duggan has expressed concern escalating legal fees — which he said could climb to $177 million — would eat up money needed to revitalize the city.
Detroit Corporation Counsel Melvin “Butch” Hollowell said Thursday that the city is “pleased” with the mediation process, and thanked Chief U.S. District Judge Gerald Rosen and the federal mediation team.
“We will make no further comments until the status conference on Monday, or the court releases us from the mediation confidentiality,” Hollowell said.
Before the deals were reached, federal mediators held at least four formal sessions over the reasonableness of more than $140 million in fees billed to Detroit by its bankruptcy lawyers and restructuring consultants. The team held talks with about a dozen firms, while the city held earlier talks with about a dozen smaller firms to reach settlements.
The city’s lawyers and consultants pointed out during mediation they had already made significant concessions on fees.
By late October, Jones Day had charged Detroit $52.3 million.
Miller Buckfire renegotiated its contract with the city twice, most recently in June. In the newest contract, the firm was to receive a flat fee of $28 million for all of its services. Prior to revising its contract, the firm had already given the city a discounted rate, according to former Emergency Manager Kevyn Orr’s office.
The resolution comes one day after Detroit’s official exit from bankruptcy. Orr told The News on Wednesday that some administrative matters still need to be wrapped up, and that the legal fee mediation would not affect the exit date.
The mediation team, in a statement released Thursday, noted that representatives for the firms, Orr and Snyder — along with Duggan, City Council members and the city’s top attorney — “fully and vigorously” participated in the discussions.
“Their agreements reflect what the mediators hope will be their final work in the Detroit bankruptcy,” the statement reads. “As we have been from the inception of our work, the mediators are privileged and proud to have played a role not only in these agreements, but in all of the agreements that have led to the expeditious and successful resolution of the Detroit bankruptcy in which the city has been able to resolve its disputes with virtually all of its creditors and professional service providers on a consensual basis.” As one of Detroit's biggest law firms, Butzel Long has represented clients in every aspect of in-court and out-of-court restructurings.
On Wednesday, the mayor noted that the role of consultants in the city will be “dramatically reduced” as full-time employees are brought in to take over.
“All of the consultants are being phased out pretty quickly,” he said.
Orr, a former Jones Day attorney, told The News on Wednesday that the fees may seem high, but he said he didn’t believe they were out of line for a case of Detroit’s magnitude.
The bankruptcy allowed the city to shed $7 billion in debt and to restructure another $3 billion, he said.
“I’m sensitive to the fact that the fees are high. But everyone says this is a historical, outstanding result. Some mediators even called it miraculous,” Orr said. “You have to recognize there’s a cost to getting that kind of result in this time frame to deal with 50 years of issues.”
Thursday, September 11, 2014
REST OF DETROIT'S CREDITORS FEELING HEAT
Original Story: Detroitnews.com
Detroit —Federal mediators will try to broker a series of deals Thursday that could piggyback on a breakthrough settlement in hopes of ending the city’s bankruptcy case.
Chief U.S. District Judge Gerald Rosen, lead mediator in the city’s bankruptcy case, on Wednesday ordered Detroit’s legal team and lawyers representing financial creditors to attend closed-door negotiations today in federal court.
The talks carry added significance since U.S. Bankruptcy Judge Steven Rhodes on Wednesday halted the city’s bankruptcy trial until Monday to give Detroit and creditors time to negotiate an end to the biggest municipal bankruptcy in U.S. history.
The city’s fiercest holdout creditor, bond insurer Syncora Guarantee Inc., meanwhile, reflected on the last-minute deal that turns the firm and Detroit from adversaries into partners in a hoped-for recovery.
“It is interesting and ironic that we are both part of Detroit’s future,” Syncora attorney Stephen Hackney said Wednesday. “It feels better to be loving rather than fighting.”
The fight lasted 14 months. During that time, Syncora fought to liquidate the city’s art collection, tried to block repairs to miles of broken streetlights and leveled a “blistering” personal attack on federal mediators that drew a rebuke from the judge.
Syncora’s strategy, Hackney said, wasn’t to target the Detroit Institute of Arts collection in hopes of loosening the city’s grip on less high-profile and cherished assets, including a parking garage in Grand Circus Park and the Detroit-Windsor tunnel.
“I can’t say we’re that Machiavellian,” Hackney said, “or smart.”
Under the deal, the city agreed to extend a lease of the Detroit-Windsor tunnel with a Syncora-controlled firm for 20 years. Syncora also gets to lease a city-owned parking lot underneath Grand Circus Park for 30 years, according to a city term sheet released Wednesday. The package of incentives is worth about $70 million, according to a source familiar with the deal.
In return, Syncora has pledged to help Detroit fight bond insurer Financial Guaranty Insurance Co., which is still objecting to Detroit’s debt-cutting plan.
Syncora and FGIC were two of the biggest opponents in the bankruptcy trial. Both firms claim the city’s debt-cutting plan pays them as little as 6 cents on the dollar for the $1.4 billion in troubled pension debt they insured to help former Mayor Kwame Kilpatrick prop up the city's pension funds in 2005.
$1.1 billion in claims
FGIC has claims of more than $1.1 billion — three times the size of Syncora’s. The firm’s negotiators walked out of closed-door talks with the city two weeks ago.
In a statement Wednesday, FGIC said the firm remains open to a good-faith settlement following the Syncora deal.
“The latest deal reinforces our view that the city has abundant sources of incremental value available ...,” the company said. “However the issue at hand is their willingness to distribute this value fairly and equitabl y...”
Matt Fabian, managing director of Municipal Market Advisors, an independent bond research firm, says getting agreements with either or both Syncora and FGIC will be instrumental in getting Detroit’s bankruptcy resolved.
Syncora, he noted, is in the same creditor class as FGIC, which would have to be awarded a value that’s comparable.
“The city probably has an idea of what that will be,” he said, adding otherwise they likely wouldn’t have signed with Syncora. “I’m assuming they have some type of plan to offer FGIC.”
Fabian added agreements are critical to shortening the trial and minimizing the follow up litigation that could result from it.
“Syncora and FGIC have made pretty good cases,” he said. “They might be right, they might be wrong. But they can drag things out. It’s important to get them onto the side of settlers.”
City bankruptcy attorney Heather Lennox told Rhodes on Wednesday that Detroit will need to file an updated debt-cutting plan that will incorporate the Syncora deal.
“We don’t expect the changes to be extensive in terms of verbiage, but will be significant in terms of settlement,” Lennox said.
Syncora’s new allowed claim is $201.5 million, down from about $400 million. In all, Syncora boosted its recovery from 6 cents on the dollar to roughly 26 cents on the dollar, sources said.
Rhodes, however, has rejected other settlements during the bankruptcy case and forced Detroit to strike less generous deals. He must approve the Syncora deal. The Detroit City Council also must approve the real estate transactions with Syncora.
Untangling past deals
Thursday’s closed-door negotiations will likely focus on untangling the Kilpatrick-era pension deal.
Detroit has been trying to get the entire $1.4 billion in debt Syncora and FGIC insured wiped from its balance sheet, claiming the debt illegally exceeded the city’s statutory borrowing limits. But the city made contingency plans to pay only $162 million if Rhodes found the debt scheme to be legal.
If Rhodes were to wipe out the debt, the city proposed splitting the proceeds of the $162 million fund, with 65 percent going to retiree health insurance, 20 percent going to limited general obligation bondholders and the remainder parceled off for other unsecured creditors.
The deal calls for Syncora to get $23.5 million from the $162 million pool of settlement funds.
Syncora wants banking giants UBS AG and Bank of America to drop their pursuit of a nearly $200 million insurance claim against Syncora tied to the troubled pension debt.
Syncora has signaled its deal with the city hinges on getting the banks, retirees and bondholders to forgo a potentially better recovery of what they’re owed, a likely topic of negotiation in mediation .
“(The break) will be useful to work on definitive documentation and allow the other parties to reassess their path forward in light of these recent developments,” city bankruptcy lawyer Thomas Cullen said.
The morning after Syncora reached its deal, the firm’s lawyer Ryan Bennett said the proposed settlement would ensure that Syncora-owned American Roads, the parent company of Detroit Windsor Tunnel LLC, would keep its headquarters and workforce of 100 in the city and “expand its presence in Detroit.”
If Syncora’s deal with the city is approved, Bennett said, it will not only provide Syncora with recovery on the swaps claim, but spur investments in city properties. The deal requires Syncora to make $13.5 million in upgrades over five years to the Grand Circus parking garage.
If the settlement goes through, Bennett said, Syncora will “stand down” and “come over and support the city.”
Detroit —Federal mediators will try to broker a series of deals Thursday that could piggyback on a breakthrough settlement in hopes of ending the city’s bankruptcy case.
Chief U.S. District Judge Gerald Rosen, lead mediator in the city’s bankruptcy case, on Wednesday ordered Detroit’s legal team and lawyers representing financial creditors to attend closed-door negotiations today in federal court.
The talks carry added significance since U.S. Bankruptcy Judge Steven Rhodes on Wednesday halted the city’s bankruptcy trial until Monday to give Detroit and creditors time to negotiate an end to the biggest municipal bankruptcy in U.S. history.
The city’s fiercest holdout creditor, bond insurer Syncora Guarantee Inc., meanwhile, reflected on the last-minute deal that turns the firm and Detroit from adversaries into partners in a hoped-for recovery.
“It is interesting and ironic that we are both part of Detroit’s future,” Syncora attorney Stephen Hackney said Wednesday. “It feels better to be loving rather than fighting.”
The fight lasted 14 months. During that time, Syncora fought to liquidate the city’s art collection, tried to block repairs to miles of broken streetlights and leveled a “blistering” personal attack on federal mediators that drew a rebuke from the judge.
Syncora’s strategy, Hackney said, wasn’t to target the Detroit Institute of Arts collection in hopes of loosening the city’s grip on less high-profile and cherished assets, including a parking garage in Grand Circus Park and the Detroit-Windsor tunnel.
“I can’t say we’re that Machiavellian,” Hackney said, “or smart.”
Under the deal, the city agreed to extend a lease of the Detroit-Windsor tunnel with a Syncora-controlled firm for 20 years. Syncora also gets to lease a city-owned parking lot underneath Grand Circus Park for 30 years, according to a city term sheet released Wednesday. The package of incentives is worth about $70 million, according to a source familiar with the deal.
In return, Syncora has pledged to help Detroit fight bond insurer Financial Guaranty Insurance Co., which is still objecting to Detroit’s debt-cutting plan.
Syncora and FGIC were two of the biggest opponents in the bankruptcy trial. Both firms claim the city’s debt-cutting plan pays them as little as 6 cents on the dollar for the $1.4 billion in troubled pension debt they insured to help former Mayor Kwame Kilpatrick prop up the city's pension funds in 2005.
$1.1 billion in claims
FGIC has claims of more than $1.1 billion — three times the size of Syncora’s. The firm’s negotiators walked out of closed-door talks with the city two weeks ago.
In a statement Wednesday, FGIC said the firm remains open to a good-faith settlement following the Syncora deal.
“The latest deal reinforces our view that the city has abundant sources of incremental value available ...,” the company said. “However the issue at hand is their willingness to distribute this value fairly and equitabl y...”
Matt Fabian, managing director of Municipal Market Advisors, an independent bond research firm, says getting agreements with either or both Syncora and FGIC will be instrumental in getting Detroit’s bankruptcy resolved.
Syncora, he noted, is in the same creditor class as FGIC, which would have to be awarded a value that’s comparable.
“The city probably has an idea of what that will be,” he said, adding otherwise they likely wouldn’t have signed with Syncora. “I’m assuming they have some type of plan to offer FGIC.”
Fabian added agreements are critical to shortening the trial and minimizing the follow up litigation that could result from it.
“Syncora and FGIC have made pretty good cases,” he said. “They might be right, they might be wrong. But they can drag things out. It’s important to get them onto the side of settlers.”
City bankruptcy attorney Heather Lennox told Rhodes on Wednesday that Detroit will need to file an updated debt-cutting plan that will incorporate the Syncora deal.
“We don’t expect the changes to be extensive in terms of verbiage, but will be significant in terms of settlement,” Lennox said.
Syncora’s new allowed claim is $201.5 million, down from about $400 million. In all, Syncora boosted its recovery from 6 cents on the dollar to roughly 26 cents on the dollar, sources said.
Rhodes, however, has rejected other settlements during the bankruptcy case and forced Detroit to strike less generous deals. He must approve the Syncora deal. The Detroit City Council also must approve the real estate transactions with Syncora.
Untangling past deals
Thursday’s closed-door negotiations will likely focus on untangling the Kilpatrick-era pension deal.
Detroit has been trying to get the entire $1.4 billion in debt Syncora and FGIC insured wiped from its balance sheet, claiming the debt illegally exceeded the city’s statutory borrowing limits. But the city made contingency plans to pay only $162 million if Rhodes found the debt scheme to be legal.
If Rhodes were to wipe out the debt, the city proposed splitting the proceeds of the $162 million fund, with 65 percent going to retiree health insurance, 20 percent going to limited general obligation bondholders and the remainder parceled off for other unsecured creditors.
The deal calls for Syncora to get $23.5 million from the $162 million pool of settlement funds.
Syncora wants banking giants UBS AG and Bank of America to drop their pursuit of a nearly $200 million insurance claim against Syncora tied to the troubled pension debt.
Syncora has signaled its deal with the city hinges on getting the banks, retirees and bondholders to forgo a potentially better recovery of what they’re owed, a likely topic of negotiation in mediation .
“(The break) will be useful to work on definitive documentation and allow the other parties to reassess their path forward in light of these recent developments,” city bankruptcy lawyer Thomas Cullen said.
The morning after Syncora reached its deal, the firm’s lawyer Ryan Bennett said the proposed settlement would ensure that Syncora-owned American Roads, the parent company of Detroit Windsor Tunnel LLC, would keep its headquarters and workforce of 100 in the city and “expand its presence in Detroit.”
If Syncora’s deal with the city is approved, Bennett said, it will not only provide Syncora with recovery on the swaps claim, but spur investments in city properties. The deal requires Syncora to make $13.5 million in upgrades over five years to the Grand Circus parking garage.
If the settlement goes through, Bennett said, Syncora will “stand down” and “come over and support the city.”
DETROIT BANKRUPTCY BREAKTHROUGH: SYNCORA REACHES AGREEMENT WITH CITY ON DEBT
Original Story: Freep.com
The City of Detroit and creditor Syncora have reached an agreement, in principle, that would end the bond insurer’s vigorous opposition to the city’s restructuring and turn the company into an ally, reflecting a remarkable breakthrough in the city’s historic bankruptcy case.
The proposed deal — which came on the same day that Detroit and its suburbs struck a deal for a regional water authority — would leave bond insurer Financial Guaranty Insurance Co. (FGIC) and several hedge funds as the last remaining major creditors preventing an amicable resolution of the largest municipal bankruptcy in U.S. history. A Texas Litigation Lawyer is reviewing the details of this case.
Crucially, the deal is contingent on Syncora and the city convincing UBS and Bank of America to release the insurer from certain interest-rate liabilities that are connected to the $1.4-billion pension debt deal Syncora and FGIC insured.
“There is a tentative agreement between Syncora and the City that we believe is an acceptable resolution for all concerned,” Syncora said in a statement. “We have asked that the trial be delayed for 48 hours so that we can work through certain contingencies contained in the deal, including obtaining full resolution with Bank of America, UBS and other stakeholders. We are hopeful the deal will be finalized in the next 48 hours.”
While the breakthrough could delay the trial until Friday, it could ultimately shorten hearings currently scheduled to go into October.
“I think this is the happiest Kevyn Orr has been in some time,” said John Pottow, a professor at the University of Michigan Law School. “This is a big happy night.”
Syncora would get a total of about 26 cents on the dollar when all elements of the deal are included — up from no more than 10 cents under the city’s current proposal, two people familiar with the deal said Syncora is owed hundreds of millions of dollars.
Bankruptcy Judge Steven Rhodes must still approve the deal.
Pottow said he is surprised at how generous the terms of the agreement are, and predicts that Rhodes will take a close look at the agreement and will likely ask his financial expert to review it. A Boston Bankruptcy Lawyer is reviewing the details of this case.
“It sounds like a lot of money to me,” Pottow said. “If I am a feasibility expert, I will want to know how they found all of this extra money.”
A person familiar with the negotiations who spoke on condition of anonymity said terms of the deal would include giving Syncora control of a city parking garage near Grand Circus for 30 years. The deal also includes a 20-year lease extension of operation of the U.S. part of the Detroit-Windsor Tunnel. The insurer currently controls the U.S. side of the tunnel through a contract that expires in 2020.
Syncora owns the company, American Roads, that operates the tunnel on the city’s behalf. Windsor owns and operates the Canadian side of the tunnel. Proceeds from the lease are around $4 million to $5 million a year. The new lease would go through 2040.
Syncora also would receive $23.5 million in cash through so-called B-notes, bonds Detroit had already floated in the bankruptcy, the person said.
Despite the tentative deal, Bank of America and UBS stand in the way.
Syncora won’t agree to settle with Detroit unless the banks release the insurer from its responsibility to cover the banks’ losses on an $85-million deal brokered in the spring to eliminate a costly swaps deal reached by Kwame Kilpatrick’s administration to secure a steady interest rate on a $1.4-billion debt.
The banks were owed nearly $290 million on the swaps but agreed to take significantly less after Rhodes said the swaps were probably illegal.
If the banks don’t agree to end their legal fight against Syncora, Detroit may still face the insurer in court.
“Once again, the swap banks are standing in the way,” one person familiar with the deal said.
The news comes on the same day the city struck a tentative 40-year deal with Macomb, Oakland and Wayne counties to create a regional water authority that will provide $50 million annually to finance badly needed upgrades and help low-income residents avoid water shutoffs. The two deals represent major breakthroughs toward resolving the city’s $18-billion bankruptcy, the largest in U.S. history.
The city has already reached deals with unions and pensioners, leaving FGIC and the hedge funds as the last big creditor holdout in Detroit’s bankruptcy. There are hundreds of small and objectors and creditors.
Syncora would get a long-term lease on the city’s parking garage beneath Grand Circus Park, which could raise significant funds for the bond insurer, but it also must invest $13 million in upgrades. After it invests for repairs, Syncora would keep the proceeds from running the garage but would eventually give Detroit 25% of the profits. Syncora would also get parking bonds worth $21 million.
Syncora also would get $6.2 million in credits toward purchasing city property and buildings that might go up for sale in the coming years, including Joe Louis Arena. Syncora could use the credits to offset the sale price.
The settlements reflect a significant achievement for the largest municipal bankruptcy that was filed on July 18, 2013. Many thought it would take years to settle. A Baton Rouge Bankruptcy Lawyer represents businesses involved in a wide range of bankruptcy cases.
But several days into the city’s historic bankruptcy trial — after which Rhodes will have the power to approve the plan of adjustment — resolving the dispute with Syncora would be a major breakthrough.
The company has been the city’s most vociferous opponent, decrying Orr’s plan to favor retirees over financial creditors and transfer the Detroit Institute of Arts to an independent trust in exchange for outside funding to reduce pension cuts.
In August, Syncora drew Rhodes’ ire by accusing bankruptcy mediators Gerald Rosen and Eugene Driker of “naked favoritism” on behalf of pensioners. The judge is considering sanctions on Syncora’s attorneys. But a deal could help smooth over the differences.
John Roach, spokesman for Mayor Mike Duggan, said the mayor is declining to comment on the bankruptcy process, which is Orr’s responsibility. Orr’s office also refused to comment Tuesday.
Syncora and FGIC insured a $1.4-billion pension obligation certificates of participation deal brokered by Kilpatrick’s administration in 2005 to eliminate the city’s unfunded pension liabilities.A Tulsa Tax Lawyer is reviewing the details of this case.
Doug Bernstein, a bankruptcy attorney and partner with Plunkett Cooney who represents the outside foundations that helped fund the grand bargain to save the DIA and reduce pension cuts said Rhodes will still want to closely evaluate the bankruptcy plan and decide if it will solve the city’s financial issues after the city emerges from bankruptcy.
“The city still has to get past that feasibility hurdle,” Bernstein said. “The biggest remaining hurdle is feasibility.”
FGIC, as the last remaining major creditor objecting to the plan, will have a tougher time arguing against the plan on its own, Bernstein said.
The City of Detroit and creditor Syncora have reached an agreement, in principle, that would end the bond insurer’s vigorous opposition to the city’s restructuring and turn the company into an ally, reflecting a remarkable breakthrough in the city’s historic bankruptcy case.
The proposed deal — which came on the same day that Detroit and its suburbs struck a deal for a regional water authority — would leave bond insurer Financial Guaranty Insurance Co. (FGIC) and several hedge funds as the last remaining major creditors preventing an amicable resolution of the largest municipal bankruptcy in U.S. history. A Texas Litigation Lawyer is reviewing the details of this case.
Crucially, the deal is contingent on Syncora and the city convincing UBS and Bank of America to release the insurer from certain interest-rate liabilities that are connected to the $1.4-billion pension debt deal Syncora and FGIC insured.
“There is a tentative agreement between Syncora and the City that we believe is an acceptable resolution for all concerned,” Syncora said in a statement. “We have asked that the trial be delayed for 48 hours so that we can work through certain contingencies contained in the deal, including obtaining full resolution with Bank of America, UBS and other stakeholders. We are hopeful the deal will be finalized in the next 48 hours.”
While the breakthrough could delay the trial until Friday, it could ultimately shorten hearings currently scheduled to go into October.
“I think this is the happiest Kevyn Orr has been in some time,” said John Pottow, a professor at the University of Michigan Law School. “This is a big happy night.”
Syncora would get a total of about 26 cents on the dollar when all elements of the deal are included — up from no more than 10 cents under the city’s current proposal, two people familiar with the deal said Syncora is owed hundreds of millions of dollars.
Bankruptcy Judge Steven Rhodes must still approve the deal.
Pottow said he is surprised at how generous the terms of the agreement are, and predicts that Rhodes will take a close look at the agreement and will likely ask his financial expert to review it. A Boston Bankruptcy Lawyer is reviewing the details of this case.
“It sounds like a lot of money to me,” Pottow said. “If I am a feasibility expert, I will want to know how they found all of this extra money.”
A person familiar with the negotiations who spoke on condition of anonymity said terms of the deal would include giving Syncora control of a city parking garage near Grand Circus for 30 years. The deal also includes a 20-year lease extension of operation of the U.S. part of the Detroit-Windsor Tunnel. The insurer currently controls the U.S. side of the tunnel through a contract that expires in 2020.
Syncora owns the company, American Roads, that operates the tunnel on the city’s behalf. Windsor owns and operates the Canadian side of the tunnel. Proceeds from the lease are around $4 million to $5 million a year. The new lease would go through 2040.
Syncora also would receive $23.5 million in cash through so-called B-notes, bonds Detroit had already floated in the bankruptcy, the person said.
Despite the tentative deal, Bank of America and UBS stand in the way.
Syncora won’t agree to settle with Detroit unless the banks release the insurer from its responsibility to cover the banks’ losses on an $85-million deal brokered in the spring to eliminate a costly swaps deal reached by Kwame Kilpatrick’s administration to secure a steady interest rate on a $1.4-billion debt.
The banks were owed nearly $290 million on the swaps but agreed to take significantly less after Rhodes said the swaps were probably illegal.
If the banks don’t agree to end their legal fight against Syncora, Detroit may still face the insurer in court.
“Once again, the swap banks are standing in the way,” one person familiar with the deal said.
The news comes on the same day the city struck a tentative 40-year deal with Macomb, Oakland and Wayne counties to create a regional water authority that will provide $50 million annually to finance badly needed upgrades and help low-income residents avoid water shutoffs. The two deals represent major breakthroughs toward resolving the city’s $18-billion bankruptcy, the largest in U.S. history.
The city has already reached deals with unions and pensioners, leaving FGIC and the hedge funds as the last big creditor holdout in Detroit’s bankruptcy. There are hundreds of small and objectors and creditors.
Syncora would get a long-term lease on the city’s parking garage beneath Grand Circus Park, which could raise significant funds for the bond insurer, but it also must invest $13 million in upgrades. After it invests for repairs, Syncora would keep the proceeds from running the garage but would eventually give Detroit 25% of the profits. Syncora would also get parking bonds worth $21 million.
Syncora also would get $6.2 million in credits toward purchasing city property and buildings that might go up for sale in the coming years, including Joe Louis Arena. Syncora could use the credits to offset the sale price.
The settlements reflect a significant achievement for the largest municipal bankruptcy that was filed on July 18, 2013. Many thought it would take years to settle. A Baton Rouge Bankruptcy Lawyer represents businesses involved in a wide range of bankruptcy cases.
But several days into the city’s historic bankruptcy trial — after which Rhodes will have the power to approve the plan of adjustment — resolving the dispute with Syncora would be a major breakthrough.
The company has been the city’s most vociferous opponent, decrying Orr’s plan to favor retirees over financial creditors and transfer the Detroit Institute of Arts to an independent trust in exchange for outside funding to reduce pension cuts.
In August, Syncora drew Rhodes’ ire by accusing bankruptcy mediators Gerald Rosen and Eugene Driker of “naked favoritism” on behalf of pensioners. The judge is considering sanctions on Syncora’s attorneys. But a deal could help smooth over the differences.
John Roach, spokesman for Mayor Mike Duggan, said the mayor is declining to comment on the bankruptcy process, which is Orr’s responsibility. Orr’s office also refused to comment Tuesday.
Syncora and FGIC insured a $1.4-billion pension obligation certificates of participation deal brokered by Kilpatrick’s administration in 2005 to eliminate the city’s unfunded pension liabilities.A Tulsa Tax Lawyer is reviewing the details of this case.
Doug Bernstein, a bankruptcy attorney and partner with Plunkett Cooney who represents the outside foundations that helped fund the grand bargain to save the DIA and reduce pension cuts said Rhodes will still want to closely evaluate the bankruptcy plan and decide if it will solve the city’s financial issues after the city emerges from bankruptcy.
“The city still has to get past that feasibility hurdle,” Bernstein said. “The biggest remaining hurdle is feasibility.”
FGIC, as the last remaining major creditor objecting to the plan, will have a tougher time arguing against the plan on its own, Bernstein said.
Monday, December 30, 2013
BANKRUPTCY DEBT DEAL TO SAVE DETROIT ABOUT $65M
Story first appeared on DetroitNews.com.
Detroit — Emergency Manager Kevyn Orr and lawyers for two banks reached a new $165 million agreement Tuesday for terminating a pension debt deal blamed for plunging Detroit into bankruptcy.
The new agreement saves Detroit an additional $65 million and was announced in court this morning before Chief U.S. District Judge Gerald Rosen, who is the lead mediator in Detroit’s bankruptcy case. The city spent two days trying to reach more favorable terms for ending the pension deal as part of a settlement seen as crucial to Orr's overall plan to shed billions in city debt.
“It's the first, I think it's fair to say, significant agreement in the bankruptcy,” Rosen said today, according to a court transcript. “We understand this has been difficult for everybody and we appreciate it.”
The deal must be finalized by Jan. 31 and approved by U.S. Bankruptcy Judge Steven Rhodes. It was unclear whether bond insurers and others who objected to the original $230 million deal will fight the new agreement.
“We are very pleased and hope that this is a change that Judge Rhodes is happy with,” lead Detroit bankruptcy lawyer David Heiman said Tuesday outside federal court before climbing into a taxi.
Asked if he was happy about reaching the deal early on Christmas Eve, he simply said: “Yes.”
Mediation talks have been private and security guards were stationed outside Rosen’s courtroom Tuesday morning. Rosen ordered the city, banks and bond insurers to meet Monday and on Christmas Eve to negotiate a deal that could free up money for restructuring.
In all, Detroit will save $128 million by terminating the troubled debt deal reached during ex-Mayor Kwame Kilpatrick’s tenure. That represents a 43 percent savings, according to Orr.
The settlement means Detroit won’t have to borrow as much money to pay off two banks, UBS and Bank of America. Instead of borrowing $350 million from London-based Barclays, the city will borrow $288 million.
Detroit will pay $165 million to the banks and spend $120 million on basic city services, including blight removal, updating city information technology and other “quality of life” improvements.
“This is an important development for the city and its residents because it means we can start moving forward on implementing needed investments in public safety and services,” Orr said in a statement Tuesday.
The negotiation sessions were ordered late last week after Rhodes expressed concern about Detroit’s plan to pay two banks up to $230 million to end an interest rate swap arrangement. Rhodes questioned whether the deal was fair to other city creditors.
“Clearly they were sent a message and they listened to what Judge Rhodes had to say – that he wasn’t going to approve it,” said Douglas Bernstein, a Bloomfield Hills attorney and expert on municipal bankruptcy. “Absent that push, nobody would have done anything and they would have had to fight it out with the other creditors.”
The renegotiated deal comes three weeks after Rhodes ruled that Detroit is eligible for Chapter 9 bankruptcy relief and said pensions can be cut in bankruptcy court.
“This is an indication that Detroit, at least for now, is starting to follow the same pattern as bankruptcies in other cities in that once you get by the eligibility dispute, settlements fall into place,” Bernstein said.
Before Rhodes raised his concern, Detroit proposed borrowing $350 million from Barclays. Orr wants to use most of the loan to pay off UBS and Bank of America for a hedge owed on interest rate swaps tied to $1.44 billion in 2005-06 pension debt.
A city banking consultant Friday said Detroit’s legal team was engaged in “extraordinarily active” negotiations with the banks to lower the swap settlement amount. Based on the value of the swaps, which is calculated based on increasing interest rates, Detroit could owe UBS and Bank of America $200 million if the city pays the banks 75 cents on the dollar, said James Doak, managing director at the consulting firm Miller Buckfire.
Several groups had objected to the initial deal, arguing it gave banks a greater payout than other creditors. Orr has proposed paying pensioners as little as 20 cents on the dollar.
Rhodes halted a trial Wednesday to determine whether Detroit could borrow the money and settle the swaps debt before presenting its debt-cutting plan of adjustment.
The judge scheduled the trial to continue Jan. 3.
A two-day trial last week focused on a soured loan deal Kilpatrick’s administration used to pump $1.44 billion into pension funds in 2005 and 2006. The deal included an interest rate swap piled on $800 million of pension debt, court records show.
Detroit’s interest rate swaps with UBS and Bank of America were supposed to protect the city from rising interest rates. But the deal soured for Detroit when prevailing interest rates plummeted in 2008-09, causing the city’s annual payments on the swaps to rise to $50 million.
Detroit — Emergency Manager Kevyn Orr and lawyers for two banks reached a new $165 million agreement Tuesday for terminating a pension debt deal blamed for plunging Detroit into bankruptcy.
The new agreement saves Detroit an additional $65 million and was announced in court this morning before Chief U.S. District Judge Gerald Rosen, who is the lead mediator in Detroit’s bankruptcy case. The city spent two days trying to reach more favorable terms for ending the pension deal as part of a settlement seen as crucial to Orr's overall plan to shed billions in city debt.
“It's the first, I think it's fair to say, significant agreement in the bankruptcy,” Rosen said today, according to a court transcript. “We understand this has been difficult for everybody and we appreciate it.”
The deal must be finalized by Jan. 31 and approved by U.S. Bankruptcy Judge Steven Rhodes. It was unclear whether bond insurers and others who objected to the original $230 million deal will fight the new agreement.
“We are very pleased and hope that this is a change that Judge Rhodes is happy with,” lead Detroit bankruptcy lawyer David Heiman said Tuesday outside federal court before climbing into a taxi.
Asked if he was happy about reaching the deal early on Christmas Eve, he simply said: “Yes.”
Mediation talks have been private and security guards were stationed outside Rosen’s courtroom Tuesday morning. Rosen ordered the city, banks and bond insurers to meet Monday and on Christmas Eve to negotiate a deal that could free up money for restructuring.
In all, Detroit will save $128 million by terminating the troubled debt deal reached during ex-Mayor Kwame Kilpatrick’s tenure. That represents a 43 percent savings, according to Orr.
The settlement means Detroit won’t have to borrow as much money to pay off two banks, UBS and Bank of America. Instead of borrowing $350 million from London-based Barclays, the city will borrow $288 million.
Detroit will pay $165 million to the banks and spend $120 million on basic city services, including blight removal, updating city information technology and other “quality of life” improvements.
“This is an important development for the city and its residents because it means we can start moving forward on implementing needed investments in public safety and services,” Orr said in a statement Tuesday.
The negotiation sessions were ordered late last week after Rhodes expressed concern about Detroit’s plan to pay two banks up to $230 million to end an interest rate swap arrangement. Rhodes questioned whether the deal was fair to other city creditors.
“Clearly they were sent a message and they listened to what Judge Rhodes had to say – that he wasn’t going to approve it,” said Douglas Bernstein, a Bloomfield Hills attorney and expert on municipal bankruptcy. “Absent that push, nobody would have done anything and they would have had to fight it out with the other creditors.”
The renegotiated deal comes three weeks after Rhodes ruled that Detroit is eligible for Chapter 9 bankruptcy relief and said pensions can be cut in bankruptcy court.
“This is an indication that Detroit, at least for now, is starting to follow the same pattern as bankruptcies in other cities in that once you get by the eligibility dispute, settlements fall into place,” Bernstein said.
Before Rhodes raised his concern, Detroit proposed borrowing $350 million from Barclays. Orr wants to use most of the loan to pay off UBS and Bank of America for a hedge owed on interest rate swaps tied to $1.44 billion in 2005-06 pension debt.
A city banking consultant Friday said Detroit’s legal team was engaged in “extraordinarily active” negotiations with the banks to lower the swap settlement amount. Based on the value of the swaps, which is calculated based on increasing interest rates, Detroit could owe UBS and Bank of America $200 million if the city pays the banks 75 cents on the dollar, said James Doak, managing director at the consulting firm Miller Buckfire.
Several groups had objected to the initial deal, arguing it gave banks a greater payout than other creditors. Orr has proposed paying pensioners as little as 20 cents on the dollar.
Rhodes halted a trial Wednesday to determine whether Detroit could borrow the money and settle the swaps debt before presenting its debt-cutting plan of adjustment.
The judge scheduled the trial to continue Jan. 3.
A two-day trial last week focused on a soured loan deal Kilpatrick’s administration used to pump $1.44 billion into pension funds in 2005 and 2006. The deal included an interest rate swap piled on $800 million of pension debt, court records show.
Detroit’s interest rate swaps with UBS and Bank of America were supposed to protect the city from rising interest rates. But the deal soured for Detroit when prevailing interest rates plummeted in 2008-09, causing the city’s annual payments on the swaps to rise to $50 million.
Monday, November 19, 2012
Bankruptcy for AMF Bowling
story first appeared in Wall Street Journal
AMF Bowling Worldwide Inc., the world's largest operator of bowling alleys, filed for bankruptcy-court protection Tuesday after being squeezed by a cash crunch and failing to find a buyer for its business.
The filing marks AMF's second trip through bankruptcy since 2001. The company, which employs 7,000 people, has struggled with both a heavy debt load and a shift in the sport.
The bowling industry has been in flux for decades. Once largely a blue-collar pastime dominated by leagues, it has shifted to a sport aimed at middle-class players, who seek amenities and attractive facilities and are generally averse to joining the teams that provide bowling alleys with steady income.
Tom Clark, the commissioner of the Professional Bowlers Association, said that even as the number of people bowling at least once a year is at a high of about 70 million, only about two million are competing regularly in leagues.
AMF, which sold off its bowling alleys overseas in a previous restructuring, operates 262 bowling centers in the U.S. Small chains and mom-and-pop operators now dominate the industry, which includes more than 5,000 bowling alleys.
AMF said that it would have upgraded its facilities to cater to today's bowlers, but the economic downturn reduced its revenue, thwarting its plans. The company does have nine bowling centers with lounges and modern décor, a response to competitors like Lucky Strike, a chain of upscale bowling centers with a dress code.
Facing what it called "unmanageable" debt levels, AMF began searching for a buyer last year. After an unsuccessful hunt, it instead began reaching out to creditors to discuss a restructuring.
The deal, which will be subject to bankruptcy-court approval, calls for AMF to exit Chapter 11 under the ownership of its senior lenders, subject to rival bids at a court-overseen auction. Either way, the lenders, which are owed more than $216 million, would see their claims paid in full.
AMF said it expects to emerge from bankruptcy protection within the next five months. Steve Satterwhite, AMF's chief financial officer and chief operating officer, said they'd be recapitalizing their balance sheet and reducing debt.
AMF, which said it hosts more than 20 million bowlers a year, said its financial troubles are tied to the bowling industry's shift to open play from leagues. It also attracted fewer bowlers during the economic downturn, which slashed revenue while the company's fixed costs remained high.
Tuesday's bankruptcy filing came about a week after AMF defaulted on its debt obligations, according to Standard & Poor's.To ensure its uninterrupted operations while it restructures, AMF won court approval Tuesday afternoon to tap $35 million of a $50 million bankruptcy loan from some of its existing senior lenders, a group led by Credit Suisse .
The Mechanicsville, Va., company reported assets and debts that were each in the range of $100 million to $500 million in its bankruptcy petition, which court papers show was filed with the U.S. Bankruptcy Court in Richmond, Va.
In 1996, Goldman Sachs Group Inc. led a $1.37 billion leveraged buyout of AMF from Richmond, Va., businessman William Goodwin. The firm went public in November 1997 but was delisted from the New York Stock Exchange three years later.
AMF first sought Chapter 11 protection in July 2001 to address declining revenue and its acquisition of 260 additional bowling centers, which the company said it struggled to manage. AMF emerged from bankruptcy protection the following year under the ownership of its secured lenders, though it quickly sought a new owner.
Chicago private-equity firm Code Hennessy & Simmons bought the bowling company in a $670 million deal and presided over what AMF called a "simplify and transform" strategy that involved shedding foreign assets and installing new management. According to the company, its financial results showed improvements between 2005 and 2008.
Steve Johnson, executive director of the Bowling Proprietors' Association of America, said the bowling industry has been making a comeback in recent years.
Tom Clark, the commissioner of the Professional Bowlers Association, said that even as the number of people bowling at least once a year is at a high of about 70 million, only about two million are competing regularly in leagues.
AMF, which sold off its bowling alleys overseas in a previous restructuring, operates 262 bowling centers in the U.S. Small chains and mom-and-pop operators now dominate the industry, which includes more than 5,000 bowling alleys.
AMF said that it would have upgraded its facilities to cater to today's bowlers, but the economic downturn reduced its revenue, thwarting its plans. The company does have nine bowling centers with lounges and modern décor, a response to competitors like Lucky Strike, a chain of upscale bowling centers with a dress code.
Facing what it called "unmanageable" debt levels, AMF began searching for a buyer last year. After an unsuccessful hunt, it instead began reaching out to creditors to discuss a restructuring.
The deal, which will be subject to bankruptcy-court approval, calls for AMF to exit Chapter 11 under the ownership of its senior lenders, subject to rival bids at a court-overseen auction. Either way, the lenders, which are owed more than $216 million, would see their claims paid in full.
AMF said it expects to emerge from bankruptcy protection within the next five months. Steve Satterwhite, AMF's chief financial officer and chief operating officer, said they'd be recapitalizing their balance sheet and reducing debt.
AMF, which said it hosts more than 20 million bowlers a year, said its financial troubles are tied to the bowling industry's shift to open play from leagues. It also attracted fewer bowlers during the economic downturn, which slashed revenue while the company's fixed costs remained high.
Tuesday's bankruptcy filing came about a week after AMF defaulted on its debt obligations, according to Standard & Poor's.To ensure its uninterrupted operations while it restructures, AMF won court approval Tuesday afternoon to tap $35 million of a $50 million bankruptcy loan from some of its existing senior lenders, a group led by Credit Suisse .
The Mechanicsville, Va., company reported assets and debts that were each in the range of $100 million to $500 million in its bankruptcy petition, which court papers show was filed with the U.S. Bankruptcy Court in Richmond, Va.
In 1996, Goldman Sachs Group Inc. led a $1.37 billion leveraged buyout of AMF from Richmond, Va., businessman William Goodwin. The firm went public in November 1997 but was delisted from the New York Stock Exchange three years later.
AMF first sought Chapter 11 protection in July 2001 to address declining revenue and its acquisition of 260 additional bowling centers, which the company said it struggled to manage. AMF emerged from bankruptcy protection the following year under the ownership of its secured lenders, though it quickly sought a new owner.
Chicago private-equity firm Code Hennessy & Simmons bought the bowling company in a $670 million deal and presided over what AMF called a "simplify and transform" strategy that involved shedding foreign assets and installing new management. According to the company, its financial results showed improvements between 2005 and 2008.
Steve Johnson, executive director of the Bowling Proprietors' Association of America, said the bowling industry has been making a comeback in recent years.
Tuesday, May 22, 2012
Education Textbook Giant Files Bankruptcy
Story first appeared in USA Today.
Houghton Mifflin Harcourt Publishers Inc. has filed for Chapter 11 bankruptcy protection after reaching an agreement to eliminate $3.1 billion of its debt, according to a Boston Bankruptcy Lawyer.
The textbook publisher's move Monday came as little surprise as it announced earlier in the month that it was planning to reorganize under a prepackaged bankruptcy plan. Such plans are made with creditors and shareholders ahead of the filing for bankruptcy to speed the process.
Houghton Mifflin said Monday that its plan is supported by the vast majority of its stakeholders and will help strengthen its financial position so it is better positioned for the future. It made the filing in U.S. Bankruptcy Court for the Southern District of New York.
The privately held company, based in Boston, has been struggling with heavy debt for years. Houghton Mifflin said last year that it was trying to reorganize its finances to improve its balance sheet, said Raleigh Bankruptcy Lawyers.
The company acquired Harcourt Education in 2007 for roughly $4 billion. While that deal helped make it one of the top sellers of kindergarten through 12th grade books, tough economic times brought cuts in public funding for education and hurt its textbook sales.
A Philadelphia Bankruptcy Lawyer noted that Houghton Mifflin has said its day-to-day operations will continue as normal under bankruptcy protection, and it expects to complete the process by the end of June.
Houghton Mifflin Harcourt Publishers Inc. has filed for Chapter 11 bankruptcy protection after reaching an agreement to eliminate $3.1 billion of its debt, according to a Boston Bankruptcy Lawyer.
The textbook publisher's move Monday came as little surprise as it announced earlier in the month that it was planning to reorganize under a prepackaged bankruptcy plan. Such plans are made with creditors and shareholders ahead of the filing for bankruptcy to speed the process.
Houghton Mifflin said Monday that its plan is supported by the vast majority of its stakeholders and will help strengthen its financial position so it is better positioned for the future. It made the filing in U.S. Bankruptcy Court for the Southern District of New York.
The privately held company, based in Boston, has been struggling with heavy debt for years. Houghton Mifflin said last year that it was trying to reorganize its finances to improve its balance sheet, said Raleigh Bankruptcy Lawyers.
The company acquired Harcourt Education in 2007 for roughly $4 billion. While that deal helped make it one of the top sellers of kindergarten through 12th grade books, tough economic times brought cuts in public funding for education and hurt its textbook sales.
A Philadelphia Bankruptcy Lawyer noted that Houghton Mifflin has said its day-to-day operations will continue as normal under bankruptcy protection, and it expects to complete the process by the end of June.
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New York Law Firm Going for Bankruptcy Protection
Story first appeared in The Wall Street Journal.
New York law firm Dewey & LeBoeuf LLP is readying a possible bankruptcy-protection filing for sometime in the next several weeks, said Philadelphia Bankruptcy Lawyers, a move that would initiate official liquidation of the beleaguered institution.
Dewey within the past week brought aboard an operational turnaround and restructuring firm to help the law firm collect receivables and attempt to return money to lenders and other creditors. Dewey's remaining lawyers and outside advisers are working to be ready to file for bankruptcy protection by the end of next week, though the actual filing could come well after.
Most of Dewey's partners, including its crisis leadership team, have left the firm over the past five months, as disputes over compensation and towering debts brought the 1,000-lawyer law firm to its knees. Many of Dewey's U.S. offices were closed or nearly empty in the past week, with 433 people laid off in New York alone, according to a notice filed with the state Labor Department.
Exactly how Dewey officially ceases operations remains under discussion and no final decisions have been made, Raleigh Bankruptcy Lawyers said. Dewey lawyers have said recently that they planned to wind down without going through a bankruptcy court.
But a bankruptcy filing has become an increasingly likely option as Dewey's remaining employees and advisers huddle to chart Dewey's end game. Dewey will have to negotiate with landlords who could at some point move to seize office equipment in lieu of rent payments unless the law firm seeks bankruptcy protection. Dewey needs computers and access to offices to wind down.
Dewey tapped restructuring firm Zolfo Cooper in the past week for additional help winding down the law firm's operations.
Zolfo Cooper, meanwhile, usually helps companies restructure their operations, sometimes offering advisers to take interim management roles. The firm also enlists advisers to oversee defunct operations and develop plans for returning money to creditors.
Dewey owes $75 million on a $100 million credit line from banks led by J.P. Morgan Chase & Co. Distressed-debt investors have been circling around Dewey creditors in recent days to buy up potential claims—betting that they can nab them at discounts and get a better recovery when the law firm ultimately winds down.
New York law firm Dewey & LeBoeuf LLP is readying a possible bankruptcy-protection filing for sometime in the next several weeks, said Philadelphia Bankruptcy Lawyers, a move that would initiate official liquidation of the beleaguered institution.
Dewey within the past week brought aboard an operational turnaround and restructuring firm to help the law firm collect receivables and attempt to return money to lenders and other creditors. Dewey's remaining lawyers and outside advisers are working to be ready to file for bankruptcy protection by the end of next week, though the actual filing could come well after.
Most of Dewey's partners, including its crisis leadership team, have left the firm over the past five months, as disputes over compensation and towering debts brought the 1,000-lawyer law firm to its knees. Many of Dewey's U.S. offices were closed or nearly empty in the past week, with 433 people laid off in New York alone, according to a notice filed with the state Labor Department.
Exactly how Dewey officially ceases operations remains under discussion and no final decisions have been made, Raleigh Bankruptcy Lawyers said. Dewey lawyers have said recently that they planned to wind down without going through a bankruptcy court.
But a bankruptcy filing has become an increasingly likely option as Dewey's remaining employees and advisers huddle to chart Dewey's end game. Dewey will have to negotiate with landlords who could at some point move to seize office equipment in lieu of rent payments unless the law firm seeks bankruptcy protection. Dewey needs computers and access to offices to wind down.
Dewey tapped restructuring firm Zolfo Cooper in the past week for additional help winding down the law firm's operations.
Zolfo Cooper, meanwhile, usually helps companies restructure their operations, sometimes offering advisers to take interim management roles. The firm also enlists advisers to oversee defunct operations and develop plans for returning money to creditors.
Dewey owes $75 million on a $100 million credit line from banks led by J.P. Morgan Chase & Co. Distressed-debt investors have been circling around Dewey creditors in recent days to buy up potential claims—betting that they can nab them at discounts and get a better recovery when the law firm ultimately winds down.
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Monday, May 7, 2012
New York Law Firm Feeling The Pressure
Story first appeared in Bloomberg Businessweek.
Dewey & LeBoeuf LLP, the law firm trying to stay out of bankruptcy as it collects bills to pay creditors, told employees it eventually may have to close if it can’t resolve its financial difficulties, according to Binghamton Bankruptcy Lawyers familiar with the case.
Dewey, based in New York, told employees yesterday it was distributing the letter to comply with labor laws that require 60 days notice of large-scale layoffs.
Although they continue to pursue various avenues, it is possible that adverse developments could ultimately result in the closure of the firm, which would result in the termination of employment.
Accordingly, in order to give employees as much advance notice as possible, and to comply with any legal obligations that may arise, the distributed letter serves as conditional advance notice under the Federal Worker Adjustment Retraining and Notification Act.
Dewey is under orders from bankers to collect as much money owed to the firm as possible after the departure of about 90 partners. West Orange Bankruptcy Lawyers state that the banks are reluctant to put the firm into bankruptcy as that might make it harder to collect the bills.
Credit Line
By last month, the New York-based law firm had drawn about $75 million of a $100 million credit line from banks including JPMorgan Chase & Co. and Citigroup Inc.
Lenders were considering a 120-day extension of the credit line until a possible combination of the firm with Greenberg Traurig LLP fell through, say Chicago Bankruptcy Lawyers.
Dewey was the 11th-largest U.S. law firm with 1,300 lawyers after a merger during the 2007 recession. American Lawyer’s 2012 rankings puts the firm in 28th place, with revenue of $782 million for 2011 and 1,040 lawyers.
Dewey Ballantine and LeBoeuf Lamb Greene & MacRae merged in October 2007. The marriage produced an international firm with offices in 25 cities and revenue of more than $900 million. The LeBoeuf Lamb Chairman took the helm and was ousted this year after a probe into possible wrongdoing at the firm was begun, Dewey disclosed in an earlier memo.
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Dewey & LeBoeuf LLP, the law firm trying to stay out of bankruptcy as it collects bills to pay creditors, told employees it eventually may have to close if it can’t resolve its financial difficulties, according to Binghamton Bankruptcy Lawyers familiar with the case.
Dewey, based in New York, told employees yesterday it was distributing the letter to comply with labor laws that require 60 days notice of large-scale layoffs.
Although they continue to pursue various avenues, it is possible that adverse developments could ultimately result in the closure of the firm, which would result in the termination of employment.
Accordingly, in order to give employees as much advance notice as possible, and to comply with any legal obligations that may arise, the distributed letter serves as conditional advance notice under the Federal Worker Adjustment Retraining and Notification Act.
Dewey is under orders from bankers to collect as much money owed to the firm as possible after the departure of about 90 partners. West Orange Bankruptcy Lawyers state that the banks are reluctant to put the firm into bankruptcy as that might make it harder to collect the bills.
Credit Line
By last month, the New York-based law firm had drawn about $75 million of a $100 million credit line from banks including JPMorgan Chase & Co. and Citigroup Inc.
Lenders were considering a 120-day extension of the credit line until a possible combination of the firm with Greenberg Traurig LLP fell through, say Chicago Bankruptcy Lawyers.
Dewey was the 11th-largest U.S. law firm with 1,300 lawyers after a merger during the 2007 recession. American Lawyer’s 2012 rankings puts the firm in 28th place, with revenue of $782 million for 2011 and 1,040 lawyers.
Dewey Ballantine and LeBoeuf Lamb Greene & MacRae merged in October 2007. The marriage produced an international firm with offices in 25 cities and revenue of more than $900 million. The LeBoeuf Lamb Chairman took the helm and was ousted this year after a probe into possible wrongdoing at the firm was begun, Dewey disclosed in an earlier memo.
For more law related news, visit the Nation of Law blog.
For national and worldwide related business news, visit the Peak News Room blog.
For local and Michigan business related news, visit the Michigan Business News blog.
For healthcare and medical related news, visit the Healthcare and Medical blog.
For real estate and home related news, visit the Commercial and Residential Real Estate blog.
For technology and electronics related news, visit the Electronics America blog.
For organic SEO and web optimization related news, visit the SEO Done Right blog.
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