Bloomberg News

Syms, Lehman, FirstFed, Global Aviation: Bankruptcy

July 06, 2012

Syms Corp. (SYMSQ:US) and the discount retailer’s official shareholders’ committee are opposing a request by the official creditors’ committee to delay a hearing related to the global settlement announced last week.

The creditors’ representative said the parties haven’t “even exchanged drafts of a revised plan and disclosure statement since the term sheet has not yet been finalized.”

There will be a conference today with the bankruptcy judge in Delaware, who will decide whether to push back the hearing to July 13 from July 9.

In a filing with the bankruptcy court on July 3, the creditors’ committee said there as yet is only a “handshake deal on the material terms” of a consensual Chapter 11 plan. Although there has been “significant progress,” there are “a few open issues” on the documentation necessary to implement the settlement, the committee said.

The official equity committee, together with Syms and subsidiary Filene’s Basement LLC, are opposing any delay in the July 9 hearing, where the bankruptcy court theoretically would consider approval of disclosure material explaining a prior version of the plan that is being superseded by the settlement. The July 9 hearing is also designed to put procedures into motion for approving the settlement and an accompanying rights offering to raise about $25 million.

In opposing delay, the shareholders’ committee said that an adjournment “will remove the pressure of a looming deadline when one is needed most.”

In general terms, the settlement provides for paying unsecured claims against Syms in full within “agreed upon time frames.” Trade and supplier claims against Filene’s will also be paid in full. Claims arising from terminated leases not guaranteed by Syms will receive 75 percent payment, also within specified time frames. For details on the settlement, click here for the July 3 Bloomberg bankruptcy report.

Syms closed yesterday at $7.50 a share in over-the-counter trading. During bankruptcy, the closing peak was $12.65 on Dec. 12, up from $7.67 immediately before the Chapter 11 filing on Nov. 2. The stock closed as low as $6.57 in late June.

Syms, based in Secaucus, New Jersey, purchased Filene’s through a bankruptcy auction in June 2009 in Filene’s second Chapter 11 reorganization. At the outset of Chapter 11 case in November, there were 25 Syms stores and 21 Filene’s locations.

The stores were closed and inventory sold. Leases were terminated, leaving Syms with owned real estate to form the cornerstone for a reorganization plan.

Assets were listed in the Chapter 11 petition for $236 million, including real estate valued at $97.7 million. Liabilities were listed at $94 million, including $31.1 million owing on a revolving credit with Bank of America NA (BAC:US) as agent. In addition, there were $11.1 million in letters of credit outstanding on the revolver.

The case is In re Filene’s Basement LLC, 11-13511, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Updates

Lehman Wins Squabble in Lawsuit with JPMorgan Chase

Lehman Brothers Holdings Inc. won a skirmish this week in the $8.6 billion battle with JPMorgan Chase Bank NA.

U.S. Bankruptcy Judge James M. Peck wrote a 15-page opinion on July 3 explaining why he won’t strike some of the objections Lehman raised to the claim of the New York-based bank. In a related lawsuit, Lehman claims that JPMorgan “abused the power of its position to improperly extract billions in incremental collateral and other concessions” before bankruptcy.

This week, Peck denied JPMorgan’s attempt to strike two parts of the objection to the bank’s claim. Peck said the dispute was “within the context of an ongoing larger multi- layered litigation concerning the net amounts that may ultimately be payable by these parties to one another.”

Peck cited authority from the U.S. Court of Appeals in Manhattan saying that motions to strike are “disfavored” and won’t be granted unless it “appears to a certainty” that no state of facts could ever “support the defense.”

In April, Peck handed down a split decision in the lawsuit that Lehman began in May 2010. In the April ruling, Peck dismissed Lehman’s claims for recovery of preferential transfers and so-called constructively fraudulent transfers.

He said Lehman is entitled to a trial on claims alleging actual fraud and 25 other theories aimed at forcing JPMorgan to disgorge payments extracted from Lehman in the declining days before bankruptcy. For details on the April ruling, click here for the April 20 Bloomberg bankruptcy report.

The Lehman holding company and the brokerage subsidiary began their bankruptcies in New York in September 2008. The Chapter 11 plan for the Lehman companies other than the broker was confirmed in December and implemented in March, with a first distribution in April.

Lehman’s brokerage subsidiary is under control of James Giddens, a trustee appointed under the Securities Investor Protection Act. The Lehman brokerage is yet to make a first distribution to non-customers.

The lawsuit between the Lehman parent and JPMorgan is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA (JPM:US) (In re Lehman Brothers Holdings Inc.), 10-03266, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

The Lehman holding company Chapter 11 case is In re Lehman Brothers Holdings Inc., 08-13555, while the liquidation proceeding under the Securities Investor Protection Act for the brokerage operation is Securities Investor Protection Corp. v. Lehman Brothers Inc., 08-01420, both in U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Northstar Has Final Approval on $29 Million in Loans

The reorganization of Northstar Aerospace (USA) Inc. is proceeding without a hitch in advance of an auction on July 17 and a hearing on July 24 for approval of sale.

The bankruptcy court in Delaware gave final approval for $29 million in financing on July 3. The court also authorized a management incentive plan.

Northstar’s principal lender, Fifth Third Bank (FITB:US), received final approval to lend a maximum of $22 million. The bank is already owed $39.5 million on a revolving credit and $18.9 million on a term loan. The bankruptcy court also gave final approval for a $7 million junior loan from Boeing Co. (BA:US)

This week, the bankruptcy judge approved a $420,000 bonus program for 10 executives and managers. Payments are contingent on completion of a sale to private-equity investor Wynnchurch Capital Ltd.

Northstar is a manufacturer of gears and gearboxes for military helicopters. Unless there is a higher bid at auction, Wynnchurch will buy the business for $70 million in cash.

Northstar filed for Chapter 11 reorganization on June 14. The sale to Wynnchurch was previously negotiated.

With U.S. operations based in Bedford Park, Illinois, Northstar makes components and assemblies for Chinook, Apache and Blackhawk helicopters, as well as the F-22 Raptor fighter. The company has six facilities in the U.S. and Canada.

Revenue in 2011 was $189.6 million. The two largest customers are the U.S. military and Boeing.

Northstar’s books show assets of $165.1 million, with liabilities totaling $147.5 million. Trade suppliers are owed $21.7 million. Canadian affiliates filed for reorganization in Canada under the Companies’ Creditors Arrangement Act.

The case is In re Northstar Aerospace (USA) Inc., 12-11817, U.S. Bankruptcy Court, District of Delaware (Wilmington).

FirstFed Making Second Stab at Plan Confirmation

Creditors of FirstFed Financial Corp. (FFEDQ:US) for a second time are voting on a proposed Chapter 11 plan.

They rejected the first plan after the explanatory disclosure statement was approved early last year by the U.S. Bankruptcy Court in Los Angeles.

FirstFed was a holding company for a savings and loan taken over by regulators in December 2009. The largest asset is a claim for a $30 million income tax refund. The Federal Deposit Insurance Corp., as receiver for the failed bank, claims that it’s entitled to the tax refund.

In addition to disputed claims from the FDIC, there are few aside from the $157.8 million owing on unsecured debentures. The plan puts the FDIC in separate classes from the debenture holders.

The new plan is jointly proposed by FirstFed and by Vik Ghei and Misah Zaitzeff, who own about $20 million of the debentures through a company named Holdco Advisors LP.

The explanatory disclosure statement tells debenture holders they will have a maximum 24 percent recovery if the court rules that the tax refund belongs to FirstFed. The FDIC, in its separate class, will have a similar recovery if its unsecured claim is found valid.

The disclosure statement was approved last week by the bankruptcy court, court records indicate.

The plan will give ownership of the company to debenture holders and the few other unsecured creditors. In lieu of stock, debenture holders can receive cash for a predicted 16.7 percent recovery should the tax refund be ruled an asset of FirstFed.

The disclosure statement accompanying last year’s plan told debenture holders to expect a 1.3 percent recovery, without regard for whatever might be collected from tax refunds or lawsuits.

FirstFed’s Chapter 11 petition listed assets for $4.5 million, with debt totaling $160 million. Liabilities included $159.5 million on three issues of senior debentures. The bank subsidiary, First Federal Bank of California, showed $6.1 billion in assets on the balance sheet when it was taken over.

The case is In re FirstFed Financial Corp., 10-10150, U.S. Bankruptcy Court, Central District of California (Woodland Hills).

Creditors Committee Objects to Global Aviation Bonus

The Global Aviation Holdings Inc. (GLAH:US) creditors’ committee and the U.S. Trustee are both opposing a $137,000 retention bonus program for five executives who aren’t among the company’s top officers.

According to the company, the intended recipients are responsible for creating “safety, maintenance and flight operation manuals and overseeing the compliance of the standards.”

The creditors’ committee argued in papers filed this week with the bankruptcy court that the mere description of their responsibilities places them within the top echelon of management, so they must be considered “insiders” for whom Congress prohibits retention bonuses.

The U.S. Trustee similarly argues that the five managers haven’t been shown not to be insiders. The bankruptcy judge will rule on the propriety of the bonuses at a July 11 hearing in Brooklyn, New York.

Global is the parent of World Airways Inc. and North American Airlines Inc. The company says it’s the largest provider of passenger air transport for the U.S. military.

Global filed for Chapter 11 reorganization in February to shed 16 of 30 aircraft. Global also said it is attempting to negotiate new collective-bargaining agreements with three unions.

The petition listed $589.8 million in assets against debt totaling $493.2 million. Liabilities include $146.5 million on 14 percent first-lien secured notes and $98.1 million on a second-lien term loan. Wells Fargo Bank NA (WFC:US) is agent for both. Trade debt is $109 million, according to a court filing.

Global, based in Peachtree City, Georgia, is 92.5 percent- owned by an affiliate of MatlinPatterson Global Advisers LLC.

The case is In re Global Aviation Holdings Inc., 12-40783, U.S. Bankruptcy Court, Eastern District New York (Brooklyn).

Georgia Hospital Authority Ineligible for Bankruptcy

The Hospital Authority of Charlton County, Georgia, is ineligible for bankruptcy in either Chapter 9 or Chapter 11, the court in Waycross, Georgia, ruled on July 3.

As a result, U.S. Bankruptcy Judge John S. Dalis dismissed the Chapter 9 municipal bankruptcy begun on April 30.

Three days after the owner of the Charlton Memorial Hospital in Fall River, Georgia, filed in Chapter 9, the U.S. Trustee filed a motion to dismiss the bankruptcy, saying that the authority is a governmental unit precluded by Georgia State law from filing bankruptcy.

In response, the authority filed papers asking the bankruptcy judge to convert the case from Chapter 9 to a Chapter 11 reorganization.

Dalis ruled that the hospital authority is a governmental unit ineligible for bankruptcy because Georgia state law “has not specifically authorized it to file for relief under Chapter 9.” Dalis denied the authority’s request for conversion to Chapter 11 because, as a governmental unit, it’s ineligible for any form of bankruptcy aside from Chapter 9.

The authority is part of government, according to Dalis, because it “possesses a number of traditional government attributes,” such as the power of eminent domain and the ability to receive tax revenue.

The Chapter 9 petition lists assets exceeding $10 million and debt of less than $10 million.

The case is In re Hospital Authority of Charlton County, U.S. Bankruptcy Court, 12-50305, U.S. Bankruptcy Court, Southern District Georgia (Waycross).

Hussey Seeks Fourth Extension of Plan ‘Exclusivity’

Hussey Copper Corp. sold the business for $107.8 million late last year and for a fourth time is seeking an enlargement of the exclusive right to propose a liquidating Chapter 11 plan.

If approved by the bankruptcy court in Delaware at an Aug. 24 hearing, the plan-filing deadline will be pushed out by two months to Sept. 2.

Hussey said it filed a proposed Chapter 11 plan in early May “to spur ongoing negotiations” intended to result in a “consensual resolution of outstanding issues.” A prior hearing for approval of the explanatory disclosure statement was rescheduled for July 18.

The company previously said that issues to be resolved include “significant” claims of the Pension Benefit Guaranty Corp.

Libertas Copper, an affiliate of Patriarch Partners LLC, bought the business. Before the Chapter 11 filing in late September, Hussey signed a contract for Kataman Metals LLC to buy the business for $88.7 million. The higher price paid by Patriarch resulted from an auction.

Family owned since 1848, Hussey produced copper products from plants near Pittsburgh and Eminence, Kentucky. Revenue shrank to $382 million in 2010 from $454 million in 2008.

At the outset of bankruptcy, debt included $38.2 million owing on a matured revolving credit. There was also a $2.4 million subordinated loan. In addition, the company owed $29 million to trade suppliers, court papers showed.

The case is In re Hussey Copper Corp., 11-13010, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Daily Podcast

Stockton, Hotels-GECC, RoomStore, Cramdown: Bankruptcy Audio

Stockton, California, the largest U.S. city ever to file for bankruptcy protection, is the first item on the bankruptcy podcast with Bloomberg Law’s Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle. Five hotels spread across the country are discussed as possible acquisition targets. The secured lender is General Electric Capital Corp. RoomStore Inc., once a 63-store furniture retailer, is liquidating the last 29 stores and is bent on paying creditors in full following going- out-of-business sales that will run for five months. The podcast ends with discussion of an appellate case from California and Nevada making life easier on a company that intends to cram down on a fully secured creditor. To listen, click here.

To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.


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