May 03, 2011, 12:04 AM EDT
By Bill Rochelle
(This report contains items about companies both in bankruptcy and not in bankruptcy.)
May 3 (Bloomberg) — A supplier to four U.S. subsidiaries of Vitro SAB filed papers yesterday objecting to the hurried sale of the U.S. companies’ businesses.
Oldcastle Building Envelope, describing itself as a leading supplier of architectural glass, said in court papers that Vitro, Mexico’s largest glassmaker, offers no explanation for why a hurried sale is necessary. There will be a hearing on May 6 for approval of auction and sale procedures.
In response to involuntary Chapter 11 petitions filed by holders of defaulted notes, Vitro put four U.S. subsidiaries into Chapter 11 cases in Texas on April 6 and immediately filed a motion to sell the U.S. businesses for $44 million to an affiliate of Grey Mountain Partners LLC from Boulder, Colorado.
Oldcastle objects to how the motion for sale doesn’t say whether the buyer is affiliated with Vitro, nor does it propose how to allocate proceeds among the four Vitro companies. Although the price is stated to be $44 million, part would be paid by assumption of debt. Because the debts aren’t listed, Oldcastle says there is no way to know how much the sale will generate.
In addition, Oldcastle objects to how the buyer will take the Vitro U.S. companies’ cash, thus reducing the purchase price, and become owner of potential lawsuits that otherwise would be assets for creditors.
The Vitro parent also filed a Chapter 15 petition in New York where it hopes a U.S. judge eventually will enforce whatever reorganization a judge in Mexico approves. The bondholders have a motion pending to transfer the New York Chapter 15 case to Texas. Vitro is opposing the transfer.
A group holding more than 60 percent of Vitro’s $1.2 billion in defaulted bonds is opposed to the Mexican reorganization. They say it would be a misuse of Chapter 15 because Vitro intends on cramming a plan down on noteholders by using votes arising from $1.9 billion in inter-company claims.
In the revived Mexican reorganization, Vitro is offering noteholders what it said would be a recovery of as much as 73 percent by exchanging existing debt for cash, new debt and convertible bonds. Bondholders believe Vitro is worth enough to pay them in full. For a summary of Vitro’s reorganization and the suits between Vitro and the noteholders, click here for the Dec. 15 Bloomberg bankruptcy report.
The Chapter 11 case in Texas is In re Vitro Asset Corp., 11-32600, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth). The new Chapter 15 case in New York is Vitro SAB de CV, 11-11754, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Updates
Harry David, Lenders Support $155 Million Loan
Lenders joined with Harry David Holdings Inc. rebutting the arguments made by the official creditors’ committee in opposition to some of the terms of the $155 million in financing for the bankruptcy reorganization begun in late March.
The hearing for approval of financing that was to have taken place yesterday was moved back to May 10. Financing hearings are sometimes adjourned if talks are under way to satisfy objections so financing can be consensual.
In response to objection that the loans are too expensive, the lenders say the committee is free to find more attractive financing. They also rebut the notion that fees associated with the loan are excessive.
The lenders contend that the bankruptcy court has no right to strip provisions from the loan that were the subject of tough negotiating.
The committee for creditors of the specialty-food retailer and direct marketer from Medford, Oregon, objects to how Wasserstein Co., which owns 63 percent of the stock, would receive a release from potential claims after a brief investigation.
In addition to being a lender, Wasserstein is the largest holder of senior notes and the predominant party providing a backstop for a rights offering.
The company previously received interim approval for a $100 million loan to finance the reorganization. The financing is provided by existing lenders whose revolving credit had been paid off before the Chapter 11 filing on March 28.
Another $55 million in financing for the Chapter 11 case is from some of the unsecured senior noteholders who are also committed to backstopping a $55 million equity rights offering to underpin the reorganization plan.
For details on the plan yet to be filed, click here for the March 28 Bloomberg bankruptcy report.
Harry David owns 3,400 acres in Oregon. It has 70 stores after closing 52. The balance sheet listed assets of $304.3 million on Dec. 25 with liabilities totaling $360.8 million.
The case is In re Harry David Holdings Inc., 11-10884, U.S. Bankruptcy Court, District of Delaware (Wilmington).
BankUnited Creditors’ Disclosure on for May 6 Hearing
The official creditors’ committee for BankUnited Financial Corp., a holding company whose bank was taken over and sold by regulators in May 2009, have a hearing in bankruptcy court on May 6 for approval of the liquidating Chapter 11 plan the panel proposed.
The committee is able to propose a plan of its own because BankUnited has been in Chapter 11 more than 18 months. The company filed its own plan in November when its last extension of so-called exclusivity was expiring. The company plan hasn’t gone forward.
The committee’s disclosure statement says there is now about $10 million cash on hand. Assets could top about $64 million, with $50 million representing tax refunds. On the low end, assets won’t exceed $11.5 million.
The disclosure statement predicts that holders of $321 million in senior notes will recover nothing to 18.4 percent. General unsecured creditors with claims totaling as much as $50 million may realize nothing, with their best recovery being 10.5 percent. Holders of preferred stock and $245 million in subordinated notes won’t see anything.
The major swing factor is the $1.47 billion claim of the Federal Deposit Insurance Corp. The FDIC contends the claim is entitled to priority, while creditors believe the claim should be disallowed entirely. The FDIC, as receiver for the failed bank subsidiary, is also claiming the right to receive tax refunds.
The committee was hoping to work out an arrangement with an investor to fund the company so operations could benefit from net operating loss carryforwards that BankUnited said could be as much as $3.6 billion.
There is a lawsuit pending to decide whether BankUnited or the FDIC owns the NOLs. BankUnited also has an unresolved $414 million claim in the bank’s receivership.
BankUnited’s formal lists of creditors showed claims of $557 million owing to unsecured creditors. There are no secured claims.
The bank’s failure cost the FDIC $4.9 billion. It had deposits of $8.6 billion and $12.8 billion in assets. Debt of the Coral Gables, Florida-based holding company includes $120 million on convertible senior notes, $12.5 million of junior subordinated debentures, $184 million in mandatorily convertible senior notes known as HiMeds, and $237 million in trust preferred securities.
The case is In re BankUnited Financial Corp., 09-19940, U.S. Bankruptcy Court, Southern District Florida (Miami).
New Filing
Retailer Metropark USA Files for Quick Liquidation
Metropark USA Inc., a retailer catering to consumers between ages 25 and 35, filed a Chapter 11 petition yesterday in White Plains, New York, for a “truncated sale process,” a court filing says.
Metropark has 69 stores in 21 states, including four in New York. Peak sales of $123 million in 2008 declined to $104 million in 2010, a 15 percent drop. The operating loss in 2010 was $16.4 million, a filing discloses.
Based in Los Angeles, the company said it can’t sustain operations “beyond the first week of this Chapter 11 case,” without financing or a guaranteed payment from a liquidator.
Increased unemployment among target customers was blamed for financial problems.
The petition listed assets of $28.9 million and debt of $28.7 million. Liabilities include $255,000 on a first-lien financing and $825,000 on second-lien debt owing to Bricoleur Capital Partners LP.
The case is In re Metropark USA Inc., 11-22866, U.S. Bankruptcy Court, Southern District of New York (White Plains).
Advance Sheets
Claims Amendments Almost Never Approved After Confirmation
After a Chapter 11 plan is confirmed, a proof of claim may be amended only in the “most compelling circumstances,” the U.S. Court of Appeals in Atlanta ruled on April 29.
The case involved a lease rejected during the Chapter 11 case. The landlord filed a claim, and the bankruptcy court sustained the debtor’s objection, reducing the claim.
After the plan was confirmed and creditors including the landlord received initial distributions, the landlord filed an amended claim, increasing the amount. The bankruptcy court disallowed the amended claim. The district court affirmed, and so did the 11th Circuit in Atlanta.
Where law says that amendments to claims should be “freely” granted before confirmation, the same principle doesn’t apply after confirmation, the opinion says. If claims could be amended after a plan is approved, it could “render a plan infeasible or alter the distribution to creditors,” Circuit Judge James C. Hill said in his opinion for the three- judge panel.
While amendments to a proof of claim after confirmation aren’t “prohibited,” Hill said they are “not favored” and will be permitted in “only the most compelling circumstances.
Hill said he agreed with the only other circuit court opinion on the issue, a 1993 ruling by the U.S. Court of Appeals in Chicago called Holstein v. Brill.
The case in IRT Partners LP v. Winn-Dixie Stores Inc. (In re Winn-Dixie Stores Inc.), 09-12237, 11th U.S. Circuit Court of Appeals (Atlanta).
–With assistance from Dawn McCarty and Michael Bathon in Wilmington, Delaware. Editor: Glenn Holdcraft, Fred Strasser
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