Download - Beard Corporate Restructuring Review for February 2013

Beard Group Corporate Restructuring ReviewFor February 2013

Presented byBeard Group, Inc.

P.O. Box 4250Frederick, MD 21705-4250

Voice: (240) 629-3300Fax: (240) 629-3360

E-mail: [email protected]

An audio recording of this presentation is available at http://bankrupt.com/restructuringreview/

____________________________________________________

Welcome to the Beard Group Corporate Restructuring Review for February 2013, brought to you by the editors of the Troubled Company Reporter and Troubled Company Prospector.

In this month's Corporate Restructuring Review, we'll discuss five topics:

• first, last month's largest chapter 11 filings and other statistics;

• second, large chapter 11 filings TCR editors anticipate in the near-term;

• third, a quick review of the major pending disputes in chapter 11 cases that we monitor day-by-day;

http://bankrupt.com/restructuringreview/

mailto:[email protected]

• fourth, reminders about debtors whose emergence from chapter 11 has been delayed; and

• fifth, information you're unlikely to find elsewhere about new publicly traded securities being issued by chapter 11 debtors.

February 2013 Mega Cases

Now, let's review the largest chapter 11 cases in February 2013.

Danilo Muñoz reports that five cases involving companies with more than $100 million in assets were filed in each of the last three months.

One of the cases filed in February exceeded the $1 billion mark in terms of assets: Reader’s Digest Association Inc.

No billion dollar cases were filed January.

For fiscal year 2012, there were a total of 12 companies that filed for Chapter 11 with excess of $1 billion in assets. Five of those cases began in May.

For 2012, there were a total of 64 mega filings with assets in excess of $100 million, compared to 82 mega filings during the same period in 2011 and 106 in 2010.

Reader’s Digest listed total assets of $1.12 billion and total liabilities of $1.18 billion when it filed for Chapter 11 [Bankr. S.D.N.Y. Lead Case No. 13-22233] in Southern District of New _____________________________________________________________________________

Beard Group Corporate Restructuring Review for February 2013 -- page 2

York on Feb. 17, 2013, along with 30 affiliates. Reader's Digest is a global media and direct marketing company that educates, entertains and connects consumers around the world with products and services from trusted brands. Reader's Digest filed, together with the petition, an agreement with major stakeholders for a pre-negotiated chapter 11 restructuring. Under the plan, the Debtor will issue the new stock to holders of senior secured notes. The Restructuring Agreement provides for the Debtors' prompt emergence from chapter 11 by July 31.

Reader's Digest first sought Chapter 11 protection on Aug. 24, 2009, together with its 47 affiliates. The Company exited bankruptcy Feb. 19, 2010.

The second largest Chapter 11 filing was by Ormet Corporation, which listed total assets of $406.82 million and total debts of $416.01 million. Ormet is a fully integrated aluminum manufacturer, providing primary metal, extrusion and thixotropic billet, foil and flat rolled sheet and other products.

Ormet and its debtor-affiliates filed for chapter 11 protection in Delaware [Bankr. D. Del. Case No. 13-10334] on Feb. 25, 2013. Ormet has signed a definitive Asset Purchase Agreement with Smelter Acquisition, LLC, a portfolio company owned by private investment funds managed by Wayzata Investment Partners LLC, in connection with a proposed financial restructuring of Ormet.

Ormet and its debtor-affiliates previously filed for chapter 11 protection on January 30, 2004, with the Bankruptcy Court for the Southern District of Ohio [Case No. 04-51255]. Its chapter 11 plan was confirmed by the Court in April 2005.

_____________________________________________________________________________


In addition, two companies filed for Chapter 11 protection listing estimated assets of between $100 million to $500 million: Liberty Medical Supply Inc. and Conexant Systems Inc.

Liberty is a mail order provider of diabetes testing supplies. In addition to diabetes testing supplies, the Debtors also sell insulin pumps and insulin pump supplies, ostomy, catheter and CPAP supplies and operate a large mail order pharmacy.

Liberty Medical led by ATLS Acquisition, LLC, sought Chapter 11 protection on Feb. 15, 2013, with the Bankruptcy Court for the District of Delaware [Lead Case No. 13-10262]. The move comes less than three months after a management buy-out and amid a notice by the lender who financed the transaction that it's exercising an option to acquire the business.

Newport Beach, California-based Conexant Systems is a fabless semiconductor company. Conexant Systems filed a Chapter 11 petition on Feb. 28, 2013, with the Bankruptcy Court for the District of Delaware [Case No. 13-10367].

Conexant Systems has an agreement for a balance sheet restructuring with equity sponsors and sole secured lender, QP SFM Capital Holdings Limited, an entity managed by Soros Fund Management LLC. As part of the restructuring, the secured lender will exchange approximately $195 million of secured debt into equity in the reorganized Company. In addition, the Secured Lender will receive $76 million of unsecured notes issued by a holding company, which can elect to either pay interest in cash or accrue interest in kind. The new unsecured notes will be non-recourse to the reorganized Conexant operating company.

Arrow Aluminum Industries, Inc., filed a Chapter 11 petition on Feb. 11, 2013, with the Bankruptcy Court for the Western District of Tennessee [Case No. 13-21470]._____________________________________________________________________________


Martin, Tennessee-based Arrow Aluminum scheduled $125.4 million in total assets and $3.13 million in liabilities. The assets were bloated by a contingent claim of $125 million on account of a lawsuit against First Citizens National Bank. Minus the contingent claim, the assets are just about $1.25 million, which include 126-acre house and farm properties in Martin, Tennessee, worth $485,000.

Of the Chapter 11 mega filings in February, two of the five cases involved a prepackaged Chapter 11 filing, the same as that in January.

For fiscal year 2012, 13 of the 64 mega cases involved a prepackaged Chapter 11 filing, or about 20% of the mega cases. For 2011, 13 of the 83 mega cases involved a prepackaged Chapter 11 plan as of the Petition Date -- or about 16% of the large Chapter 11 filings. For fiscal year 2010, a total of 35 prepacks/pre-arranged cases were filed out of the 106 bankruptcy mega cases -- or about one in every three filings in 2010.

For the first two months of 2013, five of the mega filings belonged to the information industry while three are involved in manufacturing.

For the first two months of 2013, the Bankruptcy Court for the District of Delaware cornered the lion’s share of mega filings, with five mega filings while the Southern District of New York had two of the mega filings, including Reader's Digest's billion dollar case.

In 2012, the Bankruptcy Court for the Southern District of New York was the most favored venue for mega filers with 21, wresting away the lead from the Bankruptcy Court for the District of Delaware with 19 mega filings. _____________________________________________________________________________


In 2011, the Delaware Bankruptcy Court was the most favored of bankruptcy mega cases with 38 filings, or 46% of the mega cases, followed by the Southern District of New York with 16 filings, or 19% of the mega cases, and by the Northern District of Texas with 4 filings, or 5% of the mega cases. The rest of the bankruptcy mega cases are spread evenly throughout the various bankruptcy courts.

Lehman Brothers Holding Corp. is the biggest corporate bust in history. Lehman, which filed in 2008, had $639 billion in total assets and $613 billion in total debts at that time of its filing.

For 2011, the largest Chapter 11 filing was filed by MF Global Holdings Ltd. and its affiliates. As of Sept. 30, 2011, MF Global had $41.05 billion in total assets and $39.68 billion in total liabilities.

For 2012, the largest Chapter 11 filing was by Residential Capital LLC, which disclosed $15.68 billion in assets and $15.28 billion in liabilities as of March 31, 2012.

For the first two months of 2013, Young Conaway Stargatt & Taylor LLP and Paul Weiss Rifkind Wharton & Garrison LLP represented two of the ten mega filings either as lead or co-counsel. Both law firms represented the School Specialty and Penson Worldwide in their respective Chapter 11 cases.

Anticipated Large Chapter 11 Filings

Now, let's turn to the topic of large chapter 11 filings Troubled Company Reporter editors anticipate in the near-term.

_____________________________________________________________________________


Carlo Fernandez identified five companies that may be close to filing for bankruptcy: Revel Casino, Energy Future Holdings, GMX Resources, Central European Distribution, and Gasco Energy.

(A) Revel Casino

Revel AC Inc., owner of the Revel casino in Atlantic City, New Jersey, is expected to file for bankruptcy sometime in the last two weeks of March, Bloomberg News reports, citing unnamed sources.

Revel Casino, which opened just less than a year, is pursuing a prepackaged bankruptcy restructuring where term loan lenders owed $900 million will take almost 100% ownership of the company, existing shareholders would be wiped out, and unsecured creditors would recover 100 cents on the dollar.

Revel announced Feb. 19 it has reached an agreement with a majority of its lenders to reduce its debt burden by more than $1 billion through a debt-for-equity conversion. The agreement requires Revel to seek bankruptcy protection.

As part of the restructuring, certain of Revel's lenders will provide $250 million in DIP financing, $45 million of which constitutes new money commitments and approximately $205 million of which constitutes prepetition debt. No taxpayer funds will be used to finance the restructuring.

Revel's legal advisor in connection with the restructuring is Kirkland & Ellis LLP. Alvarez & Marsal serves as its restructuring advisor and Moelis & Company serves as its investment banker for the restructuring. Other professionals tapped by Revel include Brown Rudnick LLP, as special counsel to the Company; Ernst & _____________________________________________________________________________


Young, as independent auditors and tax advisors to the Company; and Cooper Levinson, as gaming counsel to the Company.

JPMorgan, the administrative agent for the term loan lenders, is represented by Cadwalader, Wickersham & Taft LLP. The ad hoc group of existing lenders is represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP.

(B) Energy Future Holdings

Energy Future Holdings Corp. hired restructuring advisers from law firm Kirkland & Ellis and financial advisers Evercore Partners and the Blackstone Group to help the power producer deal with looming financial problems.

Creditor groups meanwhile are being wooed by Cadwalader Wickersham & Taft, Brown Rudnick, Otterbourg Steindler Houston & Rosen, and White & Case.

Energy Future Holdings was taken private in 2007 in a $43.2 billion leveraged buyout by KKR & Co. LP and TPG Inc. It lost money seven quarters in a row, and $173 million in bonds begin requiring cash interest payments in May.

The Company's balance sheet at Sept. 30, 2012, showed $42.7 billion in total assets against $51.9 billion in total liabilities.

(C) GMX Resources

GMX Resources Inc. failed to pay an interest payment due on its senior secured second-priority notes due 2018.

_____________________________________________________________________________


The Company has engaged Jefferies & Company, Inc., as financial advisor to assist the Board and senior management in its ongoing exploration of financing alternatives, including a potential restructuring of the Company's balance sheet in light of its current liquidity and cash needs.

If the Company is not able to successfully implement a consensual alternative for restructuring its balance sheet, or in order for the Company to implement a financial alternative, the Company may voluntarily seek protection under the U.S. Bankruptcy Code.

GMX Resources is an independent natural gas production company headquartered in Oklahoma City, Oklahoma. The Company's balances sheet at Sept. 30, 2012, showed $343.1 million in total assets and $467.6 million in total liabilities.

(D) Central European Distribution

Mark Kaufman and the A1 Investment Company have decided to join forces to sponsor a chapter 11 plan of reorganization for the restructuring of Central European Distribution Corporation.

In a letter to members of the Board of CEDC, A1 and Dr. Kaufman proposed to invest up to $225 million in the restructuring of CEDC in exchange for 85% of the equity of the reorganized CEDC. The Plan would be implemented through pre-arranged cases under Chapter 11 of the U.S. Bankruptcy Code.

Before commencement of the Chapter 11 cases, the Company, the Consortium and a sufficient majority of holders of the 2016 Notes would execute a plan support agreement to provide a stable and swift path towards confirmation of the Plan._____________________________________________________________________________


Under the Plan, the Plan sponsors would receive not less than 85% of the equity of the reorganized company. Unsecured debt holders and current shareholders will receive no more than 15% of the reorganized equity.

A1 is an investment company of the Alfa Group, which is one of the largest privately-owned financial and industrial conglomerates in Russia with approximately US$60 billion of assets.

Dr. Kaufman is an entrepreneur and executive with more than 20 years of international experience in the wines and spirits sector.

(E) Gasco Energy

Gasco Energy, Inc., said that due to the significant extended decline in the natural gas market and sustained low natural gas prices caused by excess production and stagnant demand for natural gas, the Company has not been able to recover its exploration and development costs as anticipated. As such, there is substantial doubt regarding the Company's ability to generate sufficient cash flows from operations to fund its ongoing operations, and it currently anticipates that cash on hand and forecasted cash flows from operations will only be sufficient to fund cash requirements for working capital, including debt payment obligations, through the second quarter of 2013.

The Company has engaged a financial advisor to assist it in evaluating such potential strategic alternatives. It is possible these strategic alternatives will require the Company to make a pre-packaged, pre-arranged or other type of filing for protection under Chapter 11 of the U.S. Bankruptcy Code (or an involuntary _____________________________________________________________________________


petition for bankruptcy may be filed against the Company). The Company did not name the advisor.

Denver-based Gasco Energy is a natural gas and petroleum exploitation, development and production company engaged in locating and developing hydrocarbon resources, primarily in the Rocky Mountain region and in California's San Joaquin Basin.

* * *

In addition to the challenged companies mentioned in Mr. Fernandez's report, the Troubled Company Reporter provides on-going reporting about more than 3,000 companies experiencing financial distress or restructuring their balance sheets in a judicial proceeding. Stay tuned to learn more about obtaining a trial subscription to the TCR at no cost or obligation.

Major Pending Disputes In Chapter 11 Cases

Next, we'll quickly review major pending disputes in large chapter 11 cases that Troubled Company Reporter editors monitor day-by-day.

Next, we'll quickly review major pending disputes in large chapter 11 cases that Troubled Company Reporter editors monitor day-by-day.

_____________________________________________________________________________


(A) Lehman Brothers

Ivy Magdadaro reports that in mid-February 2013, Lehman Brothers Holdings Inc. sought to question Bruno Iksil, the former JPMorgan Chase & Co trader known as the "London Whale", in connection with its $8.6 billion lawsuit against JPMorgan. In a court filing, Lehman and a committee of its unsecured creditors said months of disclosures about the JPMorgan trader suggest that he played a "greater role" than previously thought in the events underlying the lawsuit. Lehman said it realized Mr. Iksil could help it after JPMorgan disclosed "risk management failures," including the JPMorgan Chief Investment Office.

Lehman asked U.S. Bankruptcy Judge James Peck for permission to ask French authorities to compel Mr. Iksil's testimony on valuations of derivative trades in 2008. Lehman alleged that Mr. Iksil's "practice of intentional mismarking" of trades forced it to post $273.3 million of collateral in September 2008.

Lehman also sought to be released from a confidentiality agreement with JPMorgan so it could file supporting documents for the request.

Mr. Iksil used to work for JPMorgan in London but is no longer employed with the New York-based bank. He gained notoriety after his activities were linked to $6.2 billion of trading losses at the bank's Chief Investment Office. A September 2008 internal JPMorgan mail linked Mr. Iksil to two trades by the CIO that were then "significantly contributing" to a dispute with Lehman."_____________________________________________________________________________


Lehman is also demanding more information about JPMorgan's CIO, subject to a critical JPMorgan report that was publicized in the media.

In response, JPMorgan opposed Lehman's move, saying Mr. Iksil had nothing to do with alleged mismarked derivative trades and was not responsible for the company's bankruptcy.

In a revised request dated Feb. 28, Lehman renewed its bid to a Manhattan federal court to draw Mr. Iksil into its billion dollar fight with JPMorgan. Lehman is seeking international assistance to force Mr. Iksil, a French national, to answer questions, as he is unwilling to do so. As support to its request, Lehman attached emails from JPMorgan's collateral operations group about a dispute over 3 derivative trades in 2008, shortly before Lehman filed for bankruptcy. Two of the transactions listed Luis Buraya as the trader, together with Iksil.

Lehman filed for bankruptcy in September 2008. Technically out of bankruptcy since March last year, the company said it will continue to liquidate through 2016. Lehman hasn't succeeded so far with two of its biggest lawsuits against banks -- it got none of the $11 billion it demanded from London-based Barclays Plc, which bought the defunct firm’s North American business in 2008; and it failed last year to get a bankruptcy judge to restore key claims against JPMorgan.

Lehman’s 2010 lawsuit against JPMorgan alleges that the New York-based lender helped cause its collapse by demanding $8.6 billion in collateral. JPMorgan said a year ago it would give Lehman almost $700 million to settle part of the suit. It continues to fight most of Lehman’s claims. The two parties also are fighting over a demand by JPMorgan for $6.3 billion it says it is owed._____________________________________________________________________________


The lawsuit is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA, 10-03266, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

In other developments, Lehman Brothers Holdings has been targeted in a Feb. 25 lawsuit filed in federal district court in Denver that might interfere with the $6.5 billion sale of apartment owner Archstone Inc. The sale is scheduled for closing March 26. Archstone is Lehman's single-largest asset.

Lehman sold Archstone in a $6.5 billion cash and stock deal to Sam Zell's Equity Residential and AvalonBay Communities Inc. The sale will provide Lehman with additional funds to pay creditors and gives its estate a stake in those companies. Under the deal, the company will receive nearly $2.69 billion in cash plus 34.5 million shares of Equity Residential's stock and 14.9 million shares of AvalonBay's stock that are worth about $3.8 billion combined. Lehman will have a 13.2% stake in AvalonBay and 9.8% stake in the other company after the deal. Equity Residential will acquire about 60% of Archstone's assets and liabilities. The other buyer will acquire about 40%.

The case is Stender v. ERP Operating Limited Partnership, 13-cv-00496, U.S. District Court for the District of Colorado (Denver).

(2) Idearc

Creditors of Idearc Inc. don't concede that an unfavorable ruling in January in federal district court knocked out the entire $9.8 billion lawsuit against Verizon Communications Inc., the company's former owner.

_____________________________________________________________________________


Idearc, now named SuperMedia Inc., was Verizon's yellow pages subsidiary. It was spun off in November 2006 in what creditors called a fraudulent transfer. Idearc filed for Chapter 11 protection in March 2009 and emerged from in by the end of that same year. After conclusion of Idearc's bankruptcy reorganization, the trust created for creditors sued Verizon.

In late January, U.S. District Judge A. Joe Fish concluded that Idearc was worth at least $12 billion at the time of the spinoff and wasn't immediately insolvent. The judge asked the parties to tell him whether any part of the lawsuit survives the finding of solvency.

The creditors' trust filed papers on Feb. 8 explaining how several claims survive, including claims for an illegal dividend. The creditors believe the board never properly authorized the dividend paid to Verizon. The committee explained in its papers how claims for intentional fraudulent transfer survive even if Idearc initially was solvent. The creditors want the remaining issues tried to a jury.

Judge Fish previously ruled that the creditors weren't entitled to a jury trial.

Verizon was slated to file its papers March 1 explaining why the dividend was legal and whether any part of the lawsuit survives.

The creditors' lawsuit is U.S. Bank National Association v. Verizon Communications Inc., 10-01842, U.S. District Court, Northern District of Texas (Dallas).

_____________________________________________________________________________


Delayed Exits From Chapter 11

Julie Anne Lopez-Toledo reports about two Chapter 11 debtors whose emergence from Chapter 11 has been delayed: Quigley and Pittsburgh Corning.

(A) Quigley

Pfizer Inc. unit Quigley Co. Inc. set a June 26, 2013 confirmation hearing for its fifth amended Chapter 11 reorganization plan, almost nine years after the pharmaceutical giant entered bankruptcy.

The June hearing date marks Quigley's first bid for confirmation since U.S. Bankruptcy Judge Stuart M. Bernstein denied its fourth amended plan in September 2010 after finding that the company manipulated creditor votes and engineered the case for its own benefit.

Quigley, which Pfizer bought in 1968, at one time faced suits by more than 160,000 plaintiffs, and it filed for bankruptcy in 2004.

(B) Pittsburgh Corning

In the Chapter 11 case of Pittsburgh Corning Corporation, an Amended Plan of Reorganization and objections to the Plan remain pending.

Pittsburgh Corning has been in bankruptcy since April 2000. Between 1962 and 1972, Pittsburgh Corning manufactured pipe insulation that contained asbestos. At least 140,000 lawsuits have

_____________________________________________________________________________


been filed related to the product, and the litigation pushed the company into Chapter 11 bankruptcy.

On January 29, 2009, a Modified Third Amended Plan of Reorganization was jointly proposed by Pittsburgh Corning Corporation, the Official Committee of Asbestos Creditors and the Future Claimant's Representative and supported by Pittsburgh Corning Corporation shareholders, PPG Industries, Inc. and Corning Incorporated. The Court reviewed the Plan and on June 16, 2011, issued a Memorandum Opinion stating that PCC's Modified Third Amended Plan of Reorganization was unconfirmable but provided the plan proponents with another opportunity to amend the Plan.

The Court’s Memorandum Opinion rejected some objections to the Amended Plan and made suggestions regarding modifications to the Amended Plan that would allow the Plan to be confirmed. Parties have filed a motion for reconsideration, objecting to certain points of the Order. Certain parties to the proceeding filed specific Plan modifications in response to the Court’s opinion. Certain parties objected to the proposed Plan modifications and, to resolve some of those objections, further revisions to the Plan and other documents were filed. A modified Amended Plan was then submitted by Pittsburgh Corning, and objections to that Plan were filed by two parties. Those objections and the Plan are pending before the Court.

Corning and PPG Industries, Inc., each own 50% of the capital stock of Pittsburgh Corning, which filed for Chapter 11 on April 16, 2000, in the U.S. Bankruptcy Court for the Western District of Pennsylvania.

* * *

_____________________________________________________________________________


The Troubled Company Reporter provides detailed reporting about every chapter 11 filing nationwide. Stay tuned to learn more about obtaining a trial subscription to the TCR at no cost or obligation.

New Publicly Traded Securities

Psyche Maricon Castillon reports of four companies who issued or will issue shares of new common stock upon emergence pursuant to the plans of reorganization they filed or intend to file in their Chapter 11 cases in February 2013. These companies are: Hawker Beechcraft, Ahern Rentals, Global Aviation and Ampal-American Israel.

(A) Hawker Beechcraft

Hawker Beechcraft emerged from Chapter 11 bankruptcy in mid-February after the Bankruptcy Court in Manhattan approved the aircraft manufacturer's Joint Plan of Reorganization.

The Plan proposed by Hawker Beechcraft, now simply known as Beechcraft Corp, offers 81.9% of the new stock in return for $921 million of the $1.83 billion owing on the senior credit. Unsecured creditors are to receive the remaining 18.9% of the new stock. Holders of the senior credit will receive 86% of the new stock. The senior credit holders are projected to have a 43.1% recovery from the plan. General unsecured creditors' recovery is a projected 5.7% to 6.3%. The recovery by holders of $510 million in senior notes is predicted to be 9.2% to 10%.

_____________________________________________________________________________


(B) Ahern Rentals

Holders of Ahern Rentals' 9-1/4% Senior Secured Second Lien Notes Due 2013 filed with the Bankruptcy Court a Chapter 11 Plan of Reorganization and related Disclosure Statement.

The Plan will reduce the principal amount of the Debtor's outstanding indebtedness by at least $267.7 million by converting all of the Second Lien Notes into New Equity Interests of Reorganized Ahern. The New Equity Interests in Reorganized Ahern will be subject to dilution from: (i) the issuance of New Equity Interests in connection with the Backstopped Rights Offering, (ii) the exercise of New Warrants of Reorganized Ahern issued to Holders of existing Equity Interests in the Debtor; and (iii) New Equity Interests issued in connection with a Management Equity Incentive Plan.

Other than the Second Lien Notes Claims, the Noteholder Plan leaves Unimpaired or otherwise pays in full in Cash all of the Debtor's Claim Holders.

Ahern Rentals also filed with the Bankruptcy Court a Chapter 11 Plan that is supported by certain of its creditors. The Plan is already a revised plan that was filed after the Noteholders filed their own reorganization plan. The Debtor's Plan provides for a 100% recovery to all claims.

(C) Global Aviation

Global Aviation Holdings Inc.'s plan of reorganization became effective in mid-February after having been approved by the Bankruptcy Court for the Eastern District of New York in December last year. The Plan reflects a global settlement with the Company's first and second lien lenders, the official _____________________________________________________________________________


committee of unsecured creditors, and the Company's labor unions, allowing the Company to exit from bankruptcy with reduced debt, a rationalized and lower cost fleet, and new five-year collective bargaining agreements with four of its five represented work groups.

In connection with the Plan, the Company also secured an exit financing facility of $35 million. The exit facility, liquidity on hand, and reduced cost structure provide the necessary framework to effectively compete in today's marketplace.

The Debtor negotiated a plan with senior lenders where secured noteholders owed $111.4 million were to receive 75% ownership of the reorganized company. Unsecured creditors and second-lien noteholders originally were to receive nothing.

Pursuant to a court-approved settlement:

* Second-lien creditors will receive stock appreciation rights where they will receive the value of 3% of the stock if the company is sold within five years. They will also receive warrants to purchase 21% of the stock at exercise prices based on enterprise values ranging from $238.5 million to $363 million. Finally, second-lien creditors will split up $40,000.

* Unsecured creditors will divide $210,000 in cash.

* The estimated recovery by senior secured lenders is reduced to 75% from 78%. In addition to stock, senior secured creditors will receive a new $40 million, five-year second-lien note bearing interest at 3% payable with more notes. The senior creditors will also receive whatever is left after a new $95 million first-lien loan pays off about $91 million in financing for the reorganization.

_____________________________________________________________________________


* Incentive stock awards to company managers are reduced from 10% of the stock to 6%.

(D) Ampal-American Israel

A bankruptcy judge allowed Ampal-American Israel to proceed to soliciting votes from creditors and shareholders for its plan of reorganization, which contemplates giving rein of the company to unsecured creditors.

Pursuant to the Plan, distributions to holders of Allowed General Unsecured Claims against the Debtor's Estate in satisfaction of each such holder's Claim will be the Pro Rata share of either (i) 100% of the Preferred Stock of the Reorganized Debtor or (ii) the Cash Payment if the Equity Buyout Option is exercised.

Holders of Equity Interests will retain their shares of Class A Stock, now in the Reorganized Debtor; moreover, such holders will have the right to exercise the Equity Buyout Option by making a cash investment in the Debtor in the amount equal to 75% of the sum of (i) the Net Allowed General Unsecured Claims Amount and (ii) the total amount of all scheduled and filed Claims against the Debtor that have not been Allowed, in which case the holders of General Unsecured Claims, instead of receiving Preferred Stock, will instead receive their Pro Rata share of the Cash Payment.

_____________________________________________________________________________


* * *

That ends the Beard Group Corporate Restructuring Review for February 2013, brought to you by the editors of the Troubled Company Reporter and Troubled Company Prospector. If you'd like to receive the Troubled Company Reporter for 30-days at no cost -- and with no strings attached -- call Nina Novak at (240) 629-3300 or visit bankrupt-dot-com-slash-free-trial and we'll add you to the distribution list. That telephone number, again, is (240) 629-3300 and that Web site address, again, is bankrupt-dot-com-slash-free-trial.

Tune in to our next monthly Restructuring Review on April 16th. Thank you for listening.

_____________________________________________________________________________


Download - Beard Corporate Restructuring Review for February 2013

Top Related