California Bankruptcy Lawyer Blog

Maiden Mills Industries Inc., the maker of Polartec fleece, says that it wants to convert from Chapter 11 bankruptcy to a Chapter 7 case. This announcement comes after the textile maker’s lender, General Electric Capital Corp., and the committee of unsecured creditors failed to work out a liquidation plan under Chapter 11.

In its petition to the U.S. Bankruptcy Court in Worcester, Massachusetts, Maiden Mills said the conversion would make the winding process easier for the company. A hearing is set for March 15.

Chapter 11 cases are allowed to convert to Chapter 7 as long as the debtor is still in possession. Debtors who were involuntarily forced to declare bankruptcy are not allowed to convert their bankruptcy cases.

Last month, the textile maker won court approval to sell its assets to Chrysalis Capital Partners, a private equity firm, for $44 million. Chrysalis will run the mill under the name Polartec LLC. Proceeds from the sale will be used to settle remaining costs from the Chapter 11 case and fund the conversion, the Company said.

Maiden Mills had filed for Chapter 11 Bankruptcy on January 10.

Continue reading "Maiden Mills Wants To Convert Bankruptcy Filing From Chapter 11 To Chapter 7" »

Yesterday, the Roman Catholic Diocese of San Diego filed for Chapter 11 bankruptcy protection. In its filing, the diocese claimed that it had $60.4 million in liquid assets and $95.7 million in property holdings. The move comes just hours before the first trial related to sex abuse allegations against priests in the diocese was about to begin. The diocese and the plaintiffs had been unable to reach a following two days of negotiations in Los Angeles Superior Court.

Lawyers for the plaintiffs rejected the diocese’s “final and best” settlement offer on Tuesday. An attorney for the diocese said the rejection left the diocese “with no choice.” Meanwhile, attorneys for the plaintiffs called the settlement amount insufficient. They are also accusing the diocese of filing for bankruptcy to keep potentially embarrassing details private.

Continue reading "San Diego Diocese Files for Chapter 11 Bankruptcy Protection" »

Yesterday, the Supreme Court announced that it will not take a case involving Crown Vantage Inc. and its allegations that PriceWaterhouseCoopers LLP, Merrill Lynch and Co., Inc., a Credit Suisse Group unit, as well as other individuals and companies, approved a fraudulent transaction that had been executed by James River Corp., Crown’s parent company at the time. Crown Vantage says the fraudulent transaction is what caused it to file for Chapter 11 bankruptcy protection in 2001.

James River had set up Crown as a subsidiary in the transaction, which then left Crown with hundreds of millions of dollars in underperforming assets and debts. James then spun off Crown into a separate company.

According to Crown Paper Liquidating Trust, Crown’s bankruptcy trustee, the accounting firms and investment banks made false representations when they said that Crown “would be solvent and viable” after the transaction. In making these false representations, Crown Paper Liquidating Trust says, the investment banks and accounting firms helped defraud Crown Vantage’s creditors. Crown Vantage filed for bankruptcy protection five years later.

Continue reading "The U.S. Supreme Court Says It Will Not Review Bankruptcy Case Involving Crown Vantage Inc., Merrill Lynch and Company, PriceWaterhouseCoopers, And Others" »

The Roman Catholic Diocese of San Diego is considering filing for Chapter 11 bankruptcy, rather than going to trial regarding the 150 allegations by individuals claiming that they were sexually abused by diocese priests and church officials.

According to a letter by Bishop Robert Brom to parishioners, the bishop said that Chapter 11 could be the only option if the abuse victims could not be fairly compensated without "jeopardizing our overall mission…” he also expressed concern for the “betrayal of trust” experienced by the victims and begged for their forgiveness. He is expected to provide more extensive detail regarding his announcement later this week.

A lawyer for a number of the San Diego plaintiffs, however, says that the diocese has more than enough insurance and assets to settle the claims of clergy abuse. He also claims that the bankruptcy alternative would be one done in bad faith—not because the diocese is insolvent, but because the filing would automatically stay the upcoming trials.

The first case against the San Diego diocese that will go on trial—scheduled for the end of this month—was brought by a Colorado woman who is accusing Reverend Patrick O’Keeffe of persuading her to have sex with him at his parish office when she was just 17 in 1972. Three more trials involving multiple victims who claim that the priests who abused them were moved by diocese officials to different parishes in order to avoid the abuse incidents being exposed to the public are pending.

Continue reading "Chapter 11 Bankruptcy Protection May Be The Only Option, Says The Diocese of San Diego In California, In The Wake Of Sexual Abuse Claims Potentially Costing Over $200 Million" »

Northwest Airlines says it is on schedule to exit Chapter 11 bankruptcy protection during the second quarter of this year. The airline carrier filed its disclosure statement, as well as provided the amended details of its reorganization plan, which values the company at close to $7 billion. The plan needs to be approved by the U.S. Bankruptcy Court for the Southern District of New York, as well as by Northwest’s unsecured creditors.

Northwest is the 5th largest carrier company in the U.S. It filed for bankruptcy protection last September. A court hearing regarding its disclosure statement is scheduled for March 26.

According to Northwest’s proposed plan, holders of general unsecured claims would receive stock valued at 66% to 83% of the claims, which are estimated at anywhere from $8.75 billion to $9.5 billion. Northwest would sell new common stock worth $750 million and let unsecured creditors decide first whether they wish to buy new stock. $1.5 billion/distributions would be given to employees. Current shareholders would not receive any distribution, and current shares would be cancelled.

Chapter 11 bankruptcy
Even when a company manages to successfully exit bankruptcy, the bondholders and creditors usually become the new owners and existing equity shares are usually cancelled.

Continue reading "Northwest Airlines Files Its Disclosure Statement As It Prepares To Exit Bankruptcy Protection" »

Delta Air Lines can begin soliciting votes for its creditors to approve its bankruptcy reorganization plan. The airline carrier plans to emerge from bankruptcy in April. The disclosure plan, which was approved by the judge this week, will be sent to creditors.

According to attorneys for the Atlanta-based company, all formal, informal, unfiled, and filed objections had been resolved. Among the objections, were filings from Travelocity, several banks, the city of Los Angeles, and the county and city of Denver.

Delta first filed its disclosure statement and reorganization plan last December. Since then it has made two amendments. It has also managed a takeover bid by US Airways Group, which withdrew its bid for Delta last month after Delta’s creditors announced that it would support Delta’s plan to emerge from bankruptcy as a solo company.

Creditors can vote on the reorganization plan until April 9. The plan also includes Delta’s plans to give creditors new stock upon its exit from Chapter 11.

Continue reading "As Bankruptcy Judge Approves Disclosure Statement, Delta Moves Closer Toward Exiting Chapter 11 Bankruptcy Protection" »

The Official Unsecured Creditors’ Committee for Delta Air Lines has approved the conditions of the airline carrier’s $2.5 million financing plan to emerge from Chapter 11 bankruptcy.

The announcement comes as the country’s third-largest carrier company amended and made technical changes to its bankruptcy reorganization plan and follows the withdrawal of its hostile takeover bid (at least $9.8 billion) by US Airways.

Delta’s board had considered US Airways’s proposal several times but did not take any action beyond that. US Airways withdrew its bid after the unsecured creditors rejected the merger offer in favor of supporting Delta’s reorganization plan. The Arizona-based U.S. Airways Group had given the committee until February 1 to meet certain demands, including postponing Delta’s disclosure statement hearing that was scheduled on February 7, or it would pull its offer.

Also, because several creditors had objections with its disclosure statement, Delta is working with them to resolve those differences. The airline carrier wants its reorganization plan confirmed in April.

Continue reading "$2.5 Million Financing For Delta Air Lines To Emerge From Bankruptcy Is Approved By Creditors" »

Advanced Marketing Services, a bestselling book distributor to warehouse stores, is encountering resistance from creditors to its Chapter 11 bankruptcy reorganization efforts. In a petition filed last week by AMS’s unsecured creditors, a judge is being asked to order the company to cease operations and “transition into liquidation mode.”

A hearing is scheduled today for a federal bankruptcy judge to hear AMS’s proposal for how it will develop a plan to sell, partially sell, or refinance the business. The California-based company says it has formed confidentiality agreements with potential buyers and investors. It wants a bankruptcy judge to grant it permission to sell Publishers Group West, one of its subsidiaries, to publishing and distribution company Perseus Books.

While AMS’s creditors support the sale of Publishers Group West, they believe that the debtor is insolvent and should stop spending money by shutting down its operations. Last week, a committee of AMS’s unsecured creditors filed objections to the company’s proposal, which they are convinced will fail. Penguin Books and Random House are members of the committee.

“Because AMS's business has crumbled, AMS is no longer a viable business entity, and it should quickly ratchet back the scope of the operations and expenses and transition into a liquidation mode,” said a committee member.

Continue reading "Creditors of Advanced Marketing Services Want Bankruptcy Judge To Order Company To Liquidate" »

In the Delta Airlines Chapter 11 bankruptcy case, an adhoc creditors committee for the carrier company is requesting a postponement of a February 7 bankruptcy hearing. The creditors say they want to examine a $9.87 billion offer from US Airways Group Inc. to purchase the bankrupt carrier company.

In a written statement submitted yesterday, the creditors said that the US Airways offer of cash and stock offers a "superior recovery for creditors compared to what they would receive under Delta's standalone Chapter 11 plan." The creditors group is made up of creditors holding approximately $2.4 billion in claims. Previously, the creditors had asked Delta to consider the U.S. Airways offer. Now, they want the official creditors committee to ask Delta to look at the offer.

According to Anne Granfield, a spokeswoman for the ad hoc committee, "As it stands, unless the official committee comes out and says something, creditors won't have a choice."

According to Granfield, US Airways says it will increase its bid amount for Delta as long as the creditors are able to postpone the hearing. US Airways, however, says it has not offered to increase its offer, which will expire on February 1. But the carrier does say that it will withdraw its bid if Delta’s reorganization hearing isn’t postponed by Thursday. US Airways had attempted a hostile takeover to purchase Delta last November.

Delta estimates that its value will be somewhere between $9.4 billion and $12 billion if it exits from Chapter 11 bankruptcy by the middle of the year as a standalone company. Once its disclosure statement, which it submitted in December, is approved, the carrier company can begin soliciting votes to get its reorganization plan approved.

Continue reading "Delta Air Lines Creditors Request Postponement of Bankruptcy Hearing" »

The California city of Los Angeles has filed an objection to Delta Air Lines Inc.’s Chapter 11 bankruptcy reorganization plan, claiming that the plan cannot be approved because of the undue authority it gives Delta to reject certain leases.

The city of Los Angeles owns Ontario International Airport and Los Angeles International Airport, both airports in Southern California where Delta maintains its leases and runs its operations. The city claims that Delta’s disclosure statement does not describe the possible effect that ending its Terminal 5 lease at LAX would have on the airline company’s financial performance and operations. Without this information, the city of LA and other creditors cannot accurately evaluate the workability of Delta’s reorganization plan.

LA also says that Delta’s reorganization plan improperly gives the airline company broad discretion to defer its decisions when it comes to rejecting or assuming certain unexpired leases beyond the effective plan date.

The airline company, which filed for Chapter 11 bankruptcy in 2005, estimates that it will be worth $9.4 billion to $12 billion if it emerges from bankruptcy protection as planned and as a standalone company by mid-2007.

Continue reading "City of Los Angeles Files Objection To Delta’s Bankruptcy Reorganization Plan" »

Pacific Lumber Co. announced last week that it had filed for Chapter 11 bankruptcy protection. The lumber company said a major reason that it needed to file for bankruptcy was because it had entered into the “Headwaters agreement,” which protected some of the world’s largest and oldest redwood trees from being chopped up at lumber mills.

Pacific Lumber is one of the largest timber companies in California. It filed for bankruptcy protection at a Texas federal court in Corpus Christi, Texas. Based in Scotia, California, the lumber company said it would not be able to make its $27 million interest payment that was due to bond holders last Saturday. This missed payment, according to Pacific Lumber, would cause the company to default on $714 worth of loans and lose the 200,000 acres of timberlands in Humboldt County that it had used for collateral.

Pacific Lumber, the State of California, and the U.S. government had signed an agreement giving the timber company 7700 acres of public timberland and $300 million in exchange for 5,600 acres of company land, where some of the tallest and oldest redwood trees in the world continue to grow. The deal also included a “habitat conservation plan” which regulated how many trees the company cut down.

In December 2006, Pacific Lumber filed a lawsuit against California claiming that certain government regulations ran afoul of the agreement. The timber company said the agreement had increased its logging expenses and the conservation plan made it so hard to cut down trees that the company’s future had been put at risk.

Continue reading "Pacific Lumber Company Files For Bankruptcy Protection" »

Calpine Corp. says that it is looking for new equity investors to help finance its exit from Chapter 11 Bankruptcy. The San Jose-based energy company also says that it has given a business plan—which could form the basis of its proposed reorganization—to creditors.

Calpine has been under bankruptcy protection since December 2005. The company has until June 20 to submit its reorganization plan that will show how it plans to exit Chapter 11 and pay back creditors.

In Court papers, the energy company stated that its net loss between December 2005 and November 2006 was $800 million greater than for that same period of time the year previous. The company attributes the loss to spending $1 billion in reorganization items. It’s core operating results, however, improved from the past year.

Calpine is the number one operator of natural-gas-fired power plants in the United States. It powers 27 million homes and supplies 3.5% of all electricity used in the US. The company has sold nearly 1/5 of its 92 plants since filing for bankruptcy protection.

Continue reading "San Jose-Based Calpine Corp. Seeks Investors To Finance Chapter 11 Bankruptcy Exit" »

NWA has filed its Chapter 11 bankruptcy reorganization plan. The airline company says that it plans to emerge from bankruptcy protection during the second quarter of 2007 as an independent company. NWA also says that it plans to eliminate unsecured debt by paying its unsecured creditors using common stock in the reorganized company. Preferred and common shareholders, however, will not receive anything.

A US Bankruptcy Court gave NWA an extension until February 15 to file its disclosure statement which will detail its reorganization plan for the public.

On Friday, NWA said that the plan included new, cost-saving lease agreements with airports and other facilities, as well as purchase agreements with engine and aircraft manufacturers.

Since filing for bankruptcy protection in 2005, NWA says that they succeeded in restructuring its fleet, removing $2.4 billion in yearly costs, significantly strengthening its balance sheet, and entering into new aircraft purchase agreements. New labor accords are also expected to save the airline carrier $1.4 billion each year.

Continue reading "Northwest Airlines Submits Bankruptcy Reorganization Plan" »

Subprime mortgage lender Ownit Mortgage Solutions Inc. has filed for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court of San Fernando Valley in California.

The company, which makes loans to borrowers with poor credit and limited income, lists it debts as more than $100 million and assets between $1 million and $100 million. According to the LA Times, the bankruptcy filing is in response to lawsuits filed by two creditors.

Ownit Mortgage says that it owes its largest unsecured creditor, Merrill Lynch LP Holdings Inc., approximately $93 million. Merrill Lynch is also an owner of a 20% stake in Ownit Mortgage. Credit Suisse First Boston, owed $12.7 million, and Terwin Advisors LLC, owed $19 million, are also unsecured creditors of Ownit Mortgage.

The Automatic Stay

When filing for Chapter 11 bankruptcy, the debtor receives an automatic stay, which gives a debtor a period of time where all judgments, foreclosures, collection activities, and repossessions of property are suspended. Creditors cannot pursue any debt or claim from before the bankruptcy petition was filed.

Continue reading "California-Based Ownit Mortgage Solutions Inc. Files For Chapter 11 Bankruptcy" »