Beard Group Corporate Restructuring Review for July 2011

8/6/2019 Beard Group Corporate Restructuring Review for July 2011

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Beard Group Corporate Restructuring ReviewFor July 2011

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 availableat http://bankrupt.com/restructuringreview/

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Welcome to the Beard Group Corporate RestructuringReview for July 2011, brought to you by the editors of the

Troubled Company Reporter and Troubled Company Prospector.

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

first, last month's largest chapter 11 filings and otherstatistics;

second, large chapter 11 filings TCR editors anticipate inthe near-term;

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


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Beard Group Corporate Restructuring Review for July 2011 -- page 2

fourth, reminders about debtors whose emergence fromchapter 11 has been delayed; and

fifth, information you're unlikely to find elsewhere about

new publicly traded securities being issued by chapter 11debtors.

July 2011 Mega Cases

Now, let's review the largest chapter 11 cases in July 2011.

Danilo Muoz reports that three companies with assets inexcess of $100 million commenced Chapter 11 bankruptcyproceedings in July 2011. This raised the total number of Chapter11 filings involving assets exceeding $100 million for the firstseven months of 2011, or so-called mega cases, to 43companies, an average of six mega cases per month.

The July mega case filings, however, were lower compared

to prior months. In June alone, eight such cases were filed.

During the first seven months of last year, a total of 64 megacases were filed, a difference of 33% from this year's. In July2010, seven mega cases were filed.

For fiscal year 2010, a total of 105 mega cases were filed,an average of about 9 per month.

Of the July 2011 Chapter 11 debtors, no company reportedassets in excess of $1 billion in assets. So far this year, only twoChapter 11 bankruptcies involve more than $1 billion in assets --Borders Group and MSR Resort Golf Course. Both filed inFebruary.


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During the first seven months of 2010, there were twocompanies that filed for Chapter 11 with assets in excess of $1billion. Both billion dollar filings occurred in July 2010 --Innkeepers USA Trust and Protech Holdings LLC.

The largest Chapter 11 filing for July 2011 was by Athens,Greece-based Omega Navigation Enterprises Inc. The Companydisclosed assets of US$527.6 million and debt totaling US$359.5million.

Omega and its affiliates own a fleet of eight high-specification product tankers, with each vessel owned by a

separate debtor entity. Gregory McGrath, Omega's ChiefFinancial Officer, said in a court filing that, "The global recessionlessened demand for international charter shipping of refinedpetroleum products, and this negatively impacted Omega'sbusiness."

Omega said it was promised by its senior lenders a three-year extension on its senior debt facility if certain conditions weremet. Omega believes it has met those conditions, yet the seniorlenders did not consent to the agreed upon extension. Underthreat of default and acceleration of debt, Omega was forced tofile the chapter 11 cases to protect its interests.

Omega filed for Chapter 11 protection on July 8 with the U.S.Bankruptcy Court for the Southern District of Texas in Houston[Lead Case No. 11-35926] before Judge Karen K. Brown.

The next largest Chapter 11 filing was by ArchBrook LagunaHoldings LLC, which disclosed assets of $246.2 million againstdebt totaling $176.4 million as of March 31, 2011. ArchBrook andcertain of its affiliates filed July 8 with the Bankruptcy Court for theSouthern District of New York [Lead Case No. 11-13292].


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ArchBrook is a procurement and distribution intermediarybetween production companies and end retailers. It distributesconsumer electronics, computers and appliances to principalcustomers that include Wal-Mart Stores Inc., Best Buy Co. and

Costco Wholesale Corp.

ArchBrook is seeking to sell substantially all of its assets. Ata bankruptcy auction on August 8, liquidator Gordon BrothersGroup, LLC, emerged as the winning bidder.

ArchBrook is aiming for a quick sale of the business. TheDebtors engaged in a marketing process for the assets starting

May, and was in talks with 47 potential bidders, but failed to sign adeal for a stalking horse bidder before the Chapter 11 filing.

The third largest Chapter 11 case for July 2011 was filed byAmsterdam-based Seaarland Shipping Management BV andparent Marco Polo Seatrade BV. The Company, along withaffiliates, own six tankers and bulk carriers.

Seaarland and Marco Polo filed for Chapter 11 protectionJuly 29 with the Bankruptcy Court for the Southern District of NewYork [Case No. 11-13634]. The petition said assets and debt areboth between $100 million and $500 million.

Marco Polo explained in court filings that Credit AgricoleCorporate & Investment Bank, as agent to the Company'slenders, seized one ship on July 21 and was on the cusp ofseizing two more on July 29. The arrest of the vessel was

authorized by the U.K. Admiralty Court. Credit Agricole alsoattached a bank account with almost $1.8 million on July 29. TheChapter 11 filing precluded the seizure of the other two vessels.


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Credit Agricole is questioning the jurisdiction of the U.S.courts to hear the bankruptcy plea. Credit Agricole also isaccusing Marco Polo of filing in bad faith.

Mr. Muoz further reports that the number of prepackaged orpre-negotiated mega case restructurings remained at 10 as nolarge prepack or pre-negotiated case was commended in July.Thus far, the prepacks comprise 23% of the 43 mega cases thisyear. For fiscal year 2010, a total of 35 prepacks/pre-arrangedcases were filed -- or about one in every three filings.

Of the July mega cases, two went to the Southern District of

New York while one went to the Southern District of Texas. Forthe first four months of 2011, 22 mega-cases went to Delawareand 9 went to the Southern District of New York. The rest weredistributed among various bankruptcy courts throughout the U.S.

Lehman Brothers Holding Corp. remains the biggestcorporate bust in history. Lehman, which filed in 2008, had $639billion in total assets and $613 billion in total debts at that time ofits filing.

This year the largest failure was by MSR Resort Golf CourseLLC, which had $2.2 billion in assets and $1.9 billion in debts asof Nov. 30, 2010. MSR and its affiliates own and operate fiveiconic luxury resort properties with related real estate propertiesand amenities. The resorts subject to the filings are Grand WaileaResort and Spa, Arizona Biltmore Resort and Spa, La QuintaResort and Club and PGA West, Doral Golf Resort and Spa, and

Claremont Resort and Spa. MSR and its affiliates filed forChapter 11 protection with the Bankruptcy Court for the SouthernDistrict of New York on Feb. 1 [Lead Case No. 11-10372].

Anticipated Large Chapter 11 Filings


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

Carlo Fernandez compiled a list of six companies that maybe close to filing for bankruptcy. These are Dynegy, LeeEnterprises, Quantum Fuel, NextWave Wireless, Real Mex andPMI Group.

(A) Dynegy

Vice Chancellor Donald Parsons of Delaware's Court ofChancery on July 29 thumbed down the PSEG request for anorder to hold up Dynegy's $1.7 billion restructuring, which waslaunched early in July. The judge said PSEG, which leases plantsto Dynegy, failed to show it is likely to succeed on the merits ofclaims that Dynegy's restructuring would run afoul of contractprotections. Judge Parsons also found it unlikely Dynegy'srestructuring would later be found to be a fraud on creditors.

The corporate-debt restructuring will be managed byinvestment bank, Credit Suisse. Under the proposal, Dynegy willsplit its coal and natural-gas generating assets into two separateentities that will be bankruptcy remote from the parent holdingcompany, Dynegy Holdings Inc. The new companies could besold or pay dividends to shareholders even if the holdingcompany eventually defaults on its $3 billion of bonds.

PSEG, which is owed $790 million by Dynegy in leasepayments, said the reorganization "fraudulently transfers" assetsaway from the parent holding company, which guarantees theleases.


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LibertyView Capital Management, which owns $30 million ofDynegy bonds, is pursuing a similar action in New York.

Texas-based Dynegy produces and sells electric energy,

capacity and ancillary services in key U.S. markets.

In August last year, Dynegy tried to sell the business to anaffiliate of The Blackstone Group at $4.50 a share or roughly $4.7billion. That offer was raised to $5 a share in November.However, Dynegy shareholders led by Carl Icahn and investmentfund Seneca, thumbed down both offers.

In December 2010, an affiliate of Icahn commenced a tenderoffer to purchase all of the outstanding shares of Dynegy commonstock for $5.50 per share in cash, or roughly $665 million in theaggregate. In February 2011, Icahn Enterprises L.P. terminatedthe proposed merger agreement with the Company after it failedto garner the required number of shareholder votes.

Dynegy warned shareholders in March this year it might beforced into bankruptcy if it is unable to renegotiate the terms of itsexisting debt. The Company's balance sheet at March 31, 2011,showed $9.82 billion in total assets, $7.15 billion in total liabilitiesand $2.67 billion in total stockholders' equity.

(B) Lee Enterprises

Lee Enterprises Inc., the owner of the St. Louis Post-

Dispatch and 52 other daily newspapers, is offering lenders stockand higher interest rates as enticement to refinance and avoidbankruptcy, Bloomberg News has reported, citing four peoplefamiliar with the matter. If not enough lenders accept theproposal, it would be carried out through a prepackaged Chapter11 filing, the people said.


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Lee is facing the maturity of about $1 billion in term loansand revolving credit in April 2012. A bid to sell high-yield debt inMay failed.

Lee Enterprises has gained support from two main lenders,namely Goldman Sachs Group Inc. and hedge fund MonarchAlternative Capital, for the debt-exchange offer, The Wall StreetJournal reported.

One of The Journal's sources said the two main creditorscould end up owning about 13% of the newspaper publisher

under deal terms being discussed.

The Journal's sources said Lee plans to ask lenders incoming weeks to exchange their current debt for new debt thatmatures later and pays higher interest rates.

Based in Davenport, Iowa, Lee Enterprises has 49 dailynewspapers and a joint interest in four others, rapidly growingonline sites and more than 300 weekly newspapers and specialtypublications in 23 states. Lee's newspapers have circulation of1.5 million daily and 1.8 million Sunday, reaching four millionreaders daily.

The Company's balance sheet at March 27, 2011, showed$1.40 billion in total assets, $1.32 billion in total liabilities, and$77.65 million in total equity.

(C) Quantum Fuel

Quantum Fuel Systems Technologies Worldwide Inc., facingimminent maturities, said in July it needs to raise capital,


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refinance its debt or secure another maturity extension in comingweeks to avoid a default.

The Company reported a net loss of $11 million on $20

million of revenue for fiscal year ended April 30, 2011, comparedwith a net loss of $46 million on $9.7 million of revenue for fiscalyear 2010.

Ernst & Young LLP, in Orange County, California, the auditor,noted that Quantum Fuel's recurring losses and negative cashflows combined with the Company's existing sources of liquidityand other conditions raise substantial doubt about its ability to

continue as a going concern.

The Company's balance sheet at March 31, 2011, showed$71.97 million in total assets, $33.39 million in total liabilities, andstockholders' equity of $38.58 million.

Based in Irvine, California, Quantum Fuel develops andproduces advanced clean propulsion systems and renewableenergy generation systems and services.

In it annual report, the Company said it anticipates it willneed to raise a significant amount of debt or equity capital in thenear future to repay certain obligations owed to the Company'ssenior secured lender when they mature. As of June 15, 2011,the total amount owing to the Company's senior secured lenderwas approximately $15.5 million, which includes approximately$12.5 million of principal and interest due under three convertible

promissory notes that are scheduled to mature on Aug. 31, 2011,and a $3.0 million term note that is potentially payable in cashupon demand beginning on Aug. 1, 2011, if the Company's stockis below $10 at the time demand for payment is made.


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(D) NextWave Wireless

NextWave Wireless Inc. failed to pay off $129 million insenior secured first-lien notes when they matured on July 17.

NextWave Wireless has entered into an agreement with theholders of its secured notes pursuant to which the holders forbearfrom exercising their rights and remedies. The forbearanceagreement will provide the Company until Sept. 30, 2011, tocomplete a refinancing transaction.

NextWave has $179 million in senior-subordinated secondlien notes that mature in November. In addition, there are $640

million in senior-subordinated third-lien notes that mature inDecember.

The company said in regulatory filings that it has beendelayed in selling wireless-spectrum licenses.

For the first quarter, there was no income, leading to a $5.1million loss from operations and a $61 million net loss, taking intoconsideration $58.5 million of interest expense. As of April 2,there was $31.5 million in cash among assets on the books for$484.5 million.

San Diego, California-based NextWave Wireless is awireless technology company that manages and maintainsworldwide wireless spectrum licenses.

The Company's balance sheet at April 2, 2011, showed

$484.5 million in total assets, $941.1 million in total liabilities, anda stockholders' deficit of $456.6 million.

(E) Real Mex


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Real Mex Restaurants, Inc. reached an agreement withlenders to waive and amend certain covenants as it works torevise its corporate capital structure. As part of the agreement,the company made a $9.1 million interest payment due July 1 on

the $130 million second lien senior secured notes. An affiliate ofSun Capital Partners provided additional liquidity as part of theongoing restructuring process.

Real Mex said all financial stakeholders are working togetheron a revised capital structure that recognizes "economic realitiesand addresses future needs."

Based in Cypress, California, Real Mex Restaurantsoperates 180 restaurants under the trade names El ToritoRestaurant(R), Chevys Fresh Mex(R) and Acapulco MexicanRestaurant Y Cantina(R). Total revenues for 12 months endedMarch 2011 were $474 million.

(F) PMI Group

The PMI Group Inc. disclosed in a regulatory filing that as ofJune 30, 2011, the policyholders' position at its wholly ownedsubsidiary, PMI Mortgage Insurance Co. was below the minimumrequired by Arizona law and its risk-to-capital ratio exceeded theregulatory maximum 25:1 set by various other states.

In 16 states, if a mortgage insurer does not meet a requiredminimum policyholders' position -- calculated in accordance with

statutory formulae -- or exceeds a maximum permitted risk-to-capital ratio of 25 to 1, it may be prohibited from writing newbusiness. In two of those states, mortgage insurers are requiredto cease writing new business immediately if and so long as theyfail to meet capital requirements. In the remaining 14 states


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(including Arizona), regulators exercise discretion as to whetherthe mortgage insurer may continue writing new business.

PMI Mortgage is currently operating under regulatory

waivers or discretion in the majority of the 14 states. Four of PMIMortgage's waivers expire Dec. 31, 2011 or earlier. Each of thewaivers issued to PMI Mortgage may be withdrawn at any time bythe applicable insurance department.

PMI posted a consolidated net loss of $134.8 million and$261.6 million for the second quarter and first six months of 2011,respectively, compared to net losses of $150.6 million and $307.5

million for the corresponding periods in 2010.

According to PMI, in light of the second quarter results, itexpects that the number of states in which PMI Mortgage isprecluded from writing new business will significantly increase.

PMI said it is not clear what actions, if any, the insuranceregulators in states that do not have capital adequacyrequirements may take as a result of PMI Mortgage failing to meetcapital adequacy requirements established by one or more states.

Based in Walnut Creek, California, The PMI Group offersresidential mortgage insurance and credit enhancement products.

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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 experiencingfinancial distress or restructuring their balance sheets in a judicialproceeding. Stay tuned to learn more about obtaining a trialsubscription to the TCR at no cost or obligation.


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Major Pending Disputes In Chapter 11 Cases

Next we'll quickly review major pending disputes in four largechapter 11 cases that Troubled Company Reporter editorsmonitor day-by-day.

(A) Lehman Brothers

Ivy Magdadaro identified two major disputes pending in the

Lehman Brothers case. The disputes involve Lehman's lawsuitsagainst Barclay Plc for unpaid bonuses to former Lehmanemployees, and against JP Morgan Chase over common lawclaims.

(1) Dispute With Barclays

In an Aug. 5 filing with the U.S. Bankruptcy Court inManhattan, Barclay asked Judge James Peck to dismissLehman's lawsuit seeking million of dollars in unpaid bonusesfrom Barclays that allegedly should have been paid to formerLehman Brother employees.

The U.K. bank made a similar request in June shortly afterBarclays defeated an $11 billion lawsuit brought by the Lehmanholding company.

In its recent court filing, Barclays reiterated that it hasalready paid $2 billion to Lehman employees who transferred toBarclays as part of the U.K. bank's September 2008 purchase ofLehman's North America broker unit.


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Lehman has argued that the $2 billion figure agreed in 2008applies only to bonuses, and because only $1.5 billion of the $2billion were in actual bonuses, Barclays still owes an additional$500 million to what's left of Lehman. Lehman has also said in

court papers that Barclays breached the contract.

Barclays countered that the "$2 billion" number was a goodfaith estimate and that it referred to all kinds of compensation, not

just bonuses. The U.K. Bank complained that what should havebeen an estimate is touted by Lehman to have become acontractual obligation.

The dispute on the unpaid bonuses is a residual matterstemming from Lehman's lawsuit last year against Barclays.Lehman accused the U.K. bank, under the lawsuit, of negotiatinga discount not adequately disclosed to the court when it boughtLehman's broker unit in 2008.

Judge Peck in February held that Barclays' 2008 acquisitionof the Lehman broker unit was done in good faith, despite the not-so-perfect conditions surrounding such sale. More recently, the

judge signed final orders on July 15, denying Lehman's bid torecoup money from Barclays over the $11 billion "windfall"allegedly received by Barclays on its broker unit purchase.

Judge Peck also entered a further order on June 6 in favor ofthe trustee overseeing the liquidation of the remaining assets ofthe Lehman broker unit. The decision called for Barclays to paytrustee James Gidden all $2 billion in a disputed margin collateral

account and pay a 5% interest. On July 15, Barclays took anappeal from the decision.

In a July 29 court filing, Barclays said it also has taken anappeal from Judge Peck's ruling that the U.K. Bank is not


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unconditionally entitled to about $769 million in Lehman'scustomer accounts.

For his part, the Lehman trustee took an appeal from Judge

Peck's July 22 ruling that awarded $1.1 billion to Barclays. Thetrustee was told to return $1 billion in so-called clearance boxes tothe U.K. bank and additional assets of $769 million, if they weren'tneeded for customers. The trustee said in the appeal that hewanted 9% interest on the margin assets, not 5%.

In other news, on July 28, the Lehman holding companyappealed Judge Peck's July 15 final order that it can't recover the

alleged billions of dollars in windfall made by Barclays when itbought the Lehman broker unit.

(2) Dispute With JPMorgan

JP Morgan Chase, sued for $8.6 billion by Lehman BrothersHoldings, said the defunct firm's common law claims against itmust be decided by a U.S. district court judge rather than abankruptcy judge.

The second biggest U.S. bank has been fighting Lehman'sMay 2010 suit before the bankruptcy court, fending off demandsfor the return of $8.6 billion in collateral, plus "tens of billion" indamages for allegedly accelerating the former investment bank'sdemise. JPMorgan served as Lehman's main clearing bankduring the 2008 financial crisis.

In an Aug. 6 court filing, JPMorgan said the June 2011 U.S.Supreme Court ruling in the Anna Nicole Smith case, or Stern v.Marshall, limited the power of bankruptcy judges to rule on such"common law" claims. Under the Stern ruling, a district judgemust determine damage claims brought under New York state


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law. JPMorgan said the Lehman claims are legallyindistinguishable from the counterclaims in the Stern case.

Lehman disagreed on the impact of the Anna Nicole Smith

case. Lehman contended that nothing in the case imposes a"blanket prohibition" against bankruptcy courts deciding commonlaw claims on a final basis.

The Lehman lawsuit claimed that JPMorgan demanded loanguarantees that fatally weakened the firm. JPMorgan filed acountersuit, alleging that Lehman defrauded it into making a $70billion loan around the time of the firm's Sept. 2008 bankruptcy.

A revised scheduling order on the case was entered July 27.Trial is set to begin Aug. 13, 2012. Fact discovery is to becompleted by December 2011, while expert discovery is to becompleted by March 2012.

(B) Bernard Madoff

(1) Settlement With Tremont

Irving H. Picard, the trustee appointed under the SecuritiesInvestor Protection Act to oversee the liquidation of Bernard L.Madoff Investment Securities Inc., on July 28 brought home a$1.03 billion settlement from the second largest group of feederfunds that funneled money into the Madoff Ponzi scheme.

The Madoff trustee sued investment firms Tremont GroupHoldings Inc.; Oppenheimer Acquisition Corp., which owns theTremont hedge fund; Massachusetts Mutual Life Insurance Co.;and affiliates in December, seeking to recover about $2.1 billionthat the investment funds received directly from the Madoff firm.The lawsuit was unsealed in March.


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Pursuant to the settlement, in return for $1.03 billionpayment into escrow, the investment funds will receive about $3billion in approved customer claims. The settlement is structured

so that distributions on the funds claims will be paid directly to thefunds customers.

Combined with the $2.6 billion the Madoff trustee has onhand and the $5 billion he will receive on final approval of thesettlement with the late Jeffrey M. Picower, the trustee will have$8.6 billion, or enough to pay almost half the $17.3 billion inprincipal that customers lost with Madoff.

The money on hand doesnt include an additional $2.2 billionthrough the governments portion of the Picower settlement.Under arrangements with the government, the trustee willdistribute the $2.2 billion.

The hearing to approve the Tremont settlement will takeplace Sept. 13.

Bernard L. Madoff Investment Securities LLC and Bernard L.Madoff orchestrated the largest Ponzi scheme in history, withlosses topping $50 billion.

(2) Lawsuit Against HSBC

On July 28, the federal district court in Manhattan dismissed

the larger part of the Madoff trustee's lawsuit against HSBCHoldings Plc. The trustee had sued HSBC, alleging that theLondon-based bank enabled Madoff's Ponzi scheme andengaged in financial fraud and misconduct being "willfully bind tothe fraud." The complaint sought $9 billion, including $2.3 billionfor receipt of fraudulent transfers.


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In a 26-page opinion, U.S. District Judge Jed Rakoffdismissed what he said were $6.6 billion of common law claimsfor unjust enrichment, aiding and abetting fraud, and aiding and

abetting breach of fiduciary duty.

Judge Rakoff sent the remnants of the lawsuit back tobankruptcy court for further proceedings so the Madoff trusteecan pursue $2.2 billion in fraudulent transfer claims.

Judge Rakoff opened his opinion by stating the familiar rulethat bankruptcy trustees dont have the right to assert claims

against third parties on behalf of the estates creditors. Thetrustee previously argued that the Securities Investor ProtectionAct allows him to take over customers claims that he paid.

(C) Extended Stay

Hobart Truesdell, the trustee for the creditors trustestablished under Extended Stay Inc.'s confirmed Chapter 11plan, is asking the bankruptcy court to send four lawsuits that hefiled to U.S. District Court and one to state court.

The trustee is concerned that the bankruptcy court cantproperly hear the case in the wake of the U.S. Supreme Court'sJune opinion in Stern v. Marshall, the controversial case involvingthe estates of Anna Nicole Smith.

The trustee filed five lawsuits in June, seeking $6.3 billionfrom Blackstone Group LP, which owned the hotel operator beforea leveraged buyout in June 2007. Blackstone later was in thegroup buying back the business under the Chapter 11 plan. Insome of the suits, the trustee is also suing David Lichtenstein and


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Lightstone Group LLC, the company he controlled that was thebuyer in the LBO.

Although the trustee sued in bankruptcy court, he now says

that the Stern decision at a minimum creates ambiguity overwhether the bankruptcy court can hear the case.

The Extended Stay trustee is represented by the law firmBaker & Hostetler LLP, the same firm representing the trusteeliquidating Bernard L. Madoff Investment Securities Inc. TheMadoff trustee has been opposing removal of lawsuits frombankruptcy court.

Extended Stay operated more than 680 long-term lodgingproperties in 44 states. Blackstone, Centerbridge Partners LP andPaulson & Co. were in the group that bought the business throughthe Chapter 11 plan for $3.93 billion in cash. The plan wasimplemented in October.

Extended Stays Chapter 11 petition in June 2009 listedassets of $7.1 billion against debt totaling $7.6 billion.

(D) Washington Mutual

The dispute over insider-trading allegations remains the finalissue in the plan process hearing in the case of WashingtonMutual Inc.

WaMu shareholders say the holding company at the heart ofthe largest banking collapse in U.S. history ran a "profoundlyflawed" bankruptcy case, one that means a $7 billion payday for"powerful creditors" at the expense of others.


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Shareholders contended that the holding company bent overbackward to assist major hedge fund investors, while brushingaside competing claims, in the development of the plan. The fournamed hedge funds are Appaloosa Management LP,

Centerbridge Partners LP, Owl Creek Asset Management LP andAurelius Capital Management. Together they hold $2 billion inclaims.

The insider-trading allegations first gained attention back inDecember. The four hedge funds insist that they did not profitunfairly and assert that they played by the rules.

The official creditors committee supports the hedge funds'assertions. The creditors committee said it found nothing amissin the hedge fund trading during WaMu's bankruptcy case.

The Bankruptcy Court denied confirmation of an earlierversion of WaMu's plan in January. WaMu was back before theDelaware bankruptcy court July 13.

Shareholders will see no recovery under the current plan,which was negotiated with JP Morgan Chase, the hedge fundsand the Federal Deposit Insurance Corp. The plan, among otherthings, is based on the settlement of billion dollar lawsuits pittingWaMu, JPMorgan, and the FDIC against each other.Shareholders have asked Judge Walrath to reject the plan onallegations of insider trading.

Testimony in the WaMu bankruptcy plan hearing wrapped up

on July 21. Final written arguments and closing oral argumentsare expected in August.

WaMu is the biggest bank failure in U.S. history, with theholding company listing $4.49 billion in assets versus $7.83 billion


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in liabilities. JPMorgan acquired WaMu's banking unit in 2008 for$1.88 billion.

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The Troubled Company Reporter provides detailed reportingabout every chapter 11 filing nationwide. Stay tuned to learn moreabout obtaining a trial subscription to the TCR at no cost orobligation.

Delayed Exits From Chapter 11

Julie Anne Lopez reports about five Chapter 11 debtorswhose emergence from Chapter 11 has been delayed: TribuneCo., WR Grace & Co., Lehman Brothers, Washington Mutual, andQuigley.

(A) Tribune

Delaware Bankruptcy Judge Kevin Carey, at a June 28hearing, urged Tribune Co. and its rival Aurelius to continue theirdiscussions toward a consensual resolution. Judge Carey alsostated that he would spend time in July to come up with adecision on which Chapter 11 Plan for Tribune and its debtoraffiliates he will confirm, although he made no promises when hewould deliver.

So far, no ruling has been issued by Judge Carey, althoughthe Creditors' Committee has submitted a proposed orderregarding admissibility of trial exhibits with respect to theconfirmation of the completing Plans.


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The latest development in the case involves a reshufflingthat will help the Company's publishing business reduce the sizeof its finance and administrative departments. Tribune Co.spokesman Gary Weitman said some jobs are being eliminated

but declined to provide specifics.

The changes will give Chicago Tribune publisher TonyHunter responsibility for all Tribune Co. newspapers except theLos Angeles Times. The other newspapers reporting to Mr. Hunterare the South Florida Sun-Sentinel, Orlando (Fla.) Sentinel, TheSun of Baltimore, The Hartford (Conn.) Courant, The Morning Callof Allentown, Pa., and Daily Press of Newport News, Va.

With Mr. Hunter taking on more duties, Tribune promotedVince Casanova to president and chief operating officer ofChicago Tribune Media Group. In that role, Mr. Casanova willoversee the day-to-day operations of the Chicago Tribune andother holdings in that division.

The Los Angeles Times, the largest of Tribune's newspapers,still reports to its publisher, Eddy Hartenstein, who was namedTribune Co.'s CEO in May.

Tribune's Chapter 11 reorganization began in December2008.

(B) W.R. Grace

Judge Ronald Buckwalter of the Delaware District Court hasnot yet issued a decision affirming Judge Judith Fitzgerald's orderconfirming W.R. Grace's Joint Plan of Reorganization issued lastJanuary 31.


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However, Grace CEO Fred Festa said during the July 26investor conference call that the chemical company remainshighly confident that the District Court will rule in favor of its planof reorganization on all matters.

Mr. Festa said the oral arguments for the appeals held onJune 28 and 29 went exactly as the company expected. Headded that the company was not surprised by any of thearguments or issues raised by the appellants.

According to Mr. Festa, the company has received somequestions as to whether it can emerge, with certain appeals

outstanding. He said that if the District Court affirms Grace's plan,and rules in favor on the appeals, the appellants would have thechoice to appeal further to the Third Circuit Court of Appeals. Hesaid it is possible that the company could emerge with certaintype of appeals outstanding, and cited, as an example, that thecompany may seek to emerge with the default interest issue onappeal, or with other issues on appeal that do not affect theresolution of the company's asbestos liability. "That decisionwould have to be made with consultation with our co-proponents,"Mr. Festa said.

Mr. Festa ended his speech at the conference call by saying,"The bankruptcy has been an incredibly long process, and we areall eager to see it conclude as soon as possible. Our only realcourse at this point is to wait for the District Court ruling onaffirmation and the appeals."

W.R. Grace marked its 10th year in bankruptcy on April 2,2011.

(C) Lehman Brothers


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Lehman Brothers obtained a court order to suspend theprosecution of the rival Chapter 11 plans of reorganizationproposed by its creditors.

In an order dated July 21, Judge James Peck approved anagreement between the company and certain of its creditors tohold in abeyance the prosecution of the competing plans.

The agreement was hammered out after Lehman filed latelast month a third version of its plan, which reportedly has broadersupport from its creditors including a group led by Goldman SachsBank USA and the ad hoc group of Lehman Brothers creditors.

The plan, if confirmed, would enable the company and its affiliateddebtors to pay an estimated $65 billion to their creditors.

The July 21 order also imposed a stay on any ongoingproceeding authorized by Judge Peck's prior ruling dated April 14,in connection with the confirmation of Lehman's plan. It alsocontains a provision protecting the rights of any party to seekdiscovery.

The provision was proposed lately by Lehman after creditorsincluding American National Insurance Company, LehmanBrothers Finance AG's liquidator and Centerbridge CreditAdvisors LLC stressed the need to conduct a plan-relateddiscovery to ensure that all claimants are treated fairly.

Centerbridge complained that the Lehman plan weighs infavor of creditors that have executed so-called plan support

agreements. It argued that the plan disregards a prior court ordermandating the allowance and treatment of claims previouslyowned by Lehman Brothers Bankhaus AG, which are nowbeneficially owned by Centerbridge and other companies.


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Meanwhile, the Official Committee of Unsecured Creditorsand the ad hoc group expressed their support for the approval ofthe agreement to suspend the prosecution of the competingplans. The Creditors' Committee said the agreement is a

precondition to the plan support agreements, which are essentialto the plan process.

Lehman said it won't be serving any additional notice of theAugust 30 hearing on the approval of the disclosure statement.

Lehman has been in bankruptcy since Sept. 15, 2008.

(D) Washington Mutual

Delaware Bankruptcy Judge Mary F. Walrath convened athree-day hearing in July to consider Washington Mutual's revisedreorganization plan, which centers on the settlement of lawsuitspitting WaMu, the Federal Deposit Insurance Corp. andJPMorgan against one another. The lawsuits were filed after theFDIC seized WaMu's flagship bank in 2008 and sold its assets toJPMorgan in the largest bank failure in U.S. history.

The judge ruled in January that the proposed settlement wasreasonable but refused to confirm WaMu's plan until changeswere made.

WaMu shareholders oppose the new plan, saying it favorshedge funds who dominated negotiations with JPMorgan for their

own gain and used inside information from the bankruptcy totrade in Washington Mutual securities.

WaMu awaits the Court's ruling on the plan.


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WaMu filed for bankruptcy on Sept. 26, 2008, the day afterits banking unit was taken over by regulators and sold toJPMorgan for $1.9 billion.

(E) Quigley

Quigley Co. is asking U.S. Bankruptcy Judge StuartBernstein for permission to borrow as much as $65 million fromparent Pfizer Inc. The cash would extend Quigleys $20 millionloan agreement from 2004, when the unit entered bankruptcy, andfinance the case until February 2012, Quigley said. The

additional money and time will free Quigley to work with Pfizer,and a committee of creditors toward confirmation andconsummation of a reorganization plan, Quigley said.

Lawyers for the U.S. Trustee, an arm of the JusticeDepartment, asked the Court in December to end Quigleysbankruptcy. Creditors alleging asbestos-related health issueshave been unable to sue New York-based Pfizer during the case,and many of them have died, the U.S. Trustee said.

Christopher Loder, a Pfizer spokesman, said the companylooks forward to working through a bankruptcy plan with Quigleyand its creditors, which the extension of the credit agreement willallow. Mr. Loder said, In 30 years of asbestos litigation, Pfizerhas never been found to be derivatively liable for Quigleysliabilities. Quigleys products were made for decades beforePfizer acquired it, he said.

A hearing on a request to dismiss Quigleys bankruptcy orapprove proposed terms of its reorganization, set for Aug. 4, wasadjourned without being rescheduled, according to court papers.


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Quigley, founded in 1916, made three products for the steelindustry from the 1940s to the 1970s that contained asbestos.Pfizer bought Quigley in 1968, and the company stopped mostoperations in 1992. Pfizer said it never made or sold any Quigley

products, and some claimants hadnt released Pfizer from allegedderivative liability.

Judge Bernstein refused to allow Quigley to exit Chapter 11court protection in September, saying Pfizer had manipulated theprocess to benefit itself. Pfizer and a committee of asbestosclaimants won his approval of an agreement that will support thenew Chapter 11 plan. The Plan still requires court approval.

An ad hoc committee of tort victims, which represent 40,000asbestos claimants, asked the Court in October 2010 to haveQuigleys bankruptcy dismissed so it could bring tort claims, whichare otherwise blocked by bankruptcy law. The group calledQuigley an asset-less dummy entity that was resurrected,handed Pfizers money-losing claims handling unit, and thenpropped up by Pfizer pursuant to a non-arms-length contract oflimited duration -- all in order to provide Quigleys extremely well-heeled non-debtor parent Pfizer with a channeling injunctionagainst present and future asbestos claims.

The group said Quigley has depleted insurance assets tosustain $54 million in operating losses and $34 million inprofessional fees.

In April, the Bankruptcy Court approved a plan-support

agreement with Pfizer and the ad hoc asbestos claimantscommittee. The plan-support-agreement was designed to aid inimplementation of the final settlement negotiated among Quigley,Pfizer and the committee.


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Quigleys sixth amended plan filed in April would haveresolved disputes over how much Pfizer should contribute byhaving it turn over a 281,581-square-foot building leased to abrewery to help pay asbestos claims. The terms of that

reorganization also required Pfizer to forgive an $86 millionsecured claim, a $12.6 million bankruptcy loan and unsecuredclaims of $33 million. Pfizer also would contribute $81 million ininsurance proceeds, according to court papers.

Asbestos claims against Quigley may total $4.45 billionduring the next 42 years, according to testimony cited by JudgeBernstein in September.

In November, Pfizer reported a $701 million third-quartercharge for asbestos litigation related to Quigley.

New Publicly Traded Securities

Psyche Maricon Castillon reports about three companies thatissued or will issue shares of new common stock uponemergence pursuant to the plans of reorganization they filed intheir Chapter 11 cases in July 2011. These are: New JerseyMotorsports Park, Perkins & Marie Callenders, and NebraskaBook.

(A) New Jersey Motorsports Park

After four months in Chapter 11 proceedings, the bankruptcyjudge approved New Jersey Motorsports Parks restructuringplan, allowing the park to emerge from bankruptcy. The decisionallows NEI Motorsports LLC to purchase a majority stake in thepark for approximately $22.5 million.


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The group had previously provided New Jersey Motorsportswith a $2 million infusion of money for legal fees, food services atthe park, operating costs, priority tax claims and to payunsecured debt.

As part of the bankruptcy emergence plan, secured lenderMerrill Lynch Mortgage Inc., will cut $10 million from its $30 millionin loans to the park. NEI, an investor group that includes some ofthe park's owners, will also pay out $2 million to help the racewaymeet outstanding financial obligations.

The plan gives Merrill Lynch, owed $30.4 million, $20 million

in new secured notes plus 19.9% of the equity. Generalunsecured creditors with claims up to $2.4 million have a recoveryof 21% to 33%.

(B) Perkins & Marie Callenders

Perkins & Marie Callenders Inc. filed a plan ofreorganization to implement a debt agreement the restaurantoperator negotiated with creditors before it sought Chapter 11court protection.

Holders of senior unsecured notes owed $204 million andgeneral unsecured creditors owed as much as $25 million wouldget new stock under the plan.

The proposed disclosure statement, filed along with the plan,

doesnt tell creditors how much they stand to receive as apercentage recovery. General unsecured creditors have theoption of taking 10% cash rather than stock, so long as the totalcash payout doesnt exceed $1.5 million.


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About $103 million owing on secured notes would be rolledover into new secured notes of the same amount, plus interest,under the plan. Holders of existing stock and subordinated claimswould get nothing. Noteholders and general unsecured creditors

will be allowed to vote on the plan.

Funds managed by Wayzata Investment Partners LLC wouldget control of the reorganized company after the plan isconfirmed.

The Court scheduled an August 22, 2011 hearing to considerthe Disclosure Statement.

(C) Nebraska Book

Finally, Nebraska Book Co., the operator of a chain ofcollege bookstores, asked the bankruptcy court to let creditorsvote on a reorganization plan that would turn the company over totwo groups of noteholders. The company intends to exitbankruptcy by November 3.

The plan is based on a consensual deal with the debtorskey stakeholders and contemplates a significant de-leveraging ofthe debtors balance sheets, the company said in a disclosurestatement describing the proposal.

The company has an agreement supported by holders ofmore than 95% of its 8.625% senior subordinated notes and more

than 75% of its 11% discount notes. The bookseller said it willrestructure about $450 million in loans and bonds of its parent,NBC Acquisition Corp., and affiliates.

Under the plan, $175 million of the senior subordinatednotes would be converted into $30.6 million in secured notes,


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$120 million in unsecured notes and 78% of the new equity.Holders of the $77 million in 11% discount notes would get theremaining 22% of the stock.

Secured lenders, owed about $26.3 million, and securednoteholders, owed about $200 million, would be paid in full withcash.

* * *

That ends the Beard Group Corporate Restructuring Review for

June 2011, brought to you by the editors of the TroubledCompany Reporter and Troubled Company Prospector. If you'dlike to receive the Troubled Company Reporter for 30-days at nocost -- and with no strings attached -- call Nina Novak at (240)629-3300 or visit bankrupt-dot-com-slash-free-trial and we'll addyou 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 Restructuring Review on September 16th.Thank you for listening.

Documents

Beard Group Corporate Restructuring Review for July 2011