Corporate Restructuring Review for March 2011

8/7/2019 Corporate Restructuring Review for March 2011

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Beard Group Corporate Restructuring ReviewFor March 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 March 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;

second, large chapter 11 filings TCR editors anticipate in

the 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 March 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.

March 2011 Mega Cases

Now, let's review the largest March 2011 chapter 11 filings.

Danilo Muoz reports a total of six companies with assets ofat least $100 million filed for Chapter 11 bankruptcy in March2011. There were also six such cases in February 2011 and fivein January 2011. This translates to an average of about six megacases per month during the first quarter of 2011.

In contrast, there were 12 mega cases in March 2010, sevenin February 2010 and 15 in January 2010. The average number

of mega cases in the first quarter of 2010 was about 11 permonth.

Mega-case filings declined about 50% for the first quarter of2011 from the same period in 2010.

Chapter 11 bankruptcies involving more than $1 billion inassets remain scant: There was no such filing in January andMarch this year; and there were two in February.

Meanwhile, during the first quarter of 2010, there was noChapter 11 filing with assets in excess of $1 billion.

A total of 12 companies with assets of more than $100million filed for Chapter 11 bankruptcy in March 2010, compared


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to seven in February and 15 in January of last year. There were atotal of 105 mega cases in 2010, or an average of about ninefilings per month.

The largest Chapter 11 case for March 2011 was filed byBarnes Bay Development Limited, which listed $531 million inassets and $462 million in debt as of the bankruptcy petition date.Barnes Bay Development filed for Chapter 11 protection with theBankruptcy Court for the District of Delaware [Case No. 11-10792]on March 17.

Beverly Hills, California-based Barnes Bay Development

owns the Viceroy Anguilla Resort & Residences on the BritishWest Indies island of Anguilla. The beach resort has 166 luxuryresidences consisting of suites, penthouses, townhouses andvillas.

Barnes Bay Development filed on April 1 a Chapter 11 planof liquidation to facilitate the sale of the resort. The DelawareBankruptcy Court will convene a hearing on May 3 to consider theadequacy of the disclosure statement explaining Barnes BayDevelopments proposed liquidation plan.

Another mega case in March 2011 was filed by New StreamSecured Capital Inc., with estimated assets and debts of $500million to $1 billion each as of the Petition Date.

New Stream Secured Capital is an inter-related group ofcompanies that collectively comprise an investment fund,

headquartered in Ridgefield, Connecticut. Founded in 2002, NewStream focuses on providing non-traded private debt to theinsurance, real estate and commercial finance sectors.

New Stream Secured Capital and three affiliates filedChapter 11 petitions with the Bankruptcy Court for the District of


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Delaware [Lead Case No. 11-10753] on March 13. Aprepackaged Chapter 11 plan was filed together with the petitions.

Before seeking bankruptcy protection, New Stream

negotiated a plan of reorganization, which was "overwhelminglyapproved" by investors. The Debtors have proposed that theCourt hold a combined hearing to consider the adequacy ofdisclosure statement and prepetition solicitation procedures, andto confirm the prepackaged plan. The Debtors propose that thecombined hearing be set as soon as practicable between thedates of April 21 and May 3.

Another large Chapter 11 filing was by Harry & DavidHoldings, Inc., and its units, which also filed in DelawareBankruptcy Court [Lead Case No. 11-10884] on March 28. Thelatest financial statements filed with the U.S. Securities andExchange Commission show that Harry & David has $304.3million in total assets and $360.8 million in total liabilities.

Medford, Oregon-based Harry & David is a multi-channelspecialty retailer and producer of branded premium gift-qualityfruit and gourmet food products and gifts marketed under theHarry & David(R), Wolferman's(R) and Cushman's(R) brands. Ithas 70 stores across the country.

Harry & David has reached an agreement with holders ofapproximately 81% of its senior notes on the terms of areorganization that will eliminate substantial debt and provideequity financing to restructure the Company's balance sheet.

PJ Finance Company LLC, along with six affiliates, filedChapter 11 petitions with the Delaware Bankruptcy Court [LeadCase No. 10-10688] on March 7. PJ Finance disclosed totalassets of at least $275 million and total debts of at least $479million.


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PJ Finance owns or holds ownership interests in 32apartment communities that collectively have more than 9,500rentable units. The company has 20 apartment locations in

Texas, and the remaining 12 in Arizona, Florida, Georgia andTennessee.

Other large Chapter 11 bankruptcy filings for March 2011were by Miramar Real Estate Management Inc. and MicroBiltCorporation and affiliate CL Verify LLC.

San Juan, Puerto Rico-based Miramar Real Estate

Management filed for bankruptcy protection on March 2, with theBankruptcy Court for the District of Puerto Rico [Case No. 11-01786]. Miramar estimated its assets and debts at $100 million to$500 million.

MicroBilt and CL Verify filed for Chapter 11 bankruptcyprotection on March 23 with the Bankruptcy Court for the Districtof New Jersey, estimating $100 million to $500 million in assetsbut under $1 million in liabilities. CL Verify in Tampa, Florida,offers small business owner solutions for fraud prevention,consumer financing, debt collection, skip tracing and backgroundscreening. MicroBilt provides access to over 3 billion debitaccount records, nearly 30 billion pieces of demographic andpublic record data and over 100 million unique consumer recordsto prevent identity fraud, evaluate credit risk, and retain customerrelationships.

Of the March mega-cases, four went to Delaware bankruptcycourt, one went to New Jersey and another in Puerto Rico. InFebruary, three cases went to the Southern District of New Yorkbankruptcy court in Manhattan, one went to Delaware, one wentto the Southern District of Texas, and one to the Middle District ofGeorgia. Of the January mega-cases, four went to Delaware and


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the remaining mega case went to the Northern District of Texasbankruptcy court.

Lehman Brothers Holding Corp. remains the biggest

corporate bust in history. Lehman, which filed in 2008, had $639billion in total assets and $613 billion in total debts at that time ofits filing.

For the first three months of 2011, the largest Chapter 11filing was by MSR Resort Golf Course LLC, which has $2.2 billionin assets and $1.9 billion in debt as of Nov. 30, 2010. MSRResort Golf Course and its affiliates own and operate five iconic

luxury resort properties with related real estate properties andamenities. 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, andClaremont Resort and Spa. MSR Resort and its affiliates filed forChapter 11 protection in Manhattan on February 1 [Lead CaseNo. 11-10372].

As indicated, two of the mega cases in March -- New Streamand Harry & David -- were prepackaged or pre-negotiated. Thisraises the total of prepack and pre-negotiated cases this year tofive. The other three prepack and pre-negotiated cases werecommenced in January.

For year 2010, a total of 35 prepack and pre-negotiatedcases were filed -- about one in every three filings.

In addition to the chapter 11 debtors mentioned in Mr.Muoz's report, the Troubled Company Reporter provides detailedreporting about every chapter 11 filing nationwide. Stay tuned tolearn more about obtaining a trial subscription to the TCR at nocost or obligation.


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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 has compiled a list of six companies he'sconvinced are nearing Chapter 11 bankruptcy:

Horizon Lines; Nebraska Book; Municipal Mortgage & Equity;

American Apparel; Perkins & Marie; and Trico Shipping

and we'll discuss each of these six troubled situations.

(1) Horizon Lines

Standard & Poor's Ratings Services lowered its long-termcorporate credit rating on Horizon Lines Inc. to 'CCC' from 'B'."The downgrade reflects S&P's expectation that the company willbreach its financial covenants under the senior unsecured notesand the senior secured credit facility later this year," said Standard& Poor's credit analyst Funmi Afonja. "It also reflects refinancingrisks, with substantially all of the company's debt maturing in

2012."

Horizon Lines, which has 15 Jones Act-qualified U.S. flagcontainer ships, and five U.S. flag container ships, may file forbankruptcy as soon as April, Jonathan Keehner and Shannon D.Harrington at Bloomberg News have reported, citing three people


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familiar with the matter. Sources have told Bloomberg theCompany may seek to swap its debt for equity to avoidbankruptcy.

Horizon Lines reported a net loss of $57.9 million on $1.16billion of operating revenue for the fiscal year ended Dec. 26,2010, compared with a net loss of $31.3 million on $1.12 billion ofoperating revenue for the fiscal year ended Dec. 20, 2009.

The Companys balance sheet at Dec. 26, 2010 showed$786 million in total assets, $746 million in total liabilities and $40million in total stockholders' equity

(2) Nebraska Book

Nebraska Book Company and parent NBC Acquisition Corp.,operator of 280 college bookstores, have hired legal and financialadvisers to help in restructuring the companys debt and preparingfor a Chapter 11 filing if necessary, according to Bloomberg News.If there is a distressed exchange or a Chapter 11 filing, GoldmanSachs Group and Cerberus Capital Management could end up incontrol of the Lincoln, Nebraska-based company after purchasingdebt at discount, people familiar with the talks said.

The Company reported a net loss of $12.5 million on $414million of revenue for the nine months ended Dec. 31, 2010,compared with a net loss of $6.77 million on $412 million ofrevenue for the same period during the prior year.

The Company's balance sheet at Dec. 31, 2010 showed$657 million in total assets, $624.51 million in total liabilities andstockholders' equity of $33.28 million.


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Moody's has said it expects Nebraska Book will not be ableto make sufficient dividend payments to NBC Acquisition that willbe needed by the parent company to meet scheduled interestpayment due in September 2011 on its $77 million senior

debentures due 2013. Dividend payments from Nebraska Bookare the only source of debt repayment for the senior debentures.

S&P, which has lowered Nebraska Book's corporate creditrating to 'CCC' from 'B-', said the companys ratings reflect weakliquidity. According to S&P, the company needs to refinance itsdebt or restructure because of near-term maturities but expectsthis undertaking to be somewhat difficult given that the

company's results are highly seasonal and operating results havebeen weak over the past several quarters.

(3) Municipal Mortgage & Equity

Municipal Mortgage & Equity, LLC, in its annual report onForm 10-K for the year ended Dec. 31, 2010, warned that it mighthave to pursue a Chapter 11 filing.

The company reported a net loss of $72.5 million on $107.7million of total revenue for 2010, compared with a net loss of$380.1 million on $134.8 million of total revenue for 2009.

KPMG LLP, in Baltimore, Maryland, expressed substantialdoubt about Municipal Mortgage & Equity's ability to continue as agoing concern. KPMG said the company has been negatively

impacted by the deterioration of the capital markets and hasliquidity issues which have resulted in the company having to sellassets, liquidate collateral positions, post additional collateral, sellor close different business segments and work with its creditors torestructure or extend its debt arrangements.


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According to the regulatory filing, "Although the companyhas been able to extend, restructure and obtain forbearanceagreements on various debt and interest rate swap agreements,such that none of our debt has been accelerated at present, most

of these extensions, restructurings and forbearance agreementsare short-term in nature and do not provide a viable long-termsolution to the Company's liquidity issues," the company said inthe filing.

"If the company is not able to negotiate other arrangements,the company will not be able to pay the interest on its non-bonddebt, and possibly sooner. If these subordinated debentures were

accelerated, the company would not be able to pay the debt. Inthe event management is not successful in restructuring orsettling its remaining non-bond related debt, or in generatingsufficient liquidity from the sale of non-bond related assets or ifthe bond portfolio net interest income is substantially reduced, thecompany may have to consider seeking relief through abankruptcy filing."

At Dec. 31, 2010, the company's balance sheet showed$2.06 billion in total assets, $1.4 billion in total liabilities, andstockholders' equity of $700 million.

Baltimore, Maryland.-based Municipal Mortgage & Equity,which has been contracting its business starting 2008, has amajority position in International Housing Solutions S.a.r.l., apartnership that was formed to promote and invest in affordablehousing in overseas markets. The company also has an

unfunded equity commitment of $5.1 million, or 2.67% of totalcommitted capital with respect to its role as the general partner tothe South Africa Workforce Housing Fund S.A.


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(4) American Apparel

American Apparel, Inc., in its annual report on Form 10-Kfiled with the U.S. Securities and Exchange Commission,

disclosed that if it is unable to improve its operating performanceand financial position, obtain alternative sources of capital, orotherwise meet its liquidity needs, it may need to voluntarily seekprotection under Chapter 11 of the U.S. Bankruptcy Code.

American Apparel reported a net loss of $86.3 million on$533 million of net sales for the year ended Dec. 31, 2010,compared with net income of $1.11 million on $559 million of net

sales during the prior year. The companys balance sheet atyearend showed $328 million in total assets, $253 million in totalliabilities and $75 million in total stockholders' equity.

In its regulatory filing, the company said, "We are currentlyexperiencing significant liquidity constraints. If we are not able togenerate sufficient cash flow from operations or obtain externalsources of financing sufficient to fund our debt servicerequirements and operational needs in the near future, or we arenot able to successfully or efficiently implement the strategies thatwe are pursuing to improve our operating performance andfinancial position, and may determine that it is in AmericanApparel's best interests to voluntarily seek relief through a pre-packaged, pre-arranged or other type of filing under Chapter 11 ofthe U.S. Bankruptcy Code, including prior to the time we wouldotherwise be required to do so in an acceleration event.

Seeking relief under the U.S. Bankruptcy Code, if such reliefdoes not lead to a quick emergence from Chapter 11, couldmaterially adversely affect the relationships between us and ourexisting and potential customers, employees, suppliers, partnersand others. Further, if we were unable to implement a plan ofreorganization or if sufficient debtor-in-possession financing were


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not available, we could be forced to liquidate under Chapter 7 ofthe U.S. Bankruptcy Code."

New York-based Marcum LLP, in its audit report on American

Apparel's yearend financial statements, expressed substantialdoubt about the company's ability to continue as a going concern.As a result of non-compliance with certain loan covenants,Marcum said the companys debt -- with carrying value of roughly$138 million at Dec. 31, 2010 -- could be declared immediatelydue and payable.

Los Angeles, California-based American Apparel is a

manufacturer, distributor, and retailer of branded fashion basicapparel. As of Sept. 30, 2010, American Apparel employed over10,000 people and operated 278 retail stores in 20 countries.

(5) Perkins & Marie

Standard & Poor's Ratings Services said Perkins & MarieCallender's Inc. could seek bankruptcy protection under Chapter11 of the U.S. Bankruptcy Code. S&P early April lowered itscorporate credit rating on Memphis, Tennessee-based Perkins to'D' for default from 'CC'.

The downgrade follows Perkins missing a $9.5 millioninterest payment due April 1 on $190 million senior unsecurednotes. "Although the company has a 30-day grace period tomake the payment, we believe this is highly unlikely given our

assessment of its limited liquidity sources. In addition, thecompany has another interest payment due on its senior securednotes on May 31. S&P does not expect the company to make thepayment on a timely basis.


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proceeding. Stay tuned to learn more about obtaining a trialsubscription to the TCR at no cost or obligation.

Major Pending Disputes In Chapter 11 Cases

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

(A) Lehman Brothers

Ivy Magdadaro identified two major disputes in the LehmanBrothers bankruptcy. The disputes involve litigation commencedby the trustee for Lehman Brothers brokerage unit againstCitibank and the companys own suit against JPMorgan Chase inan effort to recover billions of dollars for Lehman creditors.

(1) Lehman-Citibank Dispute

The trustee of Lehman Brothers' brokerage unit commencedyet another lawsuit in mid-March to recover billions of dollars forthe company's creditors -- this time against Citibank.

In a complaint filed March 18 with the U.S. Bankruptcy Courtfor the Southern District of New York for the benefit of Lehmancreditors, James Gidden sought to recover more than $1.3 billion

from Citibank, N.A., Citigroup, Inc., and their affiliates. Mr.Giddens is the trustee of the liquidation proceedings of LehmanBrothers Inc. under the U.S. Securities Investor Protection Act of1970.


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The SIPA Trustee alleged that after Lehman filed forbankruptcy in September 2008, Citibank conditioned continuationof certain "foreign exchange settlement services" to Lehman'sbroker unit on the unit's depositing $1 billion in its account at

Citibank. The SIPA Trustee added that during the week ofSeptember 15, Citibank obtained a $700 million pledge fromBarclays Bank PLC as security for carrying on the same foreignexchange settlement services.

The Trustee noted that on September 19, after LehmanBrothers Inc. filed for SIPA proceedings and after LBI requestedthe return of the $1 billon deposit, Citibank advised LBI that it had

set the deposit off against "obligations owed to Citibank."

According to the complaint, LBI owed Citibank more than$15 billion, which was accumulated from Sept. 15 to 19, 2008.

The SIPA Trustee also noted that Citibank and its affiliatesaround the world froze more than $300 million in additional LBIdeposits.

The Trustee is asking the bankruptcy court to rule thatCitibank willfully violated the "automatic stay" provision of thebankruptcy code when it seized the $1 billion deposit on Sept. 19,2008.

"LBI, at a time of increasing financial distress, found itself inthe coerced position of facing a demand for funds that it could notrefuse," the complaint said. Citibank representatives, who

allegedly knew LBI would not be able to remain a viable businesswithout access to foreign exchange settlement services,reportedly attended meetings held in September 2008 at theFederal Reserve Bank in New York and at Lehman.


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In reaction to the lawsuit, Citibank has said it will vigorouslydefend its right to recover its losses, which amounted to morethan $1 billion for helping settle the Lehman trades. Citibankmaintained that the extension of credit it extended benefited

Lehman amid the panic invoked by the company's bankruptcyfiling.

A Citibank spokesperson called the Trustee's claims as"unjustified and without merit."

As noted earlier, Lehman filed the biggest corporatebankruptcy filed so far in U.S. history.

(2) Lehman-JP Morgan Dispute

Ms. Magdadaro reports that no major court decisions isexpected anytime soon in Lehman Brothers' $8.6 billion lawsuitagainst JPMorgan Chase Bank.

JPMorgan was Lehman's banker when the company filed forbankruptcy and sold its brokerage unit to Barclays. Lehman's suitalleged that JPMorgan extracted collateral from it using insiderinformation a few days before the company filed for bankruptcy.JPMorgan filed a revised countersuit in mid-February, allegingthat Lehman left it with $25 billion in unpaid loans secured byundesirable assets.

In a recent development, Lehman filed a motion to dismiss

JPMorgans countersuit in early April 2011. Lehman saidJPMorgan did not state any claim in its revised countersuitentitling the bank to damages.

JPMorgan is scheduled to file an answer to the Motion toDismiss in early June. Lehman may file reply papers in late July.


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No date has been set for the hearing on Lehman's Motion toDismiss.

Trial on the case has been set to begin in April 2012.

(B) Tribune Corp.

According to Ms. Magdadaro, the resolution of the disputed$13 billion leveraged buy-out of Tribune Co. remains in limbo asof press time, as Judge Carey of the U.S. Bankruptcy Court forthe District of Delaware refused to choose which of two rival plans

is best for Tribune's reorganization after conducting a two-weekhearing in March.

The 2007 Buy-Out has been cited as one of the majorreasons that contributed to Tribunes insolvency problems.

Lawsuits were formally filed by Tribune creditors in thebankruptcy court in November 2010 against parties involved inthe 2007 Buy-Out, which include lenders JPMorgan Chase andMerrill Lynch Capital Corporation, Tribune executive Sam Zell andother directors and officers of the company.

On March 22, 2011, Judge Carey entered an order allowingcreditors to filed a second round of lawsuits related to the Buy-Outin state courts -- even if those creditors have already filed similarclaims in federal court. Creditors have until June 4 to file thoseclaims in state court. Judge Carey, however, warned that suits

filed in state court may see little progress as Tribune is still facedwith the challenge of how to emerge from bankruptcy.

The two competing bankruptcy plans for Tribune werepresented to Judge Carey in March, one of which calls for lawsuitreleases against the lenders in relation to the Buy-Out. That


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restructuring plan is backed by Tribune Co. and sponsored byJPMorgan and other LBO lenders. The rival restructuring plan isbacked by Aurelius Capital Management; it calls for theprosecution of involved parties in the 2007 LBO.

During the hearings in March, Judge Carey listened toarguments from the plans' proponents, but said both plans did notsatisfy him. The judge instead urged both parties to engage inmore negotiation talks and even brought up the idea of amediator.

Judge Carey has nevertheless said he sees merit in a plan

based on a settlement that resolves a maximum number of BuyOut-related claims, but "only if that settlement is properly priced."The LBO lenders have previously offered about $400 million to$500 million in contribution in exchange for the lawsuit releases.

The Aurelius group filed an amended plan on March 28,which assumes that an $8 billion total distributable value, between73.9% and 81.12% of the equity value of Reorganized Tribune willbe distributed to creditors. Tribune maintains that its enterprisevalue is $6.75 billion.

Tribune also modified its bankruptcy plan on April 5 in aneffort to satisfy major objections raised by Aurelius and otherbondholders.

Judge Carey set another plan confirmation hearing inTribune for April 12, to give parties more time to mediate and work

on a settlement.

Tribune is the second largest newspaper publisher in theU.S. It filed for bankruptcy in December 2008.


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(C) Washington Mutual

Moving on, Washington Mutual Inc. is moving closer to aresolution of its dispute with JPMorgan after Judge Mary Walrath

of the U.S. Bankruptcy Court for the District of Delaware approvedon March 30 the disclosure statement explaining WaMu'samended Chapter 11 plan, allowing the former bank holdingcompany to solicit creditor votes on its plan.

Not all of the creditors who originally voted will be eligible tovote this time though, Judge Walrath said.

The amended plan is premised on a global settlement oflawsuits involving WaMu, JPMorgan and the Federal DepositInsurance Corporation, involving, among others, $4 billion indisputed funds on deposit with JPMorgan. The global settlementcalls for an allocation plan of billions of dollars in tax refunds andcash among WaMu's biggest creditors, FDIC and JPMorgan.

Judge Walrath ruled that the plan's so-called disclosurestatement, as amended, contains enough information to allow thevote. The judge previously ordered WaMu to add more details tothe disclosure statement after heeding the request of WaMucreditors and shareholders on the issue of "broad andinappropriate" lawsuit releases.

The judge is set to convene a plan confirmation hearing onMay 2.

The hearing in May will involve groups of creditors andshareholders who have long opposed the plan. They have filedobjections to the revised plan, concerned that they will be paidnothing under the plan. Judge Walrath has not ruled on some ofthe issues the objecting creditors and shareholders have raised.Noteholders are also questioning how much interest WaMu senior


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creditors will receive. The arguments on the interests andsecurities could be worth more than $1 billion, according to SethArd, Esq., an attorney representing WaMu shareholders.

WaMu is also directed to begin mediation with a group ofcreditors who hold litigation-tracking warrants related to a lawsuit.

JPMorgan bought WaMu's bankruptcy operations inSeptember 2008 for a $1.9 billion payment to the FDIC. In anearly April statement to investors, JPMorgan CEO Jaime Dimonsaid JPMorgan's acquisition of WaMu Bank turned out to be "a bitworse than expected but clearly still worth it."

Mr. Dimon said WaMu's mortgage origination and servicingbusinesses performed better than expected, while its other retailbanking operations, such as checking accounts and credit cards,did significantly worse.

* * *

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:

Tribune Co., WR Grace & Co., Lehman Brothers,


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Washington Mutual, and Pfizer's Quigley unit

(A) Tribune

According to Ms. Lopez, Judge Kevin Carey has pushedback the hearing to consider confirmation of the competingChapter 11 plans in Tribunes case from April 11 to April 12, togive parties more time to mediate and work on a settlement.

At a telephonic hearing held April 5, Judge Carey said the

delay of the confirmation hearing was requested by Judge KevinGross who is overseeing the mediation between the warringparties composed of (i) the Debtors; the creditors committee;Oaktree Capital; Angelo Gordon, and JP Morgan on one side, and(ii) Aurelius Capital, Deutsche Bank, Law Debenture Trust, andWilmington Trust on the other side.

Judge Carey previously told lawyers that should neither plan

proposal satisfy him, he will consider appointing a Chapter 11Trustee to oversee the company, which would further delay theDebtors' emergence from bankruptcy.

The Debtors filed a modified Second Amended Joint Plan ofReorganization on April 5, maintaining a $6.75 billion totaldistributable enterprise value of the Debtors. The Noteholders'Second Amended Joint Plan of Reorganization dated March 28assumes that an $8 billion total distributable value, between73.9% and 81.12% of the equity value of Reorganized Debtorswill be distributed to creditors.

Tribunes April 5 changes to its reorganization proposalprompted 20 classes of general unsecured creditors to changetheir votes from opposition to support. The April 5 plan contained


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a provision capping claims of unsecured creditors of the operatingcompanies at $150 million. When Tribune removed the cap, fourclaim holders decided to change their votes from no to yes. Byremoving the cap, Tribune said that creditors of operating

subsidiaries will now be assured of receiving 100%.

The changed votes came from Longacre Opportunity FundLP, Liquidity Solutions Inc., Fair Harbor Capital LLC and DebtAcquisition Co. of America.

Judge Carey heard two weeks of testimony in March. Hewas set to hear closing arguments from the lawyers on April 13

and 14.

(B) W.R. Grace

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

Several parties took an appeal from Judge JudithFitzgeralds January 31 order confirming the company's Joint Planof Reorganization.

The parties that filed the appeals include the OfficialCommittee of Unsecured Creditors, a group of lenders underGraces prepetition bank credit facilities, Garlock SealingTechnologies, the state of Montana, Her Majesty the Queen inRight of Canada, and BNSF Railway Company.

Grace's Joint Plan is now before the United States DistrictCourt for the District of Delaware for a final stamp of approval.This is a necessary step before Grace may exit Chapter 11.

Oral arguments on the appeals are set to be heard by theDistrict Court on July 12, 2011.


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(C) Lehman Brothers

Moving on, Judge James Peck in Manhattan is slated toconsider approval of the disclosure statement explaining LehmanBrothers bankruptcy plan as well as the process for thesolicitation of votes from creditors at a hearing on June 28.

Under Lehman's revised plan filed in January, creditors thathold senior unsecured claims against the company would recover21.4% of their claims, up from 17.4% in the initial plan. The

company's general unsecured creditors would recover 19.8% oftheir claims, which is a 14.7% increase from what was previouslyproposed in the initial plan.

Lehmans plan faces competition from a creditor-repaymentplan proposed by an ad hoc group of Lehman creditors, whichincludes the pension fund California Public Employees RetirementSystem and hedge fund Paulson & Co. Under the rival plan,senior creditors with claims against Lehman Brothers Holdingwould recover about 24.5%.

The ad hoc group has asked the Court to consider itsdisclosure statement at the June 28 hearing, along with Lehman'splan.

Bank of America also has asked Judge Peck to consider anycompeting plan and disclosure statement simultaneously with

Lehman's proposed plan.

Other Lehman creditors, which include a group of companiesled by Morgan Stanley Capital Services Inc., also filed paperscalling for rival plans to be considered along the same timeline asthe Lehman plan.


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Meanwhile, Bloomberg News said a group of creditors isconsidering proposing a bankruptcy plan for Lehman Brothersthat would compete against the two other proposals. The report

did not specify which entities might propose a third plan.

(D) Washington Mutual

Washington Mutual won court approval in March to move tothe next stage in its renewed attempt to exit bankruptcy but wastold to spell out what effect suspicions of insider trading could

have on the $7 billion distribution plan.

Judge Mary Walrath said the company can send out itsrevised plan to creditors for a vote after supplementing it with ananalysis of what could happen if there is proof of insider trading.

According to estimates, $700 million or more worth of valuecould swing to lower-ranking creditors if shareholders presentenough evidence that big investors profited from insideknowledge gained at the Chapter 11 plan bargaining table.

The suspicions are focused on four hedge funds that sat atthe bargaining table when Washington Mutual hammered out itsChapter 11 distribution scheme: Appaloosa Management LP,Aurelius Capital Management LP, Centerbridge Partners LP andOwl Creek Asset Management LP. The hedge funds denybreaching rules that ban trading based on confidential information

and say the suspicions are unfounded.

The official committee of equity security holders isinvestigating allegations to see whether there is sufficientevidence to make a case at confirmation hearings in May.


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WaMu agreed to add information about the financial effect ofa potential finding that some or all of the hedge funds profitedbased on confidential Chapter 11 data to materials that creditorswill review before deciding how to vote on the plan. The company

has set a May 2 date to seek confirmation of its revamped plan.

Judge Walrath has already approved the central feature ofthe bankruptcy plan, which is an agreement among WaMusbiggest creditors, banking regulators and JPMorgan to splitbillions of dollars in tax refunds and cash.

The hearing in May will involve groups of creditors and

shareholders who have long opposed the plan. They have filedobjections to the revised plan that are similar to the complaintsthey made in December. Judge Walrath did not rule on some ofthe issues that creditors and shareholders have fought over.

Noteholders are battling each other over how much interestWaMus senior creditors, who will be paid in full, will receive.

A group of investors who own a specialized form of debtcalled trust preferred securities are in dispute with senior creditorsover whether the securities became worthless when WaMu filedbankruptcy.

The Courts recent ruling moves WaMu a step closer toending its stay in bankruptcy, which began September 2008 whenregulators seized its bank unit.

(E) Quigley

In March, Pfizer reached a settlement with asbestosclaimants that may bring an end to the seven-year-old bankruptcycase of its Quigley unit.


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Judge Stuart Bernstein refused to allow Quigley to exitChapter 11 court protection in September last year, saying Pfizerhad manipulated the bankruptcy process to benefit itself. Pfizer

and a committee of asbestos claimants entered into anagreement on March 20 that may resolve their dispute overclaims, according to court papers filed in Manhattan.

The accord resolves the legal and equitable issues thatexisted under that plan, including enhancing distributions forcurrent claimants and future demand holders, improvingreorganized Quigleys long-term feasibility, and rectifying

concerns regarding good faith, lawyers for Quigley wrote.

Asbestos claims against Quigley may total $4.45 billionduring the next 42 years, according to testimony cited by JudgeBernstein in September. Under the deal, which requires courtapproval, asbestos claimants would vote in favor of Quigleysbankruptcy plan and waive all rights to a jury trial.

In exchange, Pfizer would contribute $264.9 million in cashand all of the stock in a reorganized Quigley to a trust to payasbestos claims. Pfizer also would forgive its own claims againstthe non-operating unit, according to a draft of the plan.

Pfizer spokesman Christopher Loder said once Quigleysreorganization plan is presented to and confirmed by the U.S.Bankruptcy Court, asbestos-related liability arising from Quigleywill be resolved through a fund established as part of the

bankruptcy reorganization.


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(B) BankUnited Financial

BankUnited Financial Corp. filed a Chapter 11 plan ofreorganization premised on a cash infusion by a new investor,

who will, in turn, receive 21% of the new common stock, pluspreferred stock, of the reorganized company.

BankUnited sought bankruptcy protection in May 2009 listingmore than $15 million in assets. The Company was the holdingcompany for BankUnited FSB, the largest banking institution inCoral Gables, Florida. On May 21, 2009, the bank was closed byregulators and the Federal Deposit Insurance Corporation

facilitated a sale of the bank to a management team headed byJohn Kanas, a veteran of the banking industry and former head ofNorth Fork Bank, as well as a group of investors led by W.L. Ross& Co.

The bank had assets of $12.8 billion and deposits of $8.6billion as of May 2, 2009.

(C) Harry & David

Harry & David entered into bankruptcy in March 2011 with aPlan Support Agreement with senior noteholders. The PlanSupport Agreement provides that the Company must file aChapter 11 plan on the terms agreed upon by the parties no laterthan May 16. The Plan must be confirmed by September 12 andthe Debtors must exit bankruptcy by October 1 this year.

Under the Plan, Reorganized Harry & David will issue onemillion shares on the effective date of the Plan. The Company willraise $55 million in capital through the consummation of the rightsoffering. Participants in the rights offering can subscribe to theshares at an exercise price of $75 per share, reflecting a 25%


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discount to the Plan's implied equity value of $100 per share. Therights offering will be backstopped by certain noteholders.

(D) RHI Entertainment

RHI Entertainment, the made-for-TV moviedeveloper/producer/distributor that commenced a prepackagedChapter 11 case in December, had its reorganization planapproved by a Bankruptcy Court. The Company emerged with itsdebt obligation reduced by more than $400 million; the rest will bepaid to lien holders via newly issued stock, among other

arrangements.

The prepackaged plan had been accepted by all of thesecond-lien debt and 94% of the first-lien obligations. Specifically,under the Plan:

(1) holders of RHIs first lien debt will receive (i) $300million of new term loan obligations (ii) roughly 99% of thenew common stock, subject to dilution, and

(2) holders of RHIs second lien debt will receive (i)roughly 1% of the new common stock, subject to dilution, (ii)new warrants representing 15% ownership of the newcommon stock on a fully diluted basis, and (iii) a limited feeand expense reimbursement of up to $250,000.

(E) Sbarro

Under a bankruptcy plan backed by creditors AresManagement LLC and MidOcean Partners, Sbarro would convertsecond-lien and bond debt to equity and raise $30 million inequity through a rights offering.


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Second lien lenders, with an allowed claim of $36.5 millionwill receive 36.5 million shares of new common stock ofreorganized Sbarro and may participate in the rights offering.

Senior noteholders will receive 29 million shares of new commonstock and will be eligible to participate in the rights offering.

Holders of other general unsecured claims will receive newcommon stock, or new unsecured notes with 6% interest and abullet maturity seven years from the effective date of the Plan -- orcash.

The agreed equity value of the Company for purposes of thePlan is $96.5 million, assuming no debt other than the New FirstLien Credit Facility.

In the rights offering, Reorganized Sbarro will raise $30million in cash in exchange for 30 million shares of new commonstock to be issued on the Plan effective date at a price of $1 pershare. As backstop commitment, MidOcean has committed topurchase 2.5 million of unsubscribed shares and Ares hascommitted to purchase 27.5 million shares not sold in the rightsoffering.

(F) PJ Financial

Apartment communities developer PJ Finance Company,which sought protection under Chapter 11 early in March, sought

bankruptcy approval to enter into a commitment letter with GaiaReal Estate Investments LLC.

Under the commitment letter, Gaia will provide PJ Financewith $42 million in new financing that will enable the Debtors toconsummate a plan of reorganization. Gaia, along with an


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affiliate of PJ Finance that will also fund $1 million, will get 100%of the equity interests of the entity that will be formed toconsummate the Chapter 11 reorganization.

(G) Majestic Star

The Majestic Star Casino LLC received court confirmation ofits plan of reorganization on March 10. The plan contemplates forthe reorganized company to issue shares of new common stock.

Under the Plan, Majestic Star will have access to a $58

million senior secured credit facility upon its emergence.

Under the Plan, senior secured credit facility lenders, owed$65.3 million, will be paid in full by receiving some cash androlling over remaining debt. If new financing is available, theexisting facility will be paid in cash. Holders of $348.4 million insenior secured notes are to have a 52% recovery by receiving58% of the new equity and $100.6 million in cash. If newfinancing is not available, noteholders will receive new debtinstead of cash. Holders of the senior notes will receive 42% ofthe new equity for about $233 million in debt, resulting in a 25%recovery. General unsecured creditors will see 25% in cash or ashare in $1 million, whichever is less. Holders of $72.6 million indiscount notes will receive nothing.

(H) Constar International

Polyethylene terephalate plastic container producer ConstarInternationals modified plan of reorganization, filed March 14,proposes for the Company to issue shares of new common stockupon emergence.


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That ends the Beard Group Corporate Restructuring Review forMarch 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 no

cost -- and with no strings attached -- call Nancy Frasier orCharlie Covell at (240) 629-3300 or visit bankrupt-dot-com-slash-free-trial and we'll add you to the distribution list. That telephonenumber, 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 May 16th. Thankyou for listening.

Documents

Corporate Restructuring Review for March 2011