Business Bankruptcy News Bulletin Summary for Week of May 3

The items below are excerpted from the Business Bankruptcy News Bulletin. A full issue contains information on dozens of troubled companies, as well as informational and analysis highlights. Please visit the insideARM bookstore for information on subscribing to the Bulletin.

A Brief Look at Liquidity Ratios

Liquidity ratios are probably the most commonly used of all business ratios.  Creditors may often be particularly interested in these because they show the ability of a business to quickly generate the cash needed to pay outstanding debt. This information should also be highly interesting since the inability to meet short-term debts would be a problem that deserves immediate attention.

Liquidity ratios are sometimes called “working capital ratios” because that, in essence, is what they measure. The liquidity ratios are the current ratio and the quick ratio. Often liquidity ratios are examined by banks when they evaluate a loan application. Once you get the loan, your lender may also require that you continue to maintain a certain minimum ratio, as part of the loan agreement.

BANKRUPT COMPANIES

Aleris International Inc. asked for permission from the U.S. Bankruptcy Court to enter into an agreement with some finance companies to raise a total of $500 million in asset-based financing as it works toward emerging from bankruptcy protection. Aleris, a manufacturer of aluminum rolled products, is operating under protection of the court in Delaware, under case number 09-10478.

Evergreen Gaming Corp., a bankrupt Canadian firm, said some of its subsidiaries are selling eleven casinos in Washington State to Nevada Gold Casinos Inc. of Houston, Tx. for a total of $11 million. Evergreen is headquartered in British Columbia.

Extended Stay Inc., a bankrupt hotel chain, has piqued the interest of some investors. Among them, Blackstone Group LP, the Manhattan, N.Y. private-equity investor, wants to buy back into Extended Stay, saying it would pump in $100 million for a minority stake in the chain, which Blackstone sold off three years ago for $3 billion. Meanwhile, Starwood Capital Group LLC said that it will enter a new bid to purchase Extended Stay, which filed for bankruptcy protection last June. Extended Stay’s filing was made in the U.S. Bankruptcy Court in Manhattan, N.Y. under case number 09-13764.

Hopewell Baptist Church, Newark, N.J., filed Chapter 11 in the U.S. Bankruptcy Court for the District of New Jersey. The firm listed assets and liabilities of between $1 million and $10 million each. The filing was under case number 10-22655. For more information contact the court at 877-239-2547.

Magic Brands LLC, the bankrupt parent company of the Fuddruckers and Koo Koo Roo restaurant chains, is in a deal to sell most of its assets to Tavistock Group in a $40 million deal. The transaction could be completed in the next two or three months, pending approval from the U.S. Bankruptcy Court. As part of its reorganization plan, Austin, Tx.-based Magic Brands, with more than 200 Fuddruckers outlets (135 of them franchised) and a dozen Koo Koo Roos, will close two dozen Fuddruckers by the end of this month. Also, Magic Brands has arranged for $14 million in financing through Wells Fargo Capital Finance Inc. to fund ongoing operations. The company’s filing was in the court in Wilmington, De. under case number 10-11310. For more information contact the court at 302-252-2560.

Ritz Camera Centers Inc. won approval from the U.S. Bankruptcy Court for its second amended liquidation plan.

W.R. Grace & Co., a Columbia, Md. chemicals firm, reported a first quarter profit of $57 million, a turnaround from a $38 million loss in the year-earlier first quarter. Revenue fell 10%–to $682 million, although the drop is partly related to an accounting change. The manufacturer, which is operating under Chapter 11, added that it managed to reduce costs in the period, partly by trimming its payroll.