Airline Finds Buyer and News on Other Challenged U.S. Companies

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.

Evaluating Whether to Sue An Insolvent Debtor

Outside considerations of bankruptcy, a creditor’s objective, in a collection lawsuit, is usually to be paid as much as possible as fast as possible.  If a creditor forces payment, whether alone or with the actions of other creditors, that payment could strain the financial situation of the debtor and the debtor may be forced to file for bankruptcy protection.  Further, if a payment may be recovered by the debtor in possession or the trustee as a preference, creditors may then be in a worse situation than if they had proceeded more cautiously or settled for less.  Under bankruptcy, the creditor has a conflicting incentive to minimize financial pressure on the debtor. The main objective of an insolvent debtor, when defending a collection lawsuit, is not always to avoid paying the debt but sometimes simply to win a delay.

Bankrupt Companies

American Steel and Aluminum Corp., Norwood, Ma., filed Chapter 11 in the U.S. Bankruptcy Court in Delaware. The firm listed assets of between $100 million and $500 million and liabilities of between $1 million and $100 million. The filing was under case number 09-13208. For more information contact the court at 302-252-2560.

Barzel Industries Inc., the Norwood Ma. firm which last May was unable to meet an $18 million interest payment on $315 million in senior secured notes, has filed Chapter 11 along with seven of its affiliates. The filing was made in the U.S. Bankruptcy Court in Delaware under case number 09-13204.  The company, which has a stalking horse bidder for its assets, also has obtained DIP financing so it can continue operating.  It should be noted that the company’s Canadian subsidiary, Barzel Industries Canada, has also filed under Canada’s Companies’ Creditors Arrangement Act.

Stamford Industrial Group Inc., the Stamford, Ct. firm which has reduced its workforce by 75% over the past year, has seen its principal subsidiary, Concord Steel Inc. of Youngstown, Oh., file Chapter 11.  Concord, which has seen its revenue decline by nearly 70% over the past year, is seeking court approval to continue operating. Stamford also saw its revenue over the past year decline from $42 million to just over $12 million.  Concord constitutes most of Stamford’s assets.  The filing was under case number 09-43448. For more information contact the court at 800-898-6899.

Daewoo Logistics Corp., New York, N.Y., filed Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York. The firm listed assets and liabilities of between $100 million and $500 million each. The filing was under case number 09-15558. For more information contact the court at 866-232-1268.

Frontier Airlines Holdings Inc., the bankrupt Denver, Co. carrier, received approval from the U.S. Bankruptcy Court for its agreement to be purchased by Republic Airways Holdings Inc. of Indianapolis, In.  The sale, valued at about $109 million, will take Frontier out of Chapter 11 after nearly a year and a half. Republic will also waive a $150 million claim that it holds against Frontier. For further information contact the U.S. Bankruptcy Court in Manhattan, N.Y. at 212-668-2780.

Idearc Inc., a Dallas, Tx.-based publisher of phone directories, received approval from the U.S. Bankruptcy Court in Texas for its amended disclosure statement. According to its reorganization plan, Idearc’s debt will be slashed from about $9 billion to $2.75 billion in secured bank debt. The rest of its existing debt and bonds will be swapped for equity.

Merisant Worldwide Inc., a Chicago, Il. provider of artificial sweeteners, filed its reorganization plan and disclosure statement with the U.S. Bankruptcy Court. With the plan eliminating about $400 million in debt, Merisasnt hopes to emerge from Chapter 11 on a sounder financial footing. A hearing on the disclosure statement is slated for 10/19.

National Gold Exchange, the bankrupt Tampa, Fl. firm, has seen its largest secured creditor object to the company’s disclosure statement, claiming the statement is  ”…unacceptable”.  Sovereign Bank, the objecting creditor which claims it is owed more than $33 million from NGE, went on to say the disclosure statement  “…requires a leap of faith”.

Nortel Networks Corp., which is auctioning off its optical gear networks unit as well as its operations that make Internet phone technology, has now seen both the U.S. and Canadian bankruptcy courts approve the sale of its communications gear operations to Avaya Inc. in a transaction valued at $910 million.  The deal is expected to close by 12/31. Nortel also recently agreed to sell its business-phone-systems manufacturing unit to Avaya Inc. for $900 million.

Pilgrim’s Pride, the bankrupt Pittsburg, Tx. firm which expects to emerge from Chapter 11 by 12/31, reported that JBS USA Holdings Inc., a unit of JBS  S.A. of Brazil, is purchasing more than 60% of the company’s new common stock while providing the company with $800 million in cash.  Proceeds of the sale will be used to repay creditors. As part of the transaction, which involves six of Pilgrim’s subsidiaries, a group of lenders have agreed to furnish the firm with secured financing of nearly $1.7 billion.

Tavern on the Green, the famous restaurant in Manhattan, N.Y.’s Central Park, filed Chapter 11 in an attempt to reorganize.