Business Bankruptcy News Bulletin Summary for Week of May 17

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.

Optional Provisions In a Reorganization Plan

Various optional provisions may be included in the reorganization plan of a bankrupt debtor. For example, a typical liquidating plan provides for the creation of a liquidating trust and the appointment of a trustee or other post to handle the assets to be liquidated and distributed to creditors. A plan can also provide for vesting all of the debtor’s assets in a new entity, subject to existing security interests. It can also provide for retaining the right to pursue preference or other actions by the newly formed entity. Other plans may provide for limits on management salaries or the rights of managers to spend money in certain ways.

BANKRUPT COMPANIES

American Hospitality Group LLC, Grand Island, N.Y., filed Chapter 11 in the U.S. Bankruptcy Court for the Western District of New York. The firm listed assets and liabilities of between $10 million and $50 million each. The filing was under case number 10-11887. For more information contact the court at 800-776-9578.

Extended Stay Inc. has seen a 5/27 auction scheduled for certain assets in its Chapter 11 case. For further information contact the U.S. Bankruptcy Court in Manhattan, N.Y. at 212-668-2780 and refer to case number 09-13764.

Fairpoint Communications Inc., which filed for Chapter 11 protection last year, reported that it overstated its earnings by nearly $22 million, in the nine-month period prior to its filing. While a hearing is scheduled within the next ten days, to confirm the company’s plan of reorganization, industry insiders feel the company will not be able to emerge from bankruptcy protection before 9/30.

L-Soft International’s Chapter 11 reorganization plan, which was approved by the U.S. Bankruptcy Court last year, has been fully administered and the company has emerged from bankruptcy protection. During its bankruptcy case, which was filed three years ago amid litigation problems, L-Soft continued operating, and its affiliates in Europe were not affected by L-Soft’s bankruptcy filing. For more information on L-Soft, which provides LISTSERV®) email hosting software, contact the court in Baltimore, Md. at 800-829-0145 and refer to case number 07-12173.

Movie Gallery Inc., the Wilsonville, Or. movie rental chain and the nation’s second largest after Blockbuster Inc., announced plans to liquidate its operations. The company, which filed for Chapter 11 protection in February, the second time in three years, had initially planned to close only 30% of its more than 2,400 U.S. outlets. MG decided to close its operations after a default provision was triggered under one of its loans. For more information contact the U.S. Bankruptcy Court for the Eastern District of Virginia at 800-326-5879 and refer to case number 10-30696.

Six Flags Inc. has filed its third amended reorganization plan. The most recent proposal would put junior bondholders in control of the company, post-petition. Under the plan the company’s CEO would maintain his $1.3 million salary while also collecting bonuses of as much as $3 million for helping the company exit Chapter 11.

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