AT&T Inc. and DirecTV, banking on becoming the new owners of Houston Regional Sports Network LP, don't want to give Comcast Corp. information about their deal with two professional sports teams to buy the network.
The Houston network has broadcast rights for games played by the Astros of Major League Baseball and the National Basketball Association's Rockets. The two teams own the network along with Philadelphia-based Comcast.
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Comcast, which now broadcasts the teams' games, stands to lose ownership of those rights under a plan that would make AT&T and DirecTV the network's new owners, splitting the equity 40/60.
Comcast asked the bankruptcy judge to compel the turnover of information about the deal by Sept. 7. A hearing on approval of disclosure materials explaining the plan is set for tomorrow.
AT&T and DirecTV incorrectly believe internal communications and analyses are irrelevant to approval of the plan unless they bear on final deal terms, according to Comcast.
Without the information, Comcast said it's "left wondering what exactly the proposed buyers are trying to hide by refusing to produce such documents." Comcast said documents concerning non-final deal terms speak directly to the "genesis, evolution, and rationale" of the transactions underlying the plan.
Comcast said the documents bear on issues "central" to plan approval, such as the valuation of its secured claim as a lender, and whether the deal is "fair and equitable" to creditors or structured to circumvent the so-called absolute priority rule.
Comcast is also in a fight over the status and amount of its secured claim. The two teams put the claim somewhere between $16 million and $23 million. Comcast said the entire $100 million claim is valid and should be paid in full.
Affiliates of Comcast filed an involuntary bankruptcy in September 2013. After an unsuccessful attempt at finding a buyer, the bankruptcy judge in Houston put the network into Chapter 11 reorganization in February.
The case is In re Houston Regional Sports Network LP, 13- bk-35998, U.S. Bankruptcy Court, Southern District of Texas (Houston).
Energy Future Holdings Corp. negotiated an agreement extending exclusive plan-filing rights until Feb. 23 and minimizing the chance that creditors will seek appointment of an examiner to perform an investigation.
The electric generator and distributor will submit the agreement on Sept. 16 to the U.S. Bankruptcy Court in Delaware where the Dallas-based company filed for Chapter 11 reorganization in late April. The agreement was negotiated with the official unsecured creditors' committee and an unofficial group of creditors with claims against Texas Competitive Electric Holdings, the unit that owns unregulated power- generation assets.
Energy Future won't file a reorganization plan without giving 10 days' advance notice to the committee and the TECH creditors. The company also agrees to meet with them once every two weeks.
If the creditors want to file lawsuits that otherwise belong to Energy Future, they must submit papers to the bankruptcy court not later than Feb. 28 and by Jan. 31 must tell the company about their plans.
The committee agrees not to seek appointment of an examiner unless told by their lawyers that the request must be made in exercise of their "fiduciary duties."
Independent directors of the operating company will be given the right to have their own professionals for advice about fulfillment of their duties and avoidance of conflicts of interest.
Energy Future had negotiated a reorganization plan with some senior lenders before the Chapter 11 filing. In the face of opposition and hesitance by the bankruptcy judge to approval of a $1.9 billion refinancing, the company said in July that it was abandoning the plan.
Last month the company said it would file papers in September for the court to approve "procedures and deadlines" to govern the "marketing process."
Formerly named TXU Corp., Energy Future was taken private seven years ago by KKR & Co., Goldman Sachs Group Inc. and TPG Capital in a record $48 billion leveraged buyout. The company filed for reorganization together with about 70 affiliates. Its petition listed assets of $36.5 billion and debt totaling $49.7 billion.
The company has 14 power plants with a combined capacity of 15,400 megawatts, making it the largest unregulated electricity provider in Texas. For the capital structure, debt, proposed plan and financing, click here and see the third item in the May 1 Bloomberg bankruptcy report.
The case is In re Energy Future Holdings Corp., 14- bk-10979, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Detroit Kicks Off Trial on Approval of Debt-Adjustment Plan
The trial began in Detroit yesterday for approval of the city's municipal debt-adjustment plan. The city's lawyer will conclude his opening remarks today, to be followed by opening statements from opponents of the plan, including bond insurer Syncora Guarantee Inc.
The trial will run over a month, absent settlement. The city expects to call more than 25 witnesses.
The city's lawyer made the point yesterday that in Chapter 9 municipal bankruptcy, unlike corporate reorganization in Chapter 11, neither creditors nor the judge has power to force a city to sell assets, such as the art collection that Syncora says could be worth billions.
If a city doesn't pay bondholders in full, outside of bankruptcy their only remedy is to file suit and force the city to raise taxes, an option that federal bankruptcy law allows Detroit to avoid, the city's lawyer said. For Bloomberg coverage of the hearing, click here. For another Bloomberg story, click here.
Detroit began history's largest municipal bankruptcy in July 2013, listing $18 billion in debt, including $5.85 billion in special revenue obligations, $6.4 billion in post-employment benefits, $3.5 billion for underfunded pensions, $1.13 billion on secured and unsecured general obligations and $1.43 billion on pension-related debt. Debt service consumes 42.5 percent of revenue.
The city has 100,000 creditors and 20,000 retirees.
The case is In re City of Detroit, Michigan, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
New York City Opera Still Lacks Reorganization Plan
New York City Opera, which halted operations before filing for bankruptcy reorganization in October, still doesn't have a plan for emerging from Chapter 11.
For a fourth time, the opera filed papers seeking a two- month extension of its exclusive right to propose a plan. If approved by the bankruptcy court in Manhattan at a Sept. 15 hearing, the new deadline will be Oct. 28.
Without providing details, the opera said it received "expressions of interest" about a "potential transaction for the disposition of NYC Opera." The opera agreed to give the official creditors' committee a draft reorganization plan two weeks before it's filed.
A potential investor is Gene Kaufman, the opera previously disclosed. The opera said it has given him "information to formalize his proposal."
The opera filed for Chapter 11 protection after moving out of its home at Lincoln Center and running out of cash. Physical assets were sold at auction in December.
The opera filed official lists showing $3.6 million in claims. Assets were on the books for $6.68 million, including $4.77 million in cash, although the opera said significant portions "may only be used in accordance with terms of the respective gift instruments."
The case is New York City Opera Inc., 13-bk-13240, U.S Bankruptcy Court, Southern District of New York (Manhattan).
USEC Reports Loss Before Sept. 5 Confirmation Hearing
USEC Inc., a producer of enriched uranium for nuclear power plants, reported an $11.7 million net loss in July on revenue of $6.7 million.
According to a report filed with the U.S. Bankruptcy Court in Delaware, the July operating loss was $5.4 million. The net loss in large part resulted from $2.2 million in interest expense and $1.5 million in reorganization costs.
USEC's reorganization plan comes up for approval at a confirmation hearing on Sept. 5. Creditors were almost unanimous in support of the plan.
Secured creditors and general unsecured creditors are paid in full and didn't vote because they are presumed to have accepted.
Holders of the convertible notes are to receive $200 million in new debt and 79 percent of the new stock. Holders of preferred stock are being given 16 percent of the new common stock plus $40.4 million in new debt.
Common shareholders can have 5 percent of the new stock because noteholders and preferred shareholders voted in favor of the plan.
When the bankruptcy reorganization began in March, the plan already had support from noteholders with more than 66 percent of the value of the notes outstanding. For details on the plan and projected recoveries, click here for the July 8 Bloomberg bankruptcy report.
USEC was owned by the U.S. government before being privatized. The petition listed assets of $70 million and liabilities of $1.07 billion because the amounts didn't include properties belonging to the operating companies not in bankruptcy. The consolidated balance sheet on June 30 showed assets of $807.7 million and liabilities totaling $1.34 billion.
USEC reported a $57.9 million operating loss and a $78.8 million net loss for the six months ended June 30 on revenue of $269.8 million.
The case is In re USEC Inc., 14-bk-10475, U.S. Bankruptcy Court, District of Delaware (Wilmington).
ClearEdge Power Inc., a maker of fuel cells, is sharing the exclusive right to propose a Chapter 11 plan with the official creditors' committee.
A bankruptcy judge in San Jose, California, signed an order on Aug. 29 giving the company and the committee the exclusive right to propose a plan until Dec. 1.
No one submitted an offer to buy the business in competition with Doosan Corp. In addition to paying as much as $12.9 million to cure defaults on contracts going along with the sale, Seoul-based Doosan will pay a purchase price that includes a base cash amount of about $32.4 million. An additional $4.8 million will be escrowed to cover later-determined costs of curing contract defaults, according to the court's order.
ClearEdge had assets of $189.3 million and debt totaling $134.2 million on the March 31 balance sheet. The Sunnyvale, California-based company also filed official lists showing assets of $31.3 million against debt totaling $67.4 million.
Debt on the official lists consists of $30.9 million in secured claims, $7.6 million of priority claims and $28.8 million of unsecured debt. Some of the priority claims are for wages. Priority claims must be paid in full if the company intends to emerge from Chapter 11.
Last year, ClearEdge acquired UTC Power Inc. from United Technologies Corp. UTC's fuel cells were used on all U.S. manned space flights.
The case is In re ClearEdge Power Inc., 14-bk-51955, U.S. Bankruptcy Court, Northern District of California (San Jose).
BioHealth College Converts to Chapter 7 Liquidation
BioHealth College Inc. won't be reorganizing. The for- profit operator of four Bryman College campuses in California went into a Chapter 7 liquidation on Aug. 29 at the company's own request.
In filing for Chapter 11 protection on July 18, BioHealth stopped eviction from its campuses and intended to arrange an orderly closing of the schools.
The U.S. Education Department ceased all funding upon the filing and the Internal Revenue Service had a lien on all assets. Together, they precluded BioHealth from using its cash.
Corinthian Colleges Inc. in substance paid BioHealth $2.3 million in 2013 to take over the four Bryman campuses, according to filings made by Corinthian with the Securities and Exchange Commission.
Bryman provided dental- and medical-assistant and pharmacy- technician programs and offered courses in business, massage therapy and medical-insurance billing at its San Jose, San Francisco, Hayward and Los Angeles campuses, according to the website.
The case is In re BioHealth College Inc., 14-bk-53057, U.S. Bankruptcy Court, Northern District of California (San Jose).
Coal Producer IBCS Gets Final Approval of New $1.5 Million Loan
IBCS Mining Inc., a producer of usable coal from mine tailings, received final approval of a $1.5 million term loan from Community Trust Bank Inc. to sustain operations until a sale.
The judge in Lynchburg, Virginia, approved the bankruptcy loan on a final basis on Aug. 26. IBCS can also use cash representing collateral for secured claims, according to court papers.
The Community Trust financing package requires that IBCS file motions to approve bidding and sale procedures, both acceptable to the lender, by Sept. 30. The sale must be completed by Dec. 15, according to court papers.
IBCS received an offer dated July 18 from a prospective purchaser, according to court papers. The identity of the bidder and the proposed purchase price were redacted.
The Charlottesville, Virginia-based company filed a Chapter 11 petition on June 27. In light of the company's inability to obtain financing from Callidus Capital Corp., the IBCS chief restructuring officer explored financing alternatives including the loan from Community Trust, according to court papers.
At the outset, IBCS was contemplating a $3.5 million loan from Callidus.
IBCS works 600 acres in West Virginia and Kentucky. The properties have 14.5 million tons of potentially recoverable coal, according to the company's website.
The case is In re IBCS Mining Inc., 14-bk-61215, U.S. Bankruptcy Court, Western District of Virginia (Lynchburg).
Real Estate Company Variant Files to Halt Foreclosure
Variant Holding Company LLC, a Tucson, Arizona-based commercial real estate company, filed a Chapter 11 petition on Aug. 28 in Delaware to stop the principal secured lender from foreclosing ownership interests the next day in some of its 27 apartment projects in seven states.
Funds affiliated with Beach Point Capital Management LP sued the company in California state court in May to collect on a $73.5 million loan secured by ownership interests in the projects, according to Variant. Administrative agent Cortland Capital Market Services LLC intended to foreclose on Aug. 29.
Variant said Beach Point made the loan as part of a "loan to own" strategy with the goal of stripping the company of valuable real estate. The company said it intends to sell projects owned by non-bankrupt affiliates in a process controlled by a chief restructuring officer. Brokers hired to market the portfolio estimate the value at more than $300 million, according to Variant.
The portfolio is encumbered by first mortgage debt of about $150 million and Beach Point's disputed and partially secured claim of about $70 million, according to the company.
Variant said there's "ample" equity in the real estate to pay Beach Point to the extent its claims are valid. The company expects to pay other creditors in full, allowing for a "significant" recovery by equity holders.
The petition shows assets of more than $100 million and liabilities of less than $100 million.
The case is In re Variant Holding Company LLC, 14-bk-12021, U.S. Bankruptcy Court, District of Delaware (Wilmington).
E-Recycling Provider CRS Holding Files Chapter 11 to Sell
CRS Holding of America LLC, a Tampa, Florida-based provider of electronics recycling services, filed a Chapter 11 petition in its hometown on Aug. 29 to halt eviction and prepare to sell its business.
After secured lenders Regions Bank and Regions Equipment Finance Corp. declared default and initiated foreclosure, the state court appointed a receiver in July. The receiver appointed himself as chief restructuring officer on Aug. 25 and filed the Chapter 11 petition four days later, saying the business is "fundamentally sound."
The receiver intends to stabilize operations and halt collection and eviction efforts by creditors and landlords. During the bankruptcy, CRS Holding wants to pare operations by rejecting leases at unprofitable facilities. CRS Holding said it will then pursue confirmation of a Chapter 11 plan providing for a sale of the assets as a going-concern.
At a hearing scheduled for today, the company is to seek permission to tap as much as $1 million in bankruptcy financing from Regions and to use cash representing collateral for secured lenders' claims, according to court papers.
The Regions bankruptcy financing requires that a sale motion be filed within 15 days.
Operating as Creative Recycling Systems, the company runs what it calls an "end-of-life" electronics recycling and data security business. It also operates Bargain Computer Products, which provides refurbished electronic items, according to court papers.
The company had gross revenue of about $30 million in 2013, according to court papers.
The outstanding loan balance to Regions is $15 million, according to the company. Other secured debt totals about $7 million. The company put general unsecured claims at about $5 million, according to court papers.
Parent company CRS Holding's petition shows assets of more than $50 million and liabilities of less than $50 million. Its operating units also filed petitions.
The case is In re CRS Holding of America LLC, 14-bk-10142, U.S. Bankruptcy Court, Middle District of Florida (Tampa).
Indianapolis Retirement Homes Files to Reorganize
Alpha Home Association of Greater Indianapolis (Indiana) Inc., a retirement community, filed a Chapter 11 petition on Aug. 26 in its hometown.
The one-story facility on six acres offers several levels of care along with rehabilitation services for 26 residents, according to the website.
The home traces its history to 1886 when it was the first residential facility for elderly black women.
The case is In re Alpha Home Association of Greater Indianapolis (Indiana) Inc., 14-bk-07997, U.S. Bankruptcy Court, Southern District of Indiana (Indianapolis).
San Francisco Appeals Court Revisits Fees for Stay Violation
The U.S. Court of Appeals in San Francisco is in a position now to decide definitively whether it will stake out a position at odds with other courts on the recovery of attorney fees when a creditor violates the so-called automatic stay.
In an opinion in April, the U.S. Court of Appeals for the Ninth Circuit backed off somewhat from an opinion in 2010, in a case called Sternberg, limiting the attorney fees someone can recover in that situation.
The case revolves around interpretation of Section 362(k) of the Bankruptcy Code, which gives an individual bankrupt the right to damages and attorney fees for a willful violation of the automatic stay prohibiting interference with property.
The 2010 Sternberg decision ruled that the bankrupt couldn't recover fees incurred seeking damages for a stay violation.
In an April 16 opinion for two of the three judges on the panel, U.S. District Judge Paul Huck of Miami, sitting by designation on the circuit bench, ruled that the new case had different facts justifying a different result and allowing the recovery of attorney fees.
The losing side filed papers two weeks later seeking rehearing by all active judges on the Ninth Circuit. In response, Huck and U.S. Circuit Judge Ronald M. Gould withdrew their April opinion and issued another opinion on Aug. 29, reaching the same result.
In Sternberg, as the majority explained, the stay violation had been remedied before the bankrupt sued to recover damages. The appeals court concluded the fees weren't recovered from the stay violation itself. Instead, they resulted from the effort to recover damages.
The new case was different, according to Huck. In the new case, a lender foreclosed on a home knowing there was a bankruptcy. Immediately after the bankruptcy court directed, the lender reconveyed the home.
The bankruptcy court awarded damages for a stay violation and also required reconveyance of the home.
The lender unsuccessfully appealed both the grant of fees and the underlying finding of a stay violation, according to Huck. The bankruptcy court denied recovery of fees for the bankrupt's appeal, following Sternberg. The Bankruptcy Appellate Panel ruled on appeal that fees should be paid, and Huck agreed.
Huck said the facts were different from Sternberg because the lender in the new case still contended there was no stay violation and no need to reconvey the home. He said the "plain language" of the statute required an award of fees.
Granting fees, Huck said, was consistent with both the financial and non-financial purposes of Section 362(k).
Huck said in a footnote that Sternberg is "an outlier among the circuits and has received substantial criticism." He said the U.S. Court of Appeals in New Orleans allowed recovery of attorney fees in a case like Sternberg. Two bankruptcy appellate panels also reached the opposite result, Huck said.
U.S. Circuit Judge J. Clifford Wallace dissented again, saying the case should be controlled by Sternberg. Even if it weren't, Wallace said, he would vote against allowing recovery of fees.
In Wallace's view, Section 362(k) doesn't explicitly allow fees under the circumstances. He said a statute should be explicit before awarding fees contrary to the so-called American rule, which says the losing side doesn't pay the winner's fees.
Both Huck and Wallace criticized the appellate panel for following one of its own decisions that had been overruled by the circuit court.
The court gave both sides 14 days to file another request for rehearing by all active judges on the San Francisco appeals court.
For details on the April opinion, click here for the April 21 Bloomberg bankruptcy report.
The case is America's Servicing Co. v. Schwartz-Tallard (In re Schwartz-Tallard), 12-60052, U.S. Court of Appeals for the Ninth Circuit (San Francisco).
Coudert Brothers Unfinished Business Suit Dismissed on Appeal
The bankruptcy trustee for Coudert Brothers LLP met the same fate as the Thelen LLP trustee: The U.S. Court of Appeals in Manhattan dismissed the trustee's claims based on the idea that unfinished business was an asset belonging to the defunct law firm.
Yesterday's opinion involving the Coudert firm was functionally similar to the decision on Aug. 6 by a different three-judge panel of the same appeals court regarding Thelen.
The two Second Circuit decisions stemmed from the liquidations of Thelen and Coudert, in which federal district judges reached different conclusions. The Thelen judge ruled that unfinished business isn't property of a bankrupt firm under New York law, while the Coudert judge said unfinished business belongs to the trustee for the defunct firm.
Appeals were taken in both cases. Because the outcomes turned on New York law, the circuit court referred the issue to the New York Court of Appeals, the highest court in the state.
That court decided on July 1 that there's no property in hourly unfinished business because it's "too contingent in nature and speculative to create a present or future property interest." For discussion of the state court's opinion, click here for the July 2 Bloomberg bankruptcy report.
A different panel tersely upheld dismissal of the Thelen suit on Aug. 6. The Coudert panel followed suit yesterday, by telling the district court to dismiss lawsuits against former partners of Coudert who went to other firms.
The Coudert opinion had a wrinkle. The Coudert trustee said there are claims not involving the unfinished-business doctrine. The circuit court told the district judge to evaluate whether those claims survive now that unfinished business doesn't represent property of a bankrupt law firm.
The claims still up in the air involve liability for accounts receivable and work-in-process.
The unfinished-business dispute arose from a 1984 intermediate appellate court decision in California called Jewel v. Boxer, which held that profit earned after dissolution belongs to the "old" firm, not to a newly formed firm that completed the work. The Jewel doctrine had been uncritically accepted ever since, a judge in San Francisco said.
To read about the California case, click here for the June 13 Bloomberg bankruptcy report. For details on the decision sending the question to the New York state court, click here for the Nov. 18 report. For a discussion of the lower court opinions, click here for the Sept. 6, 2012, Bloomberg bankruptcy report.
The Coudert appeal is Akin Gump Strauss Hauer & Feld LLP v. Development Specialists Inc. (In re Coudert Brothers LLP), 12-4916, U.S. Court of Appeals for the Second Circuit (Manhattan). The Thelen opinion is Geron v. Seyfarth Shaw LLP (In re Thelen LLP), 12-4138, in the same court.
The Thelen and Coudert cases in the New York state court were Geron v. Seyfarth Shaw LLP (In re Thelen LLP), and Development Specialists Inc. v. K&L Gates LLP (In re Coudert Brothers LLP), 136 and 137, New York State Court of Appeals (Albany).
One Creditor Can't Bootstrap on Another's Appeal, Court Says
Similarly situated creditors can't take advantage of an appeal without actually appealing, the U.S. Court of Appeals in Philadelphia ruled on Aug. 28.
Visteon Corp. filed a Chapter 11 petition in 2009 and exited Chapter 11 the next year under a confirmed reorganization plan. Along the way, the auto-parts maker sought bankruptcy court authority to end retiree health benefits.
Because none were vested, Visteon argued successfully in bankruptcy court that it wasn't required to use the cumbersome process called for in Section 1114 of the Bankruptcy Code for ending benefits.
The bankruptcy judge allowed termination, ruling that the company needn't follow Section 1114. Only one of two labor unions appealed.
The U.S. Court of Appeals for the Third Circuit reversed in 2010, requiring the use of Section 1114. On remand, the bankruptcy judge said he considered his prior ruling void from the beginning as to all Visteon workers. Visteon appealed and won.
In an opinion last week for a three-judge panel, U.S. Circuit Judge Michael A. Chagares said the original bankruptcy court order allowing termination of benefits was binding on the union that didn't appeal, even though the other union appealed and won.
The "mere fact that a party may wind up with a judgment against one party that is not logically consistent with an unappealed judgment against another is not alone sufficient to justify taking away the unappealed judgment," he said.
The case is In re Visteon Corp., 12-3352, U.S. Court of Appeals for the Third Circuit (Philadelphia).
Transfer Occurs When Receivership Order Delivered
When a judgment creditor attaches a bank account in Texas, the transfer for preference purposes takes place under state law when the bank is given a certified copy of the order of receivership, the U.S. Court of Appeals in New Orleans ruled on Aug. 28.
Texas law allows a judgment creditor to obtain appointment of a receiver to seize property of the judgment debtor. In the case at issue, involving about $18,000, the receiver delivered a certified copy of appointment to the bank within the 90-day preference period.
The judgment creditor argued that the transfer took place outside the 90-day period when the receiver was appointed.
In an unsigned opinion, the three-judge appeals court panel agreed that the transfer was a preference because it occurred within the 90 days when the certified order was given to the bank.
The appeals court upheld the lower courts' rulings "for essentially the reasons assigned" in their opinions.
The case is Flooring Systems Inc. v. Chow (In re Poston), 13-40050, U.S. Fifth Circuit Court of Appeals (New Orleans).