Beard Group Corporate Restructuring Review for May 2011

Beard Group Corporate Restructuring Review For May 2011

Presented by

Beard Group, Inc. P.O. Box 4250

Frederick, MD 21705-4250 Voice: (240) 629-3300 Fax: (240) 629-3360

E-mail: [email protected]

An audio recording of this presentation is available at http://bankrupt.com/restructuringreview/

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Welcome to the Beard Group Corporate Restructuring Review for May 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 discuss five 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 in

chapter 11 cases that we monitor day-by-day;

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Beard Group Corporate Restructuring Review for May 2011 -- page 2

• fourth, reminders about debtors whose emergence from chapter 11 has been delayed; and

• fifth, information you're unlikely to find elsewhere about

new publicly traded securities being issued by chapter 11 debtors.

May 2011 Mega Cases Now, let's review the largest chapter 11 cases in May 2011. Danilo Muñoz reports that the number of Chapter 11 cases

with assets in excess of $100 million dropped slightly in May as compared to the previous months.

Six companies, led by Jackson Hewitt Tax Service Inc., filed

for Chapter 11 bankruptcy protection with assets of at least $100 million in May, raising the total mega cases to 32 for the first five months of 2011, an average of six per month. There were eight companies with assets of at least $100 million that filed for Chapter 11 bankruptcy in April, and six each in March, February, and January.

This represents a roughly 37% decline from the same period

last year. For the first five months of 2010, a total of 51 mega cases were filed, including 10 mega cases in May 2010. The average number of mega cases in the first five months of 2010 was about 10 per month.

For fiscal year 2010, a total of 105 mega cases were filed.

This is an average of about 9 cases per month.

No billion-dollar company commenced Chapter 11 proceedings in May 2011. So far this year, two companies with

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assets in excess of $1 billion filed for Chapter 11 protection: Borders Group and MSR Resort Golf Course, both of which filed in February.

During the first five months of 2010, there was no Chapter 11

filing with assets in excess of $1 billion. The largest filer for May, Jackson Hewitt, listed $315.9

million in total assets and $378.4 million in total liabilities. Jackson Hewitt and its affiliates filed for Chapter 11

protection with the U.S. Bankruptcy Court for the District of Delaware [Lead Case No. 11-11587] on May 24, 2011. Jackson Hewitt has a deal with secured lenders that will let the company exit court protection within 60 days.

Jackson Hewitt provides computerized preparation of

federal, state and local individual income tax returns in the United States through a nationwide network of franchised and company-owned offices operating under the brand name Jackson Hewitt Tax Service®. Jackson Hewitt is the second largest paid tax return preparer in the United States, having prepared approximately 2.6 million tax returns for the 2011 tax season, which is between 3% and 4% of the total market for paid tax return preparation services.

The Chapter 11 filing comes after U.S. regulators moved to

curb the loans that tax preparers arrange for customers expecting refunds. Refund-anticipation loans are under scrutiny by regulators including the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. The biggest U.S. tax preparer, H&R Block Inc., won't offer tax-refund loans this year after the OCC, which regulates national banks, blocked HSBC Holdings Plc from funding them. JPMorgan Chase & Co. exited the refund-loan business in April 2010.

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The second largest filing was by Swiss Chalet Inc., listing

total assets of $118.52 million and total liabilities of $132.74 million. The Company filed for Chapter 11 protection on May 27, 2011, with the U.S. Bankruptcy Court for the District of Puerto Rico.

Swiss Chalet owns the Best Western Hotel Pierre in San

Juan, Puerto Rico. Charles Alfred Cuprill, Esq., in San Juan, Puerto Rico, serves as counsel to Swiss Chalet.

Four other companies that filed for Chapter 11 with

estimated assets between $100 million and $500 million are: Berkline/Benchcraft Holdings LLC, Caribe Media Inc., ALT Hotel LLC, and Wolf Mountain Resort LC.

Berkline/Benchcraft Holdings, along with five subsidiaries,

filed for Chapter 11 bankruptcy with the Bankruptcy Court for the District of Delaware [Case No. 11-11369]. The Company, with their "Berkline" and "Benchcraft" brands, held a number five market share and had a growing presence in home theater seating including reclining sofas, love seats, and sectionals.

In February, Berkline hired FTI Consulting Inc. to help it

restructure and find a buyer. When Berkline was unable to sell itself, the Company decided to liquidate and file for bankruptcy.

Caribe Media Inc. and CII Acquisition Holding Inc. filed for

Chapter 11 bankruptcy protection with the Bankruptcy Court for the District of Delaware on May 3, 2011 [Case Nos. 11-11387 and 11-11388].

Caribe Media owns publication rights for certain print and

Internet directories in the Dominican Republic and Puerto Rico. Caribe Media owns 60% of Axesa Servicios de Informacion [S. en

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C.], a Yellow Pages publisher in Puerto Rico and the official publisher of all telephone directories for Puerto Rico Telephone Company, Inc., the largest local exchange carrier in Puerto Rico, and 100% of Caribe Servicios de Informacion Dominicana [S.A.], the sole directory publisher in the Dominican Republic with the exclusive right to publish under the brand of Codetel, the largest telecom operator in the Dominican Republic. Caribe Media are affiliates of Local Insight Media Holdings, Inc.

ALT Hotel, LLC, filed a Chapter 11 petition with the

Bankruptcy Court for the Northern District of Illinois on May 5, 2011 [Case No. 11-19401]. Neal L. Wolf, Esq., and Dean C. Gramlich, Esq., at Neal Wolf & Associates, LLC, in Chicago serve as bankruptcy counsel to ALT Hotel.

ALT Hotel is the owner of the Allerton Hotel in Chicago. ALT

Hotel sought bankruptcy protection as it tries to fend off Diamond Rock Hospitality Co. -- which owns the $69 million first mortgage on the property -- from foreclosing on the property. The hotel will remain open and employees will continue to be paid, said the owner, an affiliate of Petra Capital Management LLC in New York.

Wolf Mountain Resorts, L.C., based in Los Angeles,

California, filed for Chapter 11 bankruptcy with the Bankruptcy Court for the Central District of California on May 9, 2011 [Case No. 11-30162]. Mark S. Horoupian, Esq., at SulmeyerKupetz, serves as bankruptcy counsel.

Wolf Mountain Resorts is the landowner behind the Canyons

Resort, one of Utah's biggest vacation spots. Wolf Mountain Resorts owns thousands of acres of snow-capped terrain in Park City, Utah.

On April 26, a Utah jury decided Wolf Mountain Resorts had

violated agreements it made with an affiliate of the former resort

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operator, American Skiing Co., which had leased the land in 1997 and agreed to develop the area. The jury found that Wolf Mountain Resorts breached its contract when it stalled the construction of the resort's first golf course and surrounding residential development -- delays that took place amid a heated real estate market. The jury ordered Wolf Mountain Resorts to pay $54.4 million, prompting the bankruptcy filing.

Mr. Muñoz also reports that no prepackaged Chapter 11

case was filed in May 2011. For the first five months of 2011, 8 of the 32 mega cases -- or 25% -- had prepackaged Chapter 11 plans. For fiscal year 2010, a total of 35 prepacks/pre-arranged cases were filed -- about one in every three filings in 2010.

Of the May mega cases, three went to Delaware, and one

each went to Puerto Rico, Central District of California, and Northern District of Illinois. For the first four months of 2011, 17 mega-cases went to Delaware and 7 went to the Southern District of New York.

Lehman Brothers Holding Corp. remains the biggest

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

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 compiled a list of four companies that may

be close to filing for bankruptcy: Municipal Mortgage & Equity LLC, Nebraska Book Co., American Apparel, Inc., and Horizon Lines, Inc.

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(A) Municipal Mortgage & Equity Municipal Mortgage & Equity LLC warned following its

results in 2010 that it may have to file for bankruptcy to address its liquidity issues.

Municipal Mortgage, which is engaged in investing in and

servicing tax-exempt mortgage revenue bonds, reported a net loss of $16.5 million on $21.9 million of total interest income for the three months ended March 31, 2011, compared with a net loss of $21.4 million on $23.3 million of total interest income for the same period during the prior year.

The Company's balance sheet at March 31, 2011, showed

$1.97 billion in total assets, $1.28 billion in total liabilities and $683.3 million in total equity.

(B) Nebraska Book LBO Wire has reported that Weston Presidio-backed

Nebraska Book Co. is considering its options as a cash shortage puts the company in danger of defaulting on its loans.

Moody's, which downgraded Nebraska Book parent NBC

Acquisition's corporate rating to 'Caa2' from 'Caa1' in April, said that it believes Nebraska Book will not be able to make sufficient dividend payments to NBC Acquisition that will be needed by NBC Acquisition to meet its September 2011 scheduled interest payment on its $77 million senior debentures due 2013. Dividend payments from Nebraska Book Company are the only source of debt repayment for these senior debentures.

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S&P, which has a 'CCC' credit rating on Nebraska Book, said the firm needs to refinance its debt or restructure because of near-term maturities.

Bloomberg News said in March that Nebraska Book and its

parent have hired legal and financial advisers to help in restructuring debt and preparing for a Chapter 11 filing if necessary. If there is a distressed exchange or a Chapter 11 filing, Goldman Sachs Group Inc. and Cerberus Capital Management LP could end up in control after purchasing debt at discount, people familiar with the plans said, according to the report.

NBC reported a net loss of $12.51 million on $414.4 million

of revenue for the nine months ended Dec. 31, 2010, compared with a net loss of $6.77 million on $412.13 million of revenue for the same period during the prior year.

The Company's balance sheet at Dec. 31, 2010 showed

$657.8 million in total assets, $624.5 million in total liabilities and stockholders' equity of $33.3 million.

(C) American Apparel American Apparel, Inc. reported a net loss of $20.7 million

on $116.1 million of net sales for the three months ended March 31, 2011, compared with a net loss of $42.8 million on $121.8 million of net sales for the same period during the prior year.

"If we are not able to timely, successfully or efficiently

implement the strategies that we are pursuing to improve our operating performance and financial position, obtain alternative sources of capital or otherwise meet our liquidity needs, we may need to voluntarily seek protection under Chapter 11 of the U.S.

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Bankruptcy Code," American Apparel warned in its first quarter report.

The Company acknowledged that it may not have sufficient

liquidity necessary to sustain operations for the next 12 months. In April, American Apparel announced it raised new capital,

allowing it to continue with the execution of its business plan and to take advantage of improving business conditions while meetings a bank requirement for a $5 million increase in reserves. In connection with this transaction, the Company sold 15.8 million shares of Common Stock to a group of investors, at a price of $0.90 per share, for an aggregate cash purchase price of approximately $14.2 million.

The Wall Street Journal reports that Skadden, Arps, Slate,

Meagher & Flom has been advising the company on its recent restructuring efforts alongside investment bank Rothschild Inc.


$333.9 million in total assets, $283.1 million in total liabilities, and $50.8 million in total stockholders' equity.

Los Angeles, Calif.-based American Apparel is a vertically

integrated manufacturer, distributor, and retailer of branded fashion basic apparel.

(D) Horizon Lines Horizon Lines, Inc., said the Company and the holders of the

majority of its 4.25% convertible senior notes have entered into agreements for a transaction that will refinance the company's entire capital structure.

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The agreement with the note holders contemplates a complete refinancing, in conjunction with a new asset-based revolving loan facility of up to $125 million, which is under negotiation with a leading financial institution.

The agreement provides that the RSA will terminate

automatically in the event cases under the Bankruptcy Code are commenced by or against the Company in any jurisdiction, and solely in the event of an involuntary filing against the Company, such involuntary case is not dismissed within 15 days of filing. In the event that a bankruptcy filing is commenced by or against the Company, the Company waives any requirement under section 362 of the Bankruptcy Code to lift the automatic stay thereunder in connection with the giving of any notice of termination of the RSA.

The company's current debt structure consists of a $225

million senior secured revolving credit facility, a $125 million secured term loan, and $330 million of unsecured 4.25% convertible senior notes.

The recapitalization will eliminate the refinancing risk related

to the maturity of the existing convertible notes and the existing bank debt in 2012, and will provide liquidity to fund continued operations through the new senior secured notes and new ABL Facility. At the same time, the recapitalization provides for the immediate de-leveraging of the balance sheet by $50 million through a debt-for-equity exchange and provides the potential for additional de-leveraging through the early conversion of the new convertible secured notes to be issued in the exchange offer.

During and after the recapitalization process, the company

intends to conduct business as usual throughout its trade lanes, focusing on continued customer service excellence and operational efficiencies.

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Consummation of the refinancing is expected to occur in

August, following finalization of documentation and completion of the exchange offer for the company's existing 4.25% convertible senior notes, which by law requires 20 business days to execute.

Horizon Lines, based in Charlotte, North Carolina, through its

wholly-owned indirect operating subsidiary, Horizon Lines, LLC, currently operates 11 of its 15 Jones Act qualified U.S. flag container ships in Jones Act liner services between the continental United States and either Alaska, Hawaii, or Puerto Rico and five U.S. flag container ships between the Far East, U.S. west coast and Guam.

Horizon Lines reported a net loss of $57.9 million on $1.16

billion of operating revenue for the fiscal year ended Dec. 26, 2010, compared with a net loss of $31.27 million on $1.12 billion of operating revenue for the fiscal year ended Dec. 20, 2009.


$804.0 million in total assets, $797.3 million in total liabilities, and stockholders' equity of $6.66 million.

As reported in the TCR on March 30, 2011, Ernst & Young

LLP, in Charlotte, North Carolina, expressed substantial doubt about Horizon Lines' ability to continue as a going concern, following the Company's 2010 results. According to Ernst & Young, there is uncertainty that Horizon Lines, Inc., will remain in compliance with certain debt covenants throughout 2011 and will be able to cure the acceleration clause contained in the convertible notes.

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In addition to the challenged companies mentioned in Mr. Fernandez's report, the Troubled Company Reporter provides on-going reporting about more than 3,000 companies experiencing financial distress or restructuring their balance sheets in a judicial proceeding. Stay tuned to learn more about obtaining a trial subscription to the TCR at no cost or obligation.

Major Pending Disputes In Chapter 11 Cases Next we'll quickly review major pending disputes in two large

chapter 11 cases that Troubled Company Reporter editors monitor day-by-day.

(A) Lehman Brothers Ivy Magdadaro identified four major disputes in the Lehman

Brothers bankruptcy. The disputes involve litigation by the trustee for Lehman's brokerage unit against Barclays Plc and Citigroup, and the company’s own lawsuits against JPMorgan Chase and Nomura in an effort to recover billions of dollars for Lehman creditors.

(1) Lehman-Barclays Dispute According to Ms. Magdadaro, New York Bankruptcy Judge

James Peck ruled on June 6 that the trustee overseeing the Lehman Brothers broker unit liquidation is entitled to $4 billion in margin assets. The assets have been the subject of a long-running multi-billion dollar legal fight between Lehman and U.K.-based bank, Barclays.

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The "margin assets" refer to deposits Lehman posted to cover outstanding derivatives trade. The bankruptcy judge has ruled in favor of the Lehman trustee on those margin assets.

The June 6 bench ruling means Barclays will have to return

$2 billion in margin collateral to the Lehman trustee, James Gidden. The other $2 billion in margin assets is held by third parties or the trustee, according to Barclays.

Barclays bought Lehman's North American broker business

in September 2008, just a few days after Lehman filed for bankruptcy in New York. It was disputed whether the margin assets were mistakenly handed over to Barclays in relation to the broker unit sale deal in 2008.

Judge Peck entered in first major ruling on the Lehman-

Barclays dispute back in February. The bankruptcy judge held, under the February 22 order, that Lehman's hurried 2008 sale of its broker unit to Barclays at the height of the financial crisis was fair and ruled that Barclays should return any cash it received from the sale. Judge Peck, however, did not rule on how the disputed assets related to the Lehman sale were to be divided.

After the February ruling, Barclays argued that it should be

able to use Lehman-related derivatives losses it had incurred to offset some of the margin collateral it had to return. Under the June 6 ruling, Judge Peck rejected Barclays' argument and also said Barclays would have to pay a 5% interest -- an amount lower that the 9% interest Lehman sought in court papers.

Judge Peck previously held that Barclays was entitled to

roughly $1.1 billion in "clearance box" assets, a conclusion that Lehman did not dispute.

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Since Barclays is entitled to $1.1 billion in clearance box assets, the bank's net cost for the June 6 "margin asset" ruling will be near $1 billion.

Barclays disclosed on June 7 that it has made a provision for

almost all of the net $1 billion it has been told to pay the Lehman trustee, but said it will appeal against certain aspects of the June 6 court ruling on the margin assets. No money or assets will be moved while the appeal process takes place.

The appeal may potentially extend the lawsuit by six months

or more. Barclays also has said it will ask Judge Peck to dismiss

Lehman's claim for $500 million in unpaid bonuses. In late April, Lehman told the bankruptcy judge that Barclays failed to pay bonuses the UK bank agreed to when it bought the Lehman broker unit. Barclays asserted it has paid all promised bonuses.

(2) Lehman-JPMorgan Dispute JPMorgan Chase & Co. asked Judge Peck at a May 10

hearing to dismiss Lehman Brothers' claim demanding that it hand over $8.6 billion in cash taken as collateral in the weeks before Lehman filed for bankruptcy.

JPMorgan was Lehman's main clearing bank in the days

leading to its bankruptcy filing. The dispute has been the subject of lawsuits between

Lehman and JPMorgan. Lehman filed its lawsuit in May 2010 and JPMorgan filed its countersuit in December 2010.

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The Lehman lawsuit was filed after an examiner appointed to investigate Lehman's bankruptcy found colorable claims against JPMorgan in connection with its demands for collateral, which had direct impact on Lehman's liquidity pool.

At the May 10 hearing, lawyers for JPMorgan denied

allegations that the bank had engaged in misconduct and portrayed the lawsuit brought by Lehman and its unsecured creditors as undeserved punishment for the bank's good deeds. JPMorgan's counsel reminded the Court that JPMorgan helped to mitigate the 2008 financial crisis by continuing to provide financial services to Lehman even after the unit filed for bankruptcy.

JPMorgan also accused Lehman of defrauding it into lending

$70 billion in the days leading to the bankruptcy. In a court filing on June 3, JPMorgan said Lehman

"knowingly participated in deceiving JPMorgan into making advances" that it couldn't relay in order to complete the broker unit sale deal with Barclays. JPMorgan said Lehman secretly granted Barclays the right to "cherry-pick" what it wanted from the collateral securing the loan, leaving JPMorgan with toxic worthless securities. JPMorgan said more than $25 billion of the loans it extended remains unpaid.

(3) Lehman-Nomura Dispute Lehman Brothers and affiliates of Tokyo-based Nomura

Holdings have decided to put their billion-dollar dispute on hold indefinitely.

In April 2010, Lehman sued Nomura in New York bankruptcy

court for filing claims containing "egregious inflation" resulting from calculations that were "commercially unreasonable." The

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suit was in response to six claims by Nomura subsidiaries seeking $1 billion under swap agreements terminated as a consequence of Lehman's bankruptcy.

The bankruptcy judge consolidated the various disputes and

established a scheduled for discovery and examinations under oath. However, Nomura and Lehman filed papers to the court in mid-May asking the judge to freeze the suit. Nomura and Lehman also agree that each party has the ability to cancel the stay and reinstitute the litigation.

(4) Lehman-Citigroup Dispute In late May, Citigroup, Inc. asked the New York bankruptcy

court to dismiss a $1.3 billion lawsuit filed against its banking unit by the Lehman Brothers broker unit trustee.

Citi filed its motion to dismiss on May 26. Citi said the suit is

without merit, and should be settled in arbitration proceeding not overseen by the bankruptcy court.

Under the lawsuit, James Gidden, the trustee winding down

the remaining assets of the Lehman broker unit, is seeking the return of a $1 billion deposit made to Citi the day the Lehman parent company filed for bankruptcy in 2008, plus $300 million in other Lehman funds.

In a May 26 filing, Citi foreign affiliates explained it was

under no obligation to settle foreign-exchange trades for Lehman in September 2008, but it did anyway under the condition that Lehman deposit $1 billion in cash with Citibank. Citi said that as it continued to extend "billions of dollars" of credit to Lehman, it ended up losing about $1.26 billion.

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Lehman cannot turn its back on the bargain and claw back the deposit two years later, after it has received the full benefit of the essential bank services, Citi asserted in court filings.

(B) Tribune Co.. The plan approval process in Tribune's case remains

ongoing before Delaware Judge Kevin Carey, who was set to hear closing arguments on the confirmation hearing June 14. With that, the resolution of the disputed $13 billion leveraged buy-out of the company in 2007 is also pending.

However, in recent related developments, Deutsche Bank

AG and retirees sued former shareholders of Tribune over claims that the Tribune $8.5 billion LBO was a fraudulent transfer that pushed the publishing company into bankruptcy.

The suit, filed on June 3, was brought by Deutsche Bank

against dozens of shareholders, brokers and other parties in 11 states on behalf of Tribune's pre-buyout noteholders. Those creditors are owed at least $2.5 billion that can't be repaid in full because of the 2007 deal, Deutsche said in court filings.

Most of the retirees that sued were employed by Times

Mirror Co., the former owner of the Los Angeles Times, before it merged with Tribune in 2000.

The Tribune bankruptcy is still before the Delaware

bankruptcy court. Though the bankruptcy judge gave permission for Deutsche to file the suits, he immediately stayed all of them.

The recently filed state suits are part of the strategy devised

by Aurelius Capital Management LP, which owns Tribune notes

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issued before the buyout. Aurelius proposed a reorganization plan that would use lawsuits against shareholders, lenders that funded the buyout and others to collect what pre-buyout creditors are owed.

Tribune Co. proposed a competing plan, sponsored by

JPMorgan Chase and two hedge funds, Angelo Gordon and Oaktree Capital Management. Their plan also relies on lawsuits, while settling most claims against the buyout lenders, including JPMorgan.

Tribune is the second largest newspaper publisher in the

U.S. It filed for bankruptcy in Dec. 2008.

* * * The Troubled Company Reporter provides detailed reporting

about every chapter 11 filing nationwide. Stay tuned to learn more about obtaining a trial subscription to the TCR at no cost or obligation.

Delayed Exits From Chapter 11 Julie Anne Lopez reports about five Chapter 11 debtors

whose emergence from Chapter 11 has been delayed: Tribune Co., WR Grace & Co., Lehman Brothers, Washington Mutual, and Quigley.

(A) Tribune In Tribune, Judge Kevin Carey approved in May procedures

allowing holders of Senior Loan Claims and Senior Guaranty Claims to change their votes on the Second Amended Joint Plan

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of Reorganization proposed by Tribune Co. and its debtor affiliates; the Official Committee of Unsecured Creditors; Oaktree Capital Management, L.P.; Angelo, Gordon & Co., L.P.; and JPMorgan Chase Bank.

Holders of Senior Loan Claims and Senior Guaranty Claims

were given until June 10 to return their supplemental ballots to the Debtors' voting agent.

The Court also approved the procedures allowing certain

holders of claims to make elections to (i) receive new treatment for those claims, (i) make additional elections concerning the scope of the previously-granted releases under the Debtors' Plan, and (iii) reconsider and, if they wish, opt out of the deemed transfer of so-called Disclaimed State Law Avoidance Claims to the Creditors' Trust under the Debtors' Plan.

The record holders of Senior Noteholder Claims and Other

Parent Claims have until June 30 to return their election tabulation forms to the Debtors' voting agent.

The Debtors' Supplemental Disclosure Statement was also

approved as a supplement to the previously-approved Disclosure Statement explaining their Plan.

Meanwhile, Judge Carey held that Aurelius Capital;

Deutsche Bank Trust Company; Law Debenture Trust Company of New York; and Wilmington Trust Company are not required to resolicit the votes of any classes of claims under their competing Third Amended Joint Plan of Reorganization for Tribune.

The bankruptcy judge found that with respect to all classes

other than the Senior Lender and Bridge Lender Classes, the amendments made to the Noteholder Plan, as incorporated in the

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Third Amended Noteholder Plan, are either not material or adverse to the interests of the applicable Creditors.

Judge Carey extended the deadline by which the two groups

-- Tribune Company, et al., and the Noteholders led by Aurelius Capital -- would submit their findings of fact and conclusions of law in connection with the competing Chapter 11 Plans to June 3.

The Plan Proponents were expected to file closing

arguments with respect to the rival Plans on June 14, 2011. (B) W.R. Grace According to W.R. Grace's financial results for the first

quarter ended March 31, 2011, the U. S. District Court for the District of Delaware will hold a hearing on June 28 for oral argument on appeals to the order confirming Grace's bankruptcy-exit plan.

The appeals were filed by several parties from Judge Judith

Fitzgerald's order issued January 31 confirming the company's Joint Plan of Reorganization. The appellants include the Official Committee of Unsecured Creditors, a group of lenders under the Prepetition Bank Credit Facilities, Garlock Sealing Technologies, The State of Montana, Her Majesty the Queen in Right of Canada, and BNSF Railway Company.

The timing of Grace's emergence from Chapter 11 will

depend on affirmation of the Plan by the District Court and the satisfaction or waiver of the other conditions set forth in the Plan, including the resolution of any further appeals. Grace said it is preparing to consummate the Plan as quickly as practicable.

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Grace marked its 10th year in bankruptcy on April 2, 2011. (C) Lehman Brothers Lehman Brothers has announced its intention to adjourn the

June 28 hearing on its proposed disclosure statement and the May 27 deadline for filing objections. The company has not yet fixed new dates and would file additional notice with the Court of the new hearing date and objection filing deadline.

The ad hoc group of Lehman Brothers creditors and another

group of creditors led by Goldman Sachs Bank USA have agreed with the adjournment of the hearing and deadline.

Lehman Brothers also asked Judge Peck to approve

changes in the voting procedures in connection with securities issued or guaranteed by the company. Lehman made changes to the voting process to provide that for securities issued by the company, individual holders of those securities that filed claims will be responsible for completing and submitting their own ballots if there is no indenture trustee or other voting nominee.

Lehman has said it is aiming for a confirmation hearing in

November to approve one of the three competing plans filed in its Chapter 11 case.

(D) Washington Mutual Washington Mutual rescheduled a June 6 hearing on its

reorganization plan in order to negotiate a settlement with shareholders.

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Brian Rosen, Esq., counsel to WaMu, told Delaware Bankruptcy Judge Mary F. Walrath that the company seeks to reach a final agreement with shareholders by June 17.

WaMu creditors have approved the outline of a settlement

that would end their fight with shareholders who accused the creditors of using confidential information to trade in the company’s debt. Mr. Rosen said that settlement hasn’t yet been documented and signed.

Judge Walrath has given shareholders permission to

question hedge funds that hold WaMu notes under oath and collect documents about their WaMu trades.

Should the tentative deal among WaMu, the hedge funds

and shareholders fall apart, WaMu would go ahead with its current reorganization plan on July 5, Mr. Rosen said. That plan would give shareholders nothing.

Under the settlement, shareholders would drop their

investigation of the hedge funds in exchange for common equity in the new company and funding for a litigation trust that would try to raise money through lawsuits. The trust would be funded initially with $5 million and later have access to as much as $25 million more, WaMu said.

Judge Walrath said that if the settlement goes forward, at the

July 5 hearing WaMu could either seek approval of a new disclosure statement for a new reorganization plan based on the deal, or set a schedule for approving the new plan.

A new disclosure statement may require a new round of

voting by creditors before the Court can decide whether to approve the plan.

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WaMu filed for bankruptcy on Sept. 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan for $1.9 billion.

(E) Quigley Pfizer Inc. lost an appeal in the reorganization of its non-

operating subsidiary Quigley Co. when a federal judge ruled that the drugmaker isn’t entitled to protection from some asbestos claims under the umbrella of Quigley’s Chapter 11 case.

The May 20 opinion by U.S. District Judge Richard Holwell in

New York dealt with only one Quigley product, Insulag, and only affects asbestos claims governed by Pennsylvania law or states with similar laws. Under a settlement reached while the appeal was pending, many asbestos claimants have already resolved their disputes with Quigley and Pfizer.

The “decision has limited implications,” said Edward

Weisfelner, Esq., at Brown Rudnick LLP in New York, who represents an ad hoc committee of three law firms representing asbestos claimants. “Our clients have reached a settlement with Pfizer and a goodly percentage of all asbestos lawyers had reached a settlement years ago that would preclude them from pursuing this theory.”

Under Section 524 of the Bankruptcy Code, third parties can

sometimes piggyback a company in Chapter 11 and receive absolution from asbestos claims without being in bankruptcy. Judge Holwell ruled that the provision doesn’t apply to Pfizer regarding Insulag claims under Pennsylvania law.

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Pfizer’s liability arose “out of its sponsorship of a defective product, not its corporate affiliation” with Quigley, Judge Holwell said. As a result, Judge Holwell reversed the bankruptcy judge [sic] and ruled that the asbestos claimants have the right to bring suits directly against Pfizer.

There was no power under bankruptcy law to use Quigley’s

bankruptcy to stop suits against Pfizer, Judge Holwell said. An injunction against Pfizer suits was “beyond the jurisdiction of a bankruptcy court,” he said. Judge Holwell didn’t rule that Pfizer is liable on Quigley asbestos claims.

Pfizer has said it disagrees with the ruling and will seek

clarification from the district court. Asbestos claimants were appealing an injunction by the

bankruptcy judge earlier in the case stopping suits against Pfizer. Amid the appeal, the bankruptcy judge in April approved a so-called plan-support agreement designed to end the Quigley case after more than six years. The settlement was reached with an ad hoc committee representing 40,000 asbestos claimants contending they were injured by Quigley products.

Quigley had a June 7 hearing for approval of a disclosure

statement explaining the settlement and treatment of asbestos claimants under the Chapter 11 plan. Pfizer has “requested a short extension of the bankruptcy proceedings,” according to the company’s statement.

The settlement headed off a hearing to have been held in

April where the ad hoc committee would have sought dismissal of the Quigley reorganization begun in September 2004. The motion to dismiss resulted from a ruling by the bankruptcy judge in September refusing to confirm Quigley’s prior reorganization plan.

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The judge determined that the prior plan was filed in bad faith and wasn’t feasible. Quigley’s new plan was designed to cure the defects the judge identified in September.

Quigley filed under Chapter 11 to deal with 500,000 asbestos

claims.

New Publicly Traded Securities Psyche Maricon Castillon reports about four companies who

issued or will issue shares of new common stock upon emergence pursuant to the plans of reorganization they filed in their Chapter 11 cases in June 2011: SatMex, Constar,

(A) SatMex Satelites Mexicanos, S.A. de C.V., emerged from bankruptcy

on May 26 after receiving confirmation of its prepackaged plan of reorganization.

As part of the Plan, the issuance of $325 million in principal

amount of new 9.5% senior secured notes due 2017 was also approved. The Notes were issued at par on May 5, 2011, by Satmex Escrow, S.A. de C.V., a bankruptcy-remote wholly owned subsidiary of Satmex. Satmex Escrow was to merge with and into Satmex upon emergence.

The net proceeds from the offering of the Notes will be used

to repay Satmex's existing First Priority Senior Secured Notes due 2011 and, along with the proceeds of a $96.25 million fully-backstopped rights offering of equity securities to holders of Satmex's Second Priority Senior Secured Notes due 2013; fund

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the completion of the Satmex's Satmex 8 satellite scheduled to be launched in 2012 to replace its Satmex 5 satellite; purchase 100% of the current equity in Satmex; and position Satmex to pursue future growth opportunities.

(B) Constar Constar International Inc., which makes plastic containers for

the food and beverage industries, emerged from Chapter 11 protection on May 31.

Constar filed for bankruptcy in January after striking a deal

with a majority of the holders of its $220 million in secured floating-rate notes as to the key terms of its restructuring.

The Chapter 11 plan calls for the noteholders, which have an

allowed secured claim of $100 million, to share in $70 million in new notes due 2017 as well as new shares of convertible preferred stock.

The noteholders will also see $121.4 million of their claims

classified as unsecured, which bumps them down on the Bankruptcy Code's priority scale of creditors. They will join Constar's other unsecured creditors in sharing in 100% of the new common stock in the company.

Constar's existing equity will be canceled, and holders won't

recover anything. Lenders behind Constar's $55 million bankruptcy financing

package, led by Black Diamond Commercial Finance LLC, will receive some cash and may then choose to roll $15 million of their claims over into new term loans and new notes.

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General Electric Capital Corp. and the other lenders who

provided Constar with a $75 million secured credit facility before its bankruptcy will be paid in full and in cash on their $30.2 million in allowed claims.

To fund Constar's emergence from bankruptcy, Wells Fargo

Capital Finance LLC will lead a lender group that will provide the company with a $60 million exit loan.

(C) Summit Business Media Summit Business Media emerged from bankruptcy following

approval of its pre-arranged plan of reorganization. Summit Business Media filed for Chapter 11 in January

2011, after a series of seven deals in 2006 and 2007 contributed to its debt pool. The reorganization plan, which had to go through the courts because only 83 percent of Summit lenders approved it, proposed using Summit’s bank balances and cashflow from current operations to meet working capital needs.

The plan was officially approved by the U.S. Bankruptcy

Court for the District of Delaware on May 5, wiping out $140 million of debt from Summit’s balance sheet.

Pursuant to the Plan, holders of allowed priority tax claims,

which are unimpaired and unclassified under the Plan, will be paid over a period not later than five years after the Petition Date.

Holders of prepetition first lien secured claims owed $189

million will receive a new $110 million first-priority first lien term

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loan, 89.4% of the new stock. The first-lien lenders will recover 68 cents on the dollar.

Holders of $55 million in prepetition second lien debt will

receive $1 million in cash and 5.56% of the new stock. They will have a 4% recovery.

Holders of allowed general unsecured claims expected to

total $6 million will receive $100,000 cash, resulting in a 2% recovery.

Holders of equity interests in Summit will not receive

anything and their interests will be cancelled. Equity Interests in the other debtor-affiliates will be reinstated.

(B) Harry & David Harry & David Holdings, Inc., a multi-channel specialty

retailer and producer of branded premium gift-quality fruit and gourmet food products and gifts marketed under the Harry & David® , Wolferman's® and Cushman's® brands, filed a Chapter 11 plan of reorganization and accompanying disclosure statement on May 23.

The Plan includes an equity capital raise that will generate

$55 million in equity financing upon the Company's emergence from chapter 11.

The Plan has the support of the Official Committee of

Unsecured Creditors and the holders of approximately 81% of the Company’s public notes.

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The Company expects to emerge from its financial restructuring with a significantly improved balance sheet and with substantially less debt. The proposed Plan will allow the Company to convert all of its approximately $200 million of outstanding public notes into equity of the reorganized company.

A group of the Company's existing noteholders have agreed

to backstop the equity capital raise. The Company will utilize proceeds from the equity capital raise to satisfy obligations arising from its $55 million post-petition term loan. Additionally, the Company has a $100 million revolving loan commitment to finance its operations after the Company exits chapter 11 which will replace its current $100 million post-petition revolving loan facility.

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That ends the Beard Group Corporate Restructuring Review for May 2011, brought to you by the editors of the Troubled Company Reporter and Troubled Company Prospector. If you'd like to receive the Troubled Company Reporter for 30-days at no cost -- and with no strings attached -- call Nina Novak at (240) 629-3300 or visit bankrupt-dot-com-slash-free-trial and we'll add you to the distribution list. That telephone number, 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 July 16th. Thank you for listening.

Documents

Beard Group Corporate Restructuring Review for May 2011