Bidders Line Up for NHL Team 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.

Has Government Spending Eased the Recession?

Some pundits have claimed that heavy spending by the Bush and Obama administrations prevented a bad economic situation from sliding into a serious repeat of the 1930s depression. Yet the government’s stimulus plan has spent only $120 billion of its spending commitment, and that is mostly in the form of tax cuts, food stamps and other measures that don’t involve direct pumping of money into the economy. But more important is the empirical question of whether direct government spending can be historically linked as a cause of economic recoveries. Some studies suggest otherwise. One study that the average recession between 1887 and 1929, when the government was minimally involved in recovery spending, lasted 10.3 months, with the longest one dragging out 16 months. Since the Great Depression and the New Deal, however, the average length of a recession has not notably decreased, and three recessions since 1973 have lasted 16 months or longer. Overall, given certain estimates on how long the current recession will last, the average length of a recession since WWII has been 11.3 months. Another study tracked the amount of government spending (as a percentage of gross domestic product) and percent GDP change in various countries trying to pump up their economies over the past year. It turns out that the biggest spenders, such as Sweden, Italy and France saw sharp declines in GDP while small spenders like India, China and Australia enjoyed economic growth. While macroeconomics is an inexact science, such statistics as the above certainly cast some doubt on the blanket assumption that government spending helps to ease or turn around recessions.

What to Include in Due Diligence Considerations in a Bankruptcy Case

When a debtor files for bankruptcy protection, there is some useful information that should be reviewed in due diligence.  First, you should review the bankruptcy petition and all public documents related to the filing that are posted on the court docket and available at each of the U.S. Bankruptcy Court’s websites. Second, you should review the debtor’s financial statements which should be available to all creditors.  Finally, you should consider reviewing any media accounts of the bankruptcy filing such as exist in this and other online and print sources.

Bankrupt Companies

Arlington Heavy Hauling Inc., Jacksonville, Fl., filed Chapter 11 in the U.S. Bankruptcy Court for the Middle District of Florida. The firm listed assets and liabilities of between $1 million and $100 million each. The filing was under case number 09-007277. For more information contact the court at 866-879-1286.

Baseline Oil & Gas made a prepackaged Chapter 11 bankruptcy filing. The filing, in the U.S. Bankruptcy Court in Houston, Tx., was under case number 09-36291. The plan has been accepted by all prepetition noteholders that returned their ballots. For more information contact the court at 800-745-4459.

Colonial BancGroup Inc., Montgomery, Al., filed Chapter 11, two weeks after it was seized and shuttered by banking regulators. The firm, which has been sold to BB&T Corp. of Winston-Salem, N.C., is currently being probed by the Justice Department and the Securities and Exchange Commission. In its filing, in the U.S. Bankruptcy Court  for the Middle District of Alabama, Colonial listed assets and liabilities of $45 million and $380 million respectively. In the sale, BB&T took over all of Colonial’s deposits and bought $22 billion in assets in a transaction supported by the Federal Deposit Insurance Corp. The case number of the Colonial bankruptcy filing is 09-32303. Less than a week ago Colonial’s former partner, Taylor Bean & Whitaker Mortgage Corp., also filed for bankruptcy protection as it decides whether to restructure or to liquidate.

Cynergy Data LLC, Long Island, NY, filed Chapter 11 in the U.S. Bankruptcy Court in Delaware. The firm listed assets and liabilities of between $100 million and $500 million. The filing was under case number 09-13038. Also filing were Cynergy Data Holdings Inc. and Cynergy Prosperity Plus LLC. For more information contact the court at 302-252-2560.

Everst Holdings LLC, Nevada, Tx., filed Chapter 11 in the U.S. Bankruptcy Court in Colorado. 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 09-27906. For more information contact the court at 720-904-7419.

Formtech Industries Inc. 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, under case number 09-12964, was on 8/26. Also filing was Formtech Industries Holdings LLC. For further information contact the court in Wilmington, De. at 302-252-2560.

Frontier Airlines Holdings Inc., Denver, Co., reported net income of $17.8 million in July, a turnaround from a $2.3 million loss in the year-earlier month. Consolidated operating profit reached $24.9 million as the carrier recorded its ninth-straight month in the black on an operating basis. Frontier, which is being purchased by Republic Airways Holdings Inc., expects to emerge from Chapter 11 in September.

Nortel Networks, the Toronto, Cn. firm which filed for bankruptcy protection in the U.S. Bankruptcy Court in Delaware at the beginning of the year, has asked the court to extend its deadline for filing a reorganization plan.  Citing its ongoing efforts to sell its assets, the company requested the deadline be extend to 2/1/10 from 9/11.  A hearing on Nortel’s motion has been set for 9/15.

The Phoenix Coyotes, the bankrupt National Hockey League franchise which has lost more than $310 million since moving to Arizona from Winnipeg a dozen years ago, has seen Toronto bidders, Ice Edge Holdings, reach agreement with the Coyote’s largest creditor, SOF Investments LP, to repay its debt.  SOF is owed nearly $80 million from the bankrupt hockey team.  Ice Edge bid $150 million to purchase the team, $10 million more than the bid submitted by the National Hockey League.

Tropicana Casino & Resort, Atlantic City, N.J., will return to its former parent company, Tropicana Entertainment, after gaming regulators in New Jersey said that Tropicana Entertainment has sufficiently reorganized under Chapter 11. The casino and its parent company, which have been reorganizing in the U.S. Bankruptcy Court in Delaware, will be taken over by a lending group led by financier Carl Icahn.