Business Bankruptcy News Bulletin Summary for Week of November 15

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 and an examination of business bankruptcy matters. Please visit the insideARM bookstore for information on subscribing to the Bulletin.

Authority in Bankruptcy Cases

When companies file Chapter 11, they are filing for bankruptcy protection under federal law, i.e. under the U.S. Bankruptcy Code in one of the 91 U.S. Bankruptcy Districts around the country. Therefore, bankruptcies are not under state laws, although the bankruptcy proceedings may consider state laws such as what property might be exempt from bankruptcy. The process of bankruptcy is governed by the Federal Rules of Bankruptcy Procedure. The person with ultimate authority in deciding bankruptcy issues is the judge of the U.S. Bankruptcy Court, who is a judicial officer of the U.S. District Court. The U.S. Trustee however also has authority in that he can make recommendations to the court. Committees also have authority and a responsibility to represent their class fairly, making any recommendations or objections they feel necessary to the judge.

BANKRUPT COMPANIES

Ambac Financial Group Inc. filed for Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York listing assets and liabilities of $395 million and more than $1.4 billion respectively.  Failing to work out a deal on a structured bankruptcy arrangement with its senior note holders and unable to raise additional capital, the company did however reach agreement on a nonbinding term sheet with certain debtholders. The company, which allegedly owes the City of New York more than $40 million under a disputed tax assessment, is also trying to eliminate tax liabilities for the five year period ended in 2008–a move that would allow the firm to keep the refunds it received during those years. The filing was under case number 10-15973. For more information contact the court at 866-232-1268.

Blockbuster Inc. said it will hire 4,000 seasonal workers for the holiday-shopping season as it continues reorganizing under Chapter 11.

Famous Recipe Company Operations LLC, McDonough, Ga., filed Chapter 11 in the U.S. Bankruptcy Court for the Northern District of Georgia. The firm listed assets of between $1 million and $10 million and liabilities of between $10 million and $50 million. The filing was under case number 10-94027. For more information contact the court at 866-222-8029 then enter 18.

HMP Services Holding Inc., Grafton, Ma., filed Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware. The firm listed assets of between $1 million and $10 million and liabilities of between $10 million and $50 million. The filing was under case number 10-13619. Also filing was HMP Services Holding Sub III LLC under case number 10-13618. For more information contact the court at 302-252-2560.

Lehman Brothers Holdings Inc. asked the U.S. Bankruptcy Court for permission to alter terms of a $5.2 billion restructuring of its Archstone-Smith Trust real-estate investment vehicle, hoping to erase another $237 million in debt.

Metro-Goldwyn-Mayer Studios Inc., the Los Angeles, Ca. film studio which recently filed Chapter 11, said that its prepackaged reorganization plan has been approved by nearly all of its creditors, including investor Carl Icahn. The plan will erase more than $4 billion in debt in a share swap that would turn over management of the company to Spyglass Entertainment. In another development, buyout firm Leonard Green & Partners LP of Los Angeles has made an offer to acquire MGM’s 50% interest in the Borgata Hotel Casino & Spa in Atlantic City, N.J., which would provide its MGM Resorts unit with about $250 million.

TerreStar Networks Inc, Reston, Va., asked for permission from the U.S. Bankruptcy Court to hold a creditor vote on its bankruptcy-exit plan, which calls for swapping more than $850 million in debt in exchange for most of its equity to its biggest creditor, EchoStar Corp. A hearing on the matter is scheduled for 12/10. TerreStar, which filed Chapter 11 in October, has already received approval from the court to use $18 million out of a $75 million debtor-in-possession financing facility being provided by EchoStar.

Washington Mutual Inc. has seen a 12/1 confirmation hearing scheduled for its Chapter 11 reorganization plan. For further information contact the U.S. Bankruptcy Court in Wilmington, De. at 302-252-2560 and refer to case number 08-12229.