SeedAmerica Foundation, a charitable organization based in Apollo Beach filed for Chapter 11 Bankruptcy protection last week. The foundation was set up to generate new jobs out of large buildings (such as warehouses, factories, office blocks and other industrial buildings) that have closed down. What the foundation would do was take over abandoned buildings donated to them by companies who were going out of business or moving on. In exchange the companies receive a tax write off. This is done through a federal IRS provision, the 561 exchange.
With these buildings in hand, SeedAmerica would find new tenants to lease them out to and in the process create new jobs for the community in which the building is located. The government benefits in the form of new taxes when the abandoned buildings are used again for business. This is the ‘win-win’ situation SeemAmerica hails in its website. One of the foundation’s success stories was helping ConAgra the food giant dispose of a manufacturing plant in Ashland, Ohio. On the sidelines, one of SeedAmerica’s aspirations was to build an endowment for a business school to be run on Christian principles.
But sadly, things started to decline since the summer of 2008. The foundation had to take up loans using the donated buildings as collateral in order to pay their bills. Then the credit squeeze struck and loans were not so readily approved. This brought about cash flow problems for the foundation and eventually it affected their payroll. As a result, SeedAmerica filed for bankruptcy last week.
Barely 5 years ago, things were going well for SeedAmerica. It had received tax-exempt status in 2005 and within three years, they had properties worth some $50 million and had employed 60 workers. In its initial years, SeedAmerica was based in Alpharetta, Ga. near Atlanta. It was then subsequently registered in Florida as a foreign LLC in November 2008. It bankruptcy filing records show that it is now based in Apollo Beach Boulevard with liabilities of between $10 and $50 million.
With its bankruptcy, many small communities who were relying on its operations are now left in a lurch. One example is Salem, Ill. whose biggest employer, Canadian-based Quebecor World, closed recently. SeedAmerica had taken over a 700,000 square foot printing plant promising they would find new tenants for the building. Instead, now the building is set to be demolished.
SeedAmerica has filed for Chapter 11 bankruptcy that allows for reorganization of the foundation and its debts, but its bankruptcy attorney said that the foundation intends to liquidate its assets through the bankruptcy. It is possible that SeedAmerica’s Chapter 11 filing may be changed to a Chapter 7 to allow for liquidation of its assets.
Filed under Chapter 7 (Tampa) by on Apr 1st, 2010. Comment. 
Under a prearranged agreement with its lenders, industrial textiles manufacturer Xerium Technologies applied for Chapter 11 bankruptcy protection Tuesday at the bankruptcy court in Delaware. According to the prearranged deal, Xerium’s debts would be reduced by about $150 million.
In court papers, Xerium declared that its core business is heavily dependent upon the paper production industry. Paper mills have seen the demands for their own products drastically reduce due to major shifts towards electronic media. All traditionally paper intensive sectors, including newsprint, printing and writing, print advertising and even packaging materials have registered significant drops in sales due to the global economic slowdown. All this has had a severe effect on Xerium’s operations.
In response to this, over the years Xerium has undertaken various cost cutting measures to stay solvent. These include shutting down a total of 12 manufacturing plants between 2002 and 2008. Xerium has 32 manufacturing plants in 13 countries that employ over 3,370 employees worldwide.
Xerium’s Chapter 11 bankruptcy restructuring will involve its branch companies in the United States, Canada, Austria and its non-operating holding companies in Italy and Germany. However, its operational companies in Europe, South America, Asia, Italy and Germany are not involved in the bankruptcy process. The bankruptcy process is expected to take 30 to 60 days to complete.
According to its bankruptcy filing, Xerium has total assets worth $693.5 million. On the other hand, its debts amount to $813.2 million in total. According to the restructuring plan, about $620 million of its debts would be given up in exchange for $10 million in cash, $410 million in new term loans that are set to expire in 2015 and 82.6% of the company’s common stock.
In addition, the company has also filed motions seeking the bankruptcy court’s approval for a term and revolving credit facility of $80 million it secured from its lenders. Current shareholders would see their interests in the company drastically reduced, retaining only about 17.4% equity in the company. But they would be offered warrants to buy up an additional 10% of the company’s common stock.
The company generated net sales of over $500 million for the fiscal year ended Dec. 31, 2009. The parent company, Xerium Technologies Inc. has directly or indirectly spawned 45 subsidiaries around the world.
The case is In re: Xerium Technologies Inc, U.S. Bankruptcy Court, District of Delaware (Delaware), No: 10-11031.
Filed under Chapter 7 (Tampa) by on Apr 2nd, 2010. Comment.
The recent 2,200 page examiner’s report on the Lehman Brothers bankruptcy continues to dig up more cans of worms. Part of the report points to the misdeeds of UBS, a counterparty with Lehman. UBS was alleged to have advised its clients to invest in Lehman structured notes, such as principal protected notes and other structured products, without obtaining collateral.
To make matters worse, UBS itself was loaning money to Lehman but at a high interest and stringently secured under a program called Repo 105. UBS could arrange these loans favorable to itself because it knew of the dire straits Lehman was in financially. Through Repo 105, Lehman could temporarily hide some of its potentially loss-making assets by ‘selling’ them to counterparties such as UBS. But the money that UBS afforded to Lehman was backed by more than 100% of its value in collaterals.
Prior to Lehman’s collapse, UBS had full knowledge of the investment bank’s financial troubles. For instance, UBS knew that Lehman was the lowest rated of the investments banks, that their Archstone deal turned out to be disastrous for Lehman, that Lehman’s bad assets had risen by some 300% between 2006 and the first quarter of 2008, that it had a huge amount of write-downs and that it financed more mortgage-backed loans in 2007 than any other bank which resulted in a high proportion of its total funds being tied down to risky assets.
As a result of UBS’ dealings with Lehman that heavily favored itself, UBS itself had less than $300 million in counterparty exposure when Lehman filed for bankruptcy in late 2008 while at the same time it profited massively from the billion dollar secured and high interest rate loans it gave to Lehman.
In the meantime, retail and institutional investors who have lost out by investing in Lehman’s structured notes can file a claim with the Financial Industry Regulatory Authority (FINRA) against UBS. This has proved to be a worthwhile step to take as UBS has already lost in several claims made against it through FINRA. Although UBS claims that the Lehman examiner’s report does not explicitly state that it had acted inappropriately, it is quite undeniable that it had ignored the clear signs of Lehman’s potential collapse as it continued to aggressively market Lehman’s structured notes.
To-date, many individual investors have sought to claim against UBS, both from within the US and internationally.
Filed under Chapter 7 (Tampa) by on Apr 5th, 2010. Comment.
The nation’s second largest mall owner, General Growth Properties Inc. has requested approval from the bankruptcy court for a $6.55 billion plan to reorganize its operations and finances. Under this plan, made April 29, three major investors will be given a total of 65% ownership of General Growth. The three investors are Fairholme Capital Management LLC. that will be given a 28% stake in General Growth in exchange for its investment of $2.8 billion, Brookfield Asset Management Inc. that will receive 26% ownership for its investment of $2.625 billion and Pershing Square Capital Management LP that invested $1.1 billion and will be given an 11% ownership.
This plan is part of General Growth’s process of auctioning itself to the highest bidder. A reorganization plan is also on the cards July 2 that will give its stakeholders the opportunity to review higher and better offers while at the same time avoiding risks from financial market fluctuations. But these plans may not be the only ones implemented as the company continues to seek other deals that will bring the most benefit to its stakeholders.
In its bankruptcy documents, creditors will be fully repaid and General Growth’s deal with the three major investors will protect minority shareholders. Among the three investors, Brookfield made its agreement with General Growth through an affiliate, REP Investments, unlike Fairholme and Pershing. There will not be any expense reimbursement, underwriting fees, breakup fees or other means of compensation for the investors. They will only receive the warrants according to court documents. But if General Growth goes with another offer then they are entitled to make an administrative expense claim.
According to General Growth, shareholders will benefit if there is a better offer because the investors have agreed to invest their money for nine months without requiring that the company use their funds. This injection of cash from investors will set a value for the equity of General Growth that will augur well for a bidding process that may draw in other more lucrative financing.
The investors’ money added to a $1.5 billion debt issuance would supply all the cash the company needs for its capital needs. It would be able to pay off unsecured creditors at par plus accrued interest and existing shareholders would receive 34% of the company once it is reorganized in addition to 86% ownership of a newly formed company called General Growth Opportunities. This new company will own real estate properties, including South Street Seaport in New York. General Growth Properties, on the other hand would focus on the shopping mall business.
General Growth has been given until July 15 by the bankruptcy court to file a disclosure statement that outlines its reorganization plan.
General Growth’s $6.55 billion plan would give creditors from Aug. 6 to Sept. 17 to vote on a plan of reorganization and seek final court confirmation to exit Chapter 11 on Sept. 30.
Filed under Chapter 7 (Tampa) by on Apr 6th, 2010. Comment.
Four Focus Ten companies that collectively own 25 Arby’s outlets in Florida, North Carolina and Virginia have filed for Chapter 11 bankruptcy protection. The four companies concerned are Focus Ten of Florida Inc, Focus Ten of Tampa Inc, Focus Ten of Raleigh Inc and Focus Ten of Greensboro Inc. They made their filing with the US Bankruptcy Court, Middle District of Florida on Wednesday.
The reason for this move was mainly the economy, according to sources. Due primarily to the sluggish economy, most families have tightened their belts on spending and this has brought about a detrimental effect on sales but the companies are optimistic they can reorganize successfully. Part of the reorganization efforts includes obtaining lease concessions from landlords.
Each of the companies have debts ranging from $1 million to $10 million whereas their assets come up to less than $1 million. Focus Ten of Tampa also has unsecured debts in the form of fees associated with closed locations in Ridge Manor, east of Brooksville and Clearwater. The companies’ shareholders are the Doyle siblings, Christopher J. Doyle, Monina J. Doyle and Donna J. Doyle, Bradley J. Rockwood, Patricia A. Dalton and Douglas P. Dalton who all own equal shares. The companies employ about 400 people.
Another company that has filed for Chapter 11 bankruptcy protection is Rock and Republic, the designer of upscale and pricey denims and other apparel. The Culver City-based company filed the bankruptcy petition on Thursday at the New York Bankruptcy Court.
Rock & Republic apparel are commonly sold at chic and upmarket departmental stores such as Bloomingdale’s, Neiman Marcus and Nordstrom in addition to specialist retail outlets and its own range of stores. Despite the bankruptcy filing, daily operations will carry on as usual.
According to Geoffrey D. Lurie, the new chief restructuring officer of the privately-owned company, the bankruptcy filing was made to ease the pressure of ‘balance sheet burdens’ and enable the company to take specific action to ensure the growth of the company brand. Lurie added that they are also exploring possible ‘financial relationships’ with various parties to further finance the company’s core apparel and footwear business. To-date, Rock & Republic has been able to secure a commitment for a line of credit from CIT Group/Commercial Services Inc.
Rock & Republic was started in 2002 by Michael Ball and has established itself as a major designer and supplier of highly priced apparel such as exclusive jeans that cost $200 or more per pair.
Filed under Chapter 7 (Tampa) by on Apr 7th, 2010. Comment.
