Bankruptcy had another big week with yet more
casinos, chemical producers, and commodities manufactures falling into
insolvency. There was, however, also an uptick in exchange offers
and an impressive surge in M&A activity. M&A was helped along
in no small part by a massive energy deal and other commodity-related
transactions. Debt markets also continue to be open for business, at
least for “blue chip” issuers. See our Related Resources
for more on the restructuring events, M&A transactions,
regulations, and offerings defining today’s business law
environment.
Bankruptcy
Chemtura,
represented by Kirkland & Ellis, and domestic affiliates filed for
Chapter 11 with the U.S. Bankruptcy Court in the District of Southern
New York. The petition lists assets totaling $3.1 billion and
liabilities totaling $2.6 billion. The chemical maker cited declining
demand and liquidity issues as the reasons for its petition. The
company has negotiated a $400 million (DIP) financing commitment from
prepetition lenders. Citibank is acting as the arranger on the loan.
Herbst Gaming,
represented by Gordon Silver, filed for Chapter 11 protection with the
U.S. Bankruptcy Court in the District of Delaware. The petition lists
assets of $1.0 billion and liabilities of $1.2 billion. The prepackaged
bankruptcy plan calls for the company to be split into separate casino
and slot operations. The debtor’s current owners will take a 90%
stake in reorganized slot operations. Senior lenders will own the
remaining 10% of the slots and all the equity in the reorganized casino
operations. Under the plan, current creditors and equity holders will
be completely wiped-out. HSBC, in its role as indenture trustee, has
the largest unsecured claim, which totals $330 million.
Indalex Holdings Finance,
represented by Young Conaway Stargatt & Taylor , and domestic
affiliates filed for Chapter 11 with the U.S. Bankruptcy Court in the
District of Delaware. The petition lists assets totaling $356 million
and liabilities totaling $456 million. The aluminum extruder cited
declining demand for aluminum as the reason for its petition. The
debtor’s largest unsecured creditors include trade creditors like
Alba Alum and
Alcoa, which are owed $7.1 million and $6.0 million, respectively. The company has not yet negotiated a DIP financing commitment.
BI-LO,
represented by Vinson & Elkins, filed for Chapter 11 with the U.S.
Bankruptcy Court in the District of South Carolina. The petition lists
assets and liabilities each totaling between $500 million and $1
billion. The grocer filed mere days before a $260 million term loan was
set to mature. The debtor’s largest unsecured creditors include
trade creditors like
C&S Wholesale Services and
Pepsi Cola Co.,
which are owed $16.7 million and $3.1 million, respectively. The
company has negotiated a $100 million debtor in possession (DIP)
financing commitment from prepetition lenders.
GE Capital is acting as the arranger on the loan.
Exchange Offers
Citigroup
announced that it may conduct a reverse stock split as part of an
exchange offer that could give U.S. Treasury up to a 36% stake in the
bank. The exchange offer is part of last month’s bailout of
Citigroup and allows the Treasury and participating private investors
to swap their preferred shares for shares of the bank’s common
stock.
Ford
announced that a tender offer through its finance arm, initiated to buy
back and retire senior secured term loan debt, was oversubscribed and
Ford had doubled the cash available for the offer to $1 billion. The
automaker hopes to eventually retire up to $11.3 billion of debt
through tender offers and exchange offers launched earlier this month.
Harrah’s Entertainment,
the PE-backed, debt-laden casino operator, announced that investors had
tendered $5 billion in bonds, or 57% of the issues the casino operator
was seeking to exchange for cash and for discounted longer-term debt.
M&A
Cisco Systems announced that it is acquiring
Pure Digital
for $590 million in stock consideration. Pure Digital is known
predominantly as the maker of popular “flip" digital camcorder.
Cisco is seeking to expand further into consumer markets amid a
slowdown in its traditional routers and switches business.
Suncor Energy, Canadian oil major, announced plans to merge with rival oil major
Petro-Canada,
which would create Canada's biggest oil company. The merger values
Pertro-Canada at $14.9 billion. The two parties have agreed in their
arrangement agreement to lobby the government to repeal the
Petro-Canada Act, which limits the stake in Petro-Canada that any
single shareholder can own up to 20%.
Anglo American sold its remaining 11.3% stake in South Africa's
AngloGold Ashanti for around $1.3 billion to investment funds managed by
Paulson & Co.
The hedge funds are managed by none other than John Paulson, a
financier who has reportedly made a fortune in recent years by shorting
subprime-backed securities and shares of financial institutions.
USJ Co Ltd, the operator of Japan's
Universal Studios theme park, announced that it had agreed to a $1.2 billion buyout led by
Goldman Sachs. USJ is already owns approximately 40% by a Goldman Sachs subsidiary,
Crane Holdings Ltd.
ChinaTel Group, a wireless broadband and telecommunications infrastructure provider, announced it closed a transaction with
Olotoa Investments, a private investment group. Olotoa has agreed to acquire of 49% of ChinaTel’s Class A common stock for $300 million.
Other noteworthy M&A deals include:
- Acuity Brands acquired all outstanding shares of capital stock of Sensor Switch for $207 million.
- Kinross Gold Corporation acquired minority stakes in two diamond mining ventures in transactions totaling just under $150 million.
Regulation
The
Treasury
unveiled some of the basics behind its proposed public-private
partnerships to clear up toxic assets. While details are still being
worked out, two government plans that were announced yesterday.
Each addresses a different element of the banks’ balance sheet
malaise. The first prong of the attack is set to focus on whole loans
(i.e. actual loans, or pools of them, still sitting on financial
institution balance sheet), while the second prong will focus on
securities (i.e. pooled loans that had been combined, sliced and
securitized). The essence of both plans is to loan money to private
investors and thereby (hopefully) thaw the market for the toxic the
assets in question.
Offerings
Pfizer sold $13.5 billion in notes as part of a financing strategy for the
Wyeth
deal. The company’s in-house counsel passed upon the
validity of the securities. Citigroup and Credit Suisse were among the
underwriters.
United Parcel Service sold
$2 billion of Senior Notes. King & Spalding LLP passed upon
the validity of the notes and Barclays Capital and Wells Fargo were
among the underwriters.
Time Warner Cable
sold $3 billion of notes in three parts. Paul, Weiss, Rifkind,
Wharton & Garrison LLP, handled the legal matters and UBS and
Wachovia Securities were among the underwriters.
Banks continue to issues notes under the
FDIC’s popular debt guarantee program, the
Temporary Liquidity Guarantee Program (TLGP):
- Citigroup issued and sold $7 billion of guaranteed notes.
- SunTrust issued and sold $576 million of guaranteed notes.
Several banks announced participation in the Treasury’s original bank bailout, the
Capital Purchase Program (CPP):
- First Place Financial Corp.
- First National Corp.
- Mid-Wisconsin Financial Services Inc.
- Salisbury Bancorp
Published: March 24, 2009
