March 29, 2012 7:45 PM
The Bankruptcy Files: A Bad Month for Big Shippers
Posted by Brian Baxter
While the rise of cargo-snatching Somali pirates probably didn’t help, the worldwide shipping industry has struggled in recent years with decreased rates and an inability to refinance debt.
One sign of just how choppy the waters have become: Such seafaring companies as Marco Polo Seatrade and Omega Navigation Services (both represented by Bracewell Giuliani) filed for bankruptcy in U.S. courts last year, only to be followed into insolvency by industry heavyweights General Maritime (Kramer Levin Naftalis Frankel) and Trailer Bridge (DLA Piper and Foley Lardner).
More recently, TBS Shipping Services, an affiliate of Hamilton, Bermuda-based TBS International, hired Gibson, Dunn Crutcher for its bankruptcy filing in February, and Drydocks World, the Middle East’s largest ship repair company, proposed this month to restructure $2.2 billion in debt by repaying loans over five years. In March, three more shipping companies (see below), wound up in bankruptcy court.
Demand for restructuring counsel has not been limited to oceanic outfits this month, as companies in a variety of industries try to reorganize their operations outside of bankruptcy court. Wichita-based aircraft manufacturer Hawker Beechraft, for example, is being advised by Kirkland Ellis in its efforts to shore up its balance sheet by obtaining $120 million in additional loans, according to The New York Times.
Reuters reports that text book publishing powerhouse Houghton Mifflin Harcourt Publishers has hired Paul, Weiss, Rifkind, Wharton Garrison as it seeks to restructure roughly $3 billion in debt coming due next year. Paul Weiss has also teamed with Morgan, Lewis Bockius in advising Dallas-based securities clearing firm Penson Worldwide on a proposed debt restructuring agreement with lenders, according to the company.
In the financial sector, Evansville, Indiana-based Springleaf Finance, the subprime lender owned by Fortress Investment Group, has hired Dewey LeBoeuf and Skadden, Arps, Slate, Meagher Flom as it seeks to restructure its operations, Reuters reports.
White Case‘s restructuring lawyers, meanwhile, continue to be busy, picking up assignments for life sciences solutions company Novasep and bondholders of Residential Capital, the embattled mortgage unit of Ally Financial, which is being urged to stand behind its struggling subsidiary.
On the overseas restructuring front, Clifford Chance and Travers Smith have landed roles on the administration of British video game retailer GAME Group, according to U.K. publication Legal Week, while Reed Smith has grabbed a key role on the wind-down of London-based betting operator WorldSpreads.
In other recent bankruptcy and restructuring-related news of note:
Arcapita Bank
Bahraini investment firm Arcapita Bank, a holding company that controls such assets as women’s retailer J. Jill and Irish power utility Viridian Group, filed for bankruptcy in Manhattan on March 19. Bloomberg reports the Manama-based sought Chapter 11 protection after being unable to extend a $1.1 billion shariah-compliant credit line set to expire next week.
Gibson Dunn business restructuring cochair Michael Rosenthal is advising Arcapita in the bankruptcy case. Resolutions by Arcapita’s board to put the company into bankruptcy show that $100,000 was lent to two subsidiaries so they could also retain the services of Gibson Dunn. Henry Thompson, a former Gibson Dunn lawyer, joined Arcapita in 1997 and serves as its general counsel in London.
Linklaters banking and cross-border restructuring partner Chris Howard is also serving as corporate counsel to Arcapita, which was founded in 1996 and has about $7.4 billion in assets, along with international counsel from British firm Trowers Hamlins. Hatim S. Zu’bi Partners is serving as Bahraini counsel to Arcapita. None of the three firms have yet filed billing statements with the bankruptcy court.
Arcapita owes $255 million to the Central Bank of Bahrain and almost $165 million to Germany’s Commerzbank, according to a breakdown of the company’s 50 largest creditors. None of the portfolio companies owned by Arcapita, whose North American headquarters are in Atlanta, are included in the bankruptcy filing.
Aveos Fleet Performance
Canadian aircraft repair company Aveos Fleet Performance filed for bankruptcy north of the border last week, citing a sudden drop-off in business from its biggest customer, national carrier Air Canada. The company’s abrupt collapse left more than 3,000 employees out of work, as the country’s largest airline urged global aircraft repair competitors to fill the void left by Aveos.
Corporate partner Guy Allard from Canadian firm Frasner Milner Casgrain is advising Saint-Laurent, Quebec-based Aveos in bankruptcy proceedings in Quebec Superior Court under Canada’s Companies’ Creditors Arrangement Act.
Azure Dynamics
Shortly after laying off about 120 employees, Azure Dynamics, a maker of powertrains and other parts for hybrid- and electric-powered vehicles, filed for bankruptcy in Canada on March 26. The company, whose roots are in Canada, moved its headquarters to suburban Detroit in 2008. Azure had rapidly been losing money as it sold only a small number of its existing products while investing in new technologies, according to news reports.
Pepper Hamilton corporate restructuring cochair Robert Hertzberg is advising Azure on its separate Chapter 15 case in the U.S., which was filed Monday in Detroit. The firm has not yet filed billing statements with the bankruptcy court.
Global accounting firm Ernst Young, advised by Allen Overy restruturing senior counsel Lisa Kraidin in New York, is serving as court appointed monitor for Azure under the company’s Canadian court proceedings before the Supreme Court of British Colombia. Canadian lawyer J. Brian Colburn is a member of Azure’s board of directors.
Contract Research Solutions
Cary, North Carolina-based Contract Research Solutions filed for bankruptcy in Delaware on March 26, listing assets of $205 million against $248 million in debt. CSR, which provides clinical trial research to pharmaceutical companies and is also known as Cetero Research, plans to sell its assets to lenders.
Reuters reports that Cetero’s Chapter 11 filing comes only months after the U.S. Food and Drug Administration put the company on notice for “instances of misconduct and violations” involving fake documents and manipulated drug samples. Cetero faces “considerable costs” for mandated re-testing following the FDA’s probe, the company’s chief financial officer told Bloomberg.
Luc Despins, chair of the global restructuring practice at Paul Hastings, is leading a team from the firm advising Cetero in the Chapter 11 case. Other Paul Hastings lawyers working on the matter include restructuring of counsel Marc Carmel, corporate partners Louis Hernandez III, Amit Mehta, and William Simpson, and general corporate attorney Catherine Patton.
Cetero paid Paul Hastings more than $2.8 million in fees and expenses in the year prior to its bankruptcy filing, according to a declaration by Carmel. Partners and counsel are billing between $615 and $1,125 per hour, while associates are billing at rates ranging from $345 to $805.
James Patton, Jr., chairman of Delaware’s Young Conaway Stargatt Taylor, is serving as local bankruptcy counsel to Cetero, along with partner M. Blake Cleary. The firm has not yet filed billing statements with the bankruptcy court.
Stikeman Elliott MA cochair John Leopold ($975), corporate partner Sophie Lamonde ($625), and insolvency and restructuring partner Guy Martel ($625) are serving as Canadian counsel to Cetero, which has some operations north of the border. A declaration by Martel shows that the firm received roughly $530,000 from Cetero in the year prior to the Chapter 11 filing.
Elpida Memory
The Asian Lawyer, a sibling publication, reported last month on the Japanese firms that landed the work on the collapse of Tokyo-based computer memory chipmaker Elpida Memory, the country’s largest bankruptcy in more than two years. Last week, Bloomberg reported Elpida also filed for bankruptcy in Delaware, winning Chapter 15 protection against a series of patent suits it is facing in the U.S.
Davis Polk Wardwell corporate partner Theodore Paradise, restructuring counsel Giorgio Bovenzi, and litigation counsel James McClammy are advising Elpida in the Chapter 15 case, along with bankruptcy chair Mark Collins of Delaware’s Richards, Layton Finger. Neither firm has filed billing statements with the bankruptcy court.
Elpida was formed in 1999 through the merger of the memory businesses of Hitachi and NEC, growing to become the world’s third-largest maker of memory chips. The company is attempting to restructure $5.6 billion in debt.
FastShip
FastShip, a high-speed freighter designer, pulled into Chapter 11 in Delaware on March 20. The Philadelphia-based company, which owns patents on container ships built to move heavy loads, lists less than $50,000 in assets against liabilities of between $10 million and $50 million.
Raymond Lemisch ($625), partner-in-charge of the Wilmington office at Benesch, Friedlander, Coplan Aronoff and chair of the firm’s business reorganization practice, is representing FastShip in the bankruptcy case. A court filing by the firm shows that it has only received $3,138 so far from the debtor.
According to a list of FastShip’s 20 largest unsecured creditors, the debtor owes nearly $2.1 million to Blank Rome, $228,500 to Duane Morris, and $195,458 to Philadelphia solo practitioner and former Pepper Hamilton partner Peter Hearn. FastShip also owes more than $2.4 million to an entity called DEJP Holdings, a successor to defunct Washington, D.C.-based Dyer Ellis Joseph, which merged with Blank Rome in 2003.
The Philadelphia Inquirer reports that FastShip, whose vessels were able to traverse the Atlantic in just three days, had high hopes of helping to revive the region’s shipping industry. FastShip has chosen to pursue a patent infringement suit against the U.S. Navy over a high-speed combat ship, using bankruptcy as a way of raising cash to fund the litigation against the federal government, Reuters reports.
Granite Dells Ranch Holdings
Granite Dells Ranch Holdings filed for bankruptcy in Phoenix on March 13, almost a week after one of the Scottsdale, Arizona–based real estate company’s creditors foreclosed on a $90 million loan and sought the appointment of a receiver. Court records show that Granite Dells has assets and liabilities of between $100 million and $500 million.
Stinson Morrison Hecker bankruptcy partners Alan Meda and Christopher Simpson are representing Granite Dells, which is controlled by Cavan Management Services. Lawyers from the firm are billing between $190 and $650 per hour and Stinson Morrison has received retainers totaling $100,000 with a promise by Granite Dells to provide an additional $100,000 within the first few weeks of the bankruptcy, according to court filings.
Donald Gaffney, head of the bankruptcy and reorganization practice at Snell Wilmer, is advising Arizona ECO Development, the creditor that sued Granite Dells for repayment of the $90 million loan backed by 15,000 acres of Arizona land.
Humpuss Sea Transport / PT Berlian Laju Tanker
Following the trend of large shippers sinking into insolvency, two sea transport companies with strong ties to Indonesia filed for Chapter 15 protection in U.S. courts this month.
Singapore-based Humpuss Sea Transport filed for bankruptcy in Manhattan on March 19 after being pushed into bankruptcy in Singapore High Court via a suit filed by a company represented by local boutique TSMP Law Corporation. Bloomberg reports that Humpuss is a unit of Jakarta-based shipping company Humpuss Intermoda Transportasi, which is controlled by Tommy Suharto, the youngest son of Indonesia’s longtime dictator Suharto.
Stroock Stroock Lavan bankruptcy partner Curtis Mechling is advising Humpuss in its Chapter 15 case. The firm has not yet submitted billing statements to the bankruptcy court.
Bloomberg also reports, meanwhile, that units of PT Berlian Laju Tanker, Indonesia’s largest shipping company by market value, have also sought Chapter 15 protection in Manhattan while the company seeks to restructure its operations in Singapore.
Schnader Harrison Segal Lewis business restructuring cochair Richard Barkasy, bankruptcy partner Barry Bressler, business litigation chair Kenneth Puhala, and litigation and dispute resolution partner Benjamin Deutsch are advising the various Berlian Laju entities, some of which are based in Connecticut, in their Chapter 15 cases. The firm has not yet filed billing statements with the bankruptcy court.
Southern Sky Air Tours
Southern Sky Air Tours, the parent of public charter discount carrier Direct Air, filed for bankruptcy in Worcester, Massachusetts, on March 15. The Myrtle Beach, South Carolina–based company, which listed debts and assets of between $10 million and $50 million, announced that it would immediately cease flying at the height of the spring break travel season because of mounting fuel costs.
Alan Braunstein, a founding partner of Boston’s Riemer Braunstein, is advising Southern Sky in its Chapter 11 case. Court filings by the firm show that it has been paid a $30,054 retainer for its services to Southern Sky, which has ceased all flights until May. The airline began flying in March 2007, mostly to cities in smaller markets not serviced by larger carriers.
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