Commercial Bankruptcies: Formation of an Unsecured Creditors? Committee

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.

An unsecured creditors’ committee is an essential part of a Chapter 11 reorganization in acting as a watchdog for the creditors that it represents. The committee to represent unsecured claims should be set up as soon as possible after the filing of the case.  According to the U.S. Bankruptcy Code, the committee should represent the various interests of unsecured creditors.  Following the bankruptcy filing, the U.S. Trustee may schedule a meeting of creditors to provide the Trustee with information about the case and to identify creditors willing to serve on the committee.  Any creditor interested in serving on the committee should submit a request to that effect with the Trustee, and once the committee is formed the Trustee should announce the constitution of the committee and file details of the committee with the U.S. Bankruptcy Court overseeing the case.

Advanta Corp., a small-business credit-card lending company in Spring House, Pa., will be delisted from trading on the Nasdaq Stock Market, following its recent bankruptcy filing. 

Arena Football League LLC has seen an 11/25 auction scheduled for nearly all of its assets in its Chapter 11 bankruptcy. For more information contact the counsel for the Chapter 11 trustee, John Collen, at 312-627-4193.

Mark IV Industries Inc., a privately-held Amherst, N.Y. maker of engineered systems and components for the auto sector and other industries, emerged from Chapter 11 bankruptcy protection. After wiping out $750 million in liabilities during its reorganization, Mark IV starts life anew with $145 million in term-loan credit facilities and a $50 million revolving loan backed up by assets.

Simmons Bedding Co., the Atlanta, Ga. mattress operator, filed Chapter 11 along with nine of its affiliates in the U.S. Bankruptcy Court in Delaware under case number 09-14037.  Concurrent with the petition, the company filed a Joint Prepackaged Plan of Reorganization.  The plan would reduce the company’s debt from nearly $1 billion to roughly $450 million while selling its operations to certain affiliates of Ares Management LLC and Teachers’ Private Capital.   Simmons, which expects to emerge from bankruptcy protection within 60 days, has arranged for $35 million in DIP financing.  It should be noted that Simmons’s operations in Canada and Puerto Rico were not included in the petition.

Station Casinos Inc., the bankrupt Las Vegas, Nv. firm which manages and operates 19 casinos, reported a third quarter loss of $455 million.  The loss, which compares with a $23 million loss for the same period last year, includes $370 million in bankruptcy costs.