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July 17, 2009 4:40 PM

The Bankruptcy Files: The Calm Before the Storm?

Posted by Brian Baxter

If the maelstrom of corporate bankruptcies still looms on the horizon, perhaps it's just waiting for Delphi's four-year odyssey in bankruptcy court to come to a close before the biggest swell.

The New York Times reported on Thursday that the Troy, Mich.-based auto parts supplier was near a deal with lenders and former parent General Motors that would allow Delphi to drive out of bankruptcy. An auction for Delphi's assets is scheduled for Tuesday.

On Thursday U.S. bankruptcy judge Robert Drain, who Portfolio magazine once dubbed "Judge Dread" for his hard line in the Delphi bankruptcy, will hold a final hearing to approve an exit plan.

In other news from the wonderful world of Chapter 11:

Eddie Bauer

Eddie Bauer found a new home on Friday as Golden Gate Capital, a San Francisco-based private equity firm, won a bankruptcy auction for the outdoor retailer with a $286 million bid.

Bellevue, Wash.-based Eddie Bauer became the latest retailer to succumb to the economic downturn last month when it filed for Chapter 11 protection in Delaware.

Latham & Watkins bankruptcy partner Josef Athanas and global finance chair David Heller are advising Eddie Bauer. Michael Nestor from Delaware's Young Conaway Stargatt & Taylor is serving as local bankruptcy counsel.

Kirkland & Ellis M&A partners Jeffrey Hammes, Mikaal Shoaib, Jordan Zamir, Sonali Jindal, and Gary Holihan, and restructuring partners David Eaton and Samantha Good advised Golden Gate on the acquisition. Stikeman Elliott's Simon Romano advised Golden Gate on Canadian aspects of the deal.

The Golden Gate bid beat a competing $202 million offer by CCMP Capital Advisors, a New York-based private equity firm that was advised by Weil, Gotshal & Manges and Womble Carlyle Sandridge & Rice.

The deal requires the approval of U.S. bankruptcy judge Mary Walrath in Delaware.

Basin Water

Water treatment systems manufacturer Basin Water filed for bankruptcy on Thursday, announcing a plan to sell all of its assets for $2 million to stalking horse bidder Amplio, a London-based leader in fluid filtration technology. (Say that fives times fast.)

Basin Water, based in Rancho Cucamonga, Calif., owns more than 80 installations in five states and focuses its business in the western U.S., where a growing population and dearth of clean water create strong demand for water treatment plants. 

But the SEC began looking into accounting and disclosure practices at Basin Water last fall, which led the company to delay reporting its quarterly financial statements. In May, the company stated it had lost more than $56 million over the past two years. (Orrick, Herrington & Sutcliffe's Daniel Tyukody, Jr., and Michael Tu are representing the company in related securities litigation.)

As with Eddie Bauer, Latham & Watkins and Delaware's Young Conaway are serving as debtors' counsel to Basin Water. Neither firm has filed billing statements with the court.

Court filings show that Basin Water owes $242,000 to Drinker Biddle & Reath.

Biopure

Reeling from shady dealings by company executives and FDA denials for new drugs, Cambridge, Mass.-based blood substitute maker Biopure filed for bankruptcy in Boston on Friday.

Biopure announced in June that it would file for bankruptcy unless it found a buyer. The now-bankrupt company plans to sell its assets to stalking horse bidder OPK Biotech.

Christopher Panos, the managing shareholder of Boston-based Craig and Macauley, is serving as debtors' counsel. Court filings show the firm has received $81,000 from Biopure and that the firm holds an additional $45,000 on retainer. Panos is billing $495 per hour. Ropes & Gray serves as the company's corporate counsel.

Three firms appear on an attached list of the company's unsecured creditors. Bingham McCutchen, which did securities litigation work for Biopure, is due $55,260. Foley Hoag is out $88,501. And Concord, Mass.-based IP firm Hamilton, Brook, Smith & Reynolds is owed $23,000.

Biopure's general counsel Jane Kober, a former partner at LeBoeuf, Lamb, Greene & MacRae, is owed $640,000 in severance pay under an employment agreement with the company.

Oscient Pharmaceuticals

After laying off most of its employees and still struggling with debt, Oscient Pharmaceuticals and subsidiary Guardian II Acquisition filed for bankruptcy in Boston on July 13.

To raise capital, Oscient sold the rights to Factive, an antibiotic that treats chronic bronchitis and pneumonia, to North Carolina-based Cornerstone Therapeutics for $5 million and royalties. (Factive generated $16 million in revenue for Oscient in 2008.) Oscient stated that it's also seeking a buyer for its high-cholesterol drug Antara as well as other assets.

K&L Gates bankruptcy partner Charles Dale III is serving as Chapter 11 counsel to Oscient. Ropes & Gray is serving as corporate counsel to the Waltham, Mass.-based company.

Bankruptcy court records show that K&L Gates received $83,500 for services rendered to Oscient prior to its bankruptcy filing. The firm has an additional $112,700 on retainer.

Journal Register Company

Last week U.S. bankruptcy judge Allan Gropper in Manhattan approved a reorganization plan for the Journal Register, a Yardley, Pa.-based newspaper publisher that filed for Chapter 11 in February.

The Journal Register, whose flagship publication is the New Haven Register, has a combined circulation of more than 500,000. The publisher's reorganization plan calls for converting its secured lenders' debt into a 100 percent stake in the reorganized company. Unsecured creditors would also receive some distributions, but shareholders will be wiped out.

Marc Abrams, the chair of Willkie Farr & Gallagher's restructuring group, is serving as lead debtors' counsel. Bankruptcy partner Rachel Strickland and litigation partner Terence McLaughlin are also advising the publisher.

Court records show that Willkie has billed the Journal Register for more than $1.3 million in fees and expenses so far in the bankruptcy. The firm also received nearly $2 million prior to the publisher's bankruptcy filing and holds an additional $360,800 on retainer.

Seyfarth Shaw partners David Ross and Michael Rybicki are serving as special labor counsel to the Journal Register. The firm's lawyers are billing between $450 and $760 per hour but itemized billing records have yet to be filed with the court.

Young Broadcasting

Young Broadcasting canceled a bankruptcy auction for its ten television stations on July 13 after lackluster interest by potential buyers. The New York-based company filed for Chapter 11 in February under a crushing debt load.

With none of the bids besting the offer by Young Broadcasting's bankers, senior lenders appear poised to take control of the company in a tentative $220 million deal announced later in the week. Milbank, Tweed, Hadley & McCloy restructuring partner Gregory Bray is representing the lender group.

Five more firms are playing key roles in the bankruptcy case. Sonnenschein Nath & Rosenthal partners Holly Falkowitz, Peter Wolfson, and Jo Christine Reed are serving as debtors' counsel. Court records show that the firm recently billed the company for $1.6 million in fees and expenses for postpetition work completed as of May 31. Akerman Senterfitt is serving as special corporate and securities counsel to the debtor.

Young Broadcasting is receiving regulatory and FCC advice from North Carolina firm Brooks, Pierce, McLendon, Humphrey & Leonard. Bankruptcy records reveal that the firm has billed for $204,322 in fees and expenses as of May 31.

The television broadcaster's official committee of unsecured creditors is being represented by Paul, Weiss, Rifkind, Wharton & Garrison partners Andrew Rosenberg and Jeffrey Saferstein. Court filings show that the firm has billed for $281,952 in postpetition fees and expenses as of May 31. The committee's special conflicts counsel, Delaware's Young Conaway, has billed for $88,400 during that same time period.

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