The Work

June 28, 2011 7:43 PM

The Bankruptcy Files: Dodgers to Tap JPMorgan Hedge Fund Loan

Posted by Brian Baxter

The Los Angeles Dodgers received permission from a bankruptcy court judge in Delaware on Tuesday to access $60 million in debtor-in-possession financing provided by JPMorgan Chase hedge fund affiliate Highbridge Principal Strategies in order to meet payroll.

Court records show that Fried, Frank, Harris, Shriver & Jacobson bankruptcy partner Gary Kaplan is advising Highbridge in the Chapter 11 case by the Dodgers, who stunned Major League Baseball and commissioner Bud Selig on Monday by putting the historic team's fate in the hands of a bankruptcy judge.

As reported on Monday by The Am Law Daily, Dodgers owner Frank McCourt turned to a Dewey & LeBoeuf team led by bankruptcy partners Bruce Bennett, Sidney Levinson, Martin Bienenstock, and Philip Abelson to guide the team through Chapter 11 proceedings.

MLB has retained White & Case global financial restructuring head Thomas Lauria and global commercial litigation chair Glenn Kurtz, veterans of the bankruptcy battle for control of the Texas Rangers last year, to supplement its legal team from Proskauer Rose led by bankruptcy partners Mark Thomas and Jeffrey Levitan and litigation cochair Bradley Ruskin.

Earlier on Tuesday, the league objected to the Dodgers's bankruptcy filing on the grounds that MLB itself was better equipped to lend money to the struggling club, which it appointed Akin Gump Strauss Hauer & Feld senior counsel J. Thomas Schieffer to run in April after a decision by Selig. The Associated Press reports that the league could try and seize control of the cash-strapped team under a clause in MLB's constitution.

In Monday's bankruptcy filing, lawyers for the Dodgers identified Frank McCourt as the sole owner of the franchise, something sure to tweak the owner's ex-wife Jamie, who has been battling her former husband for control of the team in a bitterly contested divorce case. Court records show that Jamie McCourt retained Laura Davis Jones, a name partner at national bankruptcy boutique Pachulski Stang Ziehl & Jones, along with partner Timothy Cairns. Both are in based in Wilmington.

Also making appearances in the Dodger bankruptcy were lawyers for the Major League Baseball Players Association, some of whose members are owed millions in salary for the current and past services to the team. New York labor firm Cohen, Weiss and Simon and Delaware's Cooch and Taylor are advising the MLBPA in the case.

The bankruptcy filing by the Dodgers on Monday was the first headline-grabbing Chapter 11 case in the United States in recent months as many of the large corporate cases dried up. (The Am Law Daily will have more tomorrow on some noteworthy overseas restructuring assignments that have developed for Am Law 200 firms.)

Some of the latest notable companies to seek the Chapter 11 route within the past month:

Nebraska Book Company

One of the largest college bookstore operators nationwide filed for bankruptcy in Delaware on Monday, citing pressure from online competitors and mounting debt repayments, Bloomberg reports.

Based in Lincoln, Neb., the Nebraska Book Company turned to Kirkland & Ellis for counsel during its Chapter 11 case. Pachulski Stang partners Laura Davis Jones and James O'Neill are serving as Delaware counsel to the company. Neither firm has yet filed billing statements with the bankruptcy court.

Deb Shops / DSI Holdings

Young women's clothing retailer Deb Shops filed for bankruptcy in Delaware on Monday as part of a financial restructuring plan that will see the company sold to a group of senior lenders, according to The New York Times.

The filing by DSI Holdings, which operates the Deb chain, comes nearly four years after the company was purchased by private equity titan Thomas H. Lee's Lee Equity Partners for $395 million. Reuters reports that lenders led by Cerberus Capital Management's Ableco Finance unit entered into a stalking horse agreement to take over Deb for $77 million in cash.

Ableco, advised by L.A. bankruptcy boutique Klee, Tuchin, Bogdanoff & Stern and Pachulski Stang in Delaware, agreed to provide $21.7 million in debtor-in-possession financing to keep Deb running during its bankruptcy case.

The Philadelphia-based company has turned to Weil, Gotshal & Manges to help guide it through Chapter 11 proceedings. Mark Collins, chair of the bankruptcy group at Delaware's Richards, Layton & Finger, is serving as local counsel to the debtor. Neither firm has yet filed billing statements with the bankruptcy court.

Perkins & Marie Callender's

Memphis-based restaurant operator Perkins & Marie Callender's filed for bankruptcy in Delaware on June 13 after securing the support of key creditors for a plan to slash its $440 million debt load, according to The Wall Street Journal.

The company, which operates the Perkins Restaurant & Bakery and Marie Callender's chains, has been hurt in recent years by a sharp decline in sales and poor economic conditions, the Los Angeles Times reports.

Troutman Sanders bankruptcy partners Mitchel Perkiel ($785 per hour) and Hollace Cohen ($785), finance partners Mitchell Portnoy ($690) and Timothy Kahler ($600), tax partner Mark Goldsmith ($795), and bankruptcy and structured finance partner Carolyn Richter ($575) are leading a team from the firm advising Perkins, which is owned by New York-based private equity firm Castle Harlan.

Court filings show that Troutman received almost $1.5 million from the debtor in the year prior to its bankruptcy filing, about $1.2 million of which is work related to the company's Chapter 11 case. (Young Conaway Stargatt & Taylor partner Robert Brady, who is also serving as local Delaware counsel to the Dodgers in their bankruptcy case, is also advising Perkins.)

According to a list of the company's largest unsecured creditors, Perkins owes $217,216 to Schulte Roth & Zabel, and $546,109 to Gibson, Dunn & Crutcher. Gibson Dunn has handled litigation work for the company, while Schulte's Robert Goldstein advised Castle Harlan on its acquisition of Perkins and subsequent merger with Marie Callender's. Court records show that Schulte is continuing to represent Castle Harlan in Perkins's Chapter 11 case.

Akin Gump Strauss Hauer & Feld restructuring partner Scott Alberino is advising Wayzata Investment Partners, a majority unsecured noteholder in line to take over Perkins once it exits bankruptcy. Paul, Hastings, Janofsky & Walker restructuring partner Jesse Austin III is representing Wells Fargo Capital Finance, which is leading a group of lenders offering up to $21 million in DIP financing.

Allen Family Foods

Allen Family Foods, a four-generation-old, family-run business, filed for bankruptcy earlier this month in Delaware. Started in 1919 by the Allen family, the poultry producer has grown to 2,400 employees working out of facilities in Delaware, Maryland, and North Carolina, according to The Delmarva Daily Times. Allen Family Foods processes between 1.6 million and 2.2 million birds per week.

The Seaford, Del.-based company is now seeking to sell off the bulk of its assets in bankruptcy to a subsidiary of Little Rock-based Mountaire Farms, which also operates poultry hatcheries and processing plants in Delaware, Maryland, and North Carolina.

Young Conaway's Brady is serving as lead Chapter 11 counsel to Allen Family Foods. The firm has not yet filed billing statements with the bankruptcy court.

Lowenstein Sandler partners Bruce Nathan, Bruce Buechler, and Jeffrey Prol in Roseland, N.J., and Womble Carlyle Sandridge & Rice partners Steven Kortanek and Thomas Horan in Wilmington have been appointed counsel to an official committee of unsecured creditors.

Jackson Hewitt Tax Service

Jackson Hewitt, the second-largest tax preparer in the U.S. behind H&R Block, filed for bankruptcy in Delaware last month after reaching an agreement with lenders to restructure $362.3 million in debt, Reuters reports.

Skadden, Arps, Slate, Meagher & Flom corporate restructuring cohead J. Gregory Milmoe is advising Jackson Hewitt, along with restructuring partner Mark Chehi and Mark McDermott and corporate finance partner Gregory Fernicola. A court filing by the firm shows that Skadden agreed to a 15 percent discount on its hourly rates for restructuring and bankruptcy-related work for Jackson Hewitt.

The Parsippany, N.J.-based company already paid the firm almost $1.9 million in the year prior to its Chapter 11 case, according to court records. Duane Morris partners Christopher Winter and Michael Lastowski, the managing partner of the firm's Wilmington office, have been appointed counsel to an official committee of unsecured creditors.

Jackson Hewitt's Chapter 11 filing reveals that some of its largest unsecured creditors are plaintiffs pressing civil claims against the company.

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