July 13, 2011 4:17 PM

The Bankruptcy Files: Greek Shipping Companies, Electronics Distributors, and Fuel Gel Sellers

Posted by Brian Baxter

The Quiznos Master, owner of the Quiznos sandwich chain, hired Paul, Weiss, Rifkind, Wharton & Garrison and investment bank Moelis & Company to help it renegotiate an $850 million debt load.

Quiznos is trying to reshape its finances by asking hedge funds and other shareholders to forgive $225 million in debt in return for ownership stakes in the company, according to reports from Bloomberg and The Wall Street Journal.

Quiznos, which has about 2,900 stores in the United States and 600 abroad, is owned by the family of cofounder and former CEO Richard Schaden and private equity firms CCMP Capital and Cervantes Capital. The Denver Post reports that the chain's owners were planning to invest $50 million in Quiznos to help the company refinance its debt obligations and avoid default.

Paul Weiss recently poached a group of partners from O'Melveny & Myers in May, some of whom did work for CCMP. A Paul Weiss spokeswoman did not immediately provide the names of lawyers from the firm advising Quiznos on its restructuring efforts. Moelis, the investment bank advising Quiznos on the restructuring, hired former private equity cochair at Skadden, Arps, Slate, Meagher & Flom private equity cochair Nick Saggese as a senior adviser in March, three months after he retired from the firm.

PlayPower Holdings successfully restructured its operations out of court last week, reaching an agreement with lenders to eliminate $145 million in debt. PlayPower will be acquired by Apollo Investment Corporation, a publicly traded affiliate of private equity giant Apollo Management, as part of the restructuring. The Huntersville, N.C.-based company manufactures commercial playground equipment and personal watercraft devices.

Willkie Farr & Gallagher served as counsel to PlayPower on the matter. Wachtell, Lipton, Rosen & Katz advised Apollo on the deal, while Paul, Hastings, Janofsky & Walker acted as counsel to administrative agent Imperial Capital, a Los Angeles-based investment bank.

The restructuring beat remains active in Europe, where international firms are keeping busy, as The Am Law Daily reported last month. A subsidiary of Raymond James Financial, based in St. Petersburg, Fla., announced plans in late June to acquire a Canadian loan portfolio from ailing Allied Irish Banks.

Canadian firm Stikeman Elliott is advising Allied Irish Banks on the deal, which includes about $650 million in loan commitments, according to Raymond James. The Stikeman Elliot team consists of corporate partners Ivan Grbesic, Elizabeth Breen, Peter Hamilton, and Kenton Rein, regulatory partner Shawn Neylan, tax partner Alan Kenigsberg, labor and employment partner Bruce Pollock, and associates Michael Kilby, Katy Pitch, and Andrew Elliott.

Dublin-based telecommunications giant Eircom began debt restructuring talks last week with a committee representing 28 percent of its first-lien lenders, according to The Irish Times. Magic Circle firm Linklaters is representing Eircom in the talks, while the coordinating committee of lenders has retained Kirkland & Ellis. A group of subordinated lenders has turned to Ropes & Gray for representation.

Linklaters, DLA Piper, and British firm Addleshaw Goddard are advising on the administration of Manchester-based home furnishings chain Homeform, according to U.K. publication The Lawyer. Homeform had been struggling as customers cut back on spending during tough economic times, Reuters reports.

Below are some of the latest corporate bankruptcies of note to cross our desk (hourly billing rates for attorneys are noted in parentheses, when available):

OMEGA NAVIGATION ENTERPRISES

The Greek debt crisis was partly to blame for the financial struggles that plunged shipping giant Omega Navigation Services and nine subsidiaries into bankruptcy court in Houston on July 8. Omega was unable to come to an agreement with senior lenders on an out-of-court restructuring, the company said in a statement. Athens-based Omega, which operates a fleet of refined fuel tankers, listed assets of $527 million against liabilities of $360 million in its bankruptcy filing.

Omega was disappointed in the "intransigence" of its senior lenders and had commenced litigation against them in Greece, according to the company's statement. George Kassiotis, who reportedly owns more than 20 percent of the company, founded Omega in 2005.

Bracewell & Giuliani's bankruptcy practice, known for its popular haiku contests, is advising Omega its Chapter 11 case. Omega is represented by Bracewell financial restructuring chair Evan Flaschen in Hartford and bankruptcy partner William "Trey" Wood III in Houston. The firm has not yet filed billing records with the bankruptcy court.

ARCHBROOK LAGUNA HOLDINGS

Carlstadt, N.J.-based electronics distributor ArchBrook Laguna Holdings and six subsidiaries filed for bankruptcy on July 8 in Manhattan as part of a plan to sell the business at auction in August, according to The Record of Bergen County, N.J.

Akin Gump Strauss Hauer & Feld financial restructuring partner Ira Dizengoff ($975/hour), senior counsel Michael Cooley ($660), counsel Alexis Freeman ($675), and corporate partner Daniel Fisher ($600) are leading a team from the firm advising ArchBrook in the case. Court filings by Akin Gump show that partners from the firm are billing between $500 and $1,200 per hour, counsel from $415 to $850 per hour, and associates at hourly rates ranging from $335 to $625.

Latham & Watkins is advising administrative agent GE Capital Commercial Services, which is providing a $150 million asset-based revolving credit facility for ArchBrook. Two years ago Latham hired finance partner Roger Schwartz from GE Capital, where he served as executive counsel for workouts and restructurings.

According to Archbrook's Chapter 11 filing, the company owes $321,655 to New Jersey firm McElroy, Deutsch, Mulvaney & Carpenter. Thomas Scrivo, a partner in McElroy's Newark, N.J., office, is listed as having handled litigation work for the debtor.

QUINCY MEDICAL CENTER

Quincy Medical Center filed for bankruptcy on July 1 in Boston, only a few days after the 196-bed, nonprofit hospital announced plans to sell itself to Steward Medical Holdings for $38 million, according to The Boston Globe. The Chapter 11 filing became necessary when Steward refused to make a $56.4 million payment to QMC bondholders to clear some of the hospital's debt.

Partners John Morrier and Michael Goldberg and counsel A. Davis Whitesell from Casner & Edwards, in Boston, are serving as bankruptcy counsel to QMC in the Chapter 11 case. Court filings by the firm reveal that partners are billing between $295 and $425 per hour, while associates are billing between $200 and $300 per hour. Casner & Edwards currently holds a $249,548 retainer and was paid $463,110 by QMC in the year prior to its bankruptcy filing.

Kenneth Bello, a name partner at Bello Black & Welsh, also in Boston, is serving as special labor and employment counsel to QMC. Court records show the firm received a $33,513 retainer and was paid less than $2,500 by the debtor in the year prior to its bankruptcy. Partners are billing between $325 and $425 per hour, while associates are billing at an hourly clip between $265 and $300.

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo has been retained by QMC as general litigation and regulatory special counsel to the debtor. Heath care partner Stephen Weiner is leading a team from the firm on the matter. Mintz Levin holds a $300,000 retainer for its work and has been paid $594,142 in the year prior to QMC's Chapter 11 filing, according to bankruptcy court records. The firm said it wouldn't actively seek payment on $26,617 that QMC owes from work done prior to the company's Chapter 11 case.

Mintz Levin, court filings show, has obtained conflict waivers from bondholders Invesco, Massachusetts Financial Services, Nuveen Asset Management, Pioneer Investments, and Putnam Investments in order to represent QMC on a limited basis. The firm is not advising QMC on its negotiations with bondholders or its bond obligations, per the agreements with clients mentioned above.

Edwards Angell Palmer & Dodge restructuring partner James McGinley is representing Steward in QMC's bankruptcy case. Massachusetts attorney general Martha Coakley, a former partner at Goodwin Procter, has filed a limited objection to QMC's proposed sale on the grounds that her office wants more time to review the terms of the hospital's sale to Steward.

NAPA HOME & GARDEN

Napa Home & Garden, which sold fire pots and candle fuel, said mounting liabilities from a product recall and injuries allegedly caused by one of its products, forced the company to file for bankruptcy on July 5 in Atlanta.

One of Napa's slow-burning fuel gels was the subject of a nationwide recall last month by the U.S. Consumer Product Safety Commission after a series of reports appeared in newspapers about victims maimed by the napalm-like substance.

Partner Leon Jones and associate Leslie Pineyro of Atlanta's Jones & Walden are advising Napa on the bankruptcy. Court filings by the firm show that it is holding a $79,931 retainer and has been paid roughly $100,000 by Napa prior to the start of its Chapter 11 case. Jones & Walden lawyers are billing between $170 and $350 an hour for their services.

Taylor English Duma, another Atlanta-based firm, has been retained by Napa as special counsel for firelite and gel products. Court records show the firm was paid more than $130,000 in the three months prior to the start of Napa's bankruptcy case and currently holds an $86,715 retainer. Partner Michael Sullivan ($295) and associate Matthew Rosenkoff ($250) are leading the team from the firm representing Napa.

Court records also show that Napa has paid Wiley Rein at least $24,300 to counsel the company on its fire gel product recall. Another firm, Slotkin Law Firm, in Decatur, Ga., was paid $6,864, according to bankruptcy court filings.

A state legislator from Suffolk County, N.Y., introduced a law last month to ban the sale of fuel gels there after a local boy was critically injured in a fuel gel explosion.

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