September 7, 2011 6:00 PM

The Bankruptcy Files: Paper Cuts, a Saab Story, a Solar Power Outage, and Not-So-Sunny Hawaii

Posted by Brian Baxter

UPDATES: 9/8/11, 10:20 a.m., EDT. A Swedish court has rejected Saab Automobile's bankruptcy application for protection from creditors, according to The New York Times. 9/8/11, 5:40 p.m., EDT. The Washington Post reports that federal agents have executed search warrants at Solyndra's offices in California.

The volatility that continues to roil the capital markets may be bad for investors, but it's been good to bankruptcy lawyers in the United States and abroad. After a months-long drought of major filings, the late-summer stock market swoon has coincided with moves by several large companies to seek refuge in bankruptcy court—and more such filings could be on the way.

One of the notable companies contending with insolvency lately is Hostess Brands, which is struggling with more than $700 million in debt. The maker of Wonder bread, Drake's coffee cakes, and the ever-popular Twinkies, has hired Jones Day bankruptcy bigwig Corinne Ball to help it implement a restructuring plan, according to news reports. Irving, Texas-based Hostess—then known as Interstate Bakeries—emerged from bankruptcy just two years ago with the help of Skadden, Arps, Slate, Meagher & Flom.

Also eyeing a possible bankruptcy: The Astoria Generating Company, a unit of Stamford, Conn.-based U.S. Power Generating, which announced in a September 2 statement that it had hired Kirkland & Ellis as restructuring counsel. Astoria Generating said it hired Kirkland, which has advised the company in the past, as a result of "lower market-clearing prices" in the power market caused in part by a "government-subsidized generating project being allowed to artificially depress prices."

U.S. Power owns power generating facilities throughout New York City, including three power stations operated by Astoria Generating, which provide more than 20 percent of the city's electrical output. U.S. Power is interested in building a new, more energy efficient plant, in Astoria, according to the Queens Chronicle.

Below are some of the latest bankruptcy filings of note and their counsel of record:

NewPage Group

Owned by private equity giant Cerberus Capital Management, ailing Midwestern papermaker NewPage Group filed for bankruptcy in Delaware on Wednesday. In its filing, the Miamisburg, Ohio–based company—one of North America's largest producers of paper products—cited decreased demand for paper products and an inability to refinance a $4.2 billion debt load as the primary reason for its decision to seek Chapter 11. Much of that debt stems from Cerberus's 2005 acquisition of the company, which, according to The New York Times, employs some 6,000 people.

Dewey & LeBoeuf business solutions and governance chair Martin Bienenstock and partners Judy Liu and Philip Abelson are serving as lead bankruptcy counsel to NewPage. Laura Davis Jones, a name partner at Pachulski Stang Ziehl & Jones in Wilmington is serving as local counsel to the debtor. Neither firm has yet filed billing statements with the bankruptcy court.

John Stringer and Benjamin Durnford from McInnes Cooper in Halifax are serving as Canadian restructuring counsel to a key NewPage subsidiary under the Companies' Creditors Arrangement Act, according to court filings before the Supreme Court of Nova Scotia. Stikeman Elliott is advising administrator Ernst & Young.

Richmond-based global packaging company MeadWestvaco sold its paper business to Cerberus in 2005 for $2.3 billion. NewPage specialty and coated paper is used to make magazines, catalogs, and annual reports for clients like Advance Publications, The McGraw-Hill Companies, and Time.

Saab Automobile

Idle car manufacturer Saab Automobile filed for bankruptcy protection from creditors Tuesday in Vänersborg District Court in western Sweden after failing to line up investors to finance its operations and pay workers.

Trollhättan-based Saab temporarily suspended production in June while it sought a fiscal life preserver. But despite signing an agreement with two potential Chinese partners, the needed funds didn't materialize, forcing the company to proceed with a reorganization plan while it awaits an influx of cash from China necessary to restart production.

Saab has sought to have former Coudert Brothers partner Guy Lofalk, founder of Swedish bankruptcy boutique Lofalk Advokatbyrå, serve as court-appointed administrator of its bankruptcy case. Lofalk handled a previous Saab reorganization plan two years ago when the carmaker was owned by former parent General Motors, which was going through a restructuring of its own in the U.S. (GM bought a 50 percent interest in Saab in 1990 and took full control of the company a decade later.)

Saab was eventually sold in January 2010 to Dutch automaker Spyker Cars for about $400 million. Magic Circle firm Allen & Overy advised Spyker on the deal, according to our previous reports, while Saab retained the services of Finnish firm Roschier. Spyker is now known as Swedish Automobile, which hopes to avoid its own bankruptcy.

Solyndra

Solar panel manufacturer Solyndra became the latest solar power provider to enter bankruptcy proceedings, filing for Chapter 11 protection in Delaware on Tuesday. Fremont, Calif.–based Solyndra, which makes photovoltaic cells for solar power systems used by commercial clients in North American and Europe, found that it couldn't compete with foreign manufacturers, despite a $535 million federal loan from the U.S. Department of the Treasury's Federal Financing Bank.

Pachulski Stang partners Bruce Grohsgal in Wilmington and Debra Grassgreen, Joshua Fried, and Maxim Litvak in San Francisco are serving as Chapter 11 counsel to Solyndra, which lists nearly $784 million in debt against $859 million in assets. Pachulski Stang has not yet filed billing statements with the bankruptcy court. According to a list of Solyndra's 35 largest unsecured creditors, the company owes almost $2.1 million to Cravath, Swaine & Moore for legal services.

Solyndra's bankruptcy filing follows those of such other solar power companies such as SpectraWatt and Evergreen Solar. Bloomberg reports that former Solyndra employees have filed a WARN Act complaint against the company over its abrupt termination of 1,100 workers last month.

M Waikiki LLC / Fontainebleau Las Vegas

Marriott International's plan to seize control of a $250 million Waikiki Edition luxury hotel in Honolulu hit a snag last week when the current owner of the property, M Waikiki LLC, abruptly filed for bankruptcy in a bid to neutralize a court ruling in New York.

Sibling publication The Am Law Litigation Daily reported last week on the efforts by Marriott's lawyers from Jenner & Block to regroup in the aftermath of Hurricane Irene to obtain an order from a state court judge in Manhattan restoring Marriott's management of the hotel.

Marriott and M Waikiki are engaged in a breach of contract suit over Marriott's alleged mismanagement of the new hotel, which M Waikiki—represented by Bickel & Brewer—claims is losing money and failing to meet expectations under the Marriott umbrella.

Name partner Patrick Neligan, Jr., and partner James Muenker from Dallas firm Neligan Foley are serving as Chapter 11 counsel to M Waikiki. Name partners Alika Piper and Simon Klevansky from Honolulu firm Klevansky Piper are serving as local counsel to the debtor. Neither firm has yet filed billing statements with the bankruptcy court.

Court filings show that Marriott is being represented in M Waikiki's Chapter 11 case by Sheppard Mullin Richter & Hampton partner Carren Shulman in New York and Susan Tius from Honolulu firm Rush Moore.

According to a list of M Waikiki's 20 largest unsecured creditors, the company owes $18,928 to Luce, Forward, Hamilton & Scripps in San Diego and $18,613 to Hawaiian firm Torkildson, Katz, Moore, Hetherington & Harris.

The Waikiki Edition isn't the only luxury property beset by legal problems these days. Two years ago we reported on the litigation battle over the stalled $2.9 billion Fontainebleau Las Vegas casino and resort development project that had moved to a bankruptcy court in Miami.

Renowned corporate raider Carl Icahn later bought the Fontainebleau for a song, but now developers tasked with completing the 63-story project, which remains in stasis, are fighting lawsuits filed by hedge funds in state court in Nevada, according to Vegas Inc.

Among the law firms involved representing defendants: Skadden, Fennemore Craig, and leading local shops like Kolesar & Leatham, Morris Peterson, and Lionel Sawyer & Collins. 

Make a comment

Comments (0)
Save & Share: Facebook | Del.ic.ious | | Email |

Reprints & Permissions

The comments to this entry are closed.