Savient Drug Auction Doubles Price: Bankruptcy
By Bill Rochelle – Dec 12, 2013 6:44 AM ET
Savient Pharmaceuticals Inc. (SVNTQ), a developer of a treatment for gout, held an auction this week where the price more than doubled, with the winning bid of $120.4 million made by Crealta Pharmaceuticals LLC.
Before the auction, senior secured noteholders worked out a global settlement with the unsecured creditors’ committee allowing the sale to go forward without objection. The settlement gives unsecured creditors a minimum of $1.775 million.
Had there been no competitive bidding, an affiliate of US WorldMeds LLC would have bought the business for $55 million and $3 million in escrow. The purchase price to be paid by Crealta will be reduced by the cost to cure contracts that are behind in payment.
Because the sale topped $60 million, the creditors may be entitled to an additional $750,000. For details on the settlement, click here for the Dec. 11 Bloomberg bankruptcy report.
Savient filed for Chapter 11 protection in October. The petition listed assets of $73.8 million against liabilities totaling $260.4 million. Bridgewater, New Jersey-based Savient owes $145 million to secured noteholders.
The case is In re Savient Pharmaceuticals, 13-12680, U.S. Bankruptcy Court, District of Delaware (Wilmington).
OSG Noteholders’ Plan to Include Rights Offerings
The Overseas Shipholding Group Inc. creditors’ committee is becoming impatient with the company’s progress toward proposing a Chapter 11 reorganization plan.
The committee and an ad hoc group of unsecured noteholders both developed term sheets for reorganization plans. According to the committee, the noteholders’ proposal would include a “multi-party rights offering” along with third-party financing.
OSG, the committee says, is currently trying to determine whether financing for the noteholder plan is feasible. Meanwhile, the company wants the bankruptcy judge to extend exclusive plan-filing rights until Feb. 28.
At a hearing on Dec. 19 in U.S. Bankruptcy Court in Delaware, the committee will tell the judge that an extension of exclusivity until Jan. 31 is sufficient. The indenture trustee for secured lenders also believes exclusivity shouldn’t go beyond the end of January.
The market is predicting a good outcome for noteholders. The $300 million in 8.125 percent senior unsecured notes due 2018 traded at 1:57 p.m. on Dec. 11 for 102 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes brought as little as 18.75 cents on the day of bankruptcy.
The stock market also indicates OSG is solvent. The shares yesterday closed up 15 cents at $4.40 in over-the-counter trading. The stock sold for about 55 cents on the day of bankruptcy last year and marked a post-bankruptcy high of $5.03 on Nov. 12.
OSG filed for Chapter 11 protection in November 2012, operating 90 vessels. It is one of the largest publicly-owned transporters of crude oil and petroleum products.
It has the largest fleet of Jones Act tankers, the only vessels permitted to operate between U.S. ports. The perceived value of the Jones Act fleet explains market prices for the stock and bonds.
The company has said it is considering splitting up the U.S. flag and international fleets as part of a reorganization plan.
OSG listed assets of $4.15 billion against $2.67 billion in liabilities, including $1.49 billion on an unsecured credit agreement with DNB Bank ASA as agent.
In addition to the $312 million in loans made by the Export-Import Bank of China for construction of five tankers, there is $518 million in unsecured notes and debentures plus $267 million on ship mortgages to finance nine vessels.
The case is In re Overseas Shipholding Group Inc. (OSGIQ), 12-bk-20000, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Park Cities Bank Heading for Contested Sale Hearing
When the bankruptcy court in Delaware approved auction procedures, the first bid of about $7.4 million was to be made by Park Cities Financial Group Inc. If outbid, Park Cities Financial was to receive $750,000 in a breakup fee and expense reimbursement.
At conclusion of the all-day auction, Park Cities Financial’s high bid was $11.8 million. Olney Bancshare of Texas Inc. made an offer of $11.44 million.
After deducting the stalking horse bidder’s breakup fee, the net from Olney would be $10.7 million, according to a court filing by the official creditors’ committee.
The bank tapped the Olney, Texas-based bank as having the best offer based on concern that Park Cities Financial “might not be able to close the transaction,” according to the committee’s court filing. The bank “had never before hinted in these proceedings” that there was any concern about the stalking horse’s ability to close, the committed said.
The committee wants the judge to declare Park Cities Financial to be the winning bidder and hold Olney’s offer open until January in case the sale at the higher price isn’t completed.
The bank had more than $396 million in deposits, four branches and 71 employees as of Sept. 30, according to a court filing. The holding company listed debt of $39.3 million, including some $34 million on trust preferred securities. North Texas Bancshares owes Providence Bank about $5.2 million in secured debt.
The case is In re North Texas Bancshares of Delaware Inc., 13-bk-12699, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Military Radar Maker Star Dynamics Files in Columbus
Star Dynamics Corp., a developer and provider of radar systems for the military, filed a petition for Chapter 11 protection on Dec. 10 in Columbus, Ohio, in part to halt a lawsuit by BAE Systems Plc. (BA/)
Assets are on the books for $28.5 million, against debt totaling $50.9 million. Revenue through Nov. 30 was $8.1 million, according to a court filing.
The case is In re Star Dynamics Corp., 13-59657, U.S. Bankruptcy Court, Southern District of Ohio (Columbus).
Bay Area Financial Files to Sell Loans, Properties
Mortgage lender Bay Area Financial Corp. filed a petition for Chapter 11 protection on Dec. 9 in Los Angeles to assist in what it called the “orderly liquidation” of the remaining loan portfolio and owned real property.
The company ceased making new loans in 2008. Managing the portfolio since then, Bay Area decided to liquidate early this year and hoped to do so without bankruptcy.
Most of the mortgages are secured by junior liens, according to a court filing.
The company said it believes it can generate $16.1 million through disposing of the remaining loans and properties. There is no secured debt, although $141,000 is owing on a priority tax claim. Cash on entering Chapter 11 was about $1.4 million, to be supplemented by almost $700,000 from an upcoming property disposition.
The petition lists assets and debt both exceeding $10 million.
The case is In re Bay Area Financial Corp., 13-38974, U.S. District Court, Central District of California (Los Angeles).
Chapter 15 Requires Property in the U.S., Circuit Rules
The U.S. Circuit Court of Appeals in New York ruled yesterday that liquidators in a foreign bankruptcy can’t use Chapter 15 under the U.S. Bankruptcy Code unless the bankrupt company resides or has a place of business or property in the U.S.
The opinion, reversing the bankruptcy court, means that foreign liquidators can’t use the U.S. bankruptcy court to conduct investigations or take discovery without first establishing there is property in the U.S.
The case involved an Australian bankruptcy where the liquidators filed a Chapter 15 petition and sought to take discovery from a hedge fund in the U.S. Over the hedge fund’s objection, U.S. Bankruptcy Judge Shelley C. Chapman in Manhattan ruled that the Australian proceedings were entitled to recognition as the so-called foreign main proceeding.
Chapman’s ruling meant creditor actions in the U.S. were halted automatically. It also meant the liquidators could use the bankruptcy court for discovery.
Recognizing the importance of the issue and the dearth of authority, Chapman authorized a direct appeal to the Second Circuit. Meanwhile, she granted the liquidators’ request to take discovery from the hedge fund.
The primary issue involved Section 109(a) of the Bankruptcy Code and its requirement that a bankrupt must reside, have a place of business, or assets in the U.S. The liquidators argued that the section doesn’t apply in Chapter 15 cases.
Writing for the three-judge appeals court, Circuit Judge Chester J. Straub concluded that the plain meaning of the statute makes Section 109 applicable in a Chapter 15 case because that section is incorporated in Chapter 15 cases by Section 103(a).
Beyond plain meaning, Straub said a textual analysis supports making Section 109 applicable. He noted that the Collier treatise on bankruptcy and two law review articles took the position that the section applies in Chapter 15.
Straub said that the venue provision for Chapter 15, Section 1410 of the Judiciary Code, is “purely procedural” and its lack of a requirement of U.S. property doesn’t excuse compliance with Section 109.
The opinion contained several notable procedural twists. Straub said that the hedge fund wasn’t a “person aggrieved” and thus lacked standing to appeal from the recognition order because there was no direct and adverse pecuniary effect.
The hedge fund nonetheless was aggrieved by and could appeal from the discovery order, Straub ruled. The discovery order brought up the recognition order for appellate review.
The case is Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet), 13-612, U.S. Second Circuit Court of Appeals (Manhattan).
Defensive Appellate Rights are Property in Texas Law
“Defensive appellate rights” are property that a bankruptcy trustee can sell, thus precluding an individual bankrupt from appealing.
Before filing in Chapter 7, an individual lost a lawsuit in state court and was saddled with sanctions. Over objection from his state court adversary, the bankrupt persuaded the bankruptcy judge to modify the automatic stay so he could pursue an appeal he filed before bankruptcy.
On a first appeal, district court reversed the bankruptcy court and ruled that defensive appellate rights are property of the estate under Texas law that could be sold to the adversary. The U.S. Court of Appeals in New Orleans reached the same result in an unsigned opinion on Dec. 10.
The Fifth Circuit in New Orleans said only two lower courts reached the same issue. A California state court ruled that defensive rights are property, while a bankruptcy court in Iowa ruled they aren’t.
The New Orleans court said appellate rights are property under Texas law because they are “valuable in nature.”
The circuit court noted that lawsuits and appellate right previously have been held to be property.
The case is Croft v. Lowry (In re Croft), 13-50020, U.S. Fifth Circuit Court of Appeals (New Orleans).
To contact the reporter on this story: Bill Rochelle in New York at firstname.lastname@example.org