The Distressed Debt Report - May 27, 2008

Sub Lenders Seen Pursuing More Aggressive Bankruptcy Strategies

Subordinate creditors are no longer standing still while senior debtholders "cram down" bankruptcy plans upon them and force them to take substantial losses.

The new wave of bankruptcies is expected to increasingly see subordinated debtholders "cram up" on those holding the senior position.

The trucking company Jevic Transportation used to brag about the can-do attitude of its 1,500 employees.

"We know things don't always run smoothly," the Delanco, N.J., company said on its web site. "That's the nature of business. And the measure of any business is the ability of its people to rise to the challenge, to go above and beyond to get the job done."

On May 19, the company abruptly changed its tune, announcing that soaring diesel fuel prices had forced it out of business.

Pappas Accused of Hindering Sale, Diverting Millions

The secured lenders to Pappas Telecasting filed an "emergency motion" to appoint a trustee to oversee the television broadcaster's recently filed Chapter 11 bankruptcy.

The lenders, acting through their agent Fortress Credit, argue in papers filed May 21 in U.S. Bankruptcy Court in Delaware that the trustee is warranted because of the actions of Pappas' chief executive and majority shareholder Harry J. Pappas.

Exit Delayed by Noteholder’s Legal Action

Financing may be in place for Dura Automotive Systems to exit bankruptcy, but a lingering dispute over a clause in an indenture contract appears to be at least temporarily delaying the auto parts maker's re-emergence.

Most of Dura's $300 million in exit financing is coming from outside financing sources, with just $67 million coming from existing creditors of the company, according to a person close to the case.

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• Signature Capital Expects to Boost Assets Under Management
• Unsecureds Oppose Auction of Service for Truckers
• Creation of Russian Lottery Proves a Bad Gamble for Investor
• Investors to Increase Allocations to Distressed Assets, Survey Says