The Distressed Debt Alert

DLA Piper Hires Three Restructuring Lawyers

The law firm of DLA Piper said it hired George B. South III, Frank Pepler, and Bennett Silverberg in its restructuring practice.

South, who is joining DLA as a partner, and Silverberg, who joins as of counsel, will be based in DLA Piper's New York office. Pepler, who joins as a partner, will be based in San Francisco.

South was previously a partner with King & Spaulding in New York. His practice includes in- and out-of-court restructurings and the rehabilitation of financially distressed companies and municipalities, DLA said. He represents corporate debtors, creditor committees, bondholder committees, bond insurers, debtor-in-possession lenders, and all different types of investors seeking to buy and sell distressed securities and assets.

Pepler joins the firm from Pepler Mastromonaco, a boutique firm he co-founded in San Francisco. Pepler represents banks, secured creditors and lessors in origination, restructuring and workout matters, as well as litigation.

Silverberg joined DLA from Skadden, Arps, Slate, Meagher and Flom as a senior associate in New York. He represents debtors and creditors in Chapter 11 reorganization cases and out-of-court restructurings.

Source: Press Release

Holders of $125 million in senior secured notes from Black Gaming, owner of three hotel and casino properties in Mesquite, Nev., agreed to exchange their claims for a new $62.5 million credit facility under a prepackaged Chapter 11 reorganization plan.

The company owns the CasaBlanca Hotel and Casino and the Virgin River Hotel and Casino, as well as the closed Oasis Resort.

Black Gaming filed for bankruptcy after securing lock-up agreement with holders of about 70% of its senior secured notes to restructure the company's debt and provide new investment capital. Under the proposed reorganization plan, Black Gaming will pay its senior credit facility with Wells Fargo Foothill in full, will exchange senior secured noteholders' claims and notes for a new $62.5 million credit facility, and will pay general unsecured claims to the extent permitted under the bankruptcy code.

The company's majority owner Randy Black, Sr. and other investors will contribute more than $18.2 million in cash for all of the new equity in the company. Black will remain as chief executive, Anthony Toti will continue as chief operating officer, and Sean McKay will remain chief financial officer.

Black Gaming said it will operate on a "business as usual" basis during the bankruptcy; continue timely, uninterrupted payments to its vendors; and honor all customer deposits and commitments.

Source: Press Release

The default rate on bonds issued by U.S. companies with speculative-grade credit ratings fell by 0.4 percentage points in February from the previous month, to 10.5%, Standard & Poor's said.

The speculative-grade default rate had reached a high of 10.9% at the end of 2009 and stayed at that level through January before falling last month, according to S&P.

Although the default rate remains above 10%, far fewer companies are defaulting each month than there were a year ago. Only three companies defaulted in February compared with 25 at the same time in 2009.

S&P expects the speculative-grade default rate to decline to about 5% by December, but it could reach as high as 6.9% if economic conditions are worse than expected.

Source: Press Release

Xerium Technologies, a Raleigh, N.C.-based manufacturer of industrial textiles and rolls used in the paper production process, said it reached an agreement in principle with the steering committee of its senior secured lenders and parties to its swap termination agreements and plans to file for Chapter 11 bankruptcy.

In conjunction with its lender agreements, the company is soliciting votes from lenders for a restructuring plan that would reduce its debt by about $150 million.

Xerium proposes to exchange $620 million in debt for $10 million in cash, $410 million in new term loans that will mature in 2015, and approximately 82.6% of the company's common stock. Existing shareholders would maintain about 17.4% of the stock and would receive warrants to purchase another stake of up to 10% in the company. Xerium would also secure a new $80 million secured revolver and term loan credit facility.

The proposal has been supported by lenders holding a majority of the company's credit facility obligations, and Xerium is seeking approval from all of its lenders.

Source: Press Release

Swoozie's Inc., an Atlanta-based luxury gift and paper products retail chain with 43 locations in 15 states, said it filed for Chapter 11 bankruptcy.

Source: Press Release

Regent Communications, a Cincinnati-based broadcaster, filed a prepackaged bankruptcy that will transfer the majority of new equity in the company to Oaktree Capital Management, according to court filings.

Regent Communications reported $166.5 million in assets and $211.2 million in debt in its Chapter 11 filing. The restructuring of the company will wipe out $87 million in debt, convert some of the old debt into equity and create new debt consisting of $95 million in senior secured debt and a $25 million in payment-in-kind loan. The secured senior debt will carry an interest rate of one-month LIBOR plus 4%, while the PIK loan is priced at 12%.

Regent, an owner of 62 radio stations in nine states, said in a statement that the restructuring will have no effect on its day-to-day operations and there would be no change in the company's senior management.

Regent said it will not require debtor-in-possession financing, since it has a current cash position of $11 million, giving it ample liquidity and sufficient funds to pay its vendors and employees.

Sources: Court Filing, Press Release

Shannon Lowry Nagle, formerly a partner with the O'Melveny and Myers law firm, joined Fried, Frank, Harris, Shriver & Jacobson as a partner in its New York bankruptcy and restructuring practice.

Source: Press Release

US Fidelis, a Wentzville, Mo.-based marketer of vehicle service contracts, filed for Chapter 11 bankruptcy, the St. Louis Business Journal reported.

Source: News Story

Catalina Lighting, a Miami-based maker of residential lighting, filed for Chapter 11 bankruptcy and plans to sell itself, according to court filings.

The company, which sells its products to retailers such as Wal-Mart, Lowe's and Kmart, said it filed for bankruptcy because of the recession's effects on its business.

Catalina said in court filings that it plans to sell itself in a Section 363 bankruptcy sale. A March 10 hearing has been set to approve Evolution Lighting, an affiliate of Boyne Capital Partners, as stalking horse bidder. Evolution Lighting's stalking horse bid will be for $3.1 million, the amount that Catalina Lighting owes on senior debt to Wachovia Bank.

Wachovia will provide Catalina with a $2 million debtor-in-possession revolving loan to finance the company's continuing operations. The bank is charging the prime rate plus 5% and a $40,000 fee.

Source: Court Filing