The Distressed Debt Alert

Impeva Labs Files Chapter 11

Impeva Labs, a Mountain View, Calif.-based provider of technology and services to track items being shipped, said it filed for Chapter 11 and plans to be sold at a bankruptcy auction May 4.

Impeva Labs secured debtor-in-possession financing of $1.2 million from ARINC Engineering Services to support normal operations, product development, and device production through the sale of the company at auction.

ARINC, a portfolio company of The Carlyle Group, was approved as the stalking horse bidder with its offer to acquire the intellectual property and other assets of Impeva for $2 million, plus $818,923 in assumed liabilities.

Source: Press Release

Loans on the Peter Cooper Village/Stuyvesant Town apartment complexes in New York and to the Extended Stay hotel chain helped push the rate of delinquencies in commercial mortgage-backed securities up by 85 basis points in March to 7.14%, Fitch Ratings said.

Loans on hotel properties had the highest delinquency rate of any property type, at 17.2%. Of the multifamily housing loans that Fitch rates, 13% were delinquent, compared to 8.97% in February. The Peter Cooper/Stuyvesant loan alone added 61 basis points to the delinquency index.

If the Peter Cooper/Stuyvesant Town and Extended Stay loans were excluded from the index, the hotel delinquency rate would be 12.38% and the multifamily delinquency rate would be 9.30%, Fitch said.

Source: Press Release

Minnesota businessman Thomas J. Petters, who acquired distressed companies such as Polaroid Corp. and Sun Country Airlines, was sentenced to 50 years in federal prison for leading a $3.7 billion Ponzi scheme, the Wall Street Journal reported.

Source: News Story

The default rate on debt held by U.S. companies rated as speculative-grade by Moody's Investors Services fell to 10.9% at the end of the first quarter from 13.9% at the end of last year.

At the end of the first quarter of 2009, the U.S. speculative-grade default rate stood at 8.4%.

Moody's is forecasting that the default rate will fall to 3.1% by the end of this year.

Twelve Moody's-rated corporate debt issuers from the U.S. have defaulted this year.

In the leveraged loan market, eight Moody's-rated loan defaults recorded in the first quarter were from the U.S. The trailing 12-month U.S. leveraged loan default rate was10.3%, down from 11.9% at the end of the fourth quarter, but up from 5.2% a year earlier.

Source: Press Release

The law firm of Haynes & Boone added David Fleischer as a litigation partner in its New York office.

The law firm said that Fleischer has 30 years of experience in multiple industries and areas of law, including financial restructurings, real estate restructurings and bankruptcies. He will concentrate on high-stakes business litigation in the entertainment, real estate, and bankruptcy areas.

Source: Press Release

The law firm of Quarles & Brady hired bankruptcy attorney Philip V. Martino to practice in its new Tampa, Fla., office.

Martino will concentrate his practice on commercial bankruptcy litigation and representation of national and regional banks and financial institutions. His experience includes single-asset real estate bankruptcies and franchisee bankruptcies, Quarles said.

Source: Press Release

Hedge funds investing in distressed assets were among the top performing hedge funds in March, according to hedge fund advisory firm Hennessee Group.

Hennessee's index that tracks distressed-asset hedge funds gained 5.32% last month. That compares with a gain of 3.05% for the Hennessee Hedge Fund Index, which tracks hedge funds of all strategies.

For the year through March, the Hennessee Distressed Index gained 8.37%, more than double the 3.5% gain in the Hennessee Hedge Fund Index.

Source: Press Release

Golub Capital, a provider of financing to middle market companies, said it added Jason Van Dussen as a managing director in its capital markets group. Van Dussen was previously managing director and head of loan sales for CIT Group.

Source: Press Release

944 Media LLC, which publishes fashion, entertainment and lifestyle magazines in 10 U.S. metropolitan areas, said it filed for Chapter 11 bankruptcy.

The media company, which is anchored by 944 Magazine, said it filed for bankruptcy to assure its continued operation as it faces several law suits. The company's founder and chief executive Marc Lotenberg said in a statement that 944 Media will secure debtor-in-possession financing and continue to pay employees and print and distribute its publications.

944 Media publishes lifestyle magazines in Atlanta, Dallas, Detroit, Las Vegas, Los Angeles, Miami, Phoenix, San Diego, San Francisco and Orange County, Calif. It also operates an entertainment and lifestyle web site, 944.com.

The company said that while in bankruptcy it plans to unveil a new logo and design for its magazines and web site this spring. It also plans to expand its publications by adding 16-page city guides to each of its magazines.

Source: Press Release

Washington Real Estate Holdings paid $5 million to Citigroup for a controlling equity stake in the St. Regis Monarch Beach Hotel, a 400-room luxury hotel in Dana Point, Calif., the Wall Street Journal reported.

Citigroup had reportedly taken control of the property after its previous owners defaulted on a $70 million mezzanine loan held by the bank.

The St. Regis Monarch Beach gained national attention two years ago when American International Group abandoned plans to hold a sales meeting there after the federal government bailed out the insurer.

Source: News Story

The default rate on debt from U.S. companies rated as speculative-grade by Standard & Poor's declined by 48 basis points in March compared with the previous month.

The speculative-grade default rate for March was 10% and is expected to drop to about 5% by December, Standard & Poor's said in a report. The rate may only drop to 6.9% if conditions are worse than expected.

The speculative-grade default rate had reached a high of 11.3% in November 2009. Since then, it's declined to 10.9% for December 2009 and January 2010. In February, the rate was 10.48%.

Five companies with debt rated as speculative-grade defaulted in March, while 15 defaulted in March 2009.

The default rate is considered a lagging indicator to the overall economy. Standard & Poor's said that credit metrics in the U.S. are strengthening, but at a slow pace.

Source: Press Release

Gerry Walker, who heads a Deutsche Bank group that sells loans, bonds and distressed debt to hedge funds, has resigned from the bank and will join Bank of America, the New York Post reported.

Walker was hired last August to run the Deutsche Bank group.

Source: News Story

Freddie Mac is rolling out a new program to allow mezzanine debt on senior multifamily mortgages that it buys, to help recapitalize and delever properties.

The effort is meant to reduced defaults, workouts and foreclosures, the government-sponsored enterprise said.

Freddie Mac said it will partner with mezzanine lenders to help fill the equity gap for borrowers who need to finance or refinance overleveraged multifamily properties whose value has declined. The program is aimed at recapitalizing multifamily properties and easing the deleveraging process. It is not intended to increase leverage on properties or fuel excessive risk taking, Freddie Mac said.

Under the program, firms that sell mortgages to Freddie Mac will originate first mortgages up to 75% of value and then work with mezzanine lenders to provide additional leverage up to 15% of value. The borrower must put a minimum 10% cash equity into the property.

The first mortgage must have a fixed rate, but the mezzanine can be a fixed- or adjustable-rate loan. First mortgages can be for acquisitions, refinancing, or takeouts of construction loans for Class A or B properties.

The mezzanine portion is a recourse loan backed by borrower's equity, not the property. That's meant to eliminate any risk to Freddie Mac on the mezzanine loan. Freddie Mac will then purchase the first mortgage to retain in its portfolio or to securitize.

Freddie Mac previously offered multifamily mortgages as high as 80% LTV along with second mortgages and mezzanine loans prior to the meltdown of the commercial mortgage-backed securities market in 2007

Source: Press Release

The Federal Reserve Bank of New York is holding billions of dollars in toxic assets in three portfolios it assumed as part of the federal bailouts of Bear Stearns and American International Group, the Wall Street Journal reported.

The portfolios, valued at $65 billion, contain troubled commercial property loans, securities backed by subprime loans, credit insurance written on troubled bond and mortgage insurers, and loans tied to struggling hotels in Georgia and California.

Source: News Story

Gems TV, a television retailer that sells jewelry products through its home shopping channel, filed for Chapter 11 bankruptcy, Bloomberg reported.

The Gems TV network reaches 37 million viewers through satellite and cable television.

Source: News Story