The Distressed Debt Alert

Texas Rangers Bankruptcy Confirmation Hearing Reset Back to July 9

A U.S. bankruptcy judge today reversed his earlier decision to delay a confirmation hearing on the Texas Rangers' bankruptcy and reset the date back to July 9, the Dallas Morning News reported.

Judge Michael Lynn yesterday moved the hearing from July 9 to July 22 and ordered good-faith mediation between the team's lenders and owners to begin July 16 after a request from the lenders. Prospective buyers Chuck Greenberg and Nolan Ryan requested the confirmation hearing be moved back to its original date.

The judge agreed, but warned that the team's reorganization and sale plans must meet with the court's approval or the Chapter 11 case could drag on.

Source: News Story

In a move which could indicate Sorin Capital is looking to invest in distressed debt, the hedge fund has joined HFF Securities in a strategic alliance.

HFF Securities, a subsidiary of mortgage banker Holiday Fenoglio Fowler, is active on a national basis with a substantial capital markets platform. Sorin, the Connecticut-based alternative investment shop, has focused its real estate activity on the acquisition and trading of CMBS securities, as well as residential MBS.

The dearth of commercial real estate deals has impacted the two companies in different ways. In the past, HFF has been one of the industry's go-to firms for different types of capital from a wide variety of sources. But with the sloth-like pace of transactions, HFF has been more active in the disposition of loans. HFF has been representing institutional lenders who want to move loans ranging from performing to distressed and non-performing loans.

It isn't much of a leap to imagine Sorin sourcing assets from HFF for investment.

Representatives of the two firms couldn't immediately be reached for comment.

Source: Press Release

ITI Internet Services, a provider of electronic payment processing, said it filed for Chapter 11 bankruptcy after an unsuccessful appeal of a law suit.

Tacoma, Wash.-based ITI is a subsidiary of HIMC Corp. and provides secure electronic check processing, refund and rebate check fulfillment services, insufficient check re-presentment and credit card processing.

The company listed about $1.4 million in assets and almost $1.2 million in liabilities in its bankruptcy filing.

Source: Press Release

The Royal Bank of Scotland has filed an involuntary Chapter 7 bankruptcy petition against Titan Capital Investment Group over funds the bank claims it is owed on a $75 million loan, Dow Jones Daily Bankruptcy Review reported.

Source: News Story

Kurt Ramlo joined the law firm DLA Piper's restructuring practice in Los Angeles as of counsel.

Ramlo previously worked for Skadden, Arps, Slate, Meagher & Flom as counsel, DLA said. He is a former assistant U.S. attorney with trial and commercial litigation experience in bankruptcy and federal district courts.

Source: Press Release

A new trend in bank acquisition may be emerging that would give private equity players a way to work around FDIC acquisition rules they find limiting. Bloomberg reports that private equity firms interested in acquiring troubled banks and the distressed assets they hold are now looking to buy healthy banks first and then acquire banks in trouble.

The strategy could allow the equity providers to sidestep regulations that require equity firms to control no more than a 25% stake in a failed lender and to hold the bank for at least three years after acquisition. Private equity investors have also chafed at FDIC requirements that they hold more capital in reserve than other investors acquiring banks. Federal regulators have put some of these regulations in place over concerns that private equity investors would take too much operating risk or flip banks too quickly.

Billionaire Gerald Ford recently purchased Pacific Capital Bancorp, and Thomas H. Lee and Warburg Pincus have invested in Sterling Financial Group. Anchorage Advisors and the Carlyle Group have agreed to buy Hampton Roads Bank, and Moelis Capital Partners has designs on Opportunity Bank in Texas, Bloomberg reports. Also, Angelo Gordon & Co. has approached the FDIC about investing in Hamilton State Bancshares of Georgia.

Source: News Story

Solar Capital, a New York-based business development company, said it received a new $35 million commitment to its senior secured revolving credit facility, bringing its total commitments under agreement to $355 million.

Solar Capital is negotiating with lenders to further increase the facility's commitments to as much as $600 million, the company said in a statement. The facility is set to expire in February 2013.

The firm provides senior secured loans, mezzanine loans, and equity to middle market companies.

Source: Press Release

JCR Capital announced the second closing of its JCR Capital Distressed & Opportunistic Real Estate Fund I, LP with commitments of $24 million. The fund has a target raise of $30 million with a projected final close of July 31.

While there is no shortage of funds targeting distressed assets on an acquisition basis, the JCR fund will provide debt, participating debt and equity on distressed assets.

Headquartered in Denver, JCR Capital has been a provider of both debt and equity in previous real estate cycles. The commercial real estate finance company said it believes opportunities are available for deals valued at $1 million to $10 million, as other opportunity funds are targeting larger properties requiring more capital.

The fund has distributed $10 million thus far. The two major investors in the fund are JAM Equity Partners, a private equity firm out of New York, and PartnerRe Capital Markets, the Greenwich, Conn., subsidiary of Bermuda reinsurance company PartnerRe Ltd.

Source: Press Release

A U.S. District Court in Manhattan cleared the way for Bank of America and special loan servicer CW Capital Asset Management to foreclose on Stuyvesant Town-Peter Cooper Village, Bloomberg reported.

The sprawling 80-acre apartment complex was bought by Tishman Speyer Properties and BlackRock Inc. in 2006 for $5.4 billion. The pair of investors defaulted on the debt earlier this year.

Bloomberg reports that the ruling will allow the property of more than 11,000 units to be sold in either one or two pieces and bidders for the complex will need to deposit $100 million.

Source: News Story

Corporate restructuring firm Accretive Solutions said it formed a new subsidiary to invest in special situations and turnarounds.

The New York-based company also hired Frank R. Mack as senior managing director to lead the new firm, Accretive Solutions Capital Markets. The firm will target investments of $10 million to $30 million for middle market restructurings.

The new venture will allow Accretive Solutions to both consult on and invest in significant corporate restructurings, the company said in a statement.

Prior to joining Accretive Solutions Capital Markets, Mack founded and served as chief executive of Project Special Situations, which sourced and managed acquisitions of distressed companies.

Source: Press Release

Petra Capital Management filed a lawsuit against DiamondRock Hospitality Co. alleging that its purchase of a discounted note from Wells Fargo interfered with Petra's ability to take over a Chicago hotel.

Crain's Chicago Business reported that New York-based Petra manages a collateralized debt obligation that includes a $10 million mezzanine loan on the Allerton, a 433-room Chicago Hotel. DiamondRock purchased a $69 million defaulted first mortgage on the hotel from Wells Fargo for $60.5 million and has announced its plans to take ownership via foreclosure, the newspaper said.

The legal skirmish is the latest example of junior and senior debt investors fighting over the meager distressed assets currently available in the market.

The hotel is currently owned by a joint venture led by Chartres Hospitality out of San Francisco, Crain's reported.

Petra claims that an agreement with Wells Fargo allowed the junior debt holder first crack at the senior debt and control of the hotel.

Petra hired Cushman & Wakefield to find buyers for its note and had made plans to seize control of the defaulted hotel. But the sale of the first mortgage to DiamondRock short circuited that strategy, Crain's reported.

At this point, it is unclear whether the mezzanine loan held by Petra holds any value since the hotel was appraised at a value of $60 million last December. Petra reportedly claims there was plenty of interest in the hotel prior to the DiamondRock note acquisition, but now nobody wants to talk about buying the Michigan Street hotel.

Source: News Story

Life insurance companies will report an increase in credit-related losses on commercial real estate loans this year and next, according to Fitch Ratings.

This projection is contrary to Fitch's expectations for moderating investment losses from other major asset classes.

Life companies' realized losses in 2009 on directly placed commercial mortgages totaled $1.5 billion, Fitch said. The credit rating agency projects additional losses of about $4 billion to $5 billion in 2010 and 2011.

Fitch said that 99.6% of commercial mortgages held by life companies were in good standing as of the end of last year, which was a better performance than was seen in the commercial mortgage-backed securities market and in commercial mortgages held by banks.

Source: Press Release