Good Luck
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Who bought 500,000?
bring to his attention...
If asked to speak...
Please speak up....
Your letters are on docket. Good work!
Docket 3886. Good read!
My Finding of Facts and Conclusion of Law: As Counsel Cornish said, AbitibiBowater and Smurfit stone cases are strikingly similar. Both have hedge fund disputes. Both in similar industries, both had enterprise valuation of $3.6 billion. Both have same law firm representing them.
The development of a valuation narrative drawn from numerous valuation cases
points to an impressive judicial display of mastery of methodology, technical
process, and procedure. Cases like Judge Carey's ACV suggest a thoughtful and
deliberate methodology in developing a robust valuation opinion. Cases like Judge
Peck's Iridium persuasively suggest that for public companies, the market through a
market capitalization assessment, may be the most reliable indicator of value,
particularly in avoidance actions where the valuation standard is a "fair valuation."
These cases often remind us in complex systems, like valuations of businesses, the
party with the ultimate burden of persuasion may simply fail to prove its case.
Cases like Judge Lynn's Mirant thoughtfully suggest that holding a separate hearing
on valuation before the confirmation hearing allows a court and parties the
opportunity to address valuation in a deliberate and thoughtful environment, at least
partially insulated from the momentum and distractions inherent at a confirmation
hearing. These cases further remind us that the role of a bankruptcy court is
modest; has an expert shown that the testimony she is offering will assist the trier of
fact, is relevant to the issues, and is reliable? If the expert's report is flawed, the
court should conclude that it is inadmissible or send the expert back to get the
methodology right. If new facts have developed between the preparation of the
expert report and the valuation hearing, a court should send the experts back to their
analysis with the new facts. The court, however, should generally refrain from the
"search and select" method, compromising valuation estimates, or cobbling its own
"expert" opinion. These cases warn us that courts generally make poor valuation
experts.
http://testwww.stjohns.edu/media/3/72c51e24b0c346e1b756bcf61fd78449.pdf
This is simply not the stage to determine the persuasiveness of an
expert opinion or the weight that a court may accord that testimony. Under the
"trier of fact" function, a court must consider all admitted evidence, weigh its
credibility and probative force, and make a determination as to the factual supportfor a particular valuation testimony. Here it is not a court's role to "complete" an
uncompleted expert report, to "search and select" through various reports to
construct a meta-report that often has no support in the record; to infuse more facts
into the expert report and then make adjustments without corresponding expert
testimony to support such adjustments; or to synthesize the competing reports
assigning, for example, sixty percent of the weight of the valuation to the debtor'sexpert and forty percent to other experts. Rather, if a court finds expert testimony
deficient, it may exclude the report and testimony in its entirety, it may appoint its
own expert or technical advisor, or it may send the experts back to consider new
facts or techniques. Nothing more, or less, is required of our courts in order to
square expert valuation testimony with their institutional duty under Daubert.
In todays' response by Aurelius, they mentioned something about filing their own Plan.
ORDER
AND NOW, this 30th day of July 2003, upon consideration of the Brief of Appellant
Estate of Robert DeLong [Doc. # 3], Brief of Appellee Frank Scott, Formerly Known as Frank
Izzi [Doc. # 4], and Appellant’s Reply Brief [Doc. # 5], and for the reasons set forth in the
attached Memorandum Opinion, it is hereby ORDERED that the Order entered on March 7,
2003 by the Honorable Kevin J. Carey of the Bankruptcy Court is hereby AFFIRMED IN
PART and REVERSED IN PART.
It is further ORDERED that this matter is REMANDED for proceedings not
inconsistent with the attached Memorandum Opinion.
It is so ORDERED.
BY THE COURT:
________________________________
CYNTHIA M. RUFE, J.
On Feb. 20, 2009, Chief Judge Kevin J. Carey of the U.S. Bankruptcy Court in the District of Delaware made clear that it was he who denied Sidley Austin the $1,100-per-hour billing rate. Judge Carey flatly stated in a hearing that “[t]o the extent that this applicant or any other hits [the $1,000] mark, I will require evidence in support of that rate.”[2] Somehow Judge Carey was able to wrestle the Sidley attorneys off of their $1,100 billing rate to a mere $925 per hour. What gave Judge Carey the authority to modify Sidley’s compensation arrangement? This article will examine that question, including a review of both the statutory provisions (and judicial interpretations of those provisions) and policy considerations surrounding the issue of fee adjustments by the courts.
I think on Octo 18th. We can prepare the Plan and leave shares intact and work with all other resources to get out of BK...
Question: Can we file our Plan for confirmation?
The Debtors bear the burden to show, by a preponderance of the evidence, that equity is not legally entitled to a recovery. They have not, and cannot, do so. Therefore, the Debtors cannot "cran1-down" the plan on Common Stock holders because the Plan is not fair and equitable within the meaning of section ll29(b) of the Bankruptcy Code. The Plan also unfairly discriminates against the Common Stock holders by stripping them of their rightful value.
Good question!
My Finding of Facts and Conclusion of Law: In last 18 months, Debtors has not provided even one valuation report by the forest industry expert (What are they afraid of). Smurfti Stone had three valuation reports and at least two by industry experts. In this case, bankruptcy expert who happens to make valuation reports for 30 other industries has prepared a preliminary valuation report, making the joke of the whole bankruptcy process!
No. It just happened that I was reading emails....haha
NO RULING TOMORROW...
My Finding of Facts and Conclusion of Law: Minimum 358% increase in the base salary of CEO and 292% increase in the base salary of senior management.
The [United States Trustee] argues with some force that if an incentive plan is based on achievement of EBITDA targets and those targets are not achieved, yet the bonus is still received, that the plan cannot be an incentive plan but must, in fact, be solely a retention plan.
The New Law's High Hurdles. To give you a flavor of the restrictions BAPCPA added to Section 503(c) of the Bankruptcy Code, a debtor company must now prove the following before it can gain approval for payment of a retention bonus to an insider:
•the transfer or obligation is essential to retention of the person because the individual has a bona fide job offer from another business at the same or greater rate of compensation;
•the services provided by the person are essential to the survival of the business; and
•either
¦the amount of the transfer made to, or obligation incurred for the benefit of, the person is not greater than an amount equal to 10 times the amount of the mean transfer or obligation of a similar kind given to nonmanagement employees for any purpose during the calendar year in which the transfer is made or the obligation is incurred; or
¦if no such similar transfers were made to, or obligations were incurred for the benefit of, such nonmanagement employees during such calendar year, the amount of the transfer or obligation is not greater than an amount equal to 25 percent of the amount of any similar transfer or obligation made to or incurred for the benefit of such insider for any purpose during the calendar year before the year in which such transfer is made or obligation is incurred.
The requirement of a bona fide job offer in particular has led some to observe that if an officer of a company in Chapter 11 really had such an offer he or she would probably just take it, mooting the entire retention issue. In any event, these provisions have had their desired effect. It is now rare to find a debtor proposing a KERP that seeks to make retention payments to officers or other insiders.
Debtors Opt For Plan B. Despite these restrictions, debtors still usually want to keep their key officers and may worry that they will leave for more stable companies absent some incentives to remain with the debtor. So what are debtors doing? Since October 2005, they have shifted gears and are proposing not retention plans but incentive plans instead. To date, only a few decisions, discussed below, have addressed what is necessary for an incentive plan to pass muster. In other instances, incentive plans have been approved with little or no opposition. Perhaps the earliest such approval came in May 2006 when Judge Burton R. Lifland approved one in the Calpine Corporation Chapter 11 case.
The Dana Corporation Case. The first significant contested plan motion came shortly after the Calpine incentive plan's approval. Dana Corporation, whose Chapter 11 case was also pending before Judge Lifland, filed a motion seeking approval of a plan similar to that approved in the Calpine case. After considering objections filed by various creditors and others, however, in September 2006 Judge Lifland refused to approve Dana Corporation's proposed plan, finding that it was a prohibited retention plan. For an excellent and entertaining discussion of the circumstances leading to denial of that first effort in the Dana Corporation case, including why the Calpine plan was approved while the first Dana plan was not, be sure to read Steve Jakubowski's detailed post on the Bankruptcy Litigation Blog.
A few months later, on Dana Corporation's second try, Judge Lifland approved the revised incentive plan. In his second ruling, he found that with certain modifications the debtor's revised proposals met the sound business judgment test required for approval. In addition, he ruled that the new plan incentivized the key officers "to produce and increase the value of the estate" and, because the benchmarks in the plan were difficult targets to reach and not easy "lay-ups," the proposal was an actual incentive plan and not a retention plan in disguise.
Evaluating Incentive Plans. In evaluating whether the Dana plan represented the exercise of sound business judgment, Judge Lifland considered the following factors:
•Is there a reasonable relationship between the plan proposed and the results to be obtained, i.e., will the key employee stay for as long as it takes for the debtor to reorganize or market its assets, or, in the case of a performance incentive, is the plan calculated to achieve the desired performance? (emphasis added)
•Is the cost of the plan reasonable in the context of the debtor's assets, liabilities and earning potential?
•Is the scope of the plan fair and reasonable; does it apply to all employees; does it discriminate unfairly?
•Is the plan or proposal consistent with industry standards?
•What were the due diligence efforts of the debtor in investigating the need for a plan; analyzing which key employees need to be incentivized; what is available; what is generally applicable in a particular industry?
•Did the debtor receive independent counsel in performing due diligence and in creating and authorizing the incentive compensation?
A bankruptcy judge on Wednesday approved a $45.6 million incentive program for top executives and managers of the Tribune Company, overruling objections by a union and the bankruptcy trustee that the payout was too high and unwarranted.
The program for 2009 covers 10 top executives and 710 managers. Kevin J. Carey, the chief judge of the Delaware Bankruptcy Court in Wilmington, did not rule on two other incentive programs for 20 top executives that totaled about $20 million. In remarks before issuing his ruling, he suggested that the Tribune board consider rolling the remaining incentive plans into the reorganization plan under which the company would emerge from Chapter 11 bankruptcy protection.
The bonuses amount to about 11 percent of the company’s 2009 operating cash flow of $500 million. William Salganik of the Washington-Baltimore Newspaper Guild, which represents employees at The Baltimore Sun, a Tribune property, called the bonuses “unprecedented” compared with the previous high payout of 3.3 percent during a 12-year period. “It’s a greater reward for lower performance,” Mr. Salganik said, noting that the 2007 cash flow had been $1.2 billion.
He said the Tribune had laid off or bought out about 3,000 employees companywide.
In court papers, the bankruptcy trustee, Roberta A. DeAngelis, disputed Tribune’s claim that the incentive programs were bona fide awards “based on real performance targets that are intended to motivate superior performance.” She said Tribune officials failed to “back up their characterization” that cash flow targets were real and had failed to provide records of actual versus projected performance.
But in a 10-minute ruling from the bench, Judge Carey said he found the proposed bonuses were justified because “there is a reasonable relationship between the plan and its objective to restore profitability and let the company move forward.” The plan,” he said, “was developed over time by and among all the major constituents of the company and has their support.” He explained that the incentive was intended for the unsecured creditors and to “put more money in their pockets.”
In considering the various objections to the Plan, the Court began its analysis by recognizing that in order for the Plan to be confirmed, it must comply with section 1129 of the Bankruptcy Code. Citing the Court's decision in Exide Technologies, Judge Carey observed:
The plan proponent bears the burden of establishing the plan's compliance with each of the requirements set forth in section 1129(a), while the objecting parties bear the burden of producing evidence to support their objections. In a case such as this one, in which an impaired class does not vote to accept the plan, the plan proponent must also show that the plan meets the additional requirements of section 1129(b), including the requirements that the plan does not unfairly discriminate against dissenting classes and the treatment of the dissenting classes is fair and equitable. In re Exide Tech., 303 B.R. 48, 58 (Bankr.. D. Del. 2003)(internal citations omitted).
Why did the Court reject Spansion's proposed Incentive Plan? The parties opposing the Plan argued that the Incentive Plan was too generous and was offered to benefit management at the expense of unsecured creditors. The Debtor, on the other hand, argued that the Incentive Plan allowed the company to attract and retain key employees. Looking to the evidence presented at the confirmation hearing, the Court noted that peer groups of comparable companies (used as a comparison for the Incentive Plan) was selected by the Debtor's board instead of a compensation expert. Further, the companies used for the benchmark comparison were those that emerged from chapter 11 bankruptcy between 2003 and 2006. This comparison, the Court found, did not reflect the dramatic and adverse effects the economy and employee compensation experienced during the last two years. Opinion at *37.
Why is your letter is not on the docket? I see Haacks' letter....
On June 15, 2009, we filed a motion with the U.S. Court to reject an amended and restated call agreement (the “Call Agreement”) in respect of Augusta
Newsprint Inc. (“ANI”), an indirect subsidiary of The Woodbridge Company Limited (“Woodbridge”) and our partner in ANC. ANC is the partnership that
owns and operates the Augusta, Georgia newsprint mill. The Call Agreement obligated ACSC to either buy out ANI at a price well above market, or risk
losing all of its equity in the joint venture pursuant to forced sale provisions. The U.S. Court granted our motion on October 27, 2009 and approved the
rejection of the Call Agreement. Our counterparties to the Call Agreement filed a Notice of Appeal with the U.S. Court on November 3, 2009. If the U.S.
Court’s judgment is not upheld and a forced sale is consummated, there can be no assurance that we would be able to recover any or all of our 52.5% equity
interest in ANC, which as of December 31, 2009, was approximately $100 million.
Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks
and assumptions underlying the projections and/or valuation estimates may prove to be wrong in material respects. Actual results may vary significantly
from those contemplated by the projections.
From 10Q Nov 15th 2010
What you make of latest version of Plan supplement 12?
Reading latest Plan....
Give me a couple of hours....
No new Plan. What happened?
Debtor’s Averment 42 (Page 17)
AbitibiBowater’s pulp and paper mill at Grand Falls continued to be powered principally by energy generated from the Bishop’s Falls and Grand Falls hydroelectric generation facilities, which together form part of what is hereafter referred to as the “Exploits River Hydro Assets.” The rights structure for the Exploits River Hydro Assets is a complex one, but the assets include among other things:
the Millertown dam (to which AbitibiBowater obtained rights in 1905);
the water use and hydroelectric generation rights at Grand Falls (which may be traced to Reid Lot 59, the Charter Lease, and a 2002 water use license, one of the 50-Year Licenses referenced above);
the Grand Falls power house and dam (which are located within Reid Lot 59);
the water use and hydroelectric generation rights at Bishop’s Falls (which can be traced to the Bishop’s Falls Deed, including the Bishop’s Falls Waterpower Lease and a 2002 water use license, one of the 50-Year Licenses referenced above); and
the Bishop’s Falls power house and dam (which rights were conferred by the Bishop’s Falls Deed).
Conclusion: The Debtor’s Rights’ structure is complex and includes many assets.
Release Date: Monday, February 11, 2008
Vancouver, BC – Catalyst Paper Corporation (TSX:CTL) today announced that it has entered into a definitive agreement with a subsidiary of AbitibiBowater to acquire its Snowflake Arizona recycled newsprint mill for a total consideration of US$161 million in cash. The purchase price excludes trade receivables of approximately US$19 million that are being retained by AbitibiBowater. The acquisition will be financed through a combination of Catalyst Paper’s revolving credit facilities and a proposed C$125 million rights offering.
The Acquisition
The Snowflake mill, a leading recycled newsprint producer with annual production capacity of 375,000 metric tonnes on two modern paper machines, is regarded as one of the lowest cost newsprint mills in North America. The acquisition of the Snowflake mill will increase Catalyst Paper’s total newsprint production capacity to approximately 980,000 metric tonnes. The mill also houses a corrugating medium machine owned by Smurfit Stone Container Corporation, which is operated by the Snowflake mill. The Apache Railway Company, a short-line railroad operating freight service between Snowflake, AZ and Holbrook, AZ is also included in the transaction.
In 2006, the Snowflake mill generated earnings before interest, taxes, depreciation and amortization (“EBITDA”) of US$58 million on net revenues of US$195 million. For the last 12 months ending September 30, 2007, the Snowflake mill generated EBITDA of US$30 million on net revenues of US$185 million. These EBITDA figures exclude AbitibiBowater corporate charges.
The acquisition of the Snowflake mill assets will provide the company with:
•one of the lowest-cost newsprint mills in North America;
•geographic, fibre and currency diversification;
•the opportunity to expand into one of North America’s fastest growing metropolitan regions, with no other newsprint mill operating within a 1,600 kilometre radius;
•an energy self-sufficient asset with the potential to sell excess electricity onto the power grid;
•expected annual synergies of at least US$10 million through increased scale which will provide general overall cost reduction in purchasing, sales, marketing and other services, and optimization of product distribution networks; and
•favourable business environment and industry hosting conditions.
“Snowflake is a first-class newsprint mill,” noted Richard Garneau, president and chief executive officer of Catalyst Paper. “We are very pleased to announce this transaction as the Snowflake mill will improve our cost-competitiveness, strengthen our presence on the west coast of North America and provide us with a more freight logical way to serve existing as well as new customers. In addition, this acquisition will provide Catalyst with a natural hedge against Canadian dollar fluctuations and is particularly timely in the current environment of virgin fibre supply constraints.”
The acquisition of the Snowflake mill is subject to the consent of the U.S. Department of Justice, other customary conditions and completion of the rights offering financing and is expected to close in the second quarter of 2008. The transacting parties have also agreed to a three-year supply contract under which AbitibiBowater will provide approximately 40% of the Snowflake mill’s recycled fibre supply in the first year, decreasing in proportion over the life of the agreement. Catalyst Paper intends to source the remainder of the mill’s fibre requirements directly from the recycled fibre market in western North America.
THE PIX NEWSPRINT BENCHMARK INDEXES (per metric ton)
Definitions of pulp and paper grade terms
Date Standard Newsprint
45 g/m2 in Europe
(Euro) Standard Newsprint
30lb. in the U.S.
(US dollars) Standard Newsprint
27lb. in the U.S.
(US dollars)
9-Nov-10 417.87 621.52 662.67
2-Nov-10 417.49 621.52 662.67
26-Oct-10 415.97 621.52 662.67
October 29, 2010
Hon. Judge Kevin J. Carey
United States Bankruptcy Court
District of Delaware
824 N. Market Street. 3rd Floor
Wilmington, Delaware 19801
Re: AbitibiBowater Inc, et al. Case No. 09-11296 (KJC)
Honorable Judge Carey:
I am a common shareholder of AbitibiBowater Inc. (henceforth, ABH), and would like to take this opportunity to present a succinct, cogent argument as to why the Plan proposed by ABH management should not be confirmed.
1. Dramatically restructured operations
ABH today is a much-improved company compared to when it entered bankruptcy. ABH significantly transformed its business while in bankruptcy: closing high cost mills, shifting focus to more attractive paper grades, and slashing operating costs. As an example, ABH closed in excess of 900k tons of newsprint capacity (representing 20% of ABH’s capacity and in excess of 10% of North American capacity) since January 2010. I anticipate only 36% of future EBITDA will be generated from Newsprint, with the other 64% coming from coated paper, specialty paper, pulp, and wood products. Additionally, the company reduced fixed costs by $925mm and will benefit from an agreement with the union upon confirmation of the Plan Of Reorganization, which will further reduce COGS (Cost of goods sold) and SG&A (Selling, general and administration) by $115 millions.
2. Overly pessimistic outlook for newsprint and under-appreciated sustainable export storyAs a result of the secular decline in North American newsprint demand accompanied by the step-function loss of demand experienced during the financial crisis, much of the North American newsprint industry found itself in financial distress over the past couple of years. The industry responded by dramatically reducing North American capacity by in excess of one forth since 2009. This reduction of capacity has caused a spillover effect which has increased the cash costs for newsprint manufacturers outside of North America and thus, shifted the cost curve in favor of the North American producers (who are currently the low cost producers in the world). This dynamic stems from North American producer’s outsized reliance on virgin wood fiber as its key raw material, relative to Asian and European producers who rely much more heavily on recycled newspaper (ONP - Old Newsprint). Historically, ONP was in plentiful supply and thus, its cheap cost accompanied by a production process that was less energy intensive allowed ONP mills to produce newsprint on the lower end of the global cost curve. As a result, almost all of the European and Asian mills built over the past two decades have been ONP-based and most do not have the equipment or the wood supply to produce newsprint using virgin wood fiber. This has come back to bite them, as ONP can only be recycled 4 times before the fibers breakdown and Asian producers must source ONP in North America (which they then have to ship back to Asia) because of its high virgin fiber content. Due to the rapid decline in North American production of newsprint, unsurprisingly recycled newsprint has become increasingly tight (and is expected to remain tight) – driving up the cost for ONP to in excess of $100 per ton relative to $50 two years ago. Additionally, the current low cost of natural gas in North America has reduced the energy cost advantage of the ONP production process. As a result, North American producers currently have over $150 cash cost per ton advantage over Asian producers. Meanwhile, European producers would not be competitive until the Euro was sub $1.20, a situation which seems less likely every day. All of the aforementioned factors have created a huge export story (ABH is currently exporting over 50% of its production and is turning down export orders) allowing North American producers to operate at 100% utilization ratios and thus, creating pricing momentum. Despite the continued secular decline in North American newsprint demand (which is expected to continue to decline at 5-6% per year), the rest of the world is actually growing - Asian demand is expected to increase in excess of 500k tons per year through 2014 (more than offsetting the decline in North American demand, as the base of North American demand is already extremely low) as literacy rates increase in emerging markets. Therefore, ABH is expected to maintain its ability to generate meaningful cash flow from newsprint operations into the foreseeable future, as it exports more of its production into the Asia and Latin America.
3. Near-term upside in coated & super-calendar paper
ABH has in excess of 1mm tons of capacity of coated paper and super-calendar paper, representing in excess of 15% of North American production. Due to a dramatic reduction in capacity and inventories, accompanied by a second half recovery in magazine and catalog circulation, coated paper manufacturers have recently announced $100 per ton of price increases. Despite these price increases, I believe there is room for additional price increases, as prices remain near historic lows on a real basis. Additionally, the US ITC (United States International Trade Commission) ruled on October 24th 2010 that domestic coated paper makers are being harmed by low-cost imports from Indonesia and China. This was the last of 4 decisions that was necessary for tariffs to be imposed on imports and is expected to keep the Chinese out of the domestic market for the next 5-years, which should further support price stability.1
4. Pulp – A long-term secular story
The recent run-up in pulp prices in 2010 to in excess of $1,000 highlights the long-term story for pulp, as consumption per-capita increases in the developed world, as more and more people in emerging market use tissues, toilet-paper, diapers, etc. and and areas of North America are the only place in the world that produce long-fiber NBSK ( northern bleached softwood kraft) pulp. Also recent industry pulp data has indicated no decline, as demand in China continues to support pricing. In addition, current prices are in excess of the Plan assumptions.
5. Upside from monetization of wood products and other assets are not reflected in the Plan
The wood products division is currently generating virtually no EBITDA. This division of ABH has generated as high as $110mm of EBITDA in the past and I believe for next the 5 years EBITDA for this business will be $100mm/year. Assuming 6x, this business could be worth $600 million alone and is not reflected in the Plan. ACH sale: ABH is in the regulatory process of selling its one of the Hydro Power Asset. This asset have 230 million of non recourse debt associated with them (Over $220 million in equity value). I expect the asset will be sold for in excess of $450 million by first quarter of 2011.
I currently ascribe no value to other assets including timberland and closed mills (which they have been selling to scrape steel companies for $18-20 million)NOL's: ABH has retained significant NOL's and I do not expect them to be a tax payer for an extensive period of time.
Business Overview/Paper Grade Exposure:
Newsprint: 3.3mm tons of capacity representing 9% of worldwide capacity and 37% of North American capacity
Coated papers: 658k tons of capacity representing 15% of North American capacity
Specialty papers: 1.8mm tons of capacity representing 36% of North American capacity (note: roughly 1/3 of this capacity is supercalendar capacity, which trades like coated, 1/3 trades like uncoated, and 1/3 trades like newsprint)
Market pulp: 1.1mm tons representing 7% of North American capacity
Wood products: the company operates 18 sawmills in Canada that produce construction grade lumber sold in North America.
For a large, multinational corporation as ABH, there are many factors that can drastically affect its EBITDA. Below are some of these key sensitivities.
-/+ $25 newsprint = -/+ 85mm of EBITDA
-/+ $30 CPP = -/+ 65mm of EBITDA
-/+ $25 Pulp = -/+ 26mm of EBITDA
+/- .01 C$/US$ = -/+ 20mm of EBITDA
+ / - 10% natural gas = -/+ 11mm of EBITDA
A change of $25 in the cost of newsprint per ton affects the EBITDA by $85million, whereas a change of penny in value of the Canadian Dollar against the US Dollar can affect it by $20 million. Hence, it is imperative that we use the most current rates (and not the stale data used in the Plan) and account for the near-term projections in determining ABH’s value.
Conclusion
In light of all the arguments presented above, I would like to request this Court to dismiss the proposed Plan and ask for one that includes a more thorough and accurate valuation. Such a valuation would show that the company is in good enough shape to partially compensate the existing common shareholders. Meanwhile, the 8.5% compensation for management is patently ludicrous and yet another reason to reject this Plan.
Respectfully,
The record reflects the Intercompany Claim does not, and was not intended to, rank paripassu with the unsecured debt claims against SSC Canada and should be valued at zero dollars. The Intercompany Claim does not have similar legal attributes as the General Unsecured Claims against SSC Canada and does not have the same rights against the estate of SSC Canada. Thus, the Intercompany Claim is sufficiently different from the General Unsecured Claims against SSC Canada to justify separate classification of the Intercompany Claim pursuant to section 1122(a) of the Bankruptcy Code.Even if the Intercompany Claim were sufficiently "substantially similar" to the General Unsecured Claims against SSC Canada to permit the Debtors to classify the Intercompany Claim in Class 15D, separate classification of substantially similar claims is permitted under section 1122(a) of the Bankruptcy Code. The classification of the Intercompany Claim is reasonable and not arbitrary, and complies with section 1122(a) of the Bankruptcy Code. SeeIn re Jersey City Med. Ctr., 817 F.2d 1055, 1060-61 (3d Cir. 1987); seealsoIn re Kaiser Aluminum Corp., No. 02-10429 (JKF), 7312, 2006 WL 616243 *5-6 (Bankr. D. Del. Feb. 6, 2006).
Where is the valuation report? I would like to see that before I sell my stock...
This policy of open inspection, codified generally in §107(a) of the Bankruptcy Code, evidences Congress’s strong desire to preserve the public’s right of access to judicial records in bankruptcy proceedings. See Orion, 21 F.3d at 26. Section 107(a) of the Code provides that all papers filed in the case and the dockets of a bankruptcy court “are public records and open to examination by an entity at reasonable times without charge.” 11 U.S.C. §107(a). The legislative history of §107(a) confirms Congress’s general intent to keep access to judicial records open. Senate Report No. 989 states that §107(a) “makes all papers filed in a bankruptcy case and the dockets of the bankruptcy court public and open to examination at reasonable times without charge.” S. Rep. No. 989, 95th Cong., 2d Sess. 30, reprinted in 1978 U.S.C.C.A.N. 5787, 5816.
Moreover, on a purely practical level, the sealing of court records inflicts a costly nuisance on the judicial system. See City of Hartford v. Chase, 942 F.2d 130, 137 (2d Cir. 1991) (Pratt, J., concurring). Mechanical and logistical problems of sealing the files, finding extra space in the vault, satisfying handling requirements, plus the related direct and indirect costs, impose substantial burdens on the clerk’s office and on a judge’s staff. All these factors argue strongly for open access to court records in the bankruptcy court. See id.
In the case of In re Orion Pictures Corp., 21 F.3d 24, 27 (2d Cir. 1994), the Second Circuit explained that “n most cases, a judge must carefully and skeptically review sealing requests to insure that there really is an extraordinary circumstance or compelling need.” Moreover, the Second Circuit emphasized that, “it is a basic tenet of our jurisprudence that court records are public and “open to examination by an entity at reasonable times without charge.” 11 U.S.C. §107(a); see, e.g., Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110 (2d Cir. 2006), (discussing Constitutional and common law rights of access to documents filed in court).
In Orion, the debtor sought to seal certain specific confidential commercial information consisting of the terms of a promotional agreement between the debtor and a major customer that the court determined would give competitors, who sought to make the information public a direct competitive advantage. The Second Circuit held that, under §107(b), protection is available if an interested party could demonstrate “that the information it sought to seal was ‘confidential’ and ‘commercial’ in nature.” Id. Of course, most would agree that the sealing of a single agreement with the debtor’s major customer is completely appropriate.
The Second Circuit held in Orion that §107(b) created a narrow exception to the general rule. Moreover, in Orion, the Second Circuit narrowly defined the term “commercial,” as used in section 107(b), as “information which would cause ‘an unfair advantage to competitors by providing them information as to the commercial operations of the debtor.’” 21 F.3d at 27 (quoting Ad Hoc Protective Comm. for 10 1/2% Debenture Holders v. Itel Corp. (In re Itel Corp.), 17 B.R. 942, 944 (B.A.P. 9th Cir. 1982)).
May 25, 2010 6:42 PM
With Shareholders Okay, Smurfit-Stone Set to Exit Bankruptcy Posted by Brian Baxter
Chicagoans know the city's Smurfit-Stone Building as both a feminist icon and billboard for local pro sports teams in the playoff hunt. And now, they know that the Windy City-based company that is its namesake, Smurfit-Stone Container Corp., is poised to exit Chapter 11.
Reuters reports that after an agreement on Monday to redistribute 2.25 percent of stock in a reorganized Smurfit-Stone to shareholders owning prebankruptcy preferred shares--as well as handing the same percentage in the reorganized company to holders of the debtor's old common stock--the container maker could be leaving bankruptcy behind at a time when demand for its cardboard boxes is high. (They come in handy, for instance, when cleaning out one's desk.)
For the past several months, Smurfit-Stone shareholders have been battling the company in bankruptcy court in Delaware, where they are opposing the debtor's proposed reorganization plan. Reuters reports the latest deal will see Smurfit-Stone abandon its plan to give its stock to unsecured creditors and leave nothing for former shareholders. The new plan will dilute the potential recovery for bondholders, but a lawyer for the company's unsecured creditors committee told Reuters that it was in everyone's best interest to move forward.
"We felt it was an appropriate way to proceed to get the company out of bankruptcy as soon as possible," said Kramer Levin Naftalis & Frankel corporate restructuring cochair Thomas Moers Mayer. (The firm is advising the committee along with bankruptcy boutique Pachulski Stang Ziehl & Jones.)
Added Willkie Farr & Gallagher restructuring partner Rachel Strickland, an attorney representing holders of preferred Smurfit-Stone stock: "As a result of [shareholders'] efforts, the debtors were compelled to update their projections and recognize the value that belongs to shareholders."The Smurfit-Stone bankruptcy has been a lucrative assignment for the company's bankruptcy counsel. Court filings show that Sidley Austin has billed Smurfit-Stone for more than $12.8 million in fees and expenses since the beginning of the company's Chapter 11 case on January 26, 2009.
Sidley Austin reorganization cochair James Conlan ($950 per hour), bankruptcy partners Matthew Clemente ($725) and Dennis Twomey ($675), and restructuring associate Bojan Guzina ($650) are leading the team from the firm advising Smurfit-Stone in bankruptcy proceedings. Delaware firm Young Conaway Stargatt & Taylor is serving as local debtor's counsel.
Sidley's Clemente and Twomey did not immediately respond to a request for comment.
Earlier this month a Canadian court approved a bankruptcy exit plan for Smurfit-Stone. Stikeman Elliott is serving as the company's Canadian counsel.
SSCC, through its wholly-owned subsidiary, Smurfit-Stone
Container Enterprises (“SSCE,” and collectively with SSCC,
hereinafer referred to as “Smurfit” or “the Company”), is one of
the leading integrated manufacturers of paperboard and paperbased
packaging in North America and one of the world’s largestpaper recyclers. The Company was created through the 1998 merger
of Jefferson Smurfit Corporation and Stone Container Corporation.
It sells a broad range of paper-based packaging products,
including containerboard, corrugated containers, kraft paper and
point of purchase displays, to a broad range of manufacturers of
industrial and consumer products.
The recent recession dramatically reduced demand for
Smurfit’s products at the same time as increased competition
forced Smurfit to accept lower prices from purchasers of itsproducts. The Company’s deteriorating financial condition led
it, along with 25 affiliated debtors (collectively with Smurfit,
“the Debtors”), to commence voluntary proceedings for relief
under Chapter 11 of the Bankruptcy Code before this Court on
January 26, 2009 (the “Petition Date”).
From: Harvey Decleration:
Management and Fairfax both considered the 8.00% Convertible Notes to
be a junior equity investment, which would be converted to equity without any debt service
payments made. The strike price of the 8.00% Convertible Notes was $10 per share and ABH’s
stock was trading at $13.79 per share after ABH announced its agreement with Fairfax for the
sale and issuance of the 8.00% Convertible Notes.
Even if Fairfax did not convert the 8.00% Convertible Notes, no one
expected Bowater to have to make payment on the 8.00% Convertible Notes at the time the
8.00% Convertible Notes Guaranty was issued. The 8.00% Convertible Notes were part of a
comprehensive refinancing plan, which, coupled with cost reductions and price increases taking
hold at the time the 8.00% Convertible Notes Guaranty was issued, was projected to provide the
Company with adequate liquidity for the foreseeable future.
Furthermore, our internal projections and industry pricing estimates
showed that Bowater’s financial condition would continue to improve throughout 2008 and
2009. The industry had recovered from then-historic lows in newsprint pricing in the Fall of
2007. We were realizing a series of price increases that were taking hold in the market at the
time the 8.00% Convertible Notes Guaranty was issued due to a very good supply-demand
balance resulting from reduced capacity in the industry as a result of capacity closures and
increased demand in the worldwide market. Indeed, Bowater out-performed its projections from
March through May 2008.
Additionally, Bowater received a clean audit opinion in its 10-K filed on
March 17, 2008, and also received a May 15, 2008 solvency opinion by a respected financial
advisory firm, Houlihan Lokey. Houlihan Lokey concluded that Bowater was solvent even after
accounting for the spin out of two valuable Bowater mills, Coosa Pines and Grenada, which were
8
owned by Bowater at the time it issued the 8.00% Convertible Notes Guaranty. In its opinion,
Houlihan Lokey concluded that Bowater was solvent under the “balance sheet” test, the
“unreasonably small capital” test and the “equity” test.
I am advised that the Association of Western Pulp and Paper Workers
("AWPP"), a collective bargaining agent for employees at Ponderay Newsprint Company
("Ponderay"), and certain of Ponderay's employees, objected to confirmation of the Plan,
arguing, inter alia, that the Plan cannot be confirmed because any potential labor strike and
disruption of Ponderay's production impacts the feasibility of the Plan and the Debtors' financial
projections. Ponderay is an unconsolidated partnership in which Debtor Lake Superior Forest
Products Inc. holds a minority interest. While Bowater manages the day-to-day operations for
the Ponderay mill pursuant to a management agreement between Bowater and Ponderay,
Ponderay’s partners are the ones that make material management decisions, including approval
of, and negotiating, labor agreements.