Beard Corporate Restructuring Review for May 2013

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Beard Group Corporate Restructuring ReviewFor May 2013

Presented byBeard Group, Inc.

P.O. Box 4250Frederick, MD 21705-4250

Voice: (240) 629-3300Fax: (240) 629-3360

E-mail: [email protected]

An audio recording of this presentation is availableat http://bankrupt.com/restructuringreview/

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Welcome to the Beard Group Corporate RestructuringReview for May 2013, brought to you by the editors of theTroubled Company Reporter and Troubled Company Prospector.

In this month's Corporate Restructuring Review, we'll discussfive topics:

first, last month's largest chapter 11 filings and otherstatistics;

second, large chapter 11 filings TCR editors anticipatein the near-term;

third, a quick review of the major pending disputes inchapter 11 cases that we monitor day-by-day;
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fourth, reminders about debtors whose emergence fromchapter 11 has been delayed; and

fifth, information you're unlikely to find elsewhere aboutnew publicly traded securities being issued by

chapter 11 debtors.

May 2013 Mega Cases

Now, let's review the largest chapter 11 cases in May 2013.

Danilo Muoz reports that two Chapter 11 cases were filedinvolving more than $100 million in assets in May 2013. Duringthe previous month, there were five bankruptcy mega filings,including one that involved more than $1 billion in assets.

Through May 2013, a total of 23 mega cases were filed,

including five that involved more than $1 billion in assets.

For fiscal year 2012, there were a total of 12 companies thatfiled for Chapter 11 with excess of $1 billion in assets. Five ofthose billion-dollar cases were filed in May that year.

Meanwhile, a total of 64 mega filings with assets in excess of$100 million were filed in 2012, compared to 82 mega filingsduring the same period in 2011 and 106 in 2010.

The month's largest Chapter 11 filing was by Sound ShoreMedical Center of Westchester, Mount Vernon Hospital Inc.,Howe Avenue Nursing Home and related entities. They soughtChapter 11 protection on May 29, 2013, with the Bankruptcy

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Court for the Southern District of New York in White Plains [LeadCase No. 13-22840].

The Sound Shore entities are the largest "safety net"

providers for Southern Westchester County in New York.Affiliated with New York Medical College, Sound Shore is a not-for-profit 242-bed, community based-teaching hospital located inNew Rochelle, New York. Mountain Vernon Hospital is avoluntary, not-for-profit 176-bed hospital located in Mount Vernon,New York. Howe Avenue Nursing Home is a 150-bed,comprehensive facility.

Sound Shore disclosed assets of $159.6 million andliabilities totaling $200 million. Revenue of $241.8 million in 2012resulted in an operating loss of $16.4 million.

The second largest Chapter 11 filing in May was filed by OakRock Financial LLC, an asset-based lender. Oak Rock put itselfinto Chapter 11 on May 6 with the U.S. Bankruptcy Court for theEastern District of New York in Central Islip [Case No. 13-72251].

The company disclosed assets of $131.1 million and debt totaling$99.9 million in the Chapter 11 papers.

On April 29, three Israeli banks filed an involuntary Chapter 7petition claiming that Oak Rock is a "massive fraud" thatrepresented having $2.5 million of additional borrowing powerfrom its bank lenders when in reality the loans were overdrawn by$47 million.

The fraud allegations have been corroborated by Oak Rock'snewly appointed Chief Restructuring Officer Clifford Zucker, fromCohnReznick LLP. Mr. Zucker described the discovery of"misconduct" by company President John Murphy, saying hemisstated collateral standing behind $90 million in secured bank

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loans. Mr. Murphy, who is the target of an FBI investigation, hassince resigned and "is now nowhere to be found."

Oak Rock provided revolving lines of credit to dealers in

consumer goods who used advances to finance purchases by thedealers' own customers. In addition to the bank loan, Oak Rockfinanced the business by selling $62.8 million in participations inthe loans it made to customers, according to a court filing by Mr.Zucker.

None of the two mega filings involved a prepackaged or pre-arranged bankruptcy. During the first five months of 2013, 12 of

the 23 mega filings involved a prepackaged Chapter 11.

For fiscal year 2012, 13 of the 64 mega cases involved aprepackaged Chapter 11 filing, or about 20% of the mega cases.For 2011, 13 of the 83 mega cases involved a prepackagedChapter 11 plan as of the Petition Date -- or about 16% of thelarge Chapter 11 filings. For fiscal year 2010, a total of 35prepacks/pre-arranged cases were filed out of the 106 bankruptcy

mega cases -- or about one in every three filings in 2010.

For the month of May, one mega filing each came from thefinance and healthcare industries.

During the first five months of 2013, 10 of the mega filingsbelonged to the information industry, 4 are involved inmanufacturing and 3 are involved in healthcare.

The distribution of bankruptcy mega cases by industry for2012 is:

Manufacturing 10 16%Information 8 13%Finance & Insurance 7 11%

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Real Estate 6 9%Transportation 5 8%Others 28 44%

The distribution of bankruptcy mega cases by industry for2011 is:

Manufacturing 14 17%Accommodation & Food Services 12 14%Finance & Insurance 9 11%Information 8 10%Retail Trade 7 8%

Real Estate 7 8%Others 26 32%

For the month of May, one mega filing each was filed in theSouthern and Eastern Districts of New York.

For the first five months of 2013, the Bankruptcy Court forthe District of Delaware cornered the lions share with 14 of the 20

mega filings, while the Southern District of New York had only 4mega filings.

Last year, the Bankruptcy Court for the Southern District ofNew York was the most favored venue for mega filers with 21.The Delaware Bankruptcy Court had 19 of the mega cases.

In 2011, the Delaware Bankruptcy Court was the mostfavored venue with 38 filings, or 46% of the mega cases, followed

by the Southern District of New York with 16 filings, or 19% of themega cases, and by the Northern District of Texas with 4 filings,or 5% of the mega cases. The rest of the bankruptcy mega casesare spread evenly throughout the various bankruptcy courts.

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Lehman Brothers Holding Corp. remains the biggestcorporate bust in history. Lehman, which filed in 2008, had $639billion in total assets and $613 billion in total debts at that time ofits filing.

For 2011, the largest Chapter 11 filing was filed by MFGlobal Holdings Ltd. and its affiliates. As of Sept. 30, 2011, MFGlobal had $41.05 billion in total assets and $39.68 billion in totalliabilities.

For 2012, the largest Chapter 11 filing was by ResidentialCapital LLC, which disclosed $15.68 billion in assets and $15.28

billion in liabilities as of March 31, 2012.

For first five months 2013, the largest Chapter 11 filing wasfiled by Dex One Corp., which filed for Chapter 11, listing totalassets of $2.84 billion and total liabilities of $2.79 billion. Otherbillion-dollar filers are: Dex One's merger partner, SupermediaInc.; publisher Reader's Digest; vodka producer Central EuropeanDistribution Corp. or CEDC; and New Jersey casino operator

Revel.

For the first five months of 2013, Young Conaway Stargatt &Taylor LLP represented 5 of the 23 mega filings either as counselor co-counsel. The law firm represented the School Specialty,Penson Worldwide, Super Media, Otelco and Rotech Healthcarein their respective Chapter 11 cases.

Anticipated Large Chapter 11 Filings

Now, let's turn to the topic of large chapter 11 filings TroubledCompany Reporter editors anticipate in the near-term._____________________________________________________________________________



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Carlo Fernandez identified four companies that may be closeto filing for bankruptcy. These are: UniTek Global, Energy FutureHoldings, Excel Maritime and Maxcom Telecommunications.

(A) UniTek Global

UniTek Global Services, Inc. failed to make the interestpayment that was due May 29, 2013 within the applicable graceperiod under its term loan credit agreement.

Unitek has forbearance agreements with lenders under itsterm and revolving credit agreements. UniTek announced that ithas initiated a process to explore refinancing alternatives for itsdebt to address its tightening financial covenants and liquiditysituation.

UniTek, based in Blue Bell, Pennsylvania, provides fulfillmentand infrastructure services to media and telecommunication

companies in the United States and Canada.

Standard & Poor's credit analyst Michael Weinstein said,"We do not believe that the company will have sufficient liquidityto make this interest payment until it negotiates with its lenders,as the company is operating with a negligible cash balance andwe do not believe it currently has access to capacity under itsasset-based revolving credit facility.

"Despite the company's intention to refinance and amend itscredit facility, we believe the company might pursue a distressedexchange or file for bankruptcy under Chapter 11 if an attempt torefinance is not successful," Mr. Weinstein added.

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(B) Energy Future Holdings

If and when Energy Future Holdings Corp. ends up inbankruptcy, the value of the Texas power plant owner won't be

sufficient to cover the $22.6 billion in first-lien debt owing by unitTexas Competitive Electric Holdings Co., according to a report byMorningstar Institutional Credit Research.

In an effort to restructure TCEH's approximately $32 billion indebt, the company disclosed in April that it had proposed thatTCEH's first-lien lenders exchange debt for $5 billion cash or newlong-term debt of TCEH plus 85 percent of the parent's equity.

The creditors turned down the offer.

Absent agreement with creditors, Morningstar seesbankruptcy as being precipitated by a loan-covenant violation latethis year on senior debt or inability to refinance a $3.8 billionTCEH term loan that matures in October 2014.

Energy Future incurred a net loss of $3.36 billion on $5.63

billion of operating revenues for 2012. This follows net losses of$1.91 billion in 2011 and $2.81 billion in 2010.

The Company's balance sheet at Dec. 31, 2012, showed$40.97 billion in total assets, $51.89 billion in total liabilities and a$10.92 billion total deficit.

(C) Excel Maritime

Excel Maritime Carriers Ltd., on June 10 commencedsoliciting acceptances of the Joint Prepackaged Chapter 11 Planof Reorganization. The Plan is supported by a steeringcommittee of secured lenders.

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The voting deadline to accept or reject the Plan is June 28.

The Company estimates its total enterprise value to bebetween $575 million and $625 million, with a mid-point of $600

million.

Under the Plan, the lenders will receive a restructuredobligation of approximately $771 million plus 100 percent of thestock in the reorganized company with an estimated recovery of77 percent of the face amount of their claims.

Holders of general unsecured claims, with estimated amount

of $163 million, have estimated recovery of 3 percent.

Based in Athens, Greece, Excel Maritime is an owner andoperator of dry bulk carriers and a provider of worldwide seabornetransportation services for dry bulk cargoes, such as iron ore, coaland grains, as well as bauxite, fertilizers and steel products.Excel owns a fleet of 40 vessels and, together with 7 Panamaxvessels under bareboat charters, operates 47 vessels.

The balance sheet for December 2011 had assets of $2.72billion and liabilities totaling $1.16 billion.

(D) Maxcom Telecom

Maxcom Telecommunications had a net loss of 136 millionMexican pesos on 2.2 billion Mexican pesos of net revenues in

2012, as compared with a net loss of 513 million Mexican pesoson 2.4 billion Mexican pesos of net revenues in 2011

The Company's balance sheet at December 31, 2012,showed 4.9 billion in total assets against 2.8 billion Mexicanpesos in total liabilities._____________________________________________________________________________



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KPMG Cardenas Dosal, S.C., in Mexico City, Mexico, issueda going concern qualification on the financial statements, notingthat the Company has experienced recurring losses, declines in

revenues, cash flows and cash balances.

The Company's Senior Notes are due December 15, 2014,for which semi-annual interest payments are due on June 2013,December 2013 and June 2014.

The Company acknowledged that its ability to continueoperating as a going concern is dependent upon its ability to

obtain sufficient cash to pay the outstanding interest paymentsand to restructure its senior notes. The Company plans toaddress this situation be considering all of its alternative including,but not limited to:

* savings in capital expenditures by ceasing capitalexpenditures for expansion projects and by limiting

capital

expenditures only to maintain the current operations;

* looking for new investors to obtain a capital injection;

* refinancing of the outstanding notes in order to extendtheir maturity;

* other restructuring proceedings, for instance by thecommencement of a voluntary restructuring under

Chapter 11 of the Unites States Bankruptcy Code."

Maxcom Telecomunicaciones, headquartered in Mexico City,Mexico, is a facilities-based telecommunications provider using a"smart-build" approach to deliver last-mile connectivity to micro,

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small and medium-sized businesses and residential customers inthe Mexican territory.

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In addition to the challenged companies mentioned in Mr.Fernandez's report, the Troubled Company Reporter provides on-going reporting about more than 3,000 companies experiencingfinancial distress or restructuring their balance sheets in a judicialproceeding. Stay tuned to learn more about obtaining a trialsubscription to the TCR at no cost or obligation.

Major Pending Disputes In Chapter 11 Cases

Next, we'll quickly review major pending disputes in largechapter 11 cases that Troubled Company Reporter editorsmonitor day-by-day.

(A) TOUSA

Bankruptcy homebuilder TOUSA Inc. on June 6 asked aFlorida bankruptcy judge to approve a settlement whereby itsinsurers will pay $67 million to end a lawsuit accusing Tousa's topbrass of disregarding their duty to the company and its creditors.

The $67 million could be the last missing piece before theliquidating homebuilder can move ahead with bankruptcy courtapproval of a Chapter 11 plan filed in mid-May.

As with everything in Tousa, the dispute with the insurancecompanies revolved around a fraudulent transfer before_____________________________________________________________________________



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bankruptcy where Tousa operating affiliates were made liable ondebt which previously had not been their responsibilities. The

judgment finding fraudulent transfers was upheld in the US Courtof Appeals in Atlanta. Alongside the main suit, Tousa's creditors

sued the company's directors and officers for authorizing thefraudulent transfers. There were also lawsuits with insurancecompanies that provided directors' and officers' liability insuranceover the question of whether there was liability on the policies.

Among the insurance companies involved are FederalInsurance Co., XL Specialty Insurance Co. and Zurich AmericanInsurance Co.

Tousa's secured lenders also sued the directors and officers,who turned the claims over to the insurance companies. Insettlement, the insurers will pay $67 million, with $47.9 milliongoing to creditors of the Tousa companies that were forced toshoulder debt improperly. The first lien lenders receive $7.66million, while second-lien lenders take home $11.5 million.

Some of the insurance companies also pay $8.27 million ofthe directors' and officers' defense costs.

The new settlement was crafted by mediator Peter L.Borowitz, who was also responsible for the larger settlementunderlying the Chapter 11 plan. The settlement took two years towork out in mediation. The Florida bankruptcy court will convenea July 11 hearing to hear merits of the settlement.

The appeal in the Circuit Court of Appeals was Citicorp NorthAmerica Inc. v. Official Committee of Unsecured Creditors (In reTousa Inc.), 11-11071, U.S. Court of Appeals for the EleventhCircuit (Atlanta).

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(B) Patriot Coal

Patriot Coal Corp. has been granted permission to tear up itscollective bargaining agreements with the United Mine Workers(UMW) and escape its obligations to provide health care to itsretirees. The May 29 ruling by US Bankruptcy Judge Kathy A.Surratt-States threatens the health care for some 21,000 retireesand their dependents and promises to bring down the labor costsof its more than 1,650 unionized miners to the level of its non-

union workforce.

Under the ruling, Patriot will be allowed to change itscollective bargaining agreements for both its active unionworkforce and retirees. The company said the ruling would permitit to adjust wages, benefits and work rules for union employees toa level consistent with the regional labor market.

Under its approved bankruptcy plan, Patriot will ceaseproviding health care to retirees and instead form a UMW RetireeHealthcare Trust, which will be structured as a VoluntaryEmployees Benefits Association (VEBA) to be administered bythe union. The company will provide the VEBA with $15 million incash, a fraction of its retiree health care costs now averagingnearly $7 million a month.

The UMW will be given a 35% stake in the reorganized

company giving the union a financial stake in ratcheting up theexploitation of its membership in the future company.

Patriot is the first major coal company to fall victim to theeconomic crisis of 2008, and its bankruptcy proceedings areclosely followed throughout the coal mining industry. It filed for_____________________________________________________________________________



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bankruptcy in July 2012 as coal demand dipped and stricterenvironmental regulations were being implemented.

In her ruling, Judge Surratt-States acknowledged the receipt

by the court of over 900 letters from retired coal miners and theworking conditions they endured for the promise of health care forlife and an earned pension. However, the judge said her decisionhad to be grounded in what the Bankruptcy Code and legalprecedent required. She also said her decision had to balancethe interests of the retirees with some 4,200 workers currentlyemployed by Patriot.

Patriot Coal was created on October 31, 2007 whenPeabody Energy - the worlds largest coal company - sold itsunion operations east of the Mississippi to the new company.Peabody sold the new company 13% of its coal reserves butburdened it with $617 million, or about 40%, of its healthcareliabilities, as well as a raft of below-market coal contracts. Amidstall these, Judge shied away from answering the charge thatPatriot was created to fail.

(C) Lehman Brothers

The trustee unwinding Lehman Brothers' defunct brokeragecontinued his fight with Barclays Plc over more than $2 billion onMay 29, with judges grilling lawyers on both sides over a keydocument that governed the British bank's purchase of Lehman'skey assets on the hectic September 2008 weekend that presaged

the financial crisis.

The definition of cash as a focal point, as three judges fromthe U.S. Court of Appeals for the Second Circuit in New York triedto determined if a bankruptcy judge properly approved a so-calledclarification letter._____________________________________________________________________________



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Trustee James W. Giddens is appealing a 2012 U.S. DistrictCourt decision handing Barclays most of the money in a "margin"account. The ruling was a win for Barclays in what was part of a

larger battle over whether Barclays negotiated a "secret discount"when it bought Lehman, a dispute also won by Barclays in a 2010bankruptcy court trial. While Mr. Giddens's appeal was of the2012 decision by U.S. District Judge Katherine Forrest, the judgesfocused almost entirely on the original bankruptcy-court decision.

Mr. Giddens, who is in charge of paying back Lehman'scustomers, said U.S. Bankruptcy Judge James Peck strictly

ordered "no cash" should go to Barclays from Lehman in the 2008sale. The judge approved the sale at a hearing on Sept. 19, 2008,a Friday, and told Lehman and Barclays to hash out the detailsover the weekend. Those details included, among other things,Lehman giving Barclays exchange-traded derivatives and thecash tied to them. The clarification letter depicted those assetsand other transactions, but was never expressly approved byJudge Peck.

Judge Gerard E. Lynch of the Court of Appeals said JudgePeck seemed to give a mixed message regarding the letter.

Judge Ralph K. Winter Jr. asked William Maguire, a HughesHubbard & Reed LLP lawyer representing Mr. Gidden, severalquestions about the exchange-traded derivative accounts thatwere transferred to Barclays.

In 2010, Lehman sued Barclays for billions of dollars,accusing the British bank of negotiating a discount that wasn'tadequately disclosed to the court when it bought Lehman'sbroker-dealer unit in 2008. Lehman sought to recover what itcalled more than $11 billion in ill-gotten gains by Barclays.

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For its part, Barclays argued in the months-long trial thatboth sides negotiated in good faith, and the deal, approved byJudge Peck just days after the investment bank collapsed intobankruptcy, was Lehman's best option.

While Lehman lost on its claims of a negotiated discount, thetrustee won on his dispute regarding the margin account andother accounts. That prompted Barclays to appeal, and last June,a U.S. District Court judge agreed with the British bank.

Mr. Giddens is reserving more than $5 billion in case of anunfavorable ruling on the dispute with Barclays.

In other matters, JPMorgan Chase & Co., which is fightingan $8.6 billion lawsuit by Lehman Brothers told a judge in lateMay it needs judicial assistance to seek testimony from DavidSwanson, a lawyer at Lehmans U.K. affiliate.

JPMorgan, accused of speeding Lehmans 2008 bankruptcyby demanding too much collateral for loans, said Mr. Swansons

evidence is necessary to show that Lehman in fact defrauded itsbank into lending $5 billion against risky securities known asRacers.

At the time, the former investment banks own Germanaffiliate wouldnt accept the securities as collateral, JPMorgansaid in a federal court filing in Manhattan on May 24.

The banks request to the judge follows a move by Lehman

to force Bruno Iksil, a French national known as the LondonWhale trader at JPMorgan, to answer questions. Lehmansrequest for international judicial assistance has been received byFrench authorities, according to a letter filed in court on May 6 bythe office that handles such requests.

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Delayed Exits From Chapter 11

Julie Anne Lopez-Toledo reports about three Chapter 11debtors whose emergence from Chapter 11 has been delayed:Pittsburgh Corning, Quigley and W.R. Grace.

(A) Pittsburgh Corning

After 13 years in bankruptcy, Pittsburgh Corning Corp. isseeing some light at the end of the tunnel.

A judge has given the thumbs up to a reorganization planthat calls for a $3.5 billion trust to resolve thousands of asbestos-related claims that caused the company to seek protection underChapter 11. U.S. Bankruptcy Judge Judith Fitzgerald approved aplan for Pittsburgh Corning to establish a trust to settle 235,000

lawsuits from people who claimed the company manufacturedand sold asbestos insulation that caused cancer and otherillnesses. She overruled final objections by insurance companiestrying to halt the reorganization of the building-supply company.

Judge Fitzgerald refused on May 25 to reconsider her initialapproval of the reorganization plan, which relies partly oninsurance proceeds to pay victims of asbestos exposure.

Insurers led by Mt. McKinley Insurance Co., had askedJudge Fitzgerald to reconsider her decision, claiming she erredMay 16 when she tentatively approved a plan to create a $3.5billion asbestos trust.

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The trust and the plan now go before a U.S. district courtjudge for a second approval, which is required for all asbestos-related bankruptcy cases that create a victims trust fund.

Phillip M. Martineau, Chairman and CEO of PittsburghCorning said the trust is intended to help support the people andfamilies who were harmed by asbestos. He further added thatwhile the legal work continues, and the Chapter 11 process is notyet fully concluded, the confirmation of the Plan of Reorganizationis a turning point, leading the Company closer to theconsummation of the Chapter 11 proceedings.

Under the bankruptcy plan, Pittsburgh Cornings parents --Corning Inc. and PPG Industries Inc. -- may shift their liability forasbestos claims to the trust, which the companies and theinsurers would fund. Corning and PPG would give the trust theright to collect on their insurance policies under the plan, whichMt. McKinley claimed would unfairly alter the policies.

During a court hearing May 23, Judge Fitzgerald gave the

insurers a final chance to talk her out of her decision. At the endof the hearing, she said she was unlikely to change her mind andasked the parties to submit any minor wording changes to herproposed order before she made a final ruling.

Pittsburgh Corning has operated under Chapter 11protection since April 16, 2000.

(B) Quigley

Quigley Co. Inc., a defunct Pfizer Inc. unit, now has a clearerpath to exiting its eight-year bankruptcy after a holdout group ofcreditors moved in May to reverse their votes and support the

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reorganization plan designed to resolve the companysmultibillion-dollar asbestos liability.

Pfizer previously set a June 26, 2013 confirmation hearing

for its fifth amended Chapter 11 reorganization plan. The Junehearing date marks Quigley's first bid for confirmation since U.S.Bankruptcy Judge Stuart M. Bernstein denied its fourth amendedplan in September 2010 after finding that the companymanipulated creditor votes and engineered the case for its ownbenefit.

Quigley, which Pfizer bought in 1968, at one time faced suits

by more than 160,000 plaintiffs. It filed for bankruptcy in 2004.

(C) W.R. Grace

Bank lenders' appeal from orders confirming W.R. Grace &Co.'s plan will be argued June 17 in the U.S. Court of Appeals inPhiladelphia. The plan, which was confirmed by the bankruptcy

and district courts, can't be implemented because pre-bankruptcysecured bank lenders filed an appeal.

Arguments will be held on June 17 in the U.S. Court ofAppeals in Philadelphia.

The banks argue on appeal that they are entitled to $185million in interest on their claims because shareholders areretaining stock worth $4.9 billion. Banks filing the appeal include

Bank of America NA, Barclays Bank Plc and JPMorgan ChaseBank NA.

Grace projects it could complete its reorganization by theend of this year. It filed for Chapter 11 in April 2001.

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The Troubled Company Reporter provides detailed reporting

about every chapter 11 filing nationwide. Stay tuned to learn moreabout obtaining a trial subscription to the TCR at no cost orobligation.

New Publicly Traded Securities

Psyche Maricon Castillon reports of five companies who

issued or will issue shares of new common stock uponemergence pursuant to the plans of reorganization they filed orintend to file in their Chapter 11 cases in May 2013. Thesecompanies are: PMI Group, Otelco Inc., School Specialty,

American Airlines and AMF Bowling.

(A) PMI Group

PMI Group Inc., once the owner of a mortgage-insurancecompany, proposed a plan of reorganization under which holdersof $691 million in senior unsecured notes are predicted to have a29 percent recovery.

General unsecured creditors with $6.3 million to $10.3million in claims are to recover 26 percent to 27 percent. Inaddition to pro rata distributions of cash, unsecured creditors and

noteholders will receive stock in reorganized PMI. There are nosecured creditors. Senior noteholders recover slightly more thangeneral creditors because noteholders benefit from subordinationprovisions in $52.9 million in subordinated notes whose holdersreceive nothing from the plan.

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At the outset of Chapter 11, PMI had $165 million in cash.The hoard since then increased to $200 million available fordistribution to creditors under the plan.

The company still has about $1.2 billion in tax loss carryforwards. The total will be reduced by debt forgiven throughbankruptcy.

(B) Otelco Inc.

Otelco Inc.'s prepackaged plan of reorganization became

effective, and the Company emerged from Chapter 11 protectionin May. Otelco's Plan provides for the following:

-- each holder of the senior secured term loan claims willreceive its pro rata share of (i) term loan obligations of theCompany under the new senior secured credit facility of not morethan $142 million, maturing on April 30, 2016; (ii) a cash paymentof no less than $20 million and (iii) the new Class B common

stock representing 7.5% of the total economic and voting interestin reorganized Otelco;

-- reinstatement of allowed senior secured revolving loanclaims, as amended, with availability of up to $5 million, pursuantto the new senior secured credit facility agreement and eachholder of the Company's outstanding subordinated notes toreceive a pro rata share of the new Class A common stock;

-- reinstatement of allowed general unsecured claims infull, provided, that, if holders of Class 5 subordinated notes claimsvote to reject the Plan, holders of allowed general unsecuredclaims will receive a cash payment equal to 40.5% of the allowedamount of such general unsecured claim; and

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-- cancellation of all of the Company's existing equityinterests.

(C) School Specialty

School Specialty Inc. overcame spirited opposition to win thesignature of the bankruptcy judge May 23 on a confirmation orderapproving the Chapter 11 reorganization plan.

Under the Plan, new common stock with voting rights will beissued to the Company's current noteholders and Ad Hoc DIP

lenders.

For a predicted full recovery, the plan gives 87.5 percent ofthe reorganized company's stock to lenders who provided $155million in replacement financing. Noteholders owed $170.7million are receiving the other 12.5 percent of the stock, for anestimated 6 percent recovery. Trade suppliers, with $35.6 millionin claims, receive 20 percent in cash, although not until almost

seven years after confirmation. Their claims in the meantime willaccrue interest at 5 percent. Alternatively, trade suppliers whocontinue to provide trade credit will be paid 45 percent in aboutseven years, with interest accruing at 10 percent.

Among the Plan opponents, holders of $17 million of the$157.5 million in 3.75 percent convertible subordinateddebentures wanted the opportunity to purchase part of thebankruptcy financing at full value and participate in buying the

lion's share of the new equity.

(D) American Airlines

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American Airlines received court approval of the disclosurestatement explaining its plan of reorganization. The plan, which ishinged to its merger with US Airways, provides that unsecuredcreditors with $2.6 billion in claims and creditors with $6.8 billion

in claims backed by aircraft will receive a full recovery. Thecompany's shareholders will get a 3.5% stake in the combinedcompany with the potential for additional shares.

Under the merger, equity in the combined company will besplit, with 72% to AMR's stakeholders and creditors and 28% toUS Airways shareholders.

(E) AMF Bowling

A hearing to consider confirmation of AMF Bowling's plan ofreorganization is scheduled to occur in June. The Company'sPlan, which calls for the merger with upscale bowling alley chainBowlmor, provides for second-lien creditors owed $80 million toown the company.

The Plan provides for these terms:

* First-lien debt will be paid in full with interest at the non-default rate.

* In exchange for debt, the second-lien creditors willreceive 20 percent of the stock of the combined companies, to becalled Bowlmor AMF.

* The report notes that to receive another 57.5 percent ofthe combined companies' equity, second-lien noteholders canparticipate in an offering to provide a $50 million second-lien loan.

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* Unsecured creditors with claims totaling from $29 millionto $34 million will share a cash pot of $2.35 million for a recoveryof 7 percent to 8 percent.

* Second-lien holders' deficiency claim won't participate inthe pool for unsecured creditors.

* In return for contributing Bowlmor to the new company,owners of Strike Holdings will receive 22.5 percent of the equity.

The offering is backstopped by Cerberus, JPMorgan andCredit Suisse, which will purchase any part of the loan not

subscribed by other second-lien holders.

The official unsecured creditors' committee and holders ofabout 80 percent of the second-lien debt and 30 percent of thefirst lien support the new plan. The original plan had offered$300,000 -- or a 1% recovery -- for unsecured creditors.

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That ends the Beard Group Corporate Restructuring Reviewfor May 2013, brought to you by the editors of the TroubledCompany Reporter and Troubled Company Prospector. If you'dlike to receive the Troubled Company Reporter for 30-days at nocost -- and with no strings attached -- call Nina Novak at (240)629-3300 or visit bankrupt-dot-com-slash-free-trial and we'll addyou to the distribution list. That telephone number, again, is (240)

629-3300 and that Web site address, again, is bankrupt-dot-com-slash-free-trial.

Tune in to our next monthly Restructuring Review on July16th. Thank you for listening.

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Beard Corporate Restructuring Review for May 2013

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Transcript of Beard Corporate Restructuring Review for May 2013