Chesapeake Corporation Files for Bankruptcy in Virginia

Chesapeake Corporation, the Richmond-based manufacturer of paperboard and plastic packaging, filed for bankruptcy protection on December 29, 2008 in the United States Bankruptcy Court for the Eastern District of Virginia.  The bankruptcy cases are being used to effectuate a sale of substantially all of the company’s operating businesses to a group of investors for $485 million.  The group of investors includes affiliates of Irving Place Capital Management, L.P. and Oaktree Capital Management, L.P.  The debtors filed a motion immediately seeking approval of bidding procedures for the asset sale.

Key facts regarding the filing:

• Assets: $937 million
• Annual Revenues: $1.06 billion
• Employees: 392 (U.S.)
• Lead Debtor Counsel: Hunton & Williams LLP

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Constar International Inc. Files for Bankruptcy in Delaware

Constar International Inc., a leading producer of plastic bottles, filed for bankruptcy protection on December 30, 2008 in the United States Bankruptcy Court for the District of Delaware.  The bankruptcy case is intended to be used to effectuate a pre-arranged restructuring of the Philadelphia-based company’s debt through a debt-for-equity swap.  The company reported that it already has received support for the restructuring from a majority in principal amount of its subordinated notes.

Key facts regarding the filing:

• Assets: $420 million
• Liabilities: $538 million
• Annual Revenues: $878 million
• Employees: 1,400
• Lead Debtor Counsel: Wilmer Cutler Pickering Hale and Dorr LLP

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DESA Heating/DHP Holdings II File First Day Pleadings

DESA Heating and its affiliates, manufacturers, distributors and marketers of vent-free heating appliances, outdoor heaters, lawn and garden electrical products, and consumer fastening systems headquartered in Bowling Green, Kentucky, filed voluntary petitions for bankruptcy protection earlier today in Delaware.  As is commonplace in large bankruptcy cases, the companies immediately filed a number of motions and applications seeking relief to facilitate the continued operation and orderly wind-down of their business operations.  The following is a list of those “first day” pleadings filed thus far:

• Motion for Order Authorizing Joint Administration of Related Chapter 11 Cases
• Declaration of Craig S. Dean, Chief Restructuring Officer of the Debtors, in Support of First Day Motions
• Application for Authorization to Employ and Retain Pachulski Stang Ziehl & Jones LLP as Counsel for the Debtors and Debtors in Possession nunc pro tunc to the Petition Date
• Application of Debtors for Order Authorizing and Approving the Retention of and Appointing Epiq Bankruptcy Solutions, LLC as Noticing, Claims and Balloting Agent
• Application for an Order Authorizing the Debtors to Retain, Employ and Compensate Certain Professionals Utilized by the Debtors in the Ordinary Course of Business
• Motion for an Order Establishing Procedures for Interim Compensation
• Motion for Order Authorizing the Debtors to Reject an Unexpired Lease of Nonresidential Real Property and Abandon Any Personal Property Located at Such Leased Premises
• Motion for the Entry of an Order Authorizing the Debtors to Reject Certain Executory Contracts
• Motion for Order Authorizing (I) Maintenance of Existing Bank Accounts, (II) Continued Use of Existing Business Forms, (III) Continued Use of Existing Cash Management System, and (IV) Providing Administrative Priority Status to Postpetition Intercompany Claims and (V) Waiver of Section 345(b) Deposit and Investment Requirements
• Motion (A) for Authorization to (I) Utilize Cash Collateral and (II) Provide Adequate Protection and (B) to Schedule a Final Hearing
• Motion for an Order Authorizing the Debtors to (I) Pay and/or Honor Prepetition Wages, Commissions, Salaries, Employee Benefits, and Other Compensation or Reimbursements; (II) Remit Witholding Obligations; (III) Maintain Employee Compensation and Certain Benefits Programs and Pay Related Administrative Obligations; and (IV) Have Applicable Banks and Other Financial Institutions Receive, Process, Honor, and Pay Certain Checks Presented for Payment and Honor Fund Transfer Requests
• Motion for the Entry of Interim and Final Orders (A) Prohibiting Utility Providers from Altering, Refusing or Discontinuing Service, (B) Deeming Utilities Adequately Assured of Future Performance, and (C) Establishing Procedures for Determining Adequate Assurance of Payment
• Motion for an Order (I) Authorizing the Debtors to Pay Prepetition Sales and Use Taxes and Regulatory Fees in the Ordinary Course of Business and (II) Authorizing Banks and Financial Institutions to Honor and Process Checks and Transfers Related Thereto
• Motion of the Debtors for an Order Providing that Creditors’ Committees are Not Authorized or Required to Provide Access to Confidential Information of the Debtors or to Privileged Information
• Motion of the Debtors for an Order Authorizing, but Not Directing, Payment of Certain Preptition Shipping and Warehousing Obligations

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DESA Heating and Affiliates File for Bankruptcy in Delaware

DESA Heating, LLC, its parent company, DHP Holdings II Corporation, and four affiliates filed for bankruptcy protection this morning in the United States Bankruptcy Court for the District of Delaware.  The companies’ foreign affiliates were not included in the bankruptcy filings. 

The companies, headquartered in Bowling Green, Kentucky, are manufacturers, distributors and marketers of vent-free heating appliances, outdoor heaters, lawn and garden electrical products, and consumer fastening systems.  In the United States, the companies also operate manufacturing and distribution facilities in Alabama and California, manufacturing facilities in Kentucky and Tennessee, a distribution facility in Kentucky and a storage facility in Alabama.  The companies’ nondebtor affiliates operate manufacturing facilities in Italy and Poland and sales and distribution facilities in Canada, Mexico and China.

The companies intend to use the chapter 11 cases to effectuate an orderly wind-down of their business operations.

Key facts regarding the filings:

• Assets: $132.5 million
• Liabilities: $133.2 million
• Annual Revenues (as of Nov. 29, 2008): $173 million ($132 million U.S.-source)
• Annual Net Loss (as of Nov. 29, 2008): $22.6 million ($24.2 million attributable to U.S. operations; international operations are profitable)
• Employees: 292 (331 employees were terminated as of Dec. 21, 2008)
• Debtor Counsel: Pachulski Stang Ziehl & Jones LLP

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The Parent Company Files First Day Pleadings

As reported earlier, The Parent Company (formerly known as BabyUniverse, Inc.) filed for bankruptcy protection on Sunday in Delaware.  The company sells various products using seven eCommerce websites, such as toys (through eToys.com and KBToys.com), personalized dolls (through myTwinn.com), and baby, toddler and maternity products (through BabyUniverse.com, DreamtimeBaby.com, PoshTots.com, and PoshLiving.com). It also operates three eContent websites (BabyTV.com, PoshCravings.com, and ePregnancy.com).

As is customary in corporate bankruptcy cases, the company immediately filed several pleadings (commonly called “first day” pleadings) in order to facilitate its continued business operations:

• Motion for Joint Administration of Related Chapter 11 Cases
• Affidavit in Support of First Day Motions of Michael J. Wagner
• Motion for an Order Authorizing the Debtors to (I) Pay Prepetition Wages, Salaries, Employee Benefits, and Other Compensation; (II) Remit Withholding Obligations; (III) Maintain Employee Compensation and Benefits Programs and Pay Related Administrative Obligations; and (IV) have Applicable Banks and Other Financial Insititutions Receive, Process, Honor, and Pay Certain Checks Presented for Payment and Honor Certain Fund Transfer Requests
• Motion for Entry of an Order Authorizing the Debtors to Honor any Prepetition Obligations to Customers and to Otherwise Continue Customer Practices and Programs in the Ordinary Course of Business
• Motion for an Order (I) Authorizing the Debtors to Pay Prepetition Sales and Use and Similar Sales Taxes in the Ordinary Course of Business and (II) Authorizing Banks and Financial Institutions to Honor and Process Checks and Transfers Related Thereto
• Motion for an Order (A) Prohibiting Utility Providers from Altering, Refusing or Discontinuing Service, (B) Deeming Utilities Adequately Assured of Future Performance, and (C) Establishing Procedures for Determining Adequate Assurance of Payment
• Motion for Order Authorizing Debtors to Pay Prepetition Claims of Shippers and Granting Related Relief
• Emergency Motion for Interim and Final Relief (I) Authorizing Post-Petition Financing; (II) Granting Liens, Security Interests and Superpriority Status; (III) Granting Adequate Protection to Certain Pre-Petition Lenders; (IV) Scheduling a Final Hearing; and (V) Modifying the Automatic Stay
• Application for Authorization to Employ Pachulski Stang Ziehl & Jones LLP as Counsel to the Debtors and Debtors in Possession
• Motion for an Order Providing that Creditors’ Committees are Not Authorized or Required to Provide Access to Confidential Information of the Debtors or to Privileged Information
• Motion for Order Authorizing the Debtors to (1) Reject Unexpired Leases of Nonresidential Real Property, and (2) Abandon any Personal Property Located at Such Premises and Fixing a Bar Date for Claims of Counterparties
• Motion for Order Authorizing the Debtors to Reject Executory Contracts and Fixing a Bar Date for Claims of Counterparties to the Rejected Contracts
• Motion for Authority to Implement a Severance Program Applicable to All Non-Management Employees
• Application Authorizing the Employment of Gibson & Rechan, LLC and to Assign David Gibson as Chief Restructuring Officer of the Debtors, Nunc Pro Tunc to the Petition Date
• Application Authorizing the Employment and Retention of Clear Thinking Group LLC as Financial Advisor to the Debtors and Debtors in Possession Nunc Pro Tunc to the Petition Date
• Application for Authorization to (1) Employ and Retain Omni Management Group, LLC as Claims, Balloting, Noticing and Administrative Agent for the Debtors and (2) Appoint Omni Management Group, LLC as Agent of the Bankruptcy Court Nunc Pro Tunc to the Petiton Date
• Application for an Order Authorizing the Debtors to Retain, Employ and Compensate Certain Professionals Utilized by the Debtors in the Ordinary Course of Business
• Motion to Approve and Establish Procedures for Interim Compensation
• Motion for Order Authorizing (I) Maintenance of Certain Existing Bank Accounts, (II) Continued Use of Existing Business Forms, (III) Continued Use of Existing Cash Management System, (IV) Providing Administrative Priority Status to Postpetition Intercompany Claims, and (V) Waiver of Section 345(b) Deposit and Investment Requirements

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The Parent Company Files for Bankruptcy in Delaware

The Parent Company (formerly known as BabyUniverse, Inc.) filed for bankruptcy protection on Sunday in the United States Bankruptcy Court for the District of Delaware.  The company’s nine affiliates, all headquartered in Denver, Colorado, also filed for bankruptcy protection in Delaware and the lead case is eToys Direct 1, LLC (likely because it is a Delaware limited liability company – which qualifies it to file for bankruptcy in Delaware - while The Parent Company is a Colorado corporation). 

The company describes itself as “a leading commerce, content, and new media company for growing families.”  The company sells various products using seven eCommerce websites, such as toys (through eToys.com and KBToys.com), personalized dolls (through myTwinn.com), and baby, toddler and maternity products (through BabyUniverse.com, DreamtimeBaby.com, PoshTots.com, and PoshLiving.com).  It also operates three eContent websites (BabyTV.com, PoshCravings.com, and ePregnancy.com).  In total, the company offers 35,000 products from 500 manufacturers for sale and its websites generate 59 million annual visits and sales to 5.9 million unique customers. 

The company is the product of a number of acquistions since its founding in 1997, including the acquistion of the online assets of KB Toys in 2004 (note that KB Toys, Inc. filed for bankruptcy on December 11, 2008 and is liquidating its remaining stores) and a merger with eToys Direct, Inc. in 2007 (note also that eToys, Inc., once one of the most highly-publicized online retailers, filed for bankruptcy in March 2001).  While the company’s most recent quarterly financial filing with the SEC reported assets of approximately $96 million, the company reported consolidated assets of only $21 million in its bankruptcy filing.  While this is not directly explained in the filing, it appears likely that this may be explained by a subsequent write-down of the $69 million in goodwill and intangible assets that were listed on the company’s balance sheet as of the earlier SEC filing (August 2, 2008). 

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Heller Ehrman Files First Day Pleadings

Heller Ehrman, LLP, a law firm headquartered in San Francisco, California which filed for bankruptcy protection on Sunday, filed several first day pleadings in furtherance of its on-going dissolution.  As reported earlier, the firm has been dissolving since September, when its shareholders approved a Plan of Dissolution.  However, the firm still has approximately $63 million in assets and 54 employees. 

The following is a list of the first day pleadings filed thus far by Heller Ehrman:

• Chapter 11 Voluntary Petition
• Creditor Matrix
• List of 20 Largest Unsecured Creditors
• List of Equity Security Holders
• Emergency Motion to Pay and Honor Pre-Petition Employee Wages and Other Employee Obligations in the Ordinary Course of Business, and (B) Continue Honoring Employee Obligations, Including Wages, Benefits and Retention Bonuses, on a Post-Petition Basis; and (2) Providing Related Relief
• Emergency Motion Authorizing Maintenance of Existing Bank Accounts and Continued Use of Existing Business Forms and Checks, and (B) Authorizing Continued Use of Existing Cash Management System
• Application to Designate Peter J. Benvenutti as Responsible Individual
• Emergency Motion to Use Cash Collateral Motion for an Order (1) Granting Debtor and Debtor in Possession Interim Use of Cash Collateral; (2) Scheduling Deadlines Relating to a Final Hearing on Permanent Use of Cash Collateral; and (3) After Conclusion of a Final Hearing Authorizing Permanent Use of Cash Collateral
• Declaration of Peter J. Benvenutti in Support of First Day Motions
• Emergency Motion to Set Hearing on First Day Motions, in addition to Ex Parte Motion to Shorten Time for Hearing on First Day Motions

Heller Ehrman has requested a hearing on the first day motions on Monday, December 29th at 2:30 p.m.

Heller Ehrman Files for Bankruptcy in San Francisco

Heller Ehrman, LLP, a law firm headquartered in San Francisco, California that is in the process of dissolving, filed for bankruptcy on Sunday, December 28th, in the United States Bankruptcy Court for the Northern District of California.  Heller Ehrman (including its predecessor firms) dates back to 1890 and grew to a firm of over 700 attorneys with offices across the United States, Europe and Asia.  However, the firm experienced financial difficulties and failed merger attempts, which resulted in a large number of attorney departures and the firm’s default under its line of credit. 

On September 26, 2008, the firm’s shareholders adopted a Plan of Dissolution and the firm began the process of dissolving.  The firm reported in its first day declaration that substantial progress in the furtherance of the Plan of Dissolution has been made prior to the bankruptcy filing.  This appears to be evidenced by the fact that the firm reported approximately $63 million in assets at the time of the bankruptcy filing, down from approximately $253 million in assets reported in the exhibits to the firm’s Plan of Dissolution. 

The decision to complete the dissolution through the bankruptcy filing was precipitated by several factors.  First, the firm reported that the agent for its credit facility was attempting to “correct” the termination of certain perfected security interests which the firm believed to be an attempt to perfect new liens which are avoidable under the Bankruptcy Code.  The firm further reported that it attempted to reach a settlement with the agent but was unable to do so. 

Second, the firm has had a dispute with the landlord for its San Francisco offices, 333 Bush Associates.  The landlord filed suit against Heller in the San Francisco Superior Court and was able to obtain a Writ of Attachment on December 19th.  The firm had apparently reached a settlement with the landlord subsequent to the issuance of the writ, but the settlement payment that the firm had agreed to make was not completed prior to the bankruptcy filing, which the firm believes cancels the lien of the landlord’s attachment.

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NetVersant Solutions Files Schedules of Assets and Liabilities and Statements of Financial Affairs

On November 24, 2008, NetVersant Solutions, Inc. and its affiliates filed separate Schedules of Assets and Liabilities and Statements of Financial Affairs for each company (a complete listing of the companies is included below).  Schedules of Assets and Liabilities and Statements of Financial Affairs are required to be filed by each company pursuant to section 521 of the Bankruptcy Code and are intended to provide creditors and other parties with a complete picture of the company’s financial position.  The information required to be included includes the following:

• Schedule A: Real Property
• Schedule B: Personal Property
• Schedule C: Property Claimed as Exempt
• Schedule D: Creditors Holding Secured Claims
• Schedule E: Creditors Holding Unsecured Priority Claims
• Schedule F: Creditors Holding Unsecured Nonpriority Claims
• Schedule G: Executory Contracts and Unexpired Leases
• Schedule H: Codebtors

The Statement of Financial Affairs includes information regarding such topics as revenues, payments made in the 90 days prior to bankruptcy (potentially subject to recovery), lawsuits against the company, property held for other parties, environmental information, locations of financial information, owners, and pension funds. 

As noted above, NetVersant filed separate Schedules and Statements for each corporate entity that filed for bankruptcy.  A complete listing of the companies that filed Schedules and Statements is included below with links to view the complete Schedules and Statements using netDockets (if you don’t yet have a netDockets account, sign up here for a free trial account and get $100 of free usage).

• NetVersant Solutions, Inc.
• NetVersant – Northern California, Inc.
• NetVersant – Southern California, Inc.
• NetVersant – California, Inc.
• NetVersant – Denver, Inc.
• NetVersant GP, Inc.
• NetVersant LP, Inc.
• NetVersant Management Co., L.P.
• NetVersant National, Inc.
• NV Resources, Inc.
• NetVersant, Inc.
• NetVersant – Oregon, Inc.
• NetVersant – Atlanta, Inc.
• NetVersant – Mid-Atlantic, Inc.
• NetVersant – New England, Inc.
• NetVersant – Minneapolis/St. Paul, Inc.
• NetVersant – Albuquerque, Inc.
• Intelligent Building Systems, Inc.
• NetVersant – Philadelphia, Inc.
• NetVersant – Texas, Inc.
• NetVersant – Cascades, Inc.
• NetVersant – Washington, Inc.

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Court Denies Confirmation of Nutritional Sourcing’s Plan of Liquidation

Yesterday, the bankruptcy court filed a 48-page opinion and entered an order denying confirmation of the proposed Plan of Liquidation for Nutritional Sourcing Corporation and its affiliates.  The Joint Plan of Liquidation was filed on September 4, 2008 and a hearing on confirmation of the Plan was held on October 14, 2008.  The Plan was supported by the debtors and the Official Committee of Unsecured Creditors appointed in the cases.  A number of parties objected to the proposed Plan.

Nutritional Sourcing and its affiliates operated a chain of supermarkets, as well as a chain of movie and game rental outlets, located in Puerto Rico and the U.S. Virgin Islands.  Nutritional Sourcing (but not its affiliated debtors Pueblo International, LLC and FLBN, LLC) previously filed for bankruptcy and the disputes regarding the terms of the Plan largely revolve around the terms of certain financing facilities entered into upon emergence from that prior bankruptcy case.  Specifically, certain debt obligations of Nutritional Sourcing (a holding company) were subordinated to obligations owed to trade creditors of its operating subsidiaries.  However, the term “trade creditor” was never defined. 

The Plan distinguished between unsecured claims owed to certain creditors that were defined as trade creditors and the unsecured claims owed to all other creditors, with a significant difference in the proposed recoveries (100% for “trade” claims vs. 13.2% for all other claims).  Parties objected and the court held that the definition used for the determination of what was, or was not, a trade claim was not consistent with the commonplace definition of a “trade creditor” under New York law (the law which applied to the financing agreements). 

The court also refused to approve these provisions of the Plan as a settlement under Bankruptcy Rule 9019 for several reasons.  First, it found that the debtors and Creditors’ Committee had not provided sufficient evidence to conclude that litigating the issue would be unduly burdensome.  Second, the court found that the “non-goods” trade creditors who would be adversely affected by the negotiated settlement were not adequately represented in the negotiations because no such creditors were included in the membership of the Creditors’ Committee and, further, the members of the Creditors’ Committee were primarily parties interested in minimizing the size of the pool of “trade creditors” to positively influence their own recoveries.  As such, the court found that it could not find the settlement to be “fair and equitable” to non-goods trade creditors.

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