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By Marie Beaudette
  
Of DOW JONES DAILY BANKRUPTCY REVIEW
 
On Tuesday, General Growth Properties Inc. (GGP) will ask the New York bankruptcy court to approve the rules that will govern an auction process to determine who’ll get to sponsor the mall giant’s exit from Chapter 11 protection.

General Growth is backing a plan sponsored by a group of investors led by Brookfield Asset Management Inc. (BAM), which has offered to pump $6.5 billion into the company to finance its exit from bankruptcy. The company postponed a hearing scheduled for this week on the rules to allow it to continue to explore the “full range of offers” it has received.

The company has been fending off advances from rival Simon Property Group Inc. (SPG), which earlier tried to buy the company outright but is now offering a deal set up like the one backed by the Brookfield-led investors.

Simon and hedge fund Paulson & Co. have put forth a plan to pump $6.5 billion into General Growth, along with other investors, in return for two-thirds of the company’s stock when it exits bankruptcy protection. Simon, however, has agreed to forgo a grant of 120 million warrants to buy more General Growth stock, which is part of the Brookfield deal. Simon has also agreed to backstop a $1.5 billion line of credit for General Growth.

At Tuesday’s court hearing, General Growth will ask the court for approval to enter into a preliminary deal with the Brookfield-led investors and to sign off on the auction procedures. According to court papers, the bidding process would last through June 2.

Shareholders of Washington Mutual Inc. (WAMUQ) on Wednesday will ask the Wilmington, Del., bankruptcy court to appoint an examiner to probe a proposed settlement that would leave them empty handed in the company’s Chapter 11 case.

Washington Mutual, the former parent of WaMu bank, has reached a deal to settle a dispute with J.P. Morgan Chase & Co. (JPM) and the Federal Deposit Insurance Corp., which engineered the sale of WaMu to J.P. Morgan in 2008.

The shareholders said an examiner should be appointed to probe the settlement because new information on the collapse of WaMu bank becomes available with “each passing week.”

A U.S. Senate subcommittee and regulatory investigations have brought to light new information about, for example, the role of Goldman Sachs Group Inc. (GS) in WaMu’s risky lending, the shareholders said in court papers.

Washington Mutual’s proposed settlement with J.P. Morgan and the FDIC would release them from claims stemming from the bank’s seizure and sale. The shareholders say lawsuits over the loss of WaMu are worth $20 billion, and WaMu’s former parent should never have agreed to a proposed settlement that leaves them with nothing.

On Tuesday, Station Casinos Inc. will ask the Reno, Nev., bankruptcy court to approve a series of agreements that will serve the basis for its plan to exit Chapter 11 protection.

The plan is based on the sale of many of Station Casino’s assets to Fertitta family, which founded the casino company. Members of the family have agreed to lead a group that includes investment firm Colony Capital and Station’s mortgage lenders that will purchase the more than a dozen of the company’s casinos, including Santa Fe Station, Texas Station and two Fiesta brand casinos, pending higher bids at a bankruptcy court supervised auction.

Station Casinos’ commercial mortgage lenders will get five Las Vegas area casinos. Senior lenders owed $2.5 billion would get a controlling stake in the casino properties and sell 46% of the equity to the Fertittas, according to court papers. Colony Capital will also make a new investment in the company.

Station Casinos filed for bankruptcy protection in July 2009 to restructure $5.7 billion in debt. It owns and operates 18 casinos in Nevada, including the Red Rock Casino Resort Spa, Palace Station Hotel & Casino and Wild Wild West Gambling Hall & Hotel.

Station Casinos rival Boyd Gaming Corp. (BYD), which has offered to buy the company, has said the insider deals the company reached to hasten its bankruptcy exit will stifle its efforts to acquire the casino operator.

 (This item appears in Dow Jones’ Daily Bankruptcy Review newsletter.)

 -By Marie Beaudette, Dow Jones Daily Bankruptcy Review; 202-862-1354

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By Joseph N. DiStefano

What happens when a town runs out of money?

In cities and townships around Pennsylvania, income, sales and property tax collections have fallen as the recession drags on.

But municipal expenses haven’t gone away. Roads need work. Crime and fires still need fighting. Health and pension costs keep rising.

So local governments, the biggest employers in many communities, cut services and jobs. “It becomes a really tough downward spiral,” said public-finance partner William Rhodes at law firm Ballard Spahrin Philadelphia.

A few towns see another way to ease costs. Westfall Township, in Pennsylvania’s northeast tip, cut millions from its debts last month as the first town in state history to successfully reorganize under Chapter 9 of the federal bankruptcy code.

In Harrisburg, City Controller Dan Miller calls bankruptcy “an option” to cut the state capital’s towering debt after the local authority failed to make payments on its bungled incinerator, deputy controller Bill Leinberger told me.

Chapter 9 leaves local officials in control of towns as they negotiate with creditors to delay or cut public debts. That’s in contrast with Chapter 11 bankruptcy, which gives creditors influence, and often control, over private companies that can’t pay what they owe.

Until now, it’s been a last resort. Westfall faced an unusual, crushing expense from a legal settlement. Harrisburg  Mayor Linda D. Thompson and other officials are reviewing the sale of city property, and service and wage cuts recommended by state advisers, to avoid bankruptcy. Philadelphia hasn’t considered Chapter 9, says finance chief Rob Dubow.

Spending in Chester, Pittsburgh, Reading, Scranton and other financially troubled Pennsylvania cities is monitored by state advisers under Act 47, which gives distressed towns state financial support and flexibility from state rules in exchange for spending curbs. Philadelphia has a separate, similar fiscal-oversight board.

Fred Reddig, who heads the local-government office in the state Department of Community and Economic Development, calls Act 47 “a safety net to deal with a municipality that has fallen over the cliff. Hitting the bottom, that would be a Chapter 9 filing.”

A town’s bankruptcy “would affect the interest rates [nearby] municipalities have to pay” to borrow money between tax collections and for capital projects, said James Roberts, a partner at Eckert Seamans Cherin & Mellott L.L.C. in Pittsburgh, who’s been hired by the state to work with that city and has advised other distressed towns.

Reddig says towns including Chester and Wilkinsburg have used Act 47 powers to force cuts in public-worker wages and employee health spending.

So far, they haven’t used it to try to cut future municipal pensions, which towns have systematically underfunded across the state, making them potentially the biggest drain on public resources.

There’s no legal reason towns couldn’t use the act’s provisions, or even bankruptcy, to push for lower-cost pension programs for future retirees, Reddig told me.

Land, money, tax

Westfall’s problems were “unique,” says J. Gregg Miller of Pepper Hamilton L.L.P. in Philadelphia, who represented the township in its bankruptcy: The township owed developers $20 million, more than 10 times its yearly budget, from a court award in a long-running land-use dispute. When the developers tried to collect, Westfall filed for bankruptcy, with the state’s support.

The Chapter 9 plan shaved more than half off what Westfall owed and gave the township 20 years to pay, in installments. Even so, Westfall had to raise its real estate tax rate 25 percent.

Even when states don’t oppose a town’s declaring bankruptcy, Chapter 9 is expensive and time-consuming, because creditors typically fight it in court, forcing towns to spend extra on proving they’re broke, said Miller.

Still, “Westfall’s important” because it shows it can be done, said Rhodes, at Ballard Spahr.

“The reality is that state and local governments and their fiscal health will be the last thing to recover in this Great Recession,” he told me. “It’s hit them in so many ways,” from pension-investment losses to lower tax hauls.

If the economy stays slow for another three to five years, as bank analysts expect, municipal governments could be looking at a “lost decade” of relentless cuts, Rhodes said.

For the desperate, that could make Chapter 9 bankruptcy a less ugly choice.

Washington Post Staff Writer
Sunday, April 11, 2010

FoxSports Former National Basketball Association No. 1 draft-pick Derrick Coleman, who filed for Chapter 7 bankruptcy protection last month, says he owes his creditors nearly $4.7 million, The Wall Street Journal’s Bankruptcy Beat blog reported Friday.

Former National Basketball Association No. 1 draft-pick Derrick Coleman, who filed for Chapter 7 bankruptcy protection last month, says he owes his creditors nearly $4.7 million, The Wall Street Journal’s Bankruptcy Beat blog reported Friday.

The ex-Syracuse University standout and 1991 NBA Rookie of the Year earned tens of millions during a 15-year playing career but listed assets of just $1 million in papers filed with the U.S. Bankruptcy Court in Detroit, Coleman’s hometown.

Coleman’s desire to invest in the Detroit area after his playing career ended contributed to his financial problems, his bankruptcy attorney Mark B. Berke said.

Among Coleman’s ventures is a struggling Detroit development called Coleman’s Corner, an attempt to revive one of the city’s most downtrodden neighborhoods. Coleman defaulted on loans related to the mall last year.

“Mr. Coleman was focused on investing in various communities throughout the city of Detroit by developing real estate, creating jobs and revitalizing business opportunities,” Berke said. “Due to the state of the economy, including the decline in the real estate market, Mr. Coleman’s investments could not be sustained.”

The former New Jersey Nets forward’s other business interests include ownership stakes in the Hilton Garden Suites hotel in downtown Detroit, a Tim Hortons Inc. doughnut shop franchise and Hungry Howie’s Pizza store, according to court papers.

Among Coleman’s largest debts is $1.3 million owed to Comerica Bank in connection with a lawsuit and a $1 million loan on property in Michigan from Thornburg Mortgage Home Loans.

Coleman also owes Detroit mayor and fellow Syracuse legend Dave Bing $50,000 from a loan granted last year.

Among the assets that could be available for creditors is an eclectic mix of automobiles: a 1957 Buick convertible, worth $20,000; a 1970 Chevrolet Nova, worth $5,000; and a 1997 Bentley convertible, valued at $50,000.

Coleman also listed two Seadoo watercraft, his $90,000 NBA pension and two chinchilla fur coats.

Read more on The Wall Street Journal Web site .

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The steady stream of emergency room patients at St. Vincent’s Hospital Manhattan stopped Friday as the bankrupt institution prepared to close its doors for good.

“It’s a weird feeling. It’s so quiet. We knew this day was coming, but it’s still a shock to see an empty emergency room in the heart of New York City,” said Dr. Alex Chang, a surgeon at St. Vincent’s for four years.

Ambulances stopped taking patients to the West Village hospital at 10 a.m. Friday. Within an hour, the usually jammed emergency room was a ghost town.

“It feels like a death in a family,” Chang said. “It’s awful. Everyone is real upset.”

“A lot of the paramedics had tears in their eyes,” said Dominique Sicile, 49, a veteran nurse who spent 24 years at St. Vincent’s. “It’s a horrible day. Today is the end of an era.”

The board of St. Vincent’s voted this week to close inpatient services at the 160-year-old hospital because of a crippling $700 million debt.

Advocates had hoped for a last-minute deal with an outside company to keep the hospital open, but it never came.

The state is seeking proposals from private health care companies to take over urgent care at St. Vincent’s in the hope that at least the emergency room can be saved.

Insiders say two potential deals to keep the hospital open fell through because the companies – Mount Sinai Medical Center and Continuum Health Partners – couldn’t make it work financially when policymakers demanded they preserve inpatient services.

“The politicians weren’t exactly being helpful,” one insider said.

“Now they’re yelling about the hospital closing, but they weren’t willing to do what was necessary to keep it open months ago,” he said. “There’s a lot of disingenuousness going on.”

Continuum and Mount Sinai are back in contention to take over the emergency room, sources said. Sources say they soon will have the added benefit of bankruptcy protection, which protects them from St. Vincent’s debt.

Meanwhile, nearby hospitals had heavier-than-usual loads in emergency departments Friday. Last week, Bellevue Hospital saw a 13% jump in visits in recent weeks in anticipation of St. Vincent’s closure.

Now, they’re seeing double the number of patients in the emergency room.

“We’re worried,” said Dr. Christopher McStay, assistant director for emergency services, who said Bellevue expects 20,000 additional ambulance visits every year with St. Vincent’s closed.

“Losing St. Vincent’s leaves a gaping hole in the community,” he said. “St. Vincent’s was a safety net hospital, and now that that’s gone, what’s left?”

With Jill Colvin

sgoldsmith@nydailynews.com

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