2005 bankruptcy recap: Calpine, Refco, auto products companies, airlines dominate distressed scene

By Caroline Salls

Pittsburgh, Dec. 30 - While the automotive parts and airline industries dominated the Chapter 11 bankruptcy scene in 2005, California power company Calpine Corp. and brokerage firm Refco Inc. also made major bankruptcy headlines.

Delta Air Lines, with $21.560 billion in assets and $28.270 billion in debt; Calpine, with $26.629 billion in assets and $22.536 billion in debt; Northwest Airlines, with $14.350 billion in assets and $17.920 billion in debt; Refco, with $16.500 billion in assets and $16.800 billion in debt and Collins & Aikman, with $3.196 billion in assets and $2.856 billion in debt, were the five biggest bankruptcy filings of the year in terms of debt.

Calpine filed for Chapter 11 on Dec. 20 "in order to allow continued operations at its power plants and facilities in the United States, Canada and Mexico, to strengthen its balance sheet, protect its assets and enhance the value of its business," the company said in its filing.

Delphi led the auto suppliers' pack into the reorganization process, and Northwest Airlines Corp. and Delta Air Lines Inc. were among airlines that headed into bankruptcy as USAirways, Inc. emerged following a merger with America West.

In the automotive industry, Collins & Aikman filed in April, citing mounting liquidity issues and the need for immediate cash to fund operations, while Delphi held off bankruptcy rumors for weeks before it finally filed on Oct. 8 "in order to preserve the value of the company and complete its transformation plan designed to resolve Delphi's existing legacy issues and the resulting high cost of U.S. operations."

Other automotive names that were driven to file Chapter 11 in 2005 included Tower Automotive, Meridian Automotive Systems Inc., Metalforming Technologies Inc. and American Remanufacturers Inc.

Meanwhile, Oxford Automotive Inc. and Intermet Corp. emerged from bankruptcy in 2005.

Just as USAirways was completing its restructuring and subsequent merger, Northwest Airlines and Delta Air Lines filed for Chapter 11 minutes apart from each other on Sept. 14, the latest air industry giants to seek bankruptcy protection amid spiking fuel prices and a post-Sept. 11 airline industry decline.

Mesaba Aviation Inc. and Independence Air parent FLYi Inc. filed for bankruptcy in 2005 as well.

Meanwhile, Brazilian air carrier Varig SA filed a Section 304 bankruptcy case with a negative net worth of $2.5 billion and no fixed assets.

Varig filed bankruptcy because of high operating leverage, high fuel costs and lessors' threat to repossess some aircraft, the company said.

High fuel oil costs and natural disasters also hurt the heating and energy business in 2005, as energy and transportation company Southaven Power LLC, New Orleans electric and natural gas provider Entergy New Orleans Inc. and Heating Oil Partners LP all filed for bankruptcy during the year.

Perryville Energy Partners LLC and Trico Marine Services Inc., which provides marine support services to the oil and gas industry, both emerged from bankruptcy in 2005.

Refco filed for Chapter 11 on Oct. 17 after a tumultuous month marked by allegations of securities fraud and the indictment of ousted chief executive officer Phillip Bennett.

In and out in 2005

Companies that were in and out of bankruptcy in 2005 included closeout retailer parent HIA Trading Associates (Amazing Savings); American Banknote Corp.; power company Panda Gila River LP/Union Power Partners, LP; furniture manufacturer Falcon Products Inc.; luggage trolley operator SMC Holdings (Smarte Carte); metals and construction supply manufacturer WHX Corp.; information technology support services provider DecisionOne Corp.; flatware and tabletop products maker Syratech Corp., industrial container maker and supply chain management company Russell-Stanley Holdings Inc., music, video and entertainment provider DMX Music Inc. and Northern Offshore Ltd.

Plumbing and auto component manufacturer Amcast Industrial Corp., which emerged from bankruptcy on Aug. 4, filed for a second time in December after General Motors Corp. threatened to seize its assets.

Mexico-based satellite operator Satelites Mexicanos SA de CV's secured and unsecured noteholders filed an involuntary Chapter 11 petition against that company after the company defaulted on $523.4 million of debt.

aaiPharma Inc. and Able Laboratories Inc. made pharmaceuticals news with 2005 bankruptcy filings.

aaiPharma's May 2005 filing was no surprise, as the company had previously said that it was "highly likely" that it would file for Chapter 11 after it missed the coupon due April 1, 2005 on its 11½% senior subordinated notes due 2010.

Retailers, consumer products names

Several retailers and supermarket chains were active on the bankruptcy scene over the past year.

Those filing in this category included electronics retailer Ultimate Electronics Inc., jewelry retailer Friedman's Inc., supermarket company Winn-Dixie Stores Inc. and Tony Roma's restaurant owner Romacorp Inc.

Retailers emerging in 2005 included specialty retailer Spiegel Group, supermarket operator Penn Traffic Co., toy store owners KB Toys Inc., restaurant company Avado Brands Inc., former lawn and garden company Frank's Nursery & Crafts Inc., Stuart Anderson's steak house operators American Restaurant Group Inc. and sportswear company Tropical Sportswear International Corp.

Also filing for bankruptcy in 2005 were consumer product companies including children's apparel company Happy Kids Inc., snack food company Tom's Foods Inc., home video supplier GT Brands, LLC, ready-to-assemble furniture manufacturer O'Sullivan Industries Holdings Inc., integrated direct marketing company Protocol Services Inc., new and used vehicle distributor Allied Holdings Inc., diet company Atkins Nutritionals Inc., glass container manufacturer Anchor Glass Container Corp., gifts and collectibles manufacturer and designer Boyds Collection Ltd., insurance company Acceptance Insurance Cos. Inc., network and infrastructure services company Orius Corp. and winery company Legacy Estate Group, LLC.

Consumer products companies that emerged in 2005 included SprintPCS affiliate IWO Holdings, insurance holding company Trenwick Group Ltd., textile company Dan River Inc., satellite company Pegasus Satellite Television Inc. and bicycle company Huffy Corp.

Casino and resort companies had a good year in terms of bankruptcy in 2005, as both Hollywood Casino Shreveport and Trump Hotels & Casino Resorts Inc. emerged and no casino and resort company filed for bankruptcy.

But in a related filing, GB Holdings Inc. sought protection under Chapter 11 because it did not have the money necessary to repay its $43.7 million 11% notes.

GB Holdings has no operating activities and its only significant asset is 2.88 million shares of Atlantic Coast Entertainment Holdings, Inc.'s common stock, a 28% stake.

Communications and industrial action

Communications companies that made bankruptcy news in the last year included comprehensive voice and data services company Birch Telecom Inc. and integrated communications services company McLeodUSA Inc., while satellite company Loral Space & Communications Ltd. and telecommunications company ATX Communications Inc. emerged during the year.

Saint Vincent Catholic Medical Centers joined fellow New York metropolitan area health care provider New York United Hospital Medical Center in Chapter 11 in July with debt that largely included $272 million in mortgages for all of its facilities. Brooklyn Hospital Center also filed for bankruptcy in 2005.

Among industrial companies, offshore pipeline and subsea construction company Torch Offshore Inc., industrial power control and surface analysis products maker High Voltage Engineering Corp., diversified manufacturer EaglePicher Inc., mining company Asarco LLC, electronics testing company Telogy Inc. and flexible polyurethane and foam products manufacturer Foamex International Inc. filed for Chapter 11 in 2005.

Industrial companies that emerged during the year included aluminum company Ormet Corp., sand and mica mining company Oglebay Norton Corp., fencing and wiring company Keystone Consolidated Industries Inc., crane rental company Maxim Crane Works, steel company Citation Corp. and packaging films manufacturer Applied Extrusion Technologies Inc.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.