Stephanie Gleason
NEW YORK--Toll-road operator American Roads LLC has a clear path
for what it intends to be a quick trip through Chapter 11, with a
prepackaged restructuring plan that no creditors have come forward
to challenge.
Creditors and a U.S. Department of Justice representative were
both supportive of American Road's proposed plan during the
company's first bankruptcy court appearance Friday. A
representative for the company's current equity holder, an
affiliate of Alinda Capital Partners LLC, didn't attend the hearing
because it's also "fully supportive," said the company's bankruptcy
attorney, Sean A. O'Neal of Cleary Gottlieb Steen & Hamilton
LLP.
Judge Burton R. Lifland of the U.S. Bankruptcy Court in
Manhattan granted all of American Road's so-called first-day
motions, an assortment of administrative request that allow
American Road to access cash and pay employees during its Chapter
11 restructuring.
American Roads filed for bankruptcy protection Thursday under
the weight of more than $800 million in bond and swap debt.
Under the company's proposed restructuring plan, Syncora
Guarantee Inc., a subsidiary of Syncora Holdings Ltd. (SYCRF), has
agreed to forgive $334 million in debt owed under swaps agreements
in exchange for all of the new equity in the reorganized American
Roads. Existing equity would be canceled and shareholders wouldn't
receive any payment.
Bondholders owed $496 million would be wiped out under the plan,
although the company plans to offer to purchase outstanding bonds
shortly after it emerges from bankruptcy protection. American Roads
would use the cash it has on hand, plus a contribution of up to $50
million from Syncora, to buy the bonds for 20 cents on the
dollar.
While the restructuring plan doesn't provide any payment for
unsecured creditors, American Roads said it expects they'll be paid
in full in connection with the company's proposal to keep the
leases and contracts it has with the creditors.
The only creditor entitled to vote on restructuring plan,
Syncora, has already accepted the plan. The company plans to seek
an Aug. 28 plan-confirmation hearing.
American Roads operates toll roads and bridges in Michigan and
Alabama. The company has seen use of its roads in Michigan decline
as people have moved out of Detroit. In Alabama, its roads saw
fewer drivers after the 2010 oil spill in the Gulf of Mexico kept
vacationers away.
Judge Lifland suggested that American Roads could have a claim
in the ongoing litigation against BP PLC (BP, BP.LN) stemming from
the spill.
The company employs 43 employees in Alabama, 43 in Michigan and
46 in Canada. Some of its employees are union members, but American
Roads said it doesn't intend to use its bankruptcy filing to modify
or reject its existing labor agreements or pension plans.
--Jacqueline Palank contributed to this article.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Stephanie Gleason at stephanie.gleason@wsj.com
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