Baxter & Baxter, LLP | Portland Oregon Bankruptcy

More and more overleveraged, recession-battered companies are ending up in bankruptcy owing their creditors much more than they are worth, which is forcing unsecured creditors to make brash legal maneuvers to squeeze out even a small recovery in Chapter 11 cases, The Wall Street Journal reports . Creditors of SemGroup LP have sued the company’s former private-equity backers in a bid to recoup $56 million worth of dividends the private-equity firms collected as the energy trading company spiraled toward collapse. Read the Daily Bankruptcy Review story here and a post from our sister blog, Private Equity Beat, here . Meanwhile, a former SemGroup manager was charged with insider trading Tuesday for allegedly selling 5,400 units of a publicly traded subsidiary before SemGroup’s financial collapse was public, the Tulsa World reports . Philadelphia Newspapers LLC’s lenders have asked the full 3rd U.S. Circuit Court of Appeals to review a decision by a three-judge panel that bars them from bidding their debt in an auction for the company, Reuters reports . Companies seeking cash to fund their exit from bankruptcy protection are turning to high-yield bonds, according to Reuters . Nortel Networks Corp. reached a new deal Tuesday with its pensioners and employees on long-term disability after a judge rejected an earlier settlement, according to the Canadian Press . Two Jefferson County commissioners who had favored bankruptcy to solve the county’s $3.2 billion sewer debt crisis said they’ll settle with Wall Street creditors if the banks cancel about $2 billion of the debt, according to the Birmingham News .

ZUMA Press Denny Hecker A Minnesota family court judge has made good on his threat to send Denny Hecker to the slammer for failing to pay domestic support to his ex-wives, saying he hopes it’ll spur the formerly high-flying businessman to do so. According to the Minneapolis Star Tribune , Hecker appeared before Judge Jay Quam at a court hearing Tuesday morning to plead for more time to meet Quam’s demands to either make missed support payments to his second wife or to offer proof why he couldn’t. But Quam wasn’t inclined to give any more time to Hecker, who filed for bankruptcy last summer under the weight of a staggering $767 million debt load tied to his former business empire. “I don’t like doing this. But I am going to take you into custody to motivate you,” Quam said, before Hecker stood up, was handcuffed and led out of the courtroom to a cell in the Hennepin County Jail. Hecker’s due back before Quam Tuesday afternoon with regard to support payments he owes his fourth wife. Heading into the hearings, Hecker filed papers claiming bad legal advice caused him to decide not to make the payments, the Star Tribune reported . “I now clearly understand that my decision not to pay any of my court-ordered obligations to my former…was based on a skewed and distorted interpretation of the law,” Hecker wrote in a sworn affidavit, while his lawyer denied the accusation. However, Hecker said he wasn’t trying to pass off the blame; instead, he acknowledged that he “alone must take responsibility for” any mistakes he made.

Lehman Brothers Holdings Inc. wants the bankruptcy court to cut creditor claims in its Chapter 11 case to $605 billion, Reuters reports . Meanwhile, the Securities and Exchange Commission is investigating the use of accounting techniques like the one Lehman used to move $50 billion in liabilities off of its balance sheet before its collapse, according to the Washington Post . Xerium Technologies Inc. has filed for bankruptcy protection. General Motors Co. is delaying by two weeks the release of its financial results for the fourth quarter, which will be the first official disclosure of the auto maker’s financial performance since it emerged from bankruptcy protection last year, The Wall Street Journal reports . Blockbuster Inc., which has warned that it may have to file for bankruptcy protection, said Monday it will ask its shareholders to vote on a reverse stock split at its upcoming annual meeting on May 26, according to the Associated Press . Magna Entertainment Corp. obtained court approval to poll its creditors on a bankruptcy-exit plan that would allow horse racing mogul Frank Stronach to maintain control of the company’s most valuable racetracks. Read the Daily Bankruptcy Review story here . A federal judge has moved the fight over Chemtura Corp.’s environmental liabilities to a district court, Reuters reports .

Reuters A Zetabid employee helps an auctioneer spot bidders during an auction of foreclosed properties in the Chicago area last September. The Los Angeles Times is getting out of the foreclosed-homes auction business, saying it needs to focus its attention and money on its other ailing operations. The newspaper, which is owned by Tribune Co., obtained bankruptcy court permission last week to sell its 66.67% interest in foreclosure auction Web site Zetabid.com to joint-venture partner Catalist Homes for $200,010. The newspaper says Zetabid is a money-loser that it can no longer afford to support. “L.A. Times has determined it cannot justify continued investment of financial and creative resources in Zetabid, especially in light of L.A. Times’ need to invest elsewhere,” the newspaper said in court papers. The newspaper launched the Web site in 2008 with the intention opening up the residential auction market to consumers. Zetabid sought to make it easy to buy bank-owned homes through public auctions that it hosts. The L.A. Times and Tribune provided media exposure while Catalist provided transactional services. Zetabid has held more than 17 auctions, including 155 foreclosed homes in Michigan and 60 homes in Florida last fall. In court papers, the L.A. Times said that in 2008 it saw the foreclosure market as an “attractive opportunity” as traditional real estate advertising slowed, but said the government’s response to the housing crisis, including foreclosure moratoriums and loan modifications, “had substantial adverse impacts on Zetabid’s business.” The site was taken down temporarily so it could be overhauled for a relaunch, Zetabid.com President Mike Davin said Friday. He said the new site will focus more on short sales and move away from big, ballroom-style auctions. “Short sales are not a big media play, but there is a lot of back-end process work,” which Zetabid owner Catalist can provide, he said. “We are very excited and ready to move forward.” Tribune, which filed Chapter 11 protection in December 2008, continues to reorganize in bankruptcy.