Denmark's Sydbank agrees to buy Tonder Bank

COPENHAGEN | Fri Nov 2, 2012 2:44pm EDT

COPENHAGEN Nov 2 (Reuters) - Sydbank, Denmark's third-biggest bank, has agreed to acquire Tonder Bank, a small lender in the south of the country, the latest deal in a banking industry under pressure from tough new regulations.

Sydbank said on Friday it would take over Tonder Bank's 18,000 customers and a balance sheet worth 2.3 billion Danish crowns ($396 million). All depositors will be covered by the transfer to Sydbank.

Danish banks have been stung by bad loans in the aftermath of a burst property bubble, a struggling agriculture sector and following tighter writedown rules imposed by the country's regulator in April.

Tonder Bank said in a statement the new writedown rules and a deadline to meet new solvency requirements by this Sunday had left it no alternative other than filing for bankruptcy on Monday.

"It has not been possible to provide the necessary capital within the prescribed period and therefore the bank must give up its independence," the bank said in a statement.

Its board members have tendered their resignation.

Denmark has the most fragmented banking industry in the Nordic region with more than 100 banks and many in the industry are predicting a wave of consolidation.

In September, two of the country's smaller listed banks, Salling Bank and Vinderup Bank, said they would merge.

Spar Nord Bank announced a week later it would acquire rival Sparbank.

Sydbank, which said the acquisition would help strengthen its position in southern Jutland, and Denmark's second-biggest lender Jyske Bank have both said they would be interested in buying rivals.

Some speculate that Sweden's capital-rich banks could also muscle into a wave of mergers in the country.

($1 = 5.8072 Danish crowns) (Reporting by Mia Shanley; Editing by David Holmes)

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UPDATE 4-Warren Buffett buys toy and party-supplies company

Fri Nov 2, 2012 5:56pm EDT

* Sale is for $500 million, person close to the deal says

* KKR, others had picked it up in 2010 restructuring

By Olivia Oran and Greg Roumeliotis

Nov 2 (Reuters) - Warren Buffett's Berkshire Hathaway Inc said it would buy Oriental Trading Co, a toy and party supplies company that is partially owned by private equity firm KKR & Co LP, for an undisclosed sum.

The deal ends a period of instability for the Omaha, Nebraska-based maker of merchandise ranging from pink flamingos and wedding favors to Halloween decorations and beading supplies, in which it underwent bankruptcy and was passed around by private equity firms.

Berkshire will pay around $500 million for the company after an earlier auction did not yield satisfactory bids, according to two people close to the deal.

In mid-October, Oriental Trading Chief Financial Officer and Chief Operating Officer Steve Mendlik e-mailed Berkshire Hathaway Chief Financial Officer Marc Hamburg, who Mendlik had met previously, CEO Sam Taylor told Reuters in an interview.

Two hours later, Mendlik got a phone call from Buffett. The two spoke for around 10 minutes before Buffett said he was interested in taking a look at the company and wanted to see its financials.

Just a few days later, Taylor and other members of Oriental Trading management met with Buffett for about two hours.

The company then offered itself for sale at a price Buffett accepted.

"He was very warm and down to earth," Taylor said. "It was a surreal experience. I was sitting on the couch pinching myself saying 'I can't believe I'm talking to Warren Buffett.'"

Oriental Trading's strong cash flow, customer loyalty and high core profit margins made the business attractive to Buffett, Taylor said.

Not to mention the fact that Buffett, who hails from Omaha, is a fan of his hometown, Taylor said.

Oriental Trading, which filed for Chapter 11 bankruptcy protection in August 2010, is owned by more than a dozen financial institutions, including KKR.

"Over the past two years the company has transitioned to steady growth, both top and bottom line, and there is no question the company has a bright future as part of the Berkshire Hathaway enterprise," Jeremiah Lane, a director in KKR's special situations team, said in a statement.

In 2006, Carlyle Group LP purchased most of Oriental Trading for more than $1 billion from private equity firm Brentwood Associates. Saddled with debt, the company filed for bankruptcy in August 2010, allowing creditors to take over.

Although the company's earnings before interest, tax depreciation and amortization (EBITDA) only fell by a third from peak to trough because of higher bulk mail costs and the recession, that was enough to cripple it due to its high debt load, one of the people said.

Carlyle had leveraged the company at 7.5 times its EBITDA, resulting in it breaching debt covenants and eventually going through a debt restructuring. KKR, which bought a third of the company's $400 million bank debt and got 55 cents on the dollar during the restructuring, stands to make two times its money due to Buffett's acquisition, the person added.

A year and a half after Oriental Trading emerged from bankruptcy, investors were looking for an exit. Reuters reported in August that Oriental Trading was up for sale in a deal that could fetch about $500 million.

"For us and our employees this is huge," Taylor said. "It's a permanent home for Oriental Trading so we can get off the private equity treadmill and not have to deal with uncertainty about who is going to be the owner."

The deal is expected to close by the end of November. Oriental Trading was advised by Lazard Middle Market..

Founded in 1932, Oriental Trading sells more than 40,000 products, ranging from Halloween decorations to teaching supplies and novelty toys.

Oriental Trading is one of several recent deals for party and crafts-supply companies.

Party City Holdings Inc was purchased by private equity firm Thomas H. Lee Partners in June for $2.69 billion.

Crafts retailer Michaels Stores Inc filed for a $500 million initial public offering in March, although those plans are currently on hold, according to sources familiar with the matter.

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US bankruptcy regulator updates proposal for lawyer fee overhaul

Fri Nov 2, 2012 7:48pm EDT

* U.S. Trustee offers three-weeks to comment on proposals

* Overhaul aimed at reining in high legal fees in bankruptcy

* Features include budgets, disclosures on billing practices

By Nick Brown

NEW YORK, Nov 2 (Reuters) - Despite their strong opposition, law firms would be still have to disclose extensive details about billing practices under the latest proposals to overhaul how lawyers are compensated when they handle bankruptcies.

The latest draft, issued on Friday, keeps proposals that would force law firms to compare their bankruptcy rates to those used in other legal work and to calculate the added cost of any increase imposed in the middle of a case.

The guidelines are being drawn up by the U.S. Trustee Program, the Justice Department arm that oversees how companies spend money in court-supervised restructurings. They are aimed at reining in legal fees seen as inconsistent with the broader market.

Bankruptcy fees, which in large cases routinely reach hundreds of millions of dollars, have long been under scrutiny by regulators such as the trustee's office. That is because the money is paid out of the bankrupt firm's estate, so the more money paid to lawyers, the less is available for creditors.

In the liquidation of Lehman Brothers Holdings - the largest Chapter 11 case ever - fees paid to lawyers, accountants, financial advisers and other professionals have topped $1.6 billion.

Bankruptcy courts, which must approve all professional fees, are the final arbiters when it comes to compensation for lawyers. But the trustee's office, charged with overseeing compliance with bankruptcy laws, can object and argue that fees are unreasonable.

The trustee's fee overhaul was first proposed last November and Friday's draft followed a feedback period in which law firms and other industry professionals offered criticism.

While the guidelines are far-reaching, a particular point of contention had been disclosures that show legal fees are in line with market rates. Law firms argued the requirements constituted unfair micromanagement.

Unchanged from the earlier draft, firms would have to disclose and calculate the cost of rate increases and offer data comparing them to fees charged in non-bankruptcy legal work.

The new draft is not a carbon-copy of the old, however. Instead of having to disclose their highest, lowest and average rates, law firms would be required only to disclose a blended average of their rates to account for the widespread use of alternative, non-hourly billing measures.

Another controversial aspect of the guidelines was the proposed imposition of non-binding budgets, which firms feared would make details of their billing agreements public.

The trustee's office stands by its budget proposal in the new draft, but makes clear that budget details would be redacted to protect privileged information.

The latest version carries a comment period through Nov. 23, after which the trustee's office will issue final guidelines. Courts will not be required to enforce them, but the trustee's office hopes they will serve as a compass in assessing fees, Cliff White, director of the trustee's office, told Reuters.

"We'll be quite conscientious and vigorous in seeking to uphold these guidelines," White said on Friday. "They are a statement of how we think (bankruptcy) statutes should be complied with."

The latest draft would raise the threshold to apply the guidelines from cases in which debtors had combined assets and liabilities of $50 million, to cases in which debtors had at least $50 million in both assets and liabilities.

The trustee's office is also now calling for large law firms to delegate certain tasks to co-counsel if they can be done more cheaply by a smaller firm, a directive left out of the prior draft.

The change was a response to a handful of comments, including from bankruptcy lawyer Albert Togut, who argued that greater use of co-counsel could be a huge cost-saver in big cases.

"It's not anybody pointing a finger at the big firms saying you did something wrong," Togut told Reuters on Friday. "But as long as you've got a co-counsel in the case, that co-counsel should be utilized."

Law firms will have some time to familiarize themselves with the new proposal. According to Friday's draft, the final guidelines, once issued, will become effective on July 1.

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UPDATE 1-UK retailer Comet close to administration-source

Thu Nov 1, 2012 6:14pm EDT

* Comet to go into administration next week - spokesman

* Comet files notice to appoint administrators

* Comet demise comes 9 months after Darty sold firm to OpCapita

* Dixons shares up 13 pct, Home Retail shares up 4 pct

By James Davey

LONDON, Nov 1 (Reuters) - British electricals retailer Comet is set to enter into administration next week, the latest household name to fall by the wayside in the consumer downturn.

Directors of the struggling company, which employs 6,500 staff in 240 stores, filed a notice on Thursday to a British court, a spokesman confirmed on Thursday.

"Comet Group Limited can confirm that it has taken steps to seek the protection of the court with a view to the company entering into administration during week commencing Nov 5," the spokesman said.

"In the meantime the board is urgently working with its advisers to seek a solution to secure a viable future for the company," he said.

Deloitte has been lined up as the potential administrator, a separate source told Reuters.

The notice to appoint administrators is a legal move providing companies with an initial five working days breathing space to discuss any possible survival plans with their nominated administrator. That can be extended to 10 working days but formal administration usually follows.

Talks will likely focus on possible suitors for any parts of the business that can be sold.

Comet, which analysts estimate has a 6 percent UK market share, was acquired by private investment firm OpCapita for a nominal 2 pounds from Darty (then known as Kesa Electricals) in February, with Darty paying OpCapita a 50 million pounds ($81 million) dowry to take the loss-making business off its hands.

Comet ran into trouble as suppliers tightened their terms as the firm attempted to reach its peak stock requirement ahead of Christmas. Trading without the credit insurance that protects suppliers meant it had to pay cash up front for goods.

TOUGH GOING

The company's anticipated collapse comes a month after British sporting goods retailer JJB Sports fell into administration with 2,200 staff made redundant.

A raft of other retailers have also fallen into administration this year, including Clinton Cards, Game Group, Peacocks and Aquascutum, as the double-dip recession took its toll, though they have re-emerged in some form.

Many British retailers are still finding the going tough as consumers hold back spending in the face of inflation, meagre wage increases and government austerity measures designed to cut record debt.

British retail sales picked up more than forecast in October, a survey showed on Tuesday. However, one published on Wednesday said UK consumer confidence fell to its lowest in six months in October, highlighting the fragility of Britain's recovery from recession.

The likely removal of Comet from the British retail scene could be positive for rivals Dixons Retail and Home Retail's Argos, whose shares rose 13 percent and 4 percent respectively, as well as the UK supermarkets such as Tesco.

"The imminent demise of Comet will leave Currys and PC World (both owned by Dixons) the masters of all they survey in out-of-town specialist electrical retailing, even though John Lewis, Amazon and Apple remain formidable competitors," said independent retail analyst Nick Bubb.

OpCapita and Deloitte both declined to comment.

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US senators seek thorough review of Chinese bid for A123

Thu Nov 1, 2012 7:13pm EDT

* China's Wanxiang Group attempting to buy bankrupt A123

* Senators concerned about its military contracts, grid tech

By Ayesha Rascoe

WASHINGTON, Nov 1 (Reuters) - Two Republican senators asked U.S. Treasury Secretary Timothy Geithner on Thursday for a thorough review of a Chinese company's plan to acquire bankrupt battery maker A123, saying military and taxpayer-funded technology must be protected.

China's Wanxiang Group Corp is currently locked in a battle with U.S.-based Johnson Controls Inc to buy A123, which makes lithium ion batteries for electric cars.

A123 also had two contracts worth a total of more than $4 million to develop batteries for the Air Force, one of which is still ongoing, an Air Force official said.

Senators John Thune and Chuck Grassley said the powerful Committee on Foreign Investment in the United States (CFIUS), led by Geithner, should review the transaction to make sure U.S. military and taxpayer interests in A123 are protected.

To acquire A123, Wanxiang needs approval from the Chinese government and from CFIUS, a U.S. inter-agency panel that vets foreign deals for security concerns.

Wanxiang's law firm Sidley Austin said earlier this month that it would submit its bid to CFIUS.

The senators warned that if Wanxiang is allowed to buy A123, which was awarded a $249 million grant from the Obama administration, the Chinese company could gain access to the company's military contracts and potentially important grid storage technologies.

"A123 has received millions of taxpayer dollars to develop technology and intellectual property that should not simply be shipped to China," Thune said in a statement.

The Energy Department, which had hailed A123 as a model for revitalizing U.S. manufacturing, has stressed that none of the government's grant would be allowed to fund facilities abroad.

Prior to filing for bankruptcy in October, A123 had received about half of its grant.

Thune and Grassley had earlier raised questions in August about a failed attempt by Wanxiang, an auto parts supplier, to rescue faltering A123.

That $465 million rescue deal fell apart when A123 was unable to meet some conditions of the agreement.

Republicans have latched on to A123's bankruptcy as another example of the Obama administration's failed attempt to kickstart the U.S. clean energy sector.

The Obama administration has defended its efforts, arguing that despite some high profile bankruptcies, most of its investments have been successful and have to helped to double renewable energy output from wind and solar.

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US tax agency appeals Solyndra's bankruptcy exit plan

Thu Nov 1, 2012 10:14pm EDT

Nov 1 (Reuters) - The U.S. Internal Revenue Service on Thursday appealed a court decision to approve solar panel maker Solyndra's plan to exit bankruptcy protection.

Solyndra, which filed for bankruptcy in September last year despite a $528 million federal loan, won court approval on Oct. 22 to repay its creditors after a judge overruled objections by the U.S. government.

U.S. Bankruptcy Judge Mary Walrath in Delaware had rejected the government argument that the plan was improper because its main purpose was to provide tax breaks.

Venture capital firms Argonaut Private Equity and Madrone Capital Partners will control Solyndra's tax breaks, known as net operating losses or NOLs, that are potentially worth $341 million after the bankruptcy.

The Internal Revenue Service had told the judge that the government might appeal and requested Judge Walrath to delay the repayment plan by 10 days.

The case is In re: Solyndra LLC et al, U.S. Bankruptcy Court, District of Delaware, No. 11-12799. (Reporting By Garima Goel in Bangalore; Editing by Ken Wills)

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Elpida says court approves acquisition by Micron

SAN FRANCISCO | Wed Oct 31, 2012 7:17pm EDT

SAN FRANCISCO Oct 31 (Reuters) - Micron Technology's plan to acquire Japanese memory chipmaker Elpida took a big step toward completion after a Tokyo court approved the agreement and dismissed a rival plan promoted by a group of bondholders.

A district court in Tokyo said on Wednesday it was referring bankrupt Elpida's plan to be bought by U.S. chipmaker Micron to creditors for approval, according to a news release on Elpida's website.

The court said it dismissed a rival proposal by a group of bondholders, led by hedge funds Linden Advisors, Owl Creek Asset Management and Taconic Capital Advisors, who have said the $2.5-billion price tag grossly undervalues Elpida, arguing that the company is worth 300 billion yen ($3.78 billion).

Elpida, the last of Japan's dynamic random access memory (DRAM) chipmakers, was driven into bankruptcy by falling chip sales and foreign competition. The company proposed a $2.5-billion sale to Micron, based in Boise, Idaho, as a way to repay creditors.

That deal would catapult Micron into the No. 2 spot in the global market for DRAM chips, behind Samsung Electronics .

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UPDATE 1-Elpida says court approves acquisition by Micron

Wed Oct 31, 2012 7:34pm EDT

SAN FRANCISCO Oct 31 (Reuters) - Micron Technology's plan to acquire Japanese memory chipmaker Elpida took a big step toward completion after a Tokyo court approved the agreement and dismissed a rival plan promoted by a group of bondholders.

A district court in Tokyo said on Wednesday it was referring bankrupt Elpida's plan to be bought by U.S. chipmaker Micron to creditors for approval, according to a news release on Elpida's website.

The court said it dismissed a rival proposal by a group of bondholders, led by hedge funds Linden Advisors, Owl Creek Asset Management and Taconic Capital Advisors, who have said the $2.5-billion price tag grossly undervalues Elpida, arguing that the company is worth 300 billion yen ($3.78 billion).

Elpida, the last of Japan's dynamic random access memory (DRAM) chipmakers, was driven into bankruptcy by falling chip sales and foreign competition.

Boise, Idaho-based Micron, which is losing money due to a crumbling PC industry, wants to create larger economies of scale and offered in early July to buy Elpida for about $750 million in cash and to pay creditors a total of $1.75 billion in annual installments through 2019.

The deal would catapult Micron into the No. 2 spot in the global market for DRAM chips, behind Samsung Electronics .

"We view this as a positive development, and continue to expect Micron to close its Elpida acquisition by (the first half of 2013)," Jefferies analyst Sundeep Bajikar said in a note to clients.

Last week, a U.S. judge overseeing Elpida's parallel U.S. case said the company was taking a risk by not keeping creditors better informed.

That U.S. judge would eventually have to approve the transfer of U.S. assets.

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UPDATE 2-Elpida says Tokyo court approves acquisition by Micron

Thu Nov 1, 2012 3:03am EDT

* Tokyo court dismisses rival proposal by group of Elpida bondholders

* Elpida bondholder group says $2.5 bln price tag undervalues company

* Group to vote against trustee's plan, to urge other creditors to do the same

SAN FRANCISCO/TOKYO, Oct 31 (Reuters) - Micron Technology's plan to acquire Japanese memory chipmaker Elpida took a big step toward completion after a Tokyo court approved the agreement and dismissed a rival proposal promoted by a group of bondholders.

A district court in Tokyo said on Wednesday it was referring bankrupt Elpida's plan to be bought by U.S. chipmaker Micron to creditors for approval, according to a news release on Elpida's website.

The court said it dismissed a rival proposal by a group of bondholders, led by hedge funds Linden Advisors, Owl Creek Asset Management and Taconic Capital Advisors, who have said the $2.5-billion price tag grossly undervalues Elpida, arguing that the company is worth 300 billion yen ($3.78 billion).

The bondholder group said in a statement on Thursday that they would vote against the trustee's plan and urged other creditors, including secured lenders, trade creditors and individual Japanese bondholders, to do the same.

"The bondholders will continue to pursue the rights and remedies available to them in the Japan, U.S., and other applicable courts," they said.

Elpida, the last of Japan's dynamic random access memory (DRAM) chipmakers, was driven into bankruptcy by falling chip sales and foreign competition.

Boise, Idaho-based Micron, which is losing money due to a crumbling PC industry, wants to create larger economies of scale and offered in early July to buy Elpida for about $750 million in cash and to pay creditors a total of $1.75 billion in annual installments through 2019.

The deal would catapult Micron into the No. 2 spot in the global market for DRAM chips, behind Samsung Electronics .

"We view this as a positive development, and continue to expect Micron to close its Elpida acquisition by (the first half of 2013)," Jefferies analyst Sundeep Bajikar said in a note to clients.

Last week, a U.S. judge overseeing Elpida's parallel U.S. case said the company was taking a risk by not keeping creditors better informed.

That U.S. judge would eventually have to approve the transfer of U.S. assets.

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AMR pilots cite 'potential' for imminent labor deal

Tue Oct 30, 2012 4:38pm EDT

* Pilots seeking industry standard on pay rates, outsourcing

* Union acknowledges progress being made

* Union still supports merger with US Airways

By Nick Brown

NEW YORK, Oct 30 (Reuters) - The pilots union at American Airlines said on Tuesday that a labor deal could be close if the bankrupt airline is willing to make certain key concessions.

The union, locked in years of tense contract negotiations with the AMR Corp unit, said in a statement that it wants a contract on par with other major carriers, namely Delta Air Lines, on issues such as pay.

"There is potential for an agreement with AMR in the days ahead, but it all comes down to a number of moves management will need to make on key deal points to bring us into the realm of industry standard," the union said.

A spokesman for AMR had no immediate comment on ongoing talks.

AMR declared bankruptcy last November, in part to reduce labor costs. While it has reached new contracts with its flight attendants' and ground workers' unions, it remains at odds with the Allied Pilots' Association.

The pilots' union announced on Oct. 21 that AMR had agreed to certain concessions, including improvements to disability plans and a one-year moratorium on closing pilot bases.

But major items remain unresolved, most notably pay rates and outsourcing work to pilots not represented by the union, Dennis Tajer, the pilots' spokesman, told Reuters on Tuesday.

In its statement, the pilots' union said getting a deal would guarantee it a 13.5 percent equity stake in a reorganized AMR. It also said labor peace would give the union more influence in talks between AMR and its creditors over how the airline would emerge from bankruptcy.

AMR has said it wants to emerge as a standalone entity, but smaller competitor US Airways Group Inc is making an aggressive push to acquire the company in bankruptcy. The pilots' union, along with the rest of AMR's unionized labor force, supports a merger.

But while Tuesday's statement acknowledged the benefits of a deal, the union is not eager to sign a new contract at any cost.

"While there is progress being made, it will only continue if it results in an industry-standard contract," Tajer told Reuters.

The union must balance its demands against economic realities. It stressed in the statement that a deal must be economically feasible for AMR because it will require support from AMR's creditors and approval by its bankruptcy court.

The sides have been in talks on a labor deal since 2006. The union voted down a tentative agreement in August, but its board went back to the negotiating table earlier this month after September flight cancellations and delays that American blamed on a slowdown campaign by pilots.

Incidents in which seats came unbolted from the floor on American flights also raised concerns about safety at the airline and made it the butt of late-night talk show jokes.

AMR is in merger talks with US Airways, although it has said it would prefer to consider a tie-up only after leaving bankruptcy. Some bondholders have expressed interest in funding a plan that would bring AMR out of bankruptcy on its own.

Power struggles can arise between creditor constituencies with differing ideas on how a company should exit bankruptcy.

One of the most powerful constituencies in AMR's case is its unsecured creditors committee, which advocates for all of the airline's unsecured creditors. The unions, which have lost faith in AMR management, including Chief Executive Officer Tom Horton, have seats on that committee and would prefer a US Airways takeover sooner rather than later. But labor discord with pilots could add uncertainty to the prospect of a smooth merger.

Tajer said on Tuesday that the union will continue to support a merger even if it signs a new contract.

A deal would save the union from having to endure unilateral work terms designed to cut costs, which AMR earlier won court approval to impose.

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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